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1. The 1st Income-tax Officer, C-II Ward, Bombay, served a notice under section 18A(1) of the Indian Income-tax Act, 1922, calling upon Bhagwandas Kevaldas - who will hereinafter be called the assessee to pay in four equal installments Rs. 25,973-5-0 as advance tax for the assessment year 1948-49. On September 17,1947, the assessee filed an estimate of his income under section 18A(2) and of the tax payable by him, and on January 10, 1948, he filed a revised estimate. An order under section 23B of the Act provisionally assessing the income was made by the Income-tax Officer and pursuant thereto on August 23, 1950, the assessee paid the tax so assessed. Regular assessment of the income was made on March 31, 1953, by the Income-tax Officer, and it was found that the tax paid on the basis of the estimate of the assessee was less than eighty per cent of tax determined as a result of the regular assessment. But the Income-tax Officer made no charged for interest under sub-section (6) of S. 18-A of the Income-tax Act.

2. The departmental auditor raised an objection in auditing accounts of C-II Ward that a mistake was committed by the Income-tax Officer in failing to charge interest in making the order of assessment against the assessee. On September 21, 1956, the Income-tax Officer served a notice upon the assessee requiring him to show cause why the mistake in not levying interest be not rectified and why he should not directed to pay "penal interest" under section 18A(6). On October 4, 1956, the Income-tax Officer recorded the following order : "During the internal checking of C-II Ward, the auditor has pointed out a mistake is apparent from record the same is rectified under section 35 after giving due notice to the assessee". and served a notice of demand calling upon the assessee to pay Rs. 14,929-10-0 as interest due under section 18A(6) for the period January 1, 1948, to July 22, 1950.

18. We may now turn to the question which is raised on the merits in this appeal. Section 18A which was added by the Indian Income-tax (Amendment) Act II of 1944, for imposing liability for advance payment of tax enacts by the first sub-section, in so far as it is material, that where there is no provision made for deduction of income-tax at the time of payment, the Income-tax Officer may or after the commencement of any financial year, by order in writing, require an assessee to pay quarterly to the credit of the Central Government the income-tax payable on so much of such income as is included in his total income of the latest previous year in respect of which he has been assessed. Contrary to the two basic concepts of the scheme of the Indian Income-tax Act under which tax is charged upon the income of the previous year and not the income of the assessment year and liability does not arise until the annual Finance Act is passed charging income to tax, section 18A introduces within the scheme of the Act the principle of advance payment of tax and authoresses pollection of advance tax before the assessment year, com minces and before even the. Finance Act which imposes liability is enacted. But this tax is ad Vance tax which is to be adjusted against tax-payable on the income of the financial year in the light of the total income which may be com putted and also in the light of the Finance Act which may be passed. Assessment and demand for advance payment of tax are therefore provisional. If ultimately the advance tax paid is in excess of the tax finally assessed, refund will be granted to the assesses if the advance tax-paid is less than what is payable, the balance because payable on the final assessment. With the object of enforcing compliance with the provision for payment of advance tax effectively, and at the same time to protect the assesses from avoidable harassment, the Legislature made a provision under sub-s, (2) of, S. 18-A enabling the assesses before the last instilment is due to intimate his own estimate of the income, of the previous year to the Income-tax-Officer and the tax payable by him calculated in the manner laid down in sub-s. (1) and to pay such amount as accords with his estimate. Provision is also made for submitting revised estimate of income. The Legislature by sub-s. (6) also on the other hand penalizes an assesses who seeks to evade liability to pay advance tax by underestimating his income by providing that if in any year an assesses paid tax under sub-s. (2) or (3) on the basis of his own estimate and the tax so paid is less than eighty per cent of the tax determined on the basis of the regular assessment, so far as such tax relates to income to which the provisions of S. 18 do not apply and so far as it is not due to variations in the rates of tax made by the Finance Act enacted for the year for which the regular assessment is made, simple interest at the rate of six per cent per annum from the 1st day of January in the financial year in which the tax was paid up to the date of the said regular assessment shall he payable by the assesses upon the amount by which the tax so paid falls short of the said eighty per cent. Sub-section (6) as originally enacted left no discretion to the Income-tax Officer: if the estimate fell below the prescribed limit, the Income-tax Officer was obliged to direct payment of interest. But by Act 25 of 1953 which was enacted with retrospective operation from April 1, 1952, the following proviso was added as the fifth provision to S. 18-A (6).

23. This court in M. K. Venkatachalam v, Bombay Dyeing and Manufacturing Co. Ltd. held in dealing with the case arising under the second proviso to section 18A(5) (which was also inserted by Act 25 of 1953 with retrospective operation from April 1, 1952) that the Income-tax Officer has power under section 35 of the Act to rectify a mistake in the assessment, even though the mistake was the result of a legal fiction arising from the retrospective operations given to the amending Act. In Venkatachalam's case on October 9, 1952, the Income- tax Officer assessed the taxpayer for the assessment year 1952-53 and gave him credit from certain amount as representing interest on tax paid in advance under section 18A(5). Thereafter, on May 24,1953, the Indian Income Tax (Amendment) Act (25 of 1953) came into force which added a proviso to section 18A(5) that the assessee was entitled to interest not on the whole of the advance tax paid by him, but only on the difference between the payment made and the amount assessed. This e face of the order. In the present case the position is reversed, but on that account the principles is not nay the less applicable. By virtue of the retrospective amendment in section 18A(6) the order which was made by the Income-tax Officer on the date of assessment and which was plainly inconsistent with the terms of the section as it then stood became one which he was competent to pass in exercise of his power.