TMI Blog1995 (9) TMI 324X X X X Extracts X X X X X X X X Extracts X X X X ..... essee only on an assessment being made by the Assessing Officer. Though the levy/charge was created by the Indian Income-tax Act, 1922, the tax became payable only when it was ascertained in accordance with the provisions of the Act. In 1944, however, section 18A was introduced providing for the payment of tax in advance, i.e., even prior to the making of the assessment. Section 18A incorporated the principle "pay as you earn". The advance tax was payable on prescribed dates during the financial year preceding the relevant assessment year. Sub-section (5), as originally introduced, provided for payment of simple interest at two per cent. per annum on the entire amount paid by way of advance tax. (The rate of interest was raised to four per cent. with effect from April 1, 1955), The interest was payable "from the date of payment (to the date of the provisional assessment made under section 23B or if no such assessment has been made) to the date of the assessment (hereinafter called the 'regular assessment') made under section 23 of the income, profits and gains of the previous year. By the Indian Income-tax (Amendment) Act, 1953, the second proviso to sub-section (5) was inserte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessment year immediately following the said financial year......" (The rate of interest has been changing from time to time. It is now 15 per cent. Further, with effect from April 1, 1985, the words "tax determined on regular assessment" have been substituted by the words " assessed tax"). The date from which interest is payable has been changed under the 1961 Act. Instead of date of payment under the 1922 Act, it is the first day of the relevant assessment year, Sub-section (2) of section 214, as originally enacted, corresponded to the first proviso to section 18A(5) of the 1922 Act. Section 215, in turn, provides for payment of interest by the assessee in case the advance tax paid by him falls short of the prescribed percentage of the tax assessed. With effect from April 1, 1968, section 214 underwent certain changes. A proviso was appended to sub-section (1) saying that "in respect of any amount refunded on a provisional assessment under section 141A, no interest shall be paid for any period after the date of such provisional assessment". Sub-section (1A) was inserted which read : "(1A) Where on completion of the regular assessment the amount on which interest was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal. The appeal is allowed as a consequence of which, the assessment order is revised. As a result of such revised assessment made pursuant to the appellate order, the tax refundable to the assessee becomes larger-say whereas, according to the original assessment, he was entitled to refund of Rs. 10,000, he becomes entitled to a total refund of Rs. 15,000 as a result of the revised assessment made pursuant to the appellate order. The question is--on what amount and up to which date is the interest payable ? On being elaborated, the question yields the following sub-questions : (a) is the interest payable only on Rs. 10,000 and if so, whether the interest is payable till the date of first/ original assessment or till the date of the revised assessment ? (b) is the interest payable on Rs. 15,000 and if payable, is it payable only till the date of first/original assessment or till the date of the revised assessment ? A large number of High Courts including Bombay, Kerala, Allahabad, Punjab and Haryana, Andhra Pradesh and Gauhati have taken the view that the interest is payable only up to the date of the first/original assessment and not up to the date of the revised assessment ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer for making a fresh assessment in accordance with the directions given by him and after making such further enquiries, as may be directed or as may be found necessary. Section 252 provides a further appeal/second appeal to the Appellate Tribunal. Section 254(1) says that the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. Section 256 provides for reference to the High Court on questions of law whereas section 257 provides for statement of a case to the Supreme Court directly in certain situations. After the receipt of the opinion of the High Court or the Supreme Court, as the case may be, the Appellate Tribunal shall have to pass orders as are necessary to dispose of the case in conformity with the judgment of the High Court/Supreme Court. Section 263 vests suo motu power of revision in the Commissioner to be exercised in certain situations. The Commissioner is empowered to "pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment". Section 264 ves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he refund is granted : Provided that, where the amount so found to be in excess was paid in instalments, such interest shall be payable on the amount of each such instalment or any part of such instalment, which was in excess, from the date on which such instalment was paid to the date on which the refund is granted : Provided further that no interest under this sub-section shall be payable for a period of one month from the date of the passing of the order in appeal or other proceeding : Provided also that where any interest is payable to an assessee under this sub-section, no interest under sub-section (1) shall be payable to him in respect of the amount so found to be in excess." Decisions of High Courts : Coming to the decided cases, the first one which considered the meaning of the expression "regular assessment" is of the Bombay High Court in Sarangpur Cotton Manufacturing Co. Ltd. v. CIT [1957] 31 ITR 698. It related to the assessment year 1947-48, which means that the matter was governed by section 18A before its amendment in 1952. According to the said provision, interest was payable on the whole of the amount paid by way of advance tax from the date of payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st was revived when that order of assessment was set aside and a different ter minus was fixed for the calculation of interest ? It seems to us that what the Legislature contemplated in using the expression 'the date of the assessment' was the factual date of the assessment and it was not considering the legality or the validity of the assessment made. It wanted to fix two terminii for the calculation of interest. With regard to one terminus there was no difficulty ; that was the date of payment of advance tax by the assessee. The other terminus had to be fixed and the other terminus was the date when the regular assessment was made. That terminus having been fixed, it could not be altered by any subsequent event or by the vicissitudes through which the assessment order might pass. If there had been no appeal and if the assessment order had not been set aside, obviously this would have been the only terminus. The Legislature did not contemplate that the terminus should be altered because the assessee chose to appeal and because the Appellate Assistant Commissioner set aside the order. (emphasis added)." The second reason, probably a more substantial one, reads : "Let us lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e should not be entitled to claim interest on rupees six lakhs paid pursuant to the original assessment order from the date of its payment till the date of the revised assessment order. At that time, it must be remembered, there was no provision under which interest could be claimed on the said amount of rupees six lakhs. Chagla C. J., points out the inequity or illogicality in paying interest on the excess amount of advance tax from the date of payment till the date of revised assessment order and in denying any interest on the amount of rupees six lakhs paid pursuant to the original assessment order. The learned Chief Justice accordingly held that when section 18A(5) spoke of "the date of the assessment (hereinafter called the "regular assessment") made under section 23", it referred to the original order of assessment. The above decision was followed by a Division Bench of the Allahabad High Court in Sir Shadilal Sugar and General Mills Ltd. v. Union of India [1972] 85 ITR 363, which is the subject-matter of Civil Appeal No. 1395 of 1974 before us. The assessment year concerned in this case is 1960-61 and, therefore, governed by the Indian Income-tax Act, 1922. R. S. Pathak J, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecisions of the Bombay and Allahabad High Courts in Sarangpur Cotton's case [1957] 31 ITR 698 and Sir Shadilal Sugar Mills' case [1972] 85 ITR 363, respectively, as having been rendered under the provisions of the 1922 Act which, said the learned judge, were different from those in the present Act. The Revenue urged before the learned judge that when Parliament enacted the 1961 Act and used the expression "regular assessment" in section 214, it must be presumed to have been aware and have approved of the interpretation placed thereon by the two High Courts, Bombay and Allahabad. The learned judge declined to accede to the said contention holding that the expression construed by the said High Courts was not the expression "regular assessment" but the words "assessment (hereinafter called the 'regular assessment')". We may next refer to the decision of the Madras High Court in CIT v. Rajalakshmi Mills Ltd. [1980] 125 ITR 141. The assessment year concerned was 1968-69. It was a case where the original assessment order was rectified by the Income-tax Officer under section 154. The Division Bench held that the original assessment order as rectified is the regular assessment order or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly up to the original assessment order ; (d) by interpreting the expression "regular assessment" as referring to original assessment, no anomaly will result ; it is consistent with the scheme of the provisions relating to advance tax ; (e) the words "regular assessment" in sub-section (1A) of section 214 carry a different meaning from the meaning the said words carry in sub-section (1) ; (f) the expression "regular assessment" should carry the same meaning in both sections 214 and 215 ; it cannot be different ; (g) inasmuch as the advance tax as well as the tax, if any, paid pursuant to the assessment order--or otherwise--get merged into one tax, payable under and referable to the assessment order, the assessee is entitled to interest on the amount refunded as a result of the revised assessment order (made pursuant to the appellate, revisional or reference order) from the date of payment till the date of refund. It would thus be seen that this decision while affirming the basic premise of Sarangpur Cotton's case [1957] 31 ITR 698 (Bom) and Sir Shadilal Sugar's case [1972] 85 ITR 363 (All), seeks to place the amount paid by way of advance tax also within the purview of sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the same assessment year, the learned Chief Justice observed. The first order of assessment, he said, is substituted by the second order. The position is the same, the learned Chief Justice observed, whether the appellate/revisional authority sets aside the assessment and directs a fresh assessment to be made or merely directs the reduction of tax liability or effects other modification. The learned Chief Justice further held that in view of its clear language, sub-section (1A) of section 244 cannot apply to or take in the amount paid by way of advance tax. Section 214(1) and section 244 operate in different fields and, therefore, section 244 cannot be dovetailed into section 244(1A), he said. When the decision in Sarangpur Cotton's case [1957] 31 ITR 698 (Bom) and its reasoning was commended to the Full Bench for its acceptance, Poti C. J., declined to accede to the same in the following words : " No doubt, there is logic in this approach, though logic alone will not be determinative of the controversy arising from a taxing statute. The approach of the learned judges in that case is evidently that if money paid to satisfy the demand pursuant to an assessment does not earn in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Legislature; (b) since payment of interest is compensatory in nature, there is no logic behind limiting it to a particular artificial date ; (c) the interpretation favoured by them acts as an assurance to the assessee that in case the amount paid by him is found to be excess, he will get interest thereon till realisation just as he is put on notice by section 215 that if he fails to pay the prescribed percentage of assessed tax by way of advance tax, he shall be liable to pay interest thereon. This interpretation really advances the object of the enactment ; (d) the complementary nature of sections 215 and 214 is also a pointer in favour of this interpretation. Reference may also be made to the decision of the Bombay High Court in Cyanamid India Ltd. v. K. N. Anantharama Ayyar [1993] 203 ITR 561. The Division Bench, while following the Full Bench decision in Carona Sahu's case [1984] 146 ITR 452 (Bom) held that a plain reading of sub-section (1A) of section 244 leaves no manner of doubt that the liability to pay interest under the said sub-section covers also the advance tax paid prior to March 31, 1975, but credited towards tax liability determined under an order of assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two artificial terminii, viz., the date from which interest is payable and the date up to which interest is payable. These terminii are fixed and constant though the differing meanings attached to the expression "regular assessment" lead to different consequences. We may give an illustration to explain what we mean. Take a case where as a result of the original assessment made on March 31, 1976, for the assessment year 1975-76, a sum of Rs. 10,000 is found to have been paid by way of advance tax in excess of the tax assessed. The assessee will be entitled to refund of the said amount of Rs. 10,000 with interest thereon calculated at the prescribed rate from the first day of April, 1975, up to March 31, 1976. On this score, there is no controversy. But, say, in this very illustration, the assessee files an appeal and as a result of the appellate authority's order, the assessment is revised on March 31, 1977, as a result of which it is found that the assessee has paid in all a sum of Rs. 15,000 by way of advance tax in excess of the assessed tax. In such a situation, the assessee would be entitled to the total refund of Rs. 15,000 but so far as interest is concerned, he would be en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in law so due. It was calculated and assessed with reference to the income of the assessee for a given year, but it became due when a demand was made under section 29 and section 45 (sections 156 and 220(1) of the 1961 Act). The position under the Act of 1961 is the same. The assessee has to pay tax pursuant to an assessment order. It becomes due and payable under section 156 of the new Act when a notice of demand under section 156 is served upon him. It must be paid within the time and at the place and to the person mentioned in the notice of demand under the provisions of section 220. If the tax liability is reduced in appeal or in any other proceeding, then the excess amount of tax realised will have to be refunded to the assessee under section 240. If the refund is delayed beyond the period mentioned in section 244, interest will have to be paid for the period commencing from the date on which the three months' period mentioned in section 244(1) expires and till the date on which the refund is granted. But, no interest is payable for the excess amount of tax realised pursuant to the notice of demand under section 156 from the date of payment to the date of the appellate ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d are incorporated in Chapter XVII of the Income-tax Act, which deals with "Collection and recovery of tax". Sub-section (1) of section 190 makes it clear that this method of payment of tax will not prejudice the charge of tax under the provisions of sub-section (1) of section 4, nor will it modify the assessee's liability to pay income-tax directly pursuant to an assessment order. The provisions of sections 190 and 191 are as under : " 190. (1) Notwithstanding that the regular assessment in respect of any income is to be made in a later assessment year, the tax on such income shall be payable by deduction at source or by advance payment, as the case may be, in accordance with the provisions of this Chapter. (2) Nothing in this section shall prejudice the charge of tax on such income under the provisions of sub-section (1) of section 4. 191. In the case of income in respect of which provision is not made under this Chapter for deducting income-tax at the time of payment, and in any case, where income-tax has not been deducted in accordance with the provisions of this Chapter, income-tax shall be payable by the assessee direct." Chapter XVII lays down three methods of collec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year for an assessment for the assessment year, next following the financial year in which it was payable and credit therefor shall be given to the assessee in the regular assessment". " 219. Credit for advance tax.-- Any sum, other than a penalty or interest, paid by or recovered from an assessee as advance tax in pursuance of this Chapter shall be treated as a payment of tax in respect of the income of the period which would be the previous year for an assessment for the assessment year next following the financial year in which it was payable, and credit therefor shall be given to the assessee in the regular assessment: Provided that where, before the completion of the regular assessment, a provisional assessment is made under section 141A, the credit shall be given also in such provisional assessment." (The proviso was added by the Finance Act, 1968 from April 1, 1968). This section introduces a legal fiction that the amount of advance tax paid shall be treated as payment of tax in respect of income of the relevant previous year. It also provides that credit for this advance tax has to be given to the assessee in the regular assessment. These provisions were necessary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the provisions of Chapter XIX of the Income-tax Act. Interest on delayed refund, if any, has to be paid under section 243. If in the assessment order, the Income-tax Officer determines that any sum is refundable to the assessee, that sum will have to be refunded under section 237. If the refund is not paid within due time, interest will have to be paid under section 243 on the refundable amount till the date of the order of the refund. The underlying idea behind this section has been taken to the logical conclusion by section 244(1A) which applies where the assessee pays tax or penalty after March 31, 1975, pursuant to an order of assessment or penalty. If as a result of appeal or other proceeding the payment of tax is determined to be in excess of the amount which the assessee was liable to pay, the Central Government has to pay interest to the assessee on the excess amount from the date on which the tax was paid to the date on which the refund was granted (excluding the month in which the order was passed). Payment of tax after March 31, 1975, will include the amount of advance tax which was retained by the Income-tax Officer after March 31, 1975, and was adjusted towards the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssurance Co. Ltd. v. LIC India [1963] 48 ITR 144 (SC) dealing with a case of refund of tax deducted at source explained the principle in the following manner : " Now, the Finance Acts for the years 1955 and 1956, like all other such Acts, provided the rates at which income-tax was payable for the assessment years commencing from 1st April of the year in which the Acts were respectively passed. It would follow that on the 1st of April in 1955 and in 1956 the amounts of the tax payable by the appellant became determinable for the income was then capable of computation and the rate was also known. So, on these dates, the appellant became entitled to a refund of the amount of tax deducted at the source or treated as paid on its behalf under the provisions of the Income-tax Act earlier mentioned which was in excess of the tax payable by it for each of these years. The assessment only particularised the amounts ; it did not create the right, for the right came into existence as soon as according to the relative Finance Act it became ascertainable that the tax deducted at source or treated as paid on its behalf had exceeded the tax payable. That right, therefore, was an asset contemplat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. This means that in the assessment order, the Income-tax Officer will have to give credit for the advance tax paid by the assessee by treating the entire amount as income-tax paid by the assessee. Thereafter, if there is any excess sum it will be refunded or if there is any shortfall in the payment of advance tax, that will be recovered by the Income-tax Officer. The amount standing to the credit of the assessee, upon assessment and after adjustment of the tax liability as quantified in the assessment order, loses its character as advance tax. It becomes an amount refundable as determined in the order of assessment. If after adjustment of the tax liability any excess amount is standing to the credit of the assessee, interest will be paid on that excess amount up to the date of the assessment order and, thereafter, the assessment order will contain a direction to refund the excess amount. The amount will be refunded with interest, if any, under section 243. Likewise, if after adjustment it is found that the liability to pay tax is more than the amount standing to the credit of the assessee, the Income-tax Officer will issue a notice of demand to recover the outstanding balance. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different from the tax paid pursuant to notice of demand under section 156 by an assessee. Any tax refundable pursuant to the appellate order has to be dealt with in accordance with the provisions of sections 240 and 244. There is no scope for invoking the provisions of section 214 in such a situation. If the assessment order is set aside by a higher authority in its entirety and a direction is given to pass a fresh assessment order, the position will remain the same. The amount of advance tax paid by the assessee loses its character by virtue of section 199 as soon as the first assessment order is made and the advance tax is set-off against the demand raised in the assessment order. If the assessment order is set aside, the adjusted amount of tax or the amount of tax refunded or refundable does not regain its character of advance tax once again. The argument made on behalf of the Revenue that in such a case a fresh assessment may be treated as "regular assessment" is misconceived and is not in consonance with the scheme of the Act and the language of various sections dealing with regular assessment. (C) Income-tax is realised by deduction at source, payment of advance tax and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncial year to the date of the regular assessment. Here also, the interest will not run beyond the date of the assessment order. If upon making an assessment, the Income-tax Officer finds that advance tax paid is less than seventy-five per cent. of the tax due from the assessee after making the statutory adjustments, then he will serve a notice of demand on the assessee, calling upon him to pay the tax due, to be paid by him. Thereafter, the tax will be recovered in accordance with the provisions of Chapter XVII-D-Collection and recovery (sections 220 to 231). If there is any delay in payment of the tax, the assessee may be liable to pay interest under sub-section (2) of section 220. These provisions go to show that once an assessment order is made, liability to pay interest on the amount of the shortfall in payment of advance tax ceases under section 215. (E) The provisions of sub-section (3) of section 215 are also of great significance in this connection. If the amount of advance tax, which was found deficient and on which interest was payable under section 215(1) by the assessee is reduced as a result of an order of rectification, appeal or revision, etc., the interest shall b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 215 and also under section 217. Section 217 deals with a case where the assessee had not been hitherto assessed to tax and has not sent an estimate as required by sub-section (3) of section 212. In such a case, the assessee has to pay interest on seventy-five per cent, of the assessed tax, subject to adjustments made in accordance with the provisions of sub-section (1) of section 215. If "regular assessment" means the final revised assessment, then even in a case of insignificant enhancement, the assessee will have to pay interest right up to the date of the revised assessment order. If such a construction is made then even if the assessee gets a small relief in appeal, the liability to pay interest may increase and the overall liability of the assessee will be larger. The argument, which was upheld in some of the cases now under appeal, is that it will be inequitable if the assessee does not get interest on the amount of advance tax paid, when the amount paid in advance is refunded pursuant to an appellate order. This is not a question of equity. There is no right to get interest on refund except as provided by the statute. The interest on excess amount of advance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been laid down in Chapter XIV of the Income-tax Act, 1961 (sections 139 to 158). Section 139 deals with the return of income. Section 140 lays down by whom and how a return has to be signed and verified. Section 141 provides for provisional assessment which may be made even before a regular assessment. Section 142 empowers the Income-tax Officer to make enquiry before assessment. Sections 143 and 144 lay down the manner in which the Income-tax Officer will make an assessment of income. Under sub-section (1) of section 143, the Income-tax Officer will straightaway assess the total income or loss of the assessee and determine the sum payable by him or refundable to him on the basis of the return of income filed by the assessee, if he was satisfied that the return was correct and complete. No enquiry was necessary before passing an order under this sub-section. But, if the Income-tax Officer was not satisfied with a return, he had to serve upon the assessee a notice requiring him to attend his office and produce any evidence on which he may rely in support of the return. After considering the evidence produced by the assessee and after taking into account all relevant material whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, the time-limit laid down in section 153(1) will not apply. If every conceivable form of computation of income is to be treated as "regular assessment", then there was no need to define the phrase "regular assessment" to mean an assessment under section 143 or section 144. There is nothing in the Act to suggest that "regular assessment" has been used in any other sense than the first assessment made under section 143 or section 144. Any modified or revised assessment after completion of the order under section 143 or section 144 will be a fresh order passed to implement the direction of a higher authority. The order will be erroneous and liable to be set aside if the direction of the higher authority is not faithfully carried out. The jurisdiction to pass such an order is conferred by the order of the higher authority. If the first order of assessment is set aside and the Income-tax Officer is directed to pass a fresh order of assessment, the position will be the same. The fresh assessment order will not be an order passed under section 143 or section 144 simpliciter. The time-limit laid down under section 153(1) for passing an order under section 143 or section 144 will not ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xceeded the tax payable on the basis of the return, the Income-tax Officer, if he was of the opinion that the regular assessment of the assessee was likely to be delayed, could proceed to make a provisional assessment on the basis of the return. Here again, "regular assessment" could have no other meaning than the original order of assessment passed under section 143 or section 144. (H) Chapter XVII deals with "Collection and recovery of tax". It provides for deduction of tax at source, payment of advance tax and also collection and recovery of tax pursuant to a notice of demand under section 156. Income-tax becomes payable only after computation of the total income and quantification of the tax by an assessment order and service of a notice of demand on the basis of the assessment. Section 190 lays down that "Notwithstanding that the regular assessment in respect of any income is to be made in a later assessment year, the tax on such income shall be payable by deduction at source or by advance payment, as the case may be, in accordance with the provisions of this Chapter". "Regular assessment" here can only mean the original order of assessment passed by the Income-tax Officer u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning than the first order of assessment passed under section 143 or section 144. This section lays down that even though no order of assessment has been passed under section 143 or section 144 for a given year, the tax in respect of the income of that year can be collected by deduction at source or by advance payment. There is no reason to presume that "regular assessment" in the other sections of Part D of Chapter XVII has been used in any other sense. "Regular assessment" has been used in section 209 once again in the sense of the first assessment. The amount of advance tax payable by an assessee in the financial year has to be computed on the basis of, inter alia, "total income of the latest previous year in respect of which he has been assessed by way of regular assessment". Here, "regular assessment" cannot possibly mean a revised or a fresh order of assessment pursuant to an appellate order. For example, if for the assessment year 1971-72 (financial year 1970-71) advance tax is being computed and the Income-tax Officer finds that assessment for the assessment year 1970-71 has already been completed, he will take that assessment as the starting point for computation of advance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e if there is an excess payment of advance tax pursuant to a demand made by the Income-tax Officer or on the basis of the estimate furnished by the assessee. Interest will have to be paid by an assessee, if the advance tax paid is less than seventy-five per cent. of the tax determined on the basis of regular assessment, after giving credit to the assessee for the amount of tax deducted at source. The interest, however, will be paid only up to the date of the regular assessment. It clearly appears from the provisions of section 214 and section 215 that "regular assessment" cannot have any other meaning than the first order of assessment, that means the date of the first order of assessment. Since tax had been collected in advance, interest will have to be paid till the date of computation of the tax in regular course, pursuant to the charge on total income of an assessee imposed by section 4. That computation is done under section 143 or section 144. The amount of tax lying to the credit-of the assessee, thereafter, is treated as tax paid pursuant to the assessment. If any excess amount of tax has been realised at source, then such excess has to be refunded with interest up to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1922, but has filed an estimate of income and paid tax accordingly under sub-section (3) of section 212. As has been noted earlier in the judgment, "regular assessment" in this context cannot have any other meaning than the first assessment made under section 143 or section 144. Lastly, section 219 provides for credit to be given for advance tax in the regular assessment. This credit has to be given in the course of the first assessment under section 143 or section 144. After completion of the assessment, the excess amount of advance tax realised, if any, will have to be refunded. There cannot be any question of giving credit for advance tax at the stage of any revised assessment passed in consequence of the order of any higher authority. Penal consequence of failure to pay or shortfall in payment of advance tax is dealt with by section 273. If an assessee furnishes a false estimate of the advance tax payable by him or fails to pay advance tax in accordance with the requisition made by the Income-tax Officer, then penalty may be imposed under section 273 of the Act, as originally enacted, which provides : "273. False estimate of or failure to pay advance tax.--If the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the quantum of tax payable by the assessee by virtue of any other order, then the quantum of tax determined will have to be modified in accordance with the provisions of sub-section (3) of section 215. In this section, modification under the provisions of section 215 can only be of "tax determined on regular assessment". We do not see any reason why the phrase "regular assessment" should be understood in any other sense than the first assessment made in accordance with the provisions of Chapter XIV and within the period of limitation laid down in sub-section (1) of section 153. (J) Even under section 153, a distinction has been drawn between assessments under section 143 or section 144 and any other types of' assessments. Section 153 lays down : " 153. Time-limit for completion of assessments and reassessments.(1) No order of assessment shall be made under section 143 or section 144 at any time after-- (a) the expiry of four years from the end of the assessment year in which the income was first assessable ; or (b) the expiry of eight years from the end of the assessment year in which the income was first assessable, in a case failing within clause (c) of sub-section (1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt passed under section 143 or section 144. If any consequential order has to be passed by the Income-tax Officer to give effect to an order passed by the higher authority, that consequential order cannot be treated as the "regular assessment" nor can the date of the consequential order be treated as the date of the regular assessment. THE INTRINSIC EVIDENCE FURNISHED BY SECTION 214 ITSELF We have, so far, mainly examined the scheme of the Act without taking into consideration the amendments made to section 214 from time to time. We shall now turn to the provisions in section 214 itself and in particular the amendments made in section 214 what we have called the short-haul approach". (A) Section 214 contains unmistakable and irrefutable indications that "regular assessment" therein means the original assessment alone. They are : (i) sub-section (1A) as substituted by the Taxation Laws (Amendment) Act, 1984, with effect from April 1, 1985, says that "where as a result of an order under section 250. . . . the amount on which interest was payable under sub-section (1) has been increased or reduced, as the case may be . . . ." the interest shall also be increased or decreased c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the manner in which any amount rended on the provisional assessment had to be dealt with. Where the sum refundable on regular assessment was equal to or exceeded the amount refunded under the provisional assessment, the amount so refunded was deemed to have been refunded towards the regular assessment. When no refund was found due on regular assessment or the amount refunded under the provisional assessment exceeded the amount refundable on regular assessment, the whole or the excess amount so refunded was deemed to be tax payable by the assessee. It was made clear by sub-section (5) that nothing done or suffered by reason or in consequence of any provisional assessment shall prejudice the determination, on the merits, of any issue in the course of the regular assessment. The Finance Act, 1968, amended sections 199 and 219 to enable the assessee to get refund pursuant to the summary assessment under section 141A. Section 199 was amended to enable the assessee to get credit for the tax deducted at source in the provisional assessment by providing that "regular assessment" in that section will include provisional assessment. Section 219, likewise, was amended to provide that the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y accordingly. (5) Nothing done or suffered by reason or in consequence of any provisional assessment made under this section shall prejudice the determination, on the merits, of any issue which may arise in the course of the regular assessment." The summary assessment made under section 141A is made, inter alia, for the purpose of refunding the excess amount of tax realised from an assessee. This assessment under section 141A cannot prejudice in any way the determination of the amount of refund payable to the assessee, if at all, ultimately in the regular assessment. If any excess amount of refund has been paid to an assessee with interest under section 214 pursuant to the provisional assessment, the excess amount so refunded shall be recovered by deeming the excess amount as tax payable by the assessee as laid down by section 141A(4). Consequently, if any excess amount of interest has been paid under section 214(1) read with the proviso, that amount will be recovered under sub-section (1A) of section 214, which was as under : " (1A) Where on completion of the regular assessment, the amount on which interest was paid under sub-section (1) has been reduced, the interest shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction (1A) has taken note of not only increase, but also reduction of the amount on which interest was paid under section 214. Simultaneously with this, section 215 was amended and sub-section (3) was recast on the lines of newly introduced sub-section (1A) of section 214 with effect from April 1, 1985. Under this provision, the amount of interest payable by an assessee had to be increased or reduced pari passu with the increase or reduction of the amount on which such interest was payable in consequence of an order of rectification or an order passed by a higher authority. In other words, section 214 and section 215, with effect from April 1, 1985, have brought about important changes in the scheme of payment of interest by the Central Government or the assessee, as the case may be. The period, therefore, for which the interest has to be paid remains the same, i.e., the first day of the relevant assessment year to the date of the regular assessment (first assessment). But, the quantum of interest payable will depend upon the amount of refund payable after the quantum of tax payable is finally determined in appeal, revision or any other proceeding. PART III In this part, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payable to him in respect of the amount so found to be in excess. This sub-section applies only to a case where an assessee has paid tax or penalty after March 31, 1975, in pursuance of any order of assessment or penalty. If, as a result of appeal or other proceedings under this Act, it is found that the amount of tax or penalty paid by an assessee is in excess of what the assessee is liable to pay, then the Central Government has to pay interest on the excess amount paid by the assessee. Such interest has to be paid up to the date on which the refund was granted. Sub-section (1A) of section 244 does not affect the operation of section 214 in any manner whatsoever. The period during which interest has to be paid under section 214 is the first day of the relevant assessment year to the date of the assessment order. The period covered by section 244(1A) is the period commencing from the date of payment of tax or penalty. Under Chapter XVII of the Act, tax may be collected from an assessee by way of deduction at source, advance payment and by, a notice of demand under section 156. But, the amount of tax deducted at source is treated as income-tax paid by the assessee upon the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount from the date on which such amount was paid to the date on which the refund was granted. Of course, there can be no question of paying interest both under section 214(1A) and section 244(1A) simultaneously. The rate of interest being the same under both the provisions, there would be no difference in the actual amount of interest payable, whichever provision is applied. This sub-section substantially alters the scheme of payment of interest on refund contained in sections 243 and 244 of the Income-tax Act, but does not affect the scope of section 214 in any way. Section 214 deals with payment of interest on the amount of tax found to have been paid in excess of the tax determined as payable on the regular assessment. Interest will have to be paid from the first day of the relevant assessment year to the date of the regular assessment, i.e., the first assessment. If the amount on which the interest was payable was varied subsequent to the first assessment, then the quantum of interest had also to be increased or decreased accordingly. But the period for which the interest had to be paid was not altered by the newly substituted sub-section (1A) of section 214. SUMMARY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant under section 264 of the Act. The assessment year concerned is 1971-72. The Commissioner held that the appellant is entitled to interest on the excess amount of advance tax paid only up to the original date of assessment and further that the said interest shall be calculated only on the excess advance tax amount paid as per the original assessment order. Having regard to the principles enunciated by us hereinabove, the appeal is liable to be dismissed and is accordingly dismissed to the extent indicated above. No costs. Civil Appeal No. 1395 of 1974 : This appeal is preferred against the judgment of the Allahabad High Court in Sir Shadilal Sugar and General Mills Ltd.'s case [1972] 85 ITR 363. The assessment year concerned herein is 1960-61 and is governed by the Indian Income-tax Act, 1922. We have referred to the judgment under appeal in the body of the judgment and for the reasons recorded therein, the appeal is dismissed. There shall be no order as to costs. Civil Appeals Nos. 5550 and 5551 of 1990 : The assessment years concerned in these appeals are 1976-77 and 1977-78. Since the facts relating to both the assessment years are similar (except the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X
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