TMI Blog1992 (1) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... he legal contentions raised in these matters, the facts of each of these petitions may briefly be set out as under: Special Civil Application No. 6656 of 1987: The petitioner, Saurashtra Cement and Chemical Industries Ltd., filed return of income for the assessment year 1980-81, on June 12, 1980, declaring a total income of Rs. 88,15,660. The petitioner had paid tax by way of advance tax and/or tax deducted at source to the tune of Rs. 52,40,000. On an application made by the petitioner for making a provisional assessment under section 141A of the said Act, the Income-tax Officer, Jamnagar, passed an order under section 141A on September 23, 1980, at annexure 'A' to the petition and worked out the tax payable on the returned income at Rs. 52,12,221, ordering refund of the excess tax of Rs. 27,779, which figure was subsequently rectified to Rs. 29,687 by an order dated December 12, 1980, passed by the Income-tax Officer and that amount was refunded to the petitioner. On February 22, 1983, a revised return was filed by the petitioner for the said year showing total income at Rs. 74,15,660 as against Rs. 88,15,660 disclosed in the original return. The difference of Rs. 14,00,000 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of 15% till the date of the actual refund of that amount and, in the alternative, has prayed for refund of Rs. 8,27,751 on the basis of the revised return filed by it. Special Civil Application No. 5944 of 1987: In this matter, the petitioner, who carries on business in the manufacture of woollen and blended fabrics, filed a return of total income of Rs. 1,07,66,520 for the assessment year 1981-82, on July 27, 1981, and, on the petitioner's making an application under section 141A of the said Act, the Income-tax Officer, on August 20, 1981, made a provisional assessment granting refund of Rs. 34,72,101. Thereafter, on March 17, 1984, the Income-tax Officer made a draft assessment order under section 144B of the Act and forwarded the same to the Inspecting Assistant Commissioner who, by his order dated September 18, 1984, gave instructions pursuant to which the Income-tax Officer passed the assessment order on September 19, 1984, assessing the total income of the petitioner at Rs. 1,38,85,270. On appeal to the Commissioner of Income-tax, certain disallowances made by the Income-tax Officer were upheld and the appeal was dismissed. Thereafter, the Tribunal, on further appeal, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in response to that notice. The petitioner requested the Income-tax Officer to drop the proceedings on the ground that the notice was invalid. Eventually, the Income-tax Officer passed an assessment order on August 8, 1977, and demand notice was issued under section 143(3) for Rs. 10,704. Thereafter, the Appellate Assistant Commissioner, by his order dated January 11, 1979, held that the notice under section 147(a) and the proceedings pursuant thereto were invalid and annulled the assessment order made on August 8, 1977. Thereafter, the petitioner applied for refund of the advance tax and the tax paid on self-assessment. The Income-tax Officer passed an order on August 27, 1979, issuing refund order for the tax paid by the petitioner other than payment under section 140A and the advance tax. The petitioner seeks relief for getting refund of the advance tax and the tax paid on self-assessment under section 140A of the Act. Special Civil Application No. 7835 of 1988: In this matter, for the assessment year 1984-85, the petitioner had applied for extension of time for filing his return up to September 30, 1984, and on July 31, 1984, the petitioner filed a return of income showin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charge itself would fail since the tax payable cannot be quantified or determined and no recovery can be made. When regular assessment cannot be made in accordance with law and the payability of tax cannot be determined and, therefore, the ad hoc recoveries made pending the regular assessment cannot be adjusted towards such regular assessment as required by the provisions of law, the necessary corollary should be to refund the entire tax collected by the Department by way of advance tax or tax deducted at source or self-assessment, as the case may be. He submitted that the tax collected by way of provisional assessment under section 141 or by way of self-assessment under section 140A or the advance tax and the tax deducted at source would all be analogous to an interim order which cannot be sustained if a final order cannot be made. He submitted that the process of collection of tax in these modes pending regular assessment would become abortive on the impossibility of making a regular assessment due to lapse of time. He, therefore, submitted that any retention of such amount collected towards the tax which could not be ultimately determined would violate the provisions of article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that, what is contemplated by the Act is computation of income to be first done by the assessee and thereafter to be checked by the Assessing Officer. He submitted that there was no warrant for the contention that the Assessing Officer can alone compute the income. He submitted that taxability is not dependent on the regular assessment. He submitted that only such amount as was paid in excess or which was not payable according to law was required to be refunded under the scheme of the Act and the tax which was payable and collected by the Department which was not wrongly recovered or was not an excess recovery was not required to be refunded even if a regular assessment was not made. Mr. Thakore also argued that the draft assessment order should be considered as final assessment order when the final assessment order was not passed within the time prescribed by section 153. He finally contended that a writ of mandamus should not be issued in favour of the persons who were otherwise liable to pay tax in accordance with law for refund of the tax amount which was payable under the Act and duly collected by them. For appreciating the rival contentions raised in these matters, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) as substituted with effect from April 1, 1976. In making the provisional assessment for refund under sub-section (1) of section 141A, the Income-tax Officer was required to make adjustments as provided in sub-section (2), which, inter alia, include disallowance of any deduction, allowance or relevant claim in the return which, on the basis of information available in such return, accounts and documents accompanying it, is prima facie inadmissible. In view of subsection (6) of section 141A, there was no right of appeal against a provisional assessment made for refund under sub-section (1). It would, however, be seen that, apart from the provisional assessment for refund under section 141A (now omitted with effect from 1-4-1989), the question of refund may also arise under section 237 of the said Act which provides that, if any person satisfies the Income-tax Officer that the amount of tax paid by him or on his behalf or treated as paid by him or on his behalf, for any assessment year exceeds the amount with which he is properly chargeable under this Act for that year, he shall be entitled to a refund of the excess. Section 239(2) prescribes the period within which a claim for re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n order which is made under section 237 of the Act is appealable under section 246. Thus, even where a regular assessment is not made by virtue of lapse of time as prescribed by section 153 of the Act, a person who may have been granted refund on provisional assessment under section 141A, though not entitled to appeal, can still claim under section 237 of the Act that the tax paid by him exceeds the amount with which he is properly chargeable under the Act though such a claim has to be made within the time prescribed under section 239(2) in the form prescribed or may be contained in a revised return filed under section 139(5). It was, however, contended on behalf of the petitioners that, where refund for any amount became due to the assessee as a result of any order passed in appeal or other proceeding under the Act, the Income-tax Officer was bound to refund the entire amount collected as tax to the assessee without his having to make any claim in that behalf under section 240 as it stood before the addition of a proviso to it with effect from April 1, 1989, which, inter alia, provided that, where the assessment is annulled, the refund shall become due only of the amount, if any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g made or as a result of an order passed in appeal or other such proceedings under the Act. It can never be the intention of the Legislature to allow a refund of the amount of tax which is properly chargeable and is payable even as per the return of the assessee. It was submitted that new facts may come to knowledge after the filing of the return which may justify refund of tax. If that be so, there are ample provisions for filing revised returns within the time prescribed and raising the claim for refund within the period prescribed under Chapter XIX in which event the Income-tax Officer can go into all the relevant facts and find out whether excess tax has been paid as claimed. This lie can do even if the period prescribed for assessment under section 143 has expired under the provisions of section 153. An enquiry into the question of such refund under Chapter XIX by the Income-tax Officer for arriving at his satisfaction as to whether the excess amount was paid is independent of the function that he discharges for regular assessment under section 143(3). Even though the regular assessment may have been time-barred, it will not come in the way of his deciding the question of refu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons enumerated therein and paid to the Central Government shall be treated as payment of tax on behalf of the person from whose income the deduction was made. Section 202 clarified that the power to recover tax by deduction was without prejudice to any other mode of recovery. Under section 205, it is provided that, where tax is deductible at the source, the assessee shall not be called upon to pay tax to the extent to which tax has been deducted from the income. As regards advance payment of tax ; section 207 provides that tax shall be payable in advance during any financial year in accordance with the provisions of sections 208 to 219 in respect of the current income of the assessee. Under section 208, advance tax shall be payable during a financial year in every case where the amount of such tax payable by the assessee during that year as computed in accordance with the provisions of Chapter XVII is 1,500 rupees or more. Section 209 provides for computation of advance tax. Section 210 provides for payment of advance tax by the assessee on his own accord or in pursuance of an order of the Assessing Officer, while section 211 relates to instalments of advance tax and due dates. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the return or any default or delay in payment of advance tax. In this context, we may also refer to the provisions of section 234B pertaining to interest for defaults in payment of advance tax and more particularly to Explanation I which, inter alia, provides that, in the said section, "assessed tax" means for the purpose of computing the interest payable under section 140A, the tax on the total income as declared in the return referred to in that section as reduced by the amount of tax deducted or collected at source in accordance with the provisions of Chapter XVII. It would, thus, be clear that, not only the liability to be subjected to tax arises under the charging section 4, but the liability to pay tax also arises immediately on determination of the rates of taxes with effect from the date on which such rates are made applicable and the liability to pay crystallizes in the context of such rates when the total income is computed in accordance with the provisions of the Act. On filing of the return under section 139, wherein such total income is indicated, section 140A, providing for self-assessment, comes into operation and it becomes obligatory on the part of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he total income as is computed by the assessee and duly quantified in the return. The procedure of assessment by the Income-tax Officer is essentially to check the computation of total income done by the assessee and to find out whether the computation made is correct or not. Where the return has been accepted by the Income-tax Officer who may not assess the total income, it cannot be said that the liability to pay the tax under the Act on the basis of the admitted total income as reflected from the returns would vanish. If the proposition canvassed on behalf of the petitioners is accepted, then it would produce a startling result where though, according to the assessee, he is liable to pay the tax as per the return filed by him and has in fact paid the tax in accordance with the provisions of section 140A of the Act and the Assessing Officer does not find it necessary to assess the total income since he may have accepted the return on expiry of the period during which the regular assessment is required to be made, the entire tax amount, admittedly payable under the Act, would be required to be refunded. If such a proposition as is canvassed on behalf of the petitioners is accepted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates are prescribed by the appropriate legislation, the liability to pay tax arises on the total income which is to be computed by the assessee in accordance with the provisions of the Act, if it exceeded the maximum amount not chargeable to tax. By the process of self-assessment, the assessee is required to pay tax on the basis of his returns and such tax is treated as assessed tax. Therefore, until it is disturbed by any further regular assessment, it remains as tax levied and collected in accordance with law. The fact that the Assessing Officer, when not accepting the correctness of the revised returns, has a power to check the computation of income and examine the correctness of the total income declared therein, cannot nullify the validity of the tax levied and collected on the basis of the return filed by the assessee. Even if the Assessing Officer does not make any regular assessment, the result only would be that the tax payable and which has been paid on the basis of the returns filed by the assessee is deemed to have been accepted as properly paid and no further demand can be made since the regular assessment has not been made within the prescribed time. On the other hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antum of tax computed under the provisional assessment was deemed to have been paid towards the regular assessment and was liable to be adjusted. If the amount exceeded the amount payable under the regular assessment, the excess amount was required to be refunded and, except for this limited purpose, the provisional assessment was a distinct proceeding it was held that it was described as a provisional assessment only for the purpose of indicating that it was provisional as to the amount of tax payable and that it did not preclude a regular assessment determining the tax liability finally. It was held that the provisional assessment did not merge in a final assessment and if the regular assessment was void and, therefore, non-est, the amount paid towards provisional assessment continued to bear that character and could not be deemed to have been paid towards the regular assessment which was without jurisdiction and did not exist in the eye of law. In such a situation, the provisions of sub-section (7) of section 23B of that Act were not attracted as no regular assessment was made. However, the order under section 23B remained valid and the amount paid under such provisional assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make a provisional assessment of the income on the basis of the return made under section 139 and the documents and accounts accompanying the return. It was held that the assessment so made was a summary one and the Income-tax Officer was not bound to make any enquiry before making provisional assessment. It was also held that the provision of section 141 was enacted with the object of expediting collection of tax on the basis of the return made by the assessee. The ratio laid down by the said decision is that it was not open to the Income-tax Officer in a provisional assessment to reject or ignore the claim of the company to carry forward and set off the losses and that section 141 bars an enquiry at the stage of making provisional assessment into disputed questions of law and fact. Therefore, this decision also cannot support the proposition canvassed on behalf of the petitioners that, on failure of regular assessment, the entire tax recovered by way of advance tax or tax deducted at source should be refunded. Even the decision of the Supreme Court in Purshottamdas Thakurdas v. CIT [1963] 48 ITR 206 (SC), which considered the nature of advance payment of tax under section 18A whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the requirements of article 265 of the Constitution. It appears that an appeal was filed against the said decision before the Division Bench being Appeal No. 1525 of 1980, which was decided on January 8, 1986 and, as observed in the judgment rendered in appeal, while the writ petitions were pending, the appellant had moved the Tribunal for modification of its earlier order annulling the assessment and, after disposal of the said writ petitions, the Tribunal had allowed the application and modified its earlier order permitting the appellant-Income-tax Officer to make a fresh assessment which was made by him and the earlier amounts were adjusted towards the tax found due in that order. In this view of the matter, the Division Bench held that the very basis of the foundation on which the writ petitions were founded and the order of the learned single judge was made had totally disappeared and, therefore, the order of the learned single judge was set aside without examining the correctness or otherwise of the view expressed by the learned single judge. Apart from the fact that the said decision has been set aside by the Division Bench, the reasoning therein to the effect that it is po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of particular goods or property or whatever may be the object of the tax in a particular case and determining its amount. The court was concerned with the provisions of the Central Excise Rules and held that mere mechanical adjustment and ostensible settlement of accounts by making the debit entries could not be equated with an assessment which was a quasi-judicial process involving an application of mind to the facts as well as to the requirements of law. It is clear that the said decision of the Supreme Court stands totally on a different footing and can have no application to the facts of the present case. The decision of the Supreme Court in Nalinikant Ambalal Mody v. S. A. L. Narayan Row [1966] 61 ITR 428, on which reliance was placed also cannot help the petitioners because it was held in that case that the receipts in dispute were not chargeable to tax at all either under the head " professional income" or under the "residuary" head and it was not said that the receipts might be brought to tax under any other head. In Burmah Shell Refineries Ltd. v. G. B. Chand, ITO [1966] 61 ITR 493 (Bom), it was held that the Income-tax Officer, while making provisional asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Supreme Court found that the right to commence a proceeding for assessment against the assessee as an agent of a non-resident party under the Income-tax Act, before it was amended, ended on March 31, 1956. Though, under the amending Act, by section 18 of the Finance Act, 1956, authority was conferred upon the Income-tax Officer to assess person as an agent of a foreign party under section 43 within two years from the end of the year of assessment, the authority of the Income-tax Officer under the Act prior to its amendment having already come to an end, the amending provision did not assist him to commence a proceeding even though at the date when he issued notice, it was within the period provided by that amending Act. The Supreme Court, found that the legislature had given to section 18 of the Finance Act, 1956, a limited retrospective operation, that is, up to April 1, 1956, only and, in the absence of any express provision or clear implication, no greater retrospectivity could be attributed to the amending provision than what was expressly mentioned. It is, thus, clear that the decision of the Supreme Court in Gadgil's case [1964] 53 ITR 231 stands totally on a different foo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment orders became refundable to him as soon as the assessment orders were set aside and since the refund was not paid within the period prescribed, the petitioner was entitled to payment of interest on the amounts refundable to him Thus, the court was concerned with the question pertaining to the right of the assessee to get interest on the amount of refund that became payable to him and the said decision cannot, therefore, help the petitioners. Even in Purshottam Dayal Varshney v. CIT [1974] 94 ITR 187 (All), the court was concerned with the payment of the amount of interest since refund was delayed. It was held that, if an assessment order was set aside, the notice of demand became ineffective and the tax already paid under such a notice of demand became refundable. The court found that the Income-tax Officer took six years to pass a fresh order ultimately holding that the tax was wrongly collected and, therefore, there was no rational basis as to why the petitioners should be deprived of the interest for the period of six years during which the Income-tax Officer kept the proceedings pending. The said decision, therefore, cannot help the petitioners. In Rayalseem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court held that all transactions encompassed by section 45 must fall under the governance of its computation provisions. The transactions to which those provisions cannot be applied must be regarded as never intended by section 45 to be the subject of the charge. Thus the said decision of the Supreme Court was rendered in a totally different context and has no relevance to the facts of the present case. Reliance on CIT v. Nagri Mills Ltd. [1987] 166 ITR 292 (Guj), on behalf of the petitioners, is also misconceived because, in that decision, Division Bench of this court held that no question of law arose for reference where the Tribunal held that no interest was chargeable under section 216 of the Act because the Income-tax Officer had failed to record finding that there had been an underestimate of advance tax by the assessee. The decision of the Supreme Court in Manmohanlal v. ITO [1987] 168 ITR 616 is an authority for the proposition that tax can be recovered from an assessee only when it becomes a debt due from him and that it becomes a debt due when a notice of demand calling for payment of the tax has been served on the assessee. The Supreme Court held that if an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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