The petitioner claims to be a partnership firm consisting of Jyoti Bhushan Gupta, his wife, Srimati Sulbha Gupta, and their son, Anil Kumar Gupta. The firm carries on the business of exhibiting cinematograph films at the Chitra Cinema, Varanasi. The petitioner filed the returns of its income in respect of the assessment years 1958-59 and 1959-60 in the status of a partnership firm. the income-tax Officer assessed the petitioner in the status of an association of persons. The petitioner appealed against the assessments and the Appellate Assistant Commissioner held that the income of the cinema business belonged to Jyoti Bhushan Gupta as an individual. the case was carried in further appeal to the Income-tax Appellate Tribunal. The Tribunal affirmed the finding of the Appellate Assistant Commissioner and setting aside the assessment orders remanded the case. The order of the Tribunal was made on April 2, 1962. No fresh assessment has yet been made upon the petitioner. the petitioner, however, dissatisfied with the order of the Tribunal, has obtained a reference to this court arising out of the Tribunals appellate order. That reference is still pending.
The Income-tax Officer, 'A' Ward, Varanasi, has passed an order under section 210 of the Income-tax Act, 1961, calling upon the petitioner to pay advance tax in the sum of Rs. 37,920 for the financial year 1963-64. the order was made on July 30, 1963. It appears from the order that the amount of advance tax was determined on the basis of the total income of the previous year relevant to the assessment year 1959-60. By a notice of demand of the same date the petitioner has been called upon to pay the said amount of advance tax. Proceedings for recovering the advance tax are being taken by the Income-tax Officer against the petitioner and the furniture of the Chitra Cinema has been attached. The petitioner prays for relief against the order under section 210, the notice of demand and the related recovery proceedings.
The petitioner contends that the assessment order for the assessment year 1959-60 having been set aside, the Income-tax Officer was not entitled to consider the total income assessed by that assessment order for the purpose of determining the advance tax payable by the petitioner. the contention has force and must be accepted.
Section 207 provides for the payment of tax advance in the case of income other than income chargeable under the head 'capital gains'. Section 209 determines how the amount of advance tax shall be computed. It is necessary for the Income-tax Officer to ascertain first the total income of the assessee of the latest previous year in respect of which he has been assessed by way of regular assessment. the amount of capital of gains, if any, included in such total income has to be deducted from it and on the balance income-tax and super-tax are calculated at the rates in force in the financial year in respect of which the advance tax is being computed. the income-tax and super-tax so calculated are then reduced by the amount of income-tax and super-tax deductible during that financial year in accordance with sections 192 to 195 on any income included in that total income, and the amount of income tax and super-tax so calculated is, subject to clauses (b) and (c), the advance tax payable.
It is clear from the provision of section 209 that for the purposed of computing the amount of advance tax payable in a financial year the starting point is the total income of the latest previous year in respect of which a regular assessment has been made. The subsequent computation proceeds on its basis. if the assessment of that total income has been set aside, it is not open to the Income-tax Officer to consider that total income for the purpose of computing the amount of advance tax. An assessment which has been set aside exists no longer. It cannot constitute any basis for computing the amount of advance tax. Parliament, when it enacted section 209, could not have intended that an assessment of total income which has been set aside should form the basis of the computation.
The respondents urge that the petitioner was liable to pay advance tax and the mere circumstances that the assessment had been set aside did not detract from that liability. it is urged that if the petitioner disputed the amount payable as advance tax as computed by the order under section 210 it was open to him under section 212(1) to send to the Income-tax Officer an estimate of the advance tax payable by him. If he does not send that estimate, it is said, he is bound to pay the amount of advance tax set out in the order under section 210. I am not impressed by that submission. It is open to an assessee to challenge an order under section 210 if the amount of advance tax has not been computed in accordance with the principles set out in the statute. if the computation does not follow the principles set out by the statute, there can be no valid order Sub-section (1) of section 212 presuppose a valid order under section 210. It contemplates that if a valid order under section 210 is made and the assessee estimates that his income subject to advance tax is less than the income on which he is required to pay such tax and accordingly wishes to pay an amount less than the amount which he is required to pay he may send to the Income-tax Officer an estimate of the total income and an estimate of the advance tax payable by him. if the order under section 210 is invalid clearly there is no occasion for him to say that his income is less than the income on which he is required to pay advance tax. When the assessment of the total income of the latest previous year considered as the basis of the order under section 210 no longer exists, the standard by reference to which the assessee can determine whether his income subject to advance tax is less ceases to have any validity.
Inasmuch as the assessment of the total income for the assessment year 1959-60 had already been set aside when the order section 210 was made, the Income-tax Officer was not entitled to consider that total income for the purpose of computing the advance tax and consequently the order under section 210 requiring the petitioner to pay advance tax on the basis of that computation is invalid.
It was pointed out by the respondents that the order under section 210 was made in before the instant petition was filed and no relief should be granted to the petitioner on the ground of his laches. There is no doubt that the petitioner has come to this court with some delay, but the order under section 210 is so patently illegal that I am persuaded to interfere, especially when recovery proceedings are being taken to give effect to it. the furniture of the cinema has been attached and it cannot be doubted that if it is sold, it will seriously interfere with the cinema business.
In the circumstances, it is not necessary to consider remaining contentions of the petitioner.
The petition is allowed. the order under section 210 of the Income-tax Act, 1961 and the consequent notice of demand as well as the recovery proceedings pursuant thereto are quashed. As the order under section 210 has been challenged with some delay, there is no order as to costs.