Income Tax Appellate Tribunal - Chandigarh
Deputy Commissioner Of Income-Tax vs Mount Shivalik Breweries Ltd. on 28 May, 1999
Equivalent citations: [2000]73ITD276(CHD)
ORDER
Mehta, Vice President
1. All these appeals - three by the Revenue and one by the assessee - involving an identical issue and arising out of the consolidated order passed by the CIT (Appeals) were heard together and are disposed of by means of a consolidated order.
2. Before we proceed to deal with the issue on merits, it would be appropriate to set out the following facts and figures to appreciate the controversy in a proper manner as follows :-
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"Asst. Current Amount Date of Amount Date of Year
chargeable of Adv. payment assessed assessment
amount S. Tax
paid
1. 2. 3. 4. 5. 6.
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1982-83 7,12,907 2,73,559 15-12-1981 11,41,950 20-11-1987 1983-84 6,59,200 2,02,767 15-12-1982 12,50,450 20-11-1987 1985-86 63,000 15,750 13-12-1984 4,78,177 31-10-1988 1986-87 4,43,700 85,925 12-12-1985 12,03,962 31-10-1988"
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3. Taking note of the aforesaid facts and figures, the Assessing Officer took the view that the assessee had filed estimate of advance surtax which it knew to be untrue. He accordingly initiated penalty proceedings under section 9A(2)(a) of the Companies (Profits) Surtax Act, 1964 and after receiving explanations from the assessee and considering these he in the ultimate analysis held that there had been a default and penalty provisions stood attracted. These were levied at Rs. 20,000 for assessment year 1982-83, the corresponding figures for assessment years 1983-84, 1985-86 and 1986-87 being Rs. 11,000, Rs. 17,000 and Rs. 48,000 respectively.
4. Being aggrieved the assessee moved the CIT (Appeals) and at which stage it was submitted that the assessee was not under any legal obligation to file voluntarily the estimates of advance surtax. This plea was taken on the ground that the assessment by way of regular assessment for the previous year relevant to the assessment year 1981-82 was made on 9-10-1985 and the first provisional assessments were made for the assessment years 1983-84 and 1985-86 on 17-2-1986. Further, as on 15-12-1981 and the corresponding dates of 1982, 1984 and 1985 on which the last instalment of advance surtax was payable, there was neither any regular assessment nor any provisional assessment in the assessee's case and, therefore, it was not required to file any statement of advance surtax for the assessment years under appeal. It was, therefore, urged that the penalties not being in order be cancelled. The alternative submission was that these were excessive and these be suitably reduced.
5. The aforesaid submissions found favour with the CIT (Appeals) for the assessment years 1982-83, 1983-84 and 1985-86 and he proceeded to cancel the penalties. The CIT (Appeals) held that there was no obligation under the law on the part of the company to submit either the statement of advance surtax payable or the estimate of advance surtax payable and these had been filed purely on a voluntary basis. It was noted as a fact that there was no regular assessment completed for the first time or a provisional assessment completed for the first time corresponding to the dates on which the last instalment of advance surtax was payable in each of the respective previous years. In cancelling penalties for the three years in question, reliance was placed on the judgment of the Hon'ble Bombay High Court in the case of Patel Aluminium (P.) Ltd. v. Miss K. M. Tawadia, ITO [1987] 165 ITR 99/[1986] 25 Taxman 248.
6. In so far as assessment year 1986-87 was concerned, the CIT (Appeals) decided it otherwise noting that prior to the due date of paying the first instalment of advance surtax, the regular assessment for assessment year 1981-82 had been completed, i.e., on 9-10-1985. The apparent variation in the current chargeable profits estimated and the amount actually assessed was noted and while confirming the initiation and levy of penalty the CIT (Appeals) reduced the same to Rs. 24,000.
7. We have heard both the parties - the learned D.R. strongly supporting the levy of penalty for all the four years and the learned counsel for the assessee supporting the order of the CIT (Appeals) for the three assessment years in respect of which the penalty had been cancelled and also pressing forth for similar relief to be given in respect of assessment year 1986-87. In respect of the last year he further pleaded that the penalty be reduced to the minimum leviable under the Act as the figure of Rs. 24,000 was on the higher side.
8. In reply, the ld D.R. invited our attention to the provisions of sub-section (5) of section 7A contending that clause (b) of the said sub-section took care of a situation where an assessee had not previously been assessed by way of regular assessment. According to him, even such an assessee was required to file an estimate of the current chargeable amount and pay the advance surtax accordingly.
9. We have examined rival contentions and before we proceed further, we would like to set out the relevant provisions of law with which we would be dealing in the present cases as follows :-
"Advance payment of surtax.
7A. (1) In this section :-
(a) 'chargeable amount', in relation to any previous year, means so much of the chargeable profits of the previous year as exceed the statutory deduction;
(b) 'current chargeable amount', in relation to the advance surtax payable by a company during any financial year, means the chargeable amount of the company of the period which would be the previous year for the assessment year immediately following that financial year.
(2) Surtax shall be payable, in accordance with the provisions of this section, in advance during the financial year in respect of the chargeable amount of the period which would be the previous year for the immediately following assessment year.
(3) The amount of advance surtax payable by an assessee in the financial year shall be computed as follows :-
(a) the chargeable amount of the latest previous year in respect of which the assessee has been assessed by way of regular assessment shall first be ascertained;
(b) in a case where the chargeable amount of the latest previous year being a year later than the previous year referred to in clause (a) on the basis of which a provisional assessment has been made under section 7 exceeds the chargeable amount referred to in clause (a), the chargeable amount referred to in clause shall be substituted by the chargeable amount on the basis of which such provisional assessment has been made;
(c) surtax shall be calculated on the chargeable amount referred to in clause (a) or, as the case may be, in clause (b), at the rates specified in the Third Schedule.
(4) ** ** (5) Every company shall, in each financial year, on or before the date on which the first instalment, or where it has not previously been assessed by way of regular assessment under this Act, on or before the date on which the last instalment of advance surtax is due in its case under sub-section (4), if it is likely to have any current chargeable amount, sent to the Income-tax Officer, -
(a) where it has been previously assessed by way of regular assessment under this Act, a statement of advance surtax payable by it computed in the manner laid down in sub-section (3), or
(b) where it has not previously been assessed by way of regular assessment under this Act, an estimate of -
(i) the current chargeable amount, and
(ii) the advance surtax payable by it on the amount specified in
(i) above calculated in the manner laid down in sub-section (3), and shall pay such amount of advance surtax, ....."
10. The CIT (Appeals) has referred to the provisions of sub-section (3) of section 7A to come to the conclusion that he did in cancelling the penalty for the first three assessment years as accord to him the first regular assessment and the first provisional assessment had been made on a date which came after the stipulated date for making the payment of the last instalment of advance surtax. Sub-section (5), clause (b) no doubt speaks of a company which has not previously been assessed by way of regular assessment under the Act and which is required to file an estimate of current chargeable amount and the advance surtax payable by it but calculated in the manner laid down in sub-section (3).
11. It is apparent that a liability to pay advance surtax is cast even on an assessee being a company which has previously not been assessed by way of regular assessment but the other requisites such as calculation of current chargeable amount and the advance surtax payable is in accordance with the provisions of sub-section (3) which makes a reference to the chargeable amount for the latest previous year in respect of which the assessee has been assessed by way of regular assessment or in respect of the chargeable amount of the latest previous year in respect of which a provisional assessment has been made which is a year later than the previous year referred to earlier, i.e., a previous year where a regular assessment has been completed and the surtax is to be calculated on the chargeable amount referred to either in one or the other at the rates specified. In other words, the provisions of sub-section (5), sub-clause (b) are not workable and where such a situation arises an assessee cannot be foisted with the liability to pay advance surtax under the Companies (Profits) Surtax Act, 1964 since the working of the current chargeable amount and the advance surtax payable has to be in accordance with the provisions of sub-section (3) which in turn speaks of, in clause (a) - an assessment by way of regular assessment and in clause (b) - a provisional assessment and clause (b) of sub-section (5) referring to only a regular assessment.
12. In view of the aforesaid discussion and in the light of specific provisions of law highlighted above, we in the ultimate analysis hold that the CIT (Appeals) was justified in cancelling the penalty for assessment year 1982-83, 1983-84 and 1985-86. We are also in agreement with the CIT (Appeals) in so far as he has taken the view that the assessee is liable to be penalised for assessment year 1986-87 and such decision is also being arrived at with reference to the relevant provisions of law. The levy of penalty at 10% on the amount in default is quite fair and reasonable and requires no modification and this leads to rejection of the alternative submission of the assessee's counsel.
13. In the result, all the four appeals are dismissed.