Karnataka High Court
G.B. Belani vs Commissioner Of Income-Tax on 1 August, 1991
Equivalent citations: [1992]195ITR639(KAR), [1992]195ITR639(KARN)
Author: N. Venkatachala
Bench: N. Venkatachala
JUDGMENT K. Shivashankar Bhat, J.
1. The question referred to this court under section 256(2) of the Income-tax Act, 1961 ("the Act" for short), reads :
"Whether, on the facts and in the circumstances of the case, the Tribunal is right in upholding the levy of penalty under section 273(c) of the Income-tax Act, 1961 ?"
2. The question pertains to the assessment year 1973-74. The assessee had been issued with a notice of demand to pay advance tax under section 210 of the Act; the basis for the demand was the tax assessed on the assessee for the assessment year 1969-70. But, at the time of finalising the assessment for the relevant year (assessment year 1973-74), it was found that the tax payable by the assessee exceeded the advance tax demanded by more than 33 1/3 percent Which meant that the assessee was under an obligation to file an estimate of his income and the advance tax payable and pay the same as provided under section 212(3A) of the Act. The Income-tax Officer issued a notice asking the assessee's explanation for this failure on the part of the assessee. According to the assessee, his main source of income was from two firms of which he was a partner and he had no knowledge till March 14, 1973, that his share income from the firms would be more. This explanation that the assessee was unaware of his share income at the relevant point of time fir filing the estimate of the income for advance tax purpose was not accepted by the Assessing Officer and this finding has been confirmed throughout.
3. The assessee, alternatively, contended that his share income for the relevant assessment year was found to be more than the estimate only because of the finalisation of the order of assessment of the income of one of the firms after be received the notice of demand under section 210(1); therefore, the said order estimating his income under section 210(1), made by the Income-tax Officer should have been amended by the officer, soon after the finalisation of the firm's assessment and such an amendment was mandatory as per section 210(3). Since no such amendment of the earlier order was made, the earlier order made under section 210 ceases to be a valid order; if so, section 212 itself was not attracted to the facts of the case.
4. It was contended that, if there was no valid order under section 210, the assessee was not obliged to comply with the provisions of section 212(3A) and if so the assessee was not liable to be penalised under section 273(c), as there was no default on his part.
5. There is no dispute that the order under section 210(1) demanding the advance tax is based on the computation of the income under section 209 and that the amount of advance tax payable by an assessee shall be computed having regard to (among other things) his total income of the latest previous year in respect of which he has been assessed by way of regular assessment; this figure would be substituted by a more recent figure of income, if available. In the case of a partner of a firm, his share in the firm's income, as assessed, is the basis to compute his income for purposes of advance tax (in addition to his income from any other source). Therefore, the Explanation to section 209(1) states that if the assessee is a partner of a registered firm and an assessment of the firm has been completed for a previous year later than the latest previous year for which the assessee's assessment has been completed, his share in the income of the firm shall be included in his total income for the purpose of advance tax payable by him, on the basis of the said assessment of the firm.
6. In the instant case, subsequent to the demand issued under section 209(1) for payment of advance tax by the assessee, the assessment of one of the firms was completed, whereby its income far exceeded the estimate of income made by the assessee; consequently, for purposes of section 209, the assessee's share in this income as found in the regular assessment of the firm shall have to be treated as part of his total income. Sri S. P. Bhat, learned counsel for the assessee, after referring to this Explanation, relied on section 210(3), whereunder power is vested in the Income-tax Officer to make an amended order, amending the earlier order made under section 210(1), enhancing the demand for advance tax from the assessee. Learned counsel urged that, by virtue of the Explanation to section 209(1), the Income-tax Officer was obliged to treat the assessee's share of the income in the total income of the firm as assessed for purposes of advance tax and, whenever the total income of the assessee is found to exceed the earlier estimate, the Explanation operates which shall be acted upon under section 210(3) also; in case the share income of the partner in the total income of the firm as assessed is less than the earlier estimate, again, the Explanation operates, and it has to be given effect to, by resorting to section 210(3). It is contended that whenever such an amended order is not made, though called for by the statute, the earlier order ceases to be a valid order and hence such as earlier order cannot be held as an effective order made under section 210.
7. If and when an assessment order is made for the latest previous year, the earlier demand for advance tax based on the earlier assessment order requires to be amended and, in that regard, exercise of the amending power under section 210(3) is a mandatory duty, is the basis of the assessee's contention. Under section 209(1) (a), the total income of the latest previous year in respect of which the assessee has been assessed is to be the basis for advance tax; for the purpose of the advance tax demanded, total income is computed in accordance with the provisions of sections 207, 208 and 209. But, can it be said that a demand issued under section 210(1) ceases to be valid, because, subsequently, another order of assessment for another subsequent previous year came into existence ? If that was the real intention, the language of section 210(3) would have been to make it obligatory on the part of the Income-tax Officer to make a fresh order demanding the advance tax based on the latest assessment order; section 210(3) does not contemplate a new order in the place of the earlier order made under section 210(1); sub-section (3) empowers the Income-tax Officer to amend the earlier order, by using the word "may". The provisions of sections 209, 210 and 212 are to be read together, as they form part of the same scheme governing the subject of advance tax. As per section 212(1), the assessee is given the liberty to estimate his total income in case the total income estimated by the order under section 210 is excessive and send the estimate to the Income-tax Officer and pay the advance tax as per the estimate made by the assessee; the filing of such estimate and payment of advance tax on the basis of his own estimate is at the option of the assessee. Section 212(3A) contemplates a different situation, In case the estimated total income and the consequent advance tax demanded under section 210 is far less than the appropriate total; income on which advance tax had to be paid, the assessee is obliged to file an estimate under circumstances stated in the subsection (3A) of section 212. Section 212(3A) is attracted under the following conditions :
(1) The assessee is already required to pay advance tax by an order under section 210;
(2) The correct income of the assessee is likely to be more than the income on which advance tax under section 210 has been demanded from him, or for any other reason;
(3) The advance tax payable on such current income would exceed the advance tax demanded section 210 by 33 1/3 per cent of the demanded amount.
8. While the language employed in section 210(3) uses the word "may", section 212(3A) uses the word "shall". Prima facie the word "may" does not create a mandatory duty, while the word "shall" is an imperative term. But principles governing statutory construction permit construing the word "may" as creating an obligatory duty; but such an inference depends upon various factors such as the purpose sought to be achieved, consequences of construing the term one way or the other, etc. Hence the Income-tax Officer has to make an order demanding advance tax based on the assessment order available for the latest year. In the case of a firm and its partners, there are likely to be more than one Assessing Officer (as happened in the instant case) and the latest order made in respect of the firm may not be intimated in time to the other Income-tax Officer who is in charge of the assessment of one of the partners. Based on the material available with him, the latter may have issued a notice under section 210(1) and, for want of knowledge as to the assessment order made on the firm, he could not resort to amending his order. It cannot be the intention of Parliament that, in such a situation the partner may take advantage of the situation by not responding in filing his estimate of the income for paying advance tax under section 212(3A). If the advance tax payable exceeds by 33 1/3 per cent of the advance tax demanded, under section 210(1) and the assessee was aware of this, there is no reason to permit him to disregard the order received by him under section 210(1) for the purposes of section 212(3A). Sections 210(3) and 212(3A) are to be read harmoniously to make both the provisions workable in a realistic manner. Section 210(3) cannot be held as creating a mandatory duty, in the light of the Explanation to section 209(1), because section 210(3), governs all kinds of assessee, while the Explanation to 209(1) is confined to the cases of partners of registered firms, A general provision cannot be interpreted to suit the case of one category of assessee only.
9. The finding of fact, here is that the assessee knew that his income for purposes of advance tax was higher than the income estimated by the Income-tax Officer, and the order under section 210(1) served on him demanded a small amount and that the real advance tax would exceed the former 33 1/3 per cent. It cannot be held that the order made under section 210(1) became invalid or inoperative solely because that order could have been amended under section 210(3) based on the subsequent assessment order in respect of a subsequent "previous year". At the most, it may be a case of irregularity which would not erase the efficacy of the order made under section 210(1) and the assessee could not have ignored the said demand.
10. In the circumstances, the Revenue is justified in contending that the assessee failed to establish a reasonable cause for not filing the estimate under section 212(3A).
11. Mr. Chanderkumar, learned counsel for the Revenue, cited the decision reported in Popular Lungi Co. v. CIT [1986] 158 ITR 656, wherein the Madras High Court pointed out that the fields of operation of sections 212(1) and 212(3A) are different and that the latter comes into operation if the tax on the current income exceeds the stipulated percentage over the tax demanded under section 210. Therefore, the obligation to file a revised return under section 212(3A) is not discharged, just because, earlier, a lower estimate was filed under section 212(1).
12. In Ganeshdass Bhojraj v. CIT , the order under section 210 mentioned a lower figure as tax payable and this was due to a clerical mistake. The High Court held that this did not result in the said order losing any efficacy and the assessee was under an obligation to file his estimate of income and pay the advance tax accordingly under section 212(3A) as the tax demanded under section 210 was far lower and section 212(3A) operated on the situation. A mere inaccuracy in the notice of demand under section 210, it was held would not vitiate it.
13. As the findings stand, in the instant case, the Income-tax Officer was not aware of the assessment order made by another Income-tax Officer in respect of one of the firms and thus was not in a position to amend his order made earlier under section 210(1). The assessee was presumed to have known his share in the total income of the said firm; therefore we are of the view that the assessee was obliged under section 212(3A) to file his estimate of the total income and pay the appropriate advance tax. The levy of penalty under section 273(1)(c), therefore, cannot be held as incorrect.
14. The question is answered in the affirmative and against the assessee.