TMI Blog1990 (1) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... the revised order. The Appellate Tribunal, Bangalore Bench, affirmed this order, following the decision of the Calcutta High Court in Chloride India Ltd. [1977] 106 ITR 38 and other similar decisions. In this background, at the instance of the Revenue, the question was referred to us for an answer. At the outset, it is necessary to note that the first part of the question was not pressed before us and learned counsel for the Revenue and the assessee argued only the question as to whether interest is payable to the assessee under section 214 of the Act on account of reduction of tax in appeal. The question is not free from difficulty. Decisions of various High Courts do not agree upon a single answer. Even in some of the High Courts, different Benches have taken differing views. The provisions governing the statutory law have undergone changes in the matter of levy of interest on the refund out of the advance tax, from the days of section 18A of the Indian Income-tax Act, 1922, till the Taxation Laws (Amendment) Act, 1984 [(with effect from 1-4-1985)-for short this Amendment Act is referred to hereinafter as the Taxation Laws (Amendment) Act, 1984]. Earliest of the decisions, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is no obligation upon the Department to pay any interest in respect of the amounts which they recovered as tax under the original assessment order." The next one is that of the Allahabad High Court in Sir Shadilal Sugar and General Mills Ltd. v. Union of India [1972] 85 ITR 363, decided in the year 1971. This again is a decision under the 1922 Act. The Bench held that the "regular assessment" meant the first or the earliest of the assessments made under section 23 ; when an order of assessment is made and a notice of demand is issued, the assessee is under an obligation to pay the tax demanded and, therefore, an obligation to compensate the, assessee for the excess tax paid by the assessee ceases to exist. The theory of advance tax being merged into the tax assessed and, therefore, ceasing to be an advance tax, is implicit in the reasoning of the Bench. The Allahabad High Court, here, assumed that, if the assessee pays the amount as tax (as per the initial/original assessment), he is not entitled to be compensated for the excess amount paid by him as tax, even in case the order of assessment is modified or reversed and the tax levied is reduced. The Bench agreed with the views ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of the first assessment order made by the Income-tax Officer. The assessee under section 208 would also be obliged to pay advance tax on that basis. The Income-tax Officer will then be free to modify the demand for the subsequent year but for the year in question he would have to proceed on the basis of demand raised in the first assessment. This would seem to be an anomalous situation and unless the language of the section compels one to make that construction, one should avoid making that construction. It has to be borne in mind that the expression 'regular assessment' has been used in several sections. In all the sections similar meaning should be given to that expression unless the context otherwise demands. Having regard to the scheme of the sections, I am of the opinion that the context does not require otherwise. Regular assessment is certainly different from the first assessment or provisional assessment. But regular assessment is not confined to first assessment. When an assessment is modified pursuant to the order of the appellate authority or direction, the subsequent order will be regular assessment and must supersede and replace the earlier assessment order. Having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m). Here, though the question arose under the provisions of the Excess Profits Tax Act, 1940, the reasoning would equally apply to the question before us. (4) CIT v. M. L. Sanghi [1988] 170 ITR 670 (Raj). We have considered the several decisions and the reasoning therein in great depth and are of the view that the reasoning of the Full Bench of the Gujarat High Court is preferable to that in other decisions in answering the question referred to us. As we are in full agreement with the Full Bench of the Gujarat High Court ( [1985] 151 ITR 389), some of its observations are reproduced here, instead of repeating the same reasoning in our own words: (i) At page 394: "The scheme of the Income-tax Act envisages payment of tax by such assessees during the very year in which they earn though what they have to finally pay is determined when assessment is made under the provisions of the Act. Tax paid in advance is then credited towards the dues of the relevant assessment year. If at the time of such assessment, it is found that the obligation of the assessee to pay advance tax has not been fully discharged by reason of the assessee having paid less than what is determined as due, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may have to adopt it."(Underlining is by us) (ii) At page 397: "Section 244 (1 A) is quite relevant for our purpose. It was inserted in the section by the Taxation Laws (Amendment) Act, 1975, with effect from October 1, 1975. For the first time, specific provision is seen made for payment of interest on so much of the amount paid by the assessee in pursuance of any order of assessment or penalty as is found to be in excess by reason of a decision in appeal or other proceeding, provided such amount is paid after March 31, 1975. The section does not apply to any payment made in excess on or before March 31, 1975. It applies only to payments made pursuant to an order of assessment. Therefore, amounts paid by way of advance tax will not fail within the section." (iii) At page 400 : "If 'regular assessment' in section 214(1) is understood as revised assessment, where there is one, the obligation on the State will be to pay interest on the amount paid as advance tax found to be in excess of what is due from the assessee on the basis of the revised or final assessment. Why should such a result be considered unreasonable ? Why should any attempt be made to reach another result ? W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee subsequent to March 31, 1975, pursuant to an order of assessment ? Section 244 (1A) entitles him to interest on such amount for the period from the date of the payment up to the date when, on account of the amount being found in excess in appeal or other proceedings, he gets a refund. He will not, in that event, get interest for excess payment made earlier as advance tax from the date of first assessment though he will be entitled to get interest on an amount paid pursuant to an assessment. This situation could not have been envisaged by Chagla C. J." We venture to state our reasons some of which, no doubt, are not new: (A) The divergence of views of several High Courts including the differing opinions expressed by different Benches of the same High Court, clearly show the ambiguity, of the law as it then stood and the doubt that pervaded its interpretation, till Parliament stepped in to enact the Taxation Laws (Amendment) Act 1984, whereby new clauses were introduced into the relevant provisions of the Act. The principle of interpretation of an earlier ambiguous law by injecting into it, the law as amended subsequently, has been accepted by the Supreme Court in a few ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision, may take note of this legislative intention and understand the law accordingly. (B) Payment of interest, essentially, is compensatory in nature.. Logically, the compensation should cover the entire period during which the person to whom the money belongs lawfully was made to part with it to another. To reduce the period for which compensation is payable, when, in fact, the person was deprived of his money for a longer period, is to truncate the very concept of compensation. (C) The object of the Legislature is to levy and collect tax. Though an implied intendment as a measure of, interpretation of a taxing statute is not called for, it will not be an irrelevant factor to consider its impact on the effect of construing the law in one way or the other. An assurance of being compensated by interest, in case ultimately the assessed tax falls short of the advance tax, may serve as an incentive to the assessee to pay advance tax; similarly, the possibility of his having to pay interest in case the assessed tax exceeds the advance tax would deter an assessee from underestimating his income for purposes of advance tax. (D) The scheme of Part-C of Chapter XVII pertains to "Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urisdiction is that it revises and corrects the proceedings in a cause already instituted and does not create that cause [vide Immigration and Naturalization Service v. Veljko Stanisic, AIR 1970 USSC (V 57 Cl)]. What the Supreme Court expressed in the context of a civil suit in Garikapati Veeraya v. N. Subbiah Choudhry, AIR 1957 SC 540, at page 553, equally governs the situation here: "... the legal pursuit of a remedy, suit, appeal and second appeal are really but steps in a series of proceedings all connected by an intrinsic unity and are to be regarded as one legal proceeding." Therefore, we are of the view that an initial order of assessment (i.e., the original order of assessment) gets effaced by the appellate or revisional order and the only effective order is the ultimate order of the superior authority. The original order of assessment becomes part of the entire proceedings culminating in the ultimate order, which here, for all practical purposes, should be treated as the order on "regular assessment". Charles. D'Souza v. CIT [1984] 147 ITR 694 is a decision of this court rendered in a different context altogether. The said decision has no bearing on the issue befor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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