TMI Blog1979 (2) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... e income of the trust was exempt from tax. The ITO rejected this plea. In appeal, the AAC upheld the claim for exemption. On further appeal to the Income-tax Appellate Tribunal by the revenue which was preferred later, it upheld the order of the AAC by accepting the petitioner's claim for exemption of the income under s. 11 of the I.T. Act. In consequence of the AAC's order, the ITO passed a consequential order dated 12th March, 1974, determining the refund due to the petitioners at Rs. 1,22,656 for the assessment year 1968-69, which amount, included the entire amount of advance tax of Rs. 82,818 paid for that year. For the later assessment year, i.e., 1969-70, the consequential order passed by the officer on 12th March, 1974, determined the amount of refund at Rs. 1,03,867, which included the advance tax amount of Rs. 44,694. However, while determining the amounts of refund, the ITO did not allow interest on the amounts of advance tax paid. The petitioners, therefore, addressed the ITO in respect of both the years on 20th March, 1974, requesting him to grant interest under s. 214 of the I. T. Act, 1961, on the amounts of advance tax paid and refunded. To this, the officer replied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12th March, 1974, giving effect to the appellate order, that a consequential order was, in law, an order of assessment under s. 143. Therefore, interest has to be allowed under s. 214 on the amounts of advance tax refunded pursuant to the order of 12th March, 1974, since that was the order of assessment itself. Sri Polovarapu Rama Rao, revenue's learned standing counsel, endeavoured to rebut the said contention on behalf of the petitioners in two ways. According to him, it is not. s. 214 that applies to the case. Instead, s. 244 read with s. 240 is the provision that directly covers the petitioners case relating to interest. In the second place, he maintained that even going by the language of s. 214 the words " regular assessment mean only initial or first assessment made by the assessing officer. Either way, according to Sri Rama Rao, the contention of Sri Anjaneyulu should fail. It is thus manifest that the following two questions arise for consideration in these writ petitions and require decision. 1. Is it s. 244 r/w s. 240 that applies to the claim of the petitioners for refund or s. 214 ? 2. What is the meaning of the words " regular assessment " occurring in s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses of the adjustments referred to in sub-clause (iv) of clause (b), also with reference to the record of the assessments, if any, of past years, and determine the sum payable by the assessee or refundable to him on the basis of such assessment. (b) In making an assessment of the total income or loss of the assessee under clause (a) the Income-tax Officer shall make the following adjustments to the income or loss declared in the return, that is to say, he shall, (i) rectify any arithmetical errors in the return, accounts and documents referred to in clause (a); (ii) allow any deduction, allowance or relief which, on the basis of the information available in such return, accounts and documents, is, prima facie, admissible, but is not claimed in the return; (iii) disallow any deduction, allowance or relief claimed in the return which, on the basis of the information available in such return, accounts and documents, is, prima facie inadmissible; (iv) give due effect to the allowance referred to in sub-section (2) of section 32, the deduction referred to in clause (ii) of sub-section (2) of section 33 or clause (ii) of sub-section (2) of section 33A or clause (i) of subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay specified in the notice issued under sub-section (2), or as soon afterwards as may be, after hearing. Such evidence as the assessee may produce and such other evidence as the Income-tax Officer may require on specified points, and after taking into account all relevant material which he has gathered, (a) in a case where no assessment has been made under sub-section (1), the Income-tax Officer shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refundable to him on the basis of such assessment; (b) in a case where an assessment has been made under sub-section (1), if either such assessment has been objected to by the assessee by an application under clause (a) of sub-section (2) or the Income-tax Officer is of opinion that such assessment is incorrect, inadequate or incomplete in any material respect, the Income-tax Officer shall, by an order in writing, make a fresh assessment of the total income or loss of the assessee, and determine the sum payable by him or refundable to him on the basis of such assessment ......." Section 144, which provides for best judgment assessment, is as follows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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......." Section 240 is in the following terms: " Where, as a result of any order passed in appeal or other proceeding under this Act, refund of any amount becomes due to the assessee, the Income-tax Officer shall, except as otherwise provided in this Act, refund the amount to the assessee without his having to make any claim in that behalf. We will now examine the first question. Sri Anjaneyulu, learned counsel for the petitioners, argued that it is s. 214 that applies to the case while Sri Rama Rao maintained that it is s. 244, read with s. 240, which governs the matter. According to the petitioners' learned counsel, s. 214 should be applied to the petitioners' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present case? If it does, being a specific provision, it should prevail over the other provisions of the enactment relating to the same subject. We have already noticed that in the 1922 Act, there was no corresponding provision to s. 244. Even this newly introduced section has been changed by the Finance Act, 1972, and the Taxation Laws (Amendment) Acts of 1970 and 1975. The following are the ingredients of sub-s. (1) of s. 244. (1) A refund shall be due to the assessee. (2) That should be as result of any order passed in appeal or other proceeding under the Act as provided in s. 240. Once that refund is payable it should be paid to the assessee without his having to make any claim in that behalf. (3) If the ITO does not do it within a period of three months from the end of the month in which the appellate order is passed, the Central Govt. shall pay to the assessee simple interest at 12 per cent. per annum on the amount of refund due. (4) The period for which the interest at 12 per cent. shall be paid is from the date immediately following the expiry of the aforesaid period of three months to the date on which the refund is granted. The essential ingredient of an order being pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be paid on refunds which become due as a result of any order passed in appeal or other proceedings. There was no need for the assessee to make any claim to refund the amount. This is undoubtedly specific provision covering the cases of refunds payable as a result of appellate orders and the interest thereon. On the other hand, s. 214 lays down the general principle that interest is payable on advance tax. Since tax is paid in advance even before the regular assessment, s. 214 says that if that amount exceeds the amount of tax determined on regular assessment, interest is payable on the excess amount from the first day of April next following the said financial year to the date of the regular assessment. Particularly it does not concern itself with cases of refund arising out of appellate orders. If by virtue of appellate orders certain refunds including that of advance tax are to be made, then there is no provision for it in s. 214. To cover such a contingency one should travel to s. 244 read with s. 240. It is for this reason the later two sections become the specific provisions in regard to refunds which result out of an order passed in appeal or other proceedings. We a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust be construed as including the consequential order passed by the assessing officer in pursuance of the order in appeal. After all, so said Sri Anjaneyulu, an appeal has always been recognised as continuation of the proceedings before the original authority and the original order would merge with the appellate order. So much so, the consequential assessment made by the original assessing authority as a result of the appellate order would become the " regular assessment " within the meaning of s. 214. If so construed, s. 214 would enable the assessees to get interest on the advance tax or excess of the advance tax, as the case may be, up to the date of the consequential order. " Regular assessment " is defined in s. 2(40) as the assessment made under s. 143 or s, 144, Section 143 deals with assessment. Sub-s. (1) deals with a case where the ITO makes an assessment of the total income or loss of the assessee without requiring the presence of the assessee or the production by him of any evidence in support of the return. To put it in other words, sub-s. (1) deals with cases of the ITO accepting the return filed by the assessee. We are not much concerned here with sub-s. (2) of s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment. It is thereafter that ss. 143 and 144 occur providing for assessment and best judgment assessment. These two assessments alone are declared as " regular assessments " by the statute in the definition in s. 2(40). From the above scheme of the Act and the significant juxtaposition of the relevant provisions, it is eminently reasonable to come to the conclusion that the assessments made by the ITO under s. 143 or s. 144 alone are " regular assessments ". It is not permissible to expand the scope of this expression by including appellate orders and the consequential orders made by the ITO. In the first place, the place where ss. 143 and 144 occur which contains the words " regular assessment " does not warrant this explanation. Secondly, had Parliament intended to give such an extended meaning, it would have clearly included in the definition of " regular assessment " consequential orders also. Furthermore, what is meant by " assessment " was explained by the Privy Council in CIT v. Khemchand Ramdas [1938] 6 ITR 414. Lord Romer, delivering the opinion of the Board, observed that one of the peculiarities of most Income-tax Acts is that the word " assessment " is used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order made in pursuance thereof as a " regular assessment ". No doubt the assessee or the revenue in whose favour the appellate order goes would certainly get the benefit of that order by virtue of the consequential order that is made by the assessing authority. But the statute does not appear to consider that resultant order as the " regular assessment ". Therefore, we are not persuaded to accept Sri. Anjaneyulu's contention in this behalf. We must also notice another contention raised by the learned counsel for the assessees. He pointed out that it would be unreasonable and unjust if interest is not paid on the excess amounts of advance tax till the consequential order is passed in pursuance of an appellate order. In equity, the department is required to pay interest so long as it retains with itself the amount paid by the assessee and retained by them unnecessarily. So long as there in no clear or specific prohibition against it, the equitable principle of paying interest right up to the date of payment must be enforced. Once again it is a matter for Parliament to lay down the rights, duties, liabilities and responsibilities of the assessees as well as the assessing officers. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we actually refer to these decisions, it must be noted that several of them arose under s. 18A(5) of the 1922 Act. Section 18A of that Act relates to advance payment of tax. Sub-s. (5) of that section provides for payment of interest. It also provides for payment of interest up to the date of the assessment, which was thereafter called " regular assessment " made under s. 23, of the income, profits and gains of the previous year. The words " regular assessment " occur in sub-s. (5) of s. 18A also and it specifically states that the assessment, thereafter called " regular assessment ", was the one made under s. 23 of the Act. Section 23 of the 1922 Act corresponds to s. 143 of the 1961 Act. Thus, there is no substantial or material change in this respect between s. 18A(5) of the 1922 Act and s. 214 of the 1961 Act. While sub-s. (5) of s. 18A by itself refers to assessment under s. 23, the words " regular assessment " occurring s. 214 of the 1961 Act will have to be understood in the light of the definition of the words contained in s. 2(40). So, the decisions which we will now refer, even though some of them considered the effect of s. 18A(5), have relevancy and bearing on the quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned the amount of tax due from the assessee but did not pass an order under s. 23(3). He did not also issue notice of demand under s. 29. The assessee preferred an appeal to the AAC but it was dismissed on the ground that it was not maintainable. The assessee in the meanwhile filed an application before the Commissioner under s. 33A(2) for revising the order of the ITO. The Commissioner dismissed the revision application not only on the merits but also on the ground that it was not clear whether a revision petition under s. 33A was maintainable. One of the points decided by the Supreme Court in this case was that no appeal lay against the computation made by the ITO to the AAC and, therefore, a revision application lay to the Commissioner under s. 33A(2) of the Act against the order of the ITO. In Shadilal Sugar and General Mills v. Union of India [1972] 85 ITR 363, the Allahabad High Court held that when s. 18A(5) speaks of the date of the assessment made under s. 23 and refers to it as the " regular assessment ", it is the first or, as one might say, the original assessment order made by the ITO for that year which is intended. Consequently, the Division Bench held that the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not being understood as the first or original assessment according to the definition in s. 2(40) of the Act. The Punjab and Haryana High Court in Smt. Kamlavati v. CIT [1978] 111 ITR 248 had to consider the question of penalty on reassessment under s. 147. The court laid down, Chinnappa Reddy, Acting Chief justice, speaking for the court, that " regular assessment " is defined in s. 2(40) to mean the assessment made under s. 143 or s. 144. An assessment or reassessment made under s. 147 cannot, therefore, be considered to be regular assessment to which s. 273(a) can be applied. All the above view points expressed by the different High Courts are in line with the view we have expressed above. Sri Anjaneyulu, however, pointed out that they are all cases of reassessments or cases where other questions would arise and are, therefore, distinguishable. We cannot accept this distinction because the ratio decidendi of the cases is important. In all these cases, they had to decide what is meant by the expression " regular assessment " and, consequently, they are useful for determining the question in this case. There are, however, two single judge's decisions of the Calcutta High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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