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Trustees of H.E.H. Nizam's Religious Endowment Trust Vs. Income-tax Officer, A-Ward and Anr. (21.02.1979 - APHC) - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberWrit Petition Nos. 1009 and 1026 of 1976
Judge
Reported in[1981]131ITR239(AP)
ActsIncome Tax Act, 1961 - Sections 143, 144, 214, 244 and 244(1)
AppellantTrustees of H.E.H. Nizam's Religious Endowment Trust
Respondentincome-tax Officer, A-Ward and Anr.
Appellant AdvocateY.V. Anjaneyulu, Adv.
Respondent AdvocateP. Rama Rao, Adv.
Excerpt:
direct taxation - interest on refund - sections 143, 144, 214, 244 and 244 (1) of income tax act, 1961 - petitioners were trustees of a trust - payment of tax was made in advance by them - such money refunded as income of trust comes under exemption - petitioner demanded interest upon advanced tax under section 214 - commissioner refused to grant interest - petition filed against such order - interest was payable on excess payment of advance tax paid over amount of tax determined on 'regular assessment' - 'regular assessment' means original or first assessment made by income tax officer - held, petitioners demand for interest under section 244 rejected. - - either way, according to sri rama rao, the contention of sri anjaneyulu should fail. ..10. section 144, which provides for best.....sambasiva rao, c.j.1. these two writ petitions relate to interest on excess advance tax paid by the trustees of h.e.h. the nizam's religious endowment trust, hyderabad. the first relates to the assessment year 1968-69 and the other to 1969-70. since both of them raise the same question, the commissioner of income-tax, andhra pradesh, considered the two revisions filed for the two assessment years under a common order. we are for the same reason considering the matters in a common order.2. the petitioners, who were the trustees of h.e.h. the nizam's religious endowment trust, paid advance tax for the two assessment years in question. there was, however, an additional demand when the assessments were completed. the case of the petitioners at the time of the assessment was that the income of.....
Judgment:

Sambasiva Rao, C.J.

1. These two writ petitions relate to interest on excess advance tax paid by the trustees of H.E.H. the Nizam's Religious Endowment Trust, Hyderabad. The first relates to the assessment year 1968-69 and the other to 1969-70. Since both of them raise the same question, the Commissioner of Income-tax, Andhra Pradesh, considered the two revisions filed for the two assessment years under a common order. We are for the same reason considering the matters in a common order.

2. The petitioners, who were the trustees of H.E.H. the Nizam's Religious Endowment Trust, paid advance tax for the two assessment years in question. There was, however, an additional demand when the assessments were completed. The case of the petitioners at the time of the assessment was that the 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 Section 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 Section 214 of the I.T. Act, 1961, on the amounts of advance tax paid and refunded. To this, the officer replied by a letter dated 18th December, 1974, to the petitioners' counsel declining to give any interest under Section 214. That was on the basis of the stand that he had passed the assessment orders under Section 143(3) which resulted in a demand. Therefore, according to him, the question of granting interest under Section 214 on the advance tax refunded did not arise.

3. Taking the view that there was no right of appeal against the aforesaid orders of the officer refusing to allow interest under Section 214, the petitioners filed revision petitions under Section 264 before the Commissioner. The Commissioner agreed with the ITO's order refusing to grant interest under Section 214. The contention of the petitioners before the Commissioner, as it was before us also, was that the order of the AAC stands in the place of the original assessment order and, therefore, the assessees were entitled to the consequential payment of interest not up to the date of the first assessment order of the ITO but right up to the date of the consequential order passed by the officer as a result of the AAC's decision upholding the appeal. That contention was advanced on the assumption that the expression 'regular assessment' occurring in Section 214 takes within its sweep not merely the first order of assessment but also the later consequential order passed by the ITO resulting from the allowing of the assessee's appeal by the Assistant Commissioner. The Commissioner repelled this understanding of Section 214. According to him, interest is payable on the excess payment of advance tax paid over the amount of tax determined on regular assessment. The expression 'regular assessment' has a special connotation as defined in Section 2(40) of the Act. That meaning is 'the assessment made under Sections 143 or 144'. Regular assessment is the assessment, according to the Commissioner, whereunder the ITO originally completed the assessment.

4. It is this view that is assailed in these writ petitions and the relief prayed for is that the abovesaid order of the Commissioner be quashed.

5. Sri Y. V. Anjaneyulu, commending the two writ petitions for our acceptance, urged that the appeal before the Assistant Commissioner was only a continuation of the original proceeding and consequently the appellate order dated back to and stood in the place of the original judgment of the ITO for all legal purposes. When the ITO passed a consequential order on 12th March, 1974, giving effect to the appellate order, that a consequential order was, in law, an order of assessment under Section 143. Therefore, interest has to be allowed under Section 214 on the amounts of advance tax refunded pursuant to the order of 12th March, 1974, since that was the order of assessment itself.

6. 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 Section 214 that applies to the case. Instead, Section 244 read with Section 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 Section 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.

7. It is thus manifest that the following two questions arise for consideration in these writ petitions and require decision.

1. Is it Section 244 r/w Section 240 that applies to the claim of the petitioners for refund or Section 214 ?

2. What is the meaning of the words 'regular assessment' occurring in Section 214?

8. In order to answer these questions, it is necessary to read the material portions of the above sections along with the allied provisions. Since the assessment years in question and the orders challenged were made and passed after the I.T. Act, 1961, came into force, it is that Act that applies. Section 214 is in the following terms:

'(1) The Central Government shall pay simple interest at twelve per cent. per annum on the amount by which the aggregate sum of any instalments of advance tax paid during any financial year in which they are payable under sections 207 - 213 exceeds the amount of the tax determined on regular assessment, from the 1st day of April next following the said financial year to the date of the regular assessment for the assessment year immediately following the said financial year, and where any such instalment is paid after the expiry of the financial year during which it is payable by reason of the provisions of Section 213, interest as aforesaid shall also be payable on that instalment from the date of its payment to the date of the regular assessment.

Provided 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.

(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 be reduced accordingly and the excess, if any, paid shall be deemed to be tax payable by the assessee and the provisions of this Act shall apply accordingly...' 'Regular assessment' is defined in Clause (40) of Section 2 thus : ''Regular assessment' means the assessment made under Section 143 or Section 144.'

9. After the changes made under the Taxation Laws (Amendment) Acts, 1970 and 1975, Section 143, which lays down the manner of assessment, reads as follows :

'(1) (a) Where a return has been made under Section 139, the Income-tax Officer may, without requiring the presence of the assessee or the production by him of any evidence in support of the return, make an assessment of the total income or loss of the assessee after making such adjustments to the income or loss declared in the return as are required to be made under Clause (b), with reference to the return and the accounts and documents, if any, accompanying it, and for the purposes 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 Sub-section (2) of Section 35 or Sub-section (1) of Section 35A or Sub-section (1) of Section 35D or Sub-section (1) of Section 35E or the first proviso to Clause (ix) of Sub-section (1) of Section 36, any loss carried forward under Sub-section (1) of Section 72 or Sub-section (2) of Section 73 or Sub-section (1) of Section 74 or Sub-section (3) of Section 74A and the deficiency referred to in Sub-section (3) of Section 80J, as computed, in each case, in the regular assessment, if any, for the earlier assessment year or years.

(2) Where a return has been made under Section 139, and-

(a) an assessment having been made under Sub-section (1), the assessee makes within one month from the date of service of the notice of demand issued in consequence of such assessment, an application to the Income-tax Officer objecting to the assessment, or

(b) whether or not an assessment has been made under Sub-section (1), the Income-tax Officer considers it necessary or expedient to verify the correctness and completeness of the return by requiring the presence of the assesses or the production of evidence in this behalf,

the Income-tax Officer shall serve on the assessee a notice requiring him, on a date to be therein specified, either to attend at the Income-tax Officer's office or to produce, or to cause to be there produced, any evidence on which the assessee may rely in support of the return :

Provided that, in a case, where an assessment has been made under Sub-section (1), the notice under this sub-section except where such notice is in pursuance of an application by the assessee under Clause (a) shall not be issued by the Income-tax Officer unless the previous approval of the Inspecting Assistant Commissioner had been obtained to the issue of such notice:

Provided further that in a case where the assessment made under Sub-section (1) is objected to by the assessee by an application under Clause (a), the assessee shall not be deemed to be in default in respect of the whole or any part of the amount of the tax demanded in pursuance of the assessment under that sub-section, which is disputed by the assessee, in so far as such amount does not relate to any adjustment referred to in Sub-clause (i) of Clause (b) of Sub-section (1), and further no interest shall be chargeable under Sub-section (2) of Section 220 in respect of such disputed amount.

(3) On the day 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....... '

10. Section 144, which provides for best judgment assessment, is as follows :

'If any person-

(a) fails to make the return required by any notice given under Sub-section (2) of Section 139 and has not made a return or a revised return under Sub-section (4) or Sub-section (5) of that section, or

(b) fails to comply with all the terms of a notice issued under Sub-section (1) of Section 142 or fails to comply with a direction issued under Sub-section (2A) of that section, or

(c) having made a return, fails to comply with all the terms of a notice issued under Sub-section (2) of Section 143, the Income-tax Officer, after taking into account all relevant material which the Income-tax Officer has gathered, shall make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee or refundable to the assessee on the basis of such assessment.'

Section 244 is a newly introduced provision in the 1961 Act, and there was no corresponding provision thereto in its predecessor Act of 1922. Its heading is 'Interest on refund where no claim is needed'. It reads thus:

'(1) Where a refund is due to the assessee in pursuance of an order referred to in Section 240 and the Income-tax Officer does not grant the refund within a period of three months from the end of the month in which such order is passed, the Central Government shall pay to the assessee simple interest at twelve per cent. per annum on the amount of refund due from the date immediately following the expiry of the period of three months aforesaid to the date on which the refund is granted.

(1A) Where the whole or any part of the refund referred to in Sub-section (1) is due to the assessee, as a result of any amount having been paid by him after the 31st day of March, 1975, in pursuance of any order of assessment or penalty and such amount or any part thereof having been found in appeal or other proceeding under this Act to be in excess of the amount which such assessee is liable to pay as tax or penalty, as the case may be, under this Act, the Central Government shall pay to such assessee simple interest at the rate specified in Sub-section (1) on the amount so found to be in excess from the date on which such amount was paid to the date on which the 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.......'

11. 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.'

12. We will now examine the first question. Sri Anjaneyulu, learned counsel for the petitioners, argued that it is Section 214 that applies to the case while Sri Rama Rao maintained that it is Section 244, read with Section 240, which governs the matter. According to the petitioners' learned counsel, Section 214 should be applied to the petitioners' claim because it is that section that provides for payment of interest on the aggregate sum of instalments of advance tax paid during the financial year in which they are payable under Sections 207 - 213. Those sections relate to advance payment of tax. If the amount of tax 'payable in advance exceeds the amount of tax determined on regular assessment, then interest becomes payable under Section 214. It is further pointed out that the second limb of Sub-section (1) also provides for the contingency of an instalment of advance tax being paid after the expiry of the financial year. Then emphasis is laid on the proviso to Sub-section (1), Sub-sections (1A) and (2) in order to point out that all conceivable contingencies are provided for under Section 214 for payment of interest on advance tax by the Government. The immediately succeeding sections, viz., Sections 215, 216 and 217, provide -for interest payable by the assessee in case of deficiency in payment, in case of underestimate, or in a case where there was no estimate at all. He, therefore, urged that these sections, taken together, provide for payment of interest either by the Government or by the assessee on the advance income-tax after regular assessment in different contingencies. Consequently, Section 214 is the appropriate provision under which the claim of the petitioners should be decided.

13. On the other hand, Sri Rama Rao argued that Section 214 is a general provision declaring the liability to pay interest on advance tax after regular assessment, while Section 244 is a provision made for the specific contingency where no claim is needed for payment of interest on refund. Section 244 applies to all cases which come under Section 240, and since the case on hand is one which comes under Section 240, automatically the specific provision in Section 244 comes into operation. Where there is a specific provision, so contended Sri Rama Rao, the general provision like Section 214, shall not be applied. Sri Anjaneyulu in his turn disputed this argument of the learned counsel for the revenue and urged that Section 244 refers to delayed refunds and also does not cover quantification of refund and applies only to payment of interest. For quantification of the amount of refund, it is argued by the learned counsel for the assessee, one should go again to Section 214. Therefore, in his submission Section 244 does not apply.

14. Then the question boils down to this : whether Section 244 applies to the present case? If it does, being a specific provision, it should prevail over the other provisions of the enactment relating to the same subject.

15. We have already noticed that in the 1922 Act, there was no corresponding provision to Section 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-section (1) of Section 244. (1) A refund shall be due to the assessee. (2) That should be as a result of any order passed in appeal or other proceeding under the Act as provided in Section 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 passed in appeal and, in consequence, certain amount becoming refundable to the assessee arose in this case.

16. Section 240 enjoins upon the ITO to refund the amount to the assessee without the latter making any claim for it. Therefore, in this case, the requirement of Section 240 and consequently that of Section 244 is satisfied and that as a result of an order passed in appeal, refund of certain amounts became due to the assessees. That refund should have been made without any claim. Even without the assessee claiming a refund, the ITO is required to grant the refund within a period of three months 'from the end of the month in which the appellate order is passed. When the assessees' appeal in this matter was allowed by the AAC by granting them exemption from tax, it was incumbent on the ITO to give refund of not only the advance tax but also the other amounts collected within three months from the date of the order without the assessees asking for it. We are, therefore, satisfied that the right of the assessees to get interest on the amounts of advance tax they paid which became refundable to them comes squarely within the ambit of Section 244(1) read with Section 240,

17. This conclusion is further reinforced by the other portions of Section 244. Though Sub-section (1A) does not apply to the case because it came into force with effect from October 1, 1975, the newly added sub-section says that where the whole or any part of the refund under Sub-section (1) is due to the assessee by virtue of the amount having been paid by him after 31st of March, 1975, on account of any order of assessment or penalty having been found in appeal or other proceeding to be in excess of the amount which such assessee is liable to pay as tax or penalty, the Central Govt. shall pay to the assessee simple interest at the same rate of 12 per cent. on the amount found to be in excess from the date on which such amount was paid to the date on which refund is granted. The provisos to Sub-section (1A) relate to the payments in instalments and the interest payable thereon and the absence of liability on the part of the Central Govt. to pay the assesses interest for a period of one month from the date of the passing of the order in appeal. Sub-section (2) even provides for the case where a refund is withheld under the provisions of Section 241.

18. It is thus manifest that Section 244 is the specific provision laying down that interest shall 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 a specific provision covering the cases of refunds payable as a result of appellate orders and the interest thereon.

19. On the other hand, Section 214 lays down the general principle that interest is payable on advance tax. Since tax is paid in advance even before the regular assessment, Section 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 Section 214. To cover such a contingency one should travel to Section 244 read with Section 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.

20. We are not impressed by the argument of Sri Anjaneyulu that Section 244 only refers to delayed refunds and does not cover quantification of the amount of refund. In so far as interest on refunds under Sub-section (1) is concerned, it is related to refunds postulated under Section 240. There should be refunds which result from any order passed in appeal. Then the ITO is ordained by Section 240 to refund the amount to the assessee without his having to make any claim in that behalf. The period for which interest on the refund shall be paid is also mentioned in Sub-section (1). Thus, there is no question of any delayed refund under Section 244(1) read with Section 240. Only if it is a case which comes under Sub-section (1A) of Section 244, the second proviso thereto says that no interest shall be payable for a period of one month from the date of the passing of the order in appeal. So, it is a misnomer to say that Section 244 refers to delayed refunds.

21. Nor are we impressed by the argument of the assessee's learned counsel that Sections 244 and 240 do not cover quantification of the amount of refund. This argument ignores the clear language of Section 240. If a refund, arises out of any order passed in appeal or other proceeding, the amount of such refund should be immediately quantified. This is a necessary corollary to Section 240. Therefore, to argue that for quantification of the amount of refund one should travel to the other provisions is untenable. Naturally and logically fixation of the amount of refund should be made by the appropriate officer or authority in accordance with the provisions of the Act. That docs not take away the fact that Section 244(1) read with Section 240 is the specific provision covering cases like the present one. We are, therefore, of the opinion that the case of the petitioner is governed by Section 244. If that applies, no interest is payable from 29th of August, 1970, to 22nd of May, 1974, thereby defeating the claim of the petitioners. This is sufficient to dismiss the writ petitions.

22. Otherwise also, we do not think that even if Section 214 applies, the petitioners would be entitled to any interest after the first assessment made by the ITO. That section requires the Central Govt. to pay simple interest only up to the date of the regular assessment for the assessment year immediately following the financial year. Assessees' learned counsel contended that this expression 'regular assessment' includes and must 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 Section 214. If so construed, Section 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 Section 2(40) as the assessment made under Section 143 or Section 144.

23. Section 143 deals with assessment. Sub-section (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-section (1) deals with cases of the ITO accepting the return filed by the assessee. We are not much concerned here with Sub-section (2) of Section 143. Section 143(3) deals with cases of making assessment after giving a notice under Sub-section (2) and after hearing such evidence as the assessee may produce and such other evidence as the ITO may require on specified points and after taking into account all relevant material which he has gathered. These are the varieties of assessments postulated by Section 143. Section 144 enables the ITO to make a best judgment assessment if an assessee fails to make a return or fails to comply with all the terms of a notice under Section 142(1), etc., or when he fails to comply with all the terms of the notice issued under Section 143. The statute considers these assessments made under Section 143 or Section 144 as 'regular assessments'. It does not expand the concept of 'regular assessment' to any other mode of assessment or any other stage of assessment. It does not say that regular assessment or the assessment made under Section 143 or Section 144 includes the consequential order passed by the ITO in pursuance of an appellate order. If one goes through the scheme of the Act, particularly Chap. XIV which lays down the procedure for assessment, it would become clear that the assessments contemplated by Sections 143 and 144 are assessments made by the ITO after the filing of the return of income by the assessee and after holding such enquiry as may be found necessary or even by accepting the return filed.

24. It is pertinent to note that Section 140A refers to self-assessment. That section lays down that where any tax is payable on the basis of any return after taking into account the amount of tax, if any, already paid under any provision of the Act, the assessee shall be liable to pay such tax before furnishing the return and the return shall be accompanied by proof of payment of such tax. This is called ' self-assessment'. Then Sub-section (2) of that section introduces a deeming provision by saying that after a regular assessment under Section 143 or Section 144 has been made, any amount paid under Sub-section (1) shall be deemed to have been paid towards such regular assessment. It is significant to note the self-assessment contemplated by Section 140A in contradistinction with the regular assessment under Section 143 or Section 144. Originally there used to be Section 141 enabling the authorities to make provisional assessment but that has been omitted by the Taxation Laws (Amendment) Act, 1970. Section 142 lays down the procedure for enquiry before assessment. It is thereafter that Sections 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 Section 2(40).

25. 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 Section 143 or Section 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 Sections 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.

26. 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 as meaning sometimes the computation of income, sometimes the determination of the amount of tax payable and sometimes the whole procedure laid down in the Act for imposing liabilities on the taxpayer.

27. This wide connotation of the word 'assessment' was reiterated by the Supreme Court in C. A. Abraham v. ITO : [1961]41ITR425(SC) . After quoting the above passage from Lord Romer's opinion, the Supreme Court held:

'A review of the provisions of Chapter IV of the Act sufficiently discloses that the word 'assessment' has been used in its widest connotation in that chapter.'

28. After referring to several provisions in Chap. IV of the Indian I.T. Act of 1922 the court held that the expression 'assessment' used in those sections is not used merely in the sense of computation of income.

29. Once again the Supreme Court said in S. Sankappa v. ITO : [1968]68ITR760(SC) , that proceedings for assessment are used with wide connotation in the 1922 Act and that proceedings taken for rectification of assessment to tax were also proceedings for assessment.

30. In the light of the wide meaning of the word 'assessment', it will have to be understood in the context it is used to find out which particular meaning and aspect of assessment which the word is used to convey. To put it in other words, the word 'assessment', wherever it is used in the income-tax law, will have to be understood in the light of the context it is used. But the task of understanding the meaning of 'Regular assessment' is rendered easier because of the place and context in which, Sections 143 and 144 occur in the statute of 1961 to which we have already referred.

31. It is true that an appeal is considered as a continuation of the original proceeding. Sri Anjaneyulu placed reliance for this contention on Rangaswamy v. Alagayammal AIR 1915 Mad 1133. This proposition is undoubted. For that reason alone we cannot consider the order passed in appeal and the consequential order passed by the original authority as the 'regular assessment'. After all, an appeal is a creature of a statute and the result therein also must abide by the provisions of the statute which create the rights and procedure for appeals. When the income-tax law provides for original assessment and carrying the matter in appeal by the aggrieved persons, it did not think it necessary to declare the order made in the appeal or the consequential 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.

32. 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. It is laid down by Parliament in the statute and one has to look into the statute to find out how, to what date and at what rate interest shall be paid on excess payments by the assessee. The concept of equity cannot be injected into taxation laws. One should go by the provisions of the taxing statute. Probably appreciating this equitable principle, Parliament has introduced Section 244 in the 1961 Act which was absent in the 1922 Act. Still further, with effect from 1975 they have added Sub-section (1A) to Section 244. Therefore, the argument of absence of specific prohibition against payment of interest carries no weight.

33. Assessees' learned counsel also endeavoured to exhort us to accept his understanding of the words 'regular assessment' by pointing out that if that were not to be accepted, certain anomalous situations would arise. He invited our attention to Sections 207, 209, 210, 216 and 217 in this connection. All these provisions occur under the title 'Advance payment of tax'. This part of the statute starts with Section 207 which says that tax shall be payable in advance in accordance with the provisions of Sections 208 - 219. Section 209 deals with computation of advance tax. Section 209A deals with computation and payment of advance tax by the assessee. Then Section 210 enables the ITO to require any former assessee to pay advance income-tax. Sections 215 and 216 require the assessee to pay interest if it is less than 75% of the assessed tax up to the date of the regular assessment. Section 216 deals with underestimate of the income by the assessee and the consequential lesser payment of the advance tax. Then he will be required to pay interest after finding out the tax levied on him on making regular assessment. Likewise, Section 217 provides for interest to be paid by the assessee when no estimate has been made. We see no anomaly in these provisions. The words 'regular assessment' are used in all these sections as it is used in Section 214 because all of them occur in the same context of payment of advance tax.

34. From the foregoing consideration, we conclude that the words 'regular assessment' used in Section 214 refer to the assessment made by the ITO under Section 143 or Section 144 on the first occasion and do not include the consequential order passed by him as a result of an order in appeal.

35. We may refer to some decisions of the Supreme Court, this court and other High Courts. Before we actually refer to these decisions, it must be noted that several of them arose under Section 18A(5) of the 1922 Act. Section 18A of that Act relates to advance payment of tax. Sub-section (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 Section 23, of the income, profits and gains of the previous year. The words 'regular assessment' occur in Sub-section (5) of Section 18A also and it specifically states that the assessment, thereafter called 'regular assessment', was the one made under Section 23 of the Act. Section 23 of the 1922 Act corresponds to Section 143 of the 1961 Act. Thus, there is no substantial or material change in this respect between Section 18A(5) of the 1922 Act and Section 214 of the 1961 Act. While Sub-section (5) of Section 18A by itself refers to assessment under Section 23, the words 'regular assessment' occurring Section 214 of the 1961 Act will have to be understood in the light of the definition of the words contained in Section 2(40). So, the decisions which we will now refer, even though some of them considered the effect of Section 18A(5), have relevancy and bearing on the question under consideration.

36. The Bombay High Court spoke on the subject in Sarangpur Cotton . v. CIT : [1957]31ITR698(Bom) . Chagla CJ. said this on the meaning of the words ' The date of assessment under Section 23' up to which interest is payable to an assessee on the advance tax paid by him under Section 18A:

''The date of assessment under Section 23' up to which interest is payable to an assessee on the advance tax paid by him under section 18A, refers to the date of the assessment under Section 23 in fact. The mere fact that an assessment made under Section 23 was set aside on appeal by the Appellate Assistant Commissioner, and a fresh assessment was made at a subsequent date, would not entitle the assessee to interest on the advance tax up to the date of the subsequent assessment.'

37. The Madras High Court in Natarajan Chettiar v. ITO : [1961]42ITR29(Mad) had to consider the meaning of the words 'regular assessment' occurring in Section 18A(6) of the 1922 Act. Rajamannar C.J., delivering the opinion of the court, held that the words 'regular assessment' in Section 18A(6) must bear the same meaning attributed to them in Sub-section (5) of that section. After referring to Chagla C.J.'s opinion in Sarangpur Cotton . v. CIT : [1957]31ITR698(Bom) , Rajamannar CJ. held that the ratio decidendi of that decision would apply equally to the case before them which arose under Section 18A(6). Pointing out that a different view could also be taken, it was observed that they would follow the well established rule that in construing a fiscal enactment like the I.T. Act unless the language is so clear that it could bear only one construction, the assessee would be entitled to, what one might call, 'the benefit of the doubt'. Having said this, the learned Chief Justice clearly pointed out that they should not be understood as having a doubt with regard to the construction of Sub-section (6) of Section 18A.

38. Then in the chronological sequence is the decision of the Supreme Court in Dwarka Nath v. ITO : [1965]57ITR349(SC) . In that case, the Appellate Tribunal directed in appeal under Section 33 of the 1922 Act that the excess realised by the assessee from the sale of certain shares should be assessed not as business income but as capital gains under Section 12B of the Act. Thereupon the ITO re-determined the assessable income under the head 'Capital gains' and ascertained the amount of tax due from the assessee but did not pass an order under Section 23(3). He did not also issue a notice of demand under Section 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 Section 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 Section 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 Section 33A(2) of the Act against the order of the ITO.

39. In Shadilal Sugar and General Mills v. Union of India : [1972]85ITR363(All) , the Allahabad High Court held that when Section 18A(5) speaks of the date of the assessment made under Section 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 compensation by way of interest is intended only for the period during which there was no obligation to pay the tax, i.e., up to the date of the first assessment by the ITO.

40. In Gates Foam & Rubber Co. v. CIT : [1973]90ITR422(Ker) , the Kerala High Court also took the same view. The Division Bench held that reassessments made after resort to the provisions in Section 147 of the I.T. Act, 1961, are not assessments under Section 143. Such assessments are not 'regular assessments' because the definition of 'regular assessment' in Section 2(40) specifically states that 'regular assessments' are those made under Section 143 or Section 144. The expression 'regular assessment' in Section 273 can mean only assessments under Section 143 or Section 144 and, therefore, that section cannot apply to reassessment under Section 147.

41. Once again the Bombay High Court in Deviprasad Kejriwal v. CIT : [1976]102ITR180(Bom) had to consider the scope of the expression ' regular assessment'. Holding that the said expression occurring in Section 18A(9) would cover cases of reassessment undertaken under Section 34(1), Tulzapurkar J., delivering the judgment of the Division Bench, pointed out that the same expression may be used in different senses in the same statute and even in the same section. The subject-matter dealt with by the provisions in Section 18A(5) and (6) is entirely different from the subject-matter dealt with in Section 18A(9). In that connection, the learned judge pointed out that Sub-sections (5) and (6) of Section 18A deal with the liability to pay interest either on the part of the Central Govt. or on the part of the assessee in respect of the amount of advance tax and the purpose of using the expression 'regular assessment' in those provisions is to indicate the two termini of the period for which interest should become payable. It was also added that the purpose of using the expression 'regular assessment' in those provisions, viz., Sub-sections (5) and (6), obviously is, as has been clearly stated in Sarangpur Cotton Manufacturing Company's case : [1957]31ITR698(Bom) .

42. In Laxmipat Singhania v. CIT : [1977]110ITR289(All) the Allahabad High Court had to deal with an identical question which arose under the 1961 Act as that which arises in this case. Chandrasekhar J. (as he then was), speaking for the Bench, pointed out that there is nothing in the context of Section 214 of the I.T. Act, 1961, which requires the expression 'regular assessment' not being understood as the first or original assessment according to the definition in Section 2(40) of the Act.

43. The Punjab and Haryana High Court in Smt. Kamlavati v. CIT had to consider the question of penalty on reassessment under Section 147. The court laid down, Chinnappa Reddy, Acting Chief Justice, speaking for the court, that 'regular assessment' is defined in Section 2(40) to mean the assessment made under Section 143 or Section 144. An assessment or reassessment made under Section 147 cannot, therefore, be considered to be regular assessment to which Section 273(a) can be applied.

44. 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.

45. There are, however, two single judge's decisions of the Calcutta High Court dealing with the same question under Section 214 of the 1961 Act. They are Chloride India Ltd. v. CIT : [1977]106ITR38(Cal) and General Fibre Dealers Ltd. v. ITO : [1979]116ITR40(Cal) . Sabyasachi Mukharji J., sitting singly, decided both the cases in writ petitions. In both of them, the learned judge expressed the opinion that having regard to the scheme of the Act and the context in which the expression had been used, 'regular assessment' under Section 214 would include in the particular facts and circumstances of the case, an assessment made by the ITO pursuant to the direction of the AAC. The learned judge did not consider in the two cases the scope of Section 244 read with Section 240. That apart, with respect, we are not inclined to adopt that view.

46. Finally, Sri Anjaneyulu urged the argument that consequential orders passed by the ITO pursuant to the appellate orders are appealable under Section 143(3). In order to demonstrate this, he relied on the Punjab High Court's decision in Gopi Lal v. CIT the Calcutta High Court's decision in Kooka Sidhwa and Co. v. CIT : [1964]54ITR54(Cal) and our own High Court's decision in CIT v. Warner Hindustan Ltd. : [1979]117ITR15(AP) .

47. In the second case, viz., Kooka Sidhwa and Co. v. CIT : [1964]54ITR54(Cal) it was held that the order passed by the ITO pursuant to the appellate order partakes of the character of a fresh assessment order and is referable to Section 23(3) of the Act. Therefore, an appeal would lie under Section 30 of the Act to the AAC. Mukharji J., a member of the Bench, pointed out that the statutory right of appeal cannot be wiped out by the procedural formalities which the appellant has to observe.

48. In Gopi Lal v. CIT the Punjab High Court also held that an appeal lies to the AAC against the order of the ITO made in pursuance of a direction given by the Appellate Tribunal under Section 33(5) of the Act.

49. In CIT v. Warner Hindustan Ltd. : [1979]117ITR15(AP) , the AAC, in an appeal under Section 246, gave a direction to the ITO to revise the assessment. In pursuance of that direction an order was passed. Obul Reddi C.J. and Narasinga Rao J. ruled that the fresh order was appealable.

50. Since a fresh order is an appealable order, it does not follow that the expression 'regular assessment' occurring in Section 214 need be given a different meaning than what is contained in the definition in Section 2(40). Section 214 of the 1961 Act allows interest only up to the 'regular assessment' which could only mean in the context of the section original or first assessment made by the ITO. Therefore, the above three decisions will not help the contention of the petitioners' learned counsel.

51. In the light of the above discussion, we hold that under Section 244, which applies to the case, the petitioners' present claim cannot be granted and that even on the basis of Section 214, their claim for interest cannot be acceded to. We, consequently, uphold the decision of the Commissioner and dismiss the writ petitions. Since there has been no settled law on this aspect of the matter in so far as this court is concerned, we direct the parties to bear their own costs in both the writ petitions.


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