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New Delhi Hotels Ltd. Vs. Inspecting Assistant - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Delhi
Decided On
Judge
Reported in(1984)9ITD824(Delhi)
AppellantNew Delhi Hotels Ltd.
Respondentinspecting Assistant
Excerpt:
.....this act income-tax is to be charged in respect of the income of a period other than the previous year, income-tax shall be charged accordingly. (2) in respect of income chargeable under sub-section (1), income-tax shall be deducted at the source or paid in advance, where it is so deductible or payable under any provision of this act.4. since the tax has not been charged on the assessee in accordance with and subject to the provisions of the act, inasmuch as, according to the finding in the impugned order of the learned commissioner (appeals) the ito treated the assessee as one in which the public were not substantially interested and that too in the face of the fact that in the assessment order there is no specific finding to the said effect.5. since the assessment as also the charge.....
Judgment:
1. The appeal is by the assessee and the following facts as stand reproduced in verbatim from the impugned order of the learned first appellate authority give the background of the case : The ITO completed the assessment for assessment year 1976-77 on 22-8-1979. It is true that in the assessment order there is no specific finding given by the ITO whether the company is an 'industrial company' or not presumably because no such claim was made either in the return of income or during the course of the assessment proceedings. The ITO, accordingly, treated the company as one in which the public were not substantially interested and levied the tax at the rate of 65 per cent as applicable to a closely-held non-industrial company.

2. The assessee made a request to the ITO to charge correctly the rate of tax which, according to the assessee, was 60 per cent and which the ITO has charged at 65 per cent. The assessee contended that it was carrying on manufacturing activities of construction of building. His request was negatived and on appeal, the learned first appellate authority upheld the assessing officer's order, inter alia, on the ground that there was no mistake apparent from record within the meaning of Section 154 of the Income-tax Act, 1961 ('the Act'). He also discussed the merits of the case and held that even on merits the assessee has no case. The assessee is aggrieved and we have heard at length the learned authorised representatives of the parties. We have also given our due and careful consideration to the reasoning of the lower authorities.

3. In the impugned order the learned Commissioner (Appeals) is categorical that there is no specific finding given by the ITO in the assessment order as to whether the assessee-company is an industrial company or not. He is also categorical that the ITO has raised a demand of income-tax against the assessee-company treating it as a company in which public were not substantially interested. The assessee is in appeal but the revenue is not, hence, we have to proceed with these categorical findings as the base and, accordingly, we do hold that there was no justification with either of the lower authorities to have charged a rate of 65 per cent on the total income of the assessee for the assessment year under appeal since the assessment as also the charge of tax, in the case of the assessee, under the Act, has to be in accordance with and subject to the provisions of that Act and for ready reference, we reproduce hereunder the charging section, i.e., Section, 4, which finds place in Chapter II of the Act.--'Basis of charge' : 4. Charge of income-tax - (1) Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of, this Act in respect of the total income of the previous year or previous years, as the case may be, of every person : Provided that where by virtue of any provision of this Act income-tax is to be charged in respect of the income of a period other than the previous year, income-tax shall be charged accordingly.

(2) In respect of income chargeable under Sub-section (1), income-tax shall be deducted at the source or paid in advance, where it is so deductible or payable under any provision of this Act.

4. Since the tax has not been charged on the assessee in accordance with and subject to the provisions of the Act, inasmuch as, according to the finding in the impugned order of the learned Commissioner (Appeals) the ITO treated the assessee as one in which the public were not substantially interested and that too in the face of the fact that in the assessment order there is no specific finding to the said effect.

5. Since the assessment as also the charge of tax has to be in accordance with the law, viz., the provisions of the Act and since the charge of tax on the assessee at the rate of 65 per cent is not in accordance with the law, the assessee is well within his right to approach the assessing officer to charge correct rate of tax and it does not involve any action which calls for any controversy. The order of assessment has to be a valid order and a valid order is an order which is in accordance with and subject to the provisions of the Act.

Their . Lordships of the Hon'ble Supreme Court, in the case of Motilal Padampat Sugar Mills Co. Ltd. v. State of UP [1979] 118 ITR 326, 339 have observed that," . . .the fact is that there is not and never has been a presumption that everyone knows the law." Their Lordships also observed that there is no presumption in this country that every person knows the law and it would be contrary to common sense and reason if it were so and further, that it is impossible to know all the statutory law and not very possible to know all the common law. The income-tax law is generally said to be real complex in nature and an assessee cannot be said to be well conversant with the provisions of the law, more so, when each year, with every Finance Act there are amendments and amendments and perhaps it is for this reason that as early as in the year 1942 [1955] the Board vide Circular No. 3, dated 16-1-1942 [Circular No. 14 (XL.35), dated 11-4-1955 --See Taxmann's Direct Taxes Circular, 1980 Edn., Vol. 1, p. 920] issued administrative instructions in regard to the attitude of the department in matters affecting the assessee's interest, in the following terms : 549. Administrative "instructions in regard to the attitude of the department in matters affecting assessee's interest. -- 1. The Board have issued instructions from time to time in regard to the attitude which the officers of the department should adopt in dealing with assessees in matters affecting their interests and convenience. It appears that these instructions are not being uniformly followed.

2. Complaints are still being received that while Income-tax Officers are prompt in making assessments likely to result into demands and in effecting their recovery, they are lethargic and indifferent in granting refunds and giving reliefs due to assessees under the Act. Dilatoriness or indifference in dealing with refunds of claims (either under Section 48 or due to appellate, revisional, etc., orders) must be completely avoided so that the public may feel that the Government are actually prompt and careful in the matter of collecting taxes and granting refunds and giving reliefs.

3. Officers of the department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the department for it would inspire confidence in him that he may be sure of getting a square deal from the department. Although, therefore, the responsibility for claiming refunds and reliefs rates with assessees on whom it is imposed by law, officers should : (a) draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other ; (b) freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs.

4. Public Relations Officers have been appointed at important centres, but by the very nature of their duties, their field of activity is bound to be limited. The following examples (which are by no means exhaustive) indicate the attitude which officers should adopt : 1. Section 17(1) [section 113 of the 1961 Act] - While dealing with the assessment of a non-resident assessee the officer should bring to his notice that he may exercise the option to pay tax on his Indian income with reference to his total world income if it is to his advantage.

2. Section 18(3), (3A), (3B) and (3D) [sections 193 and 197(1), 195(1), 195(2) and 194 of the 1961 Act] - The officer should in every appropriate case bring to the assessee's notice the possibility of obtaining a certificate authorising deduction of income-tax at a rate less than the maximum or deduction of super-tax at a rate lower than the flat rate, as the case may be.

3. Section 25(3) and 25(4) - The mandatory relief about exemption from tax must be granted whether claimed or not ; the other relief about substitution, if not time barred, must be brought to the notice of a taxpayer.

4. Section 26A [sections 184 to 186 of the 1961 Acr] - The benefit to be obtained by registration should be explained in appropriate cases. Where an application for registration presented by a firm is found defective, the officer should point out the defect to it and give it an opportunity to present a proper application.

5. Section 33A [section 264 of the 1961 Act] - Cases in which the Income-tax Officer or the Assistant Commissioner thinks that an assessment should be revised, must be brought to the notice of the Commissioner of Income-tax.

6. Section 35 [sections 154 and 155 of the 1961 Act] - Mistakes should be rectified as soon as they are discovered without waiting for an assessee to point them out.

7. Section 60(2) [sections 89(1) and 103 of the 1961 Act] - Cases where relief can properly be given under this sub-section should be reported to the Board.

5. While officers should, when requested, freely advise assessees the way in which entries should be made in various forms, they should not themselves make any in them on their behalf. Where such advice is given, it should be clearly explained to them that they are responsible for the entries made in any form and that they cannot be allowed to plead that they were made under official instructions. This equally applies to the Public Relations Officers.

6. The intention of this circular is not that tax due should not be charged or that any favour should be shown to anybody in the matter of assessment, or that where investigations are called for, they should not be made. Whatever the legitimate tax it must be assessed and must be collected. The purpose of this circular is merely to emphasise that we should not take advantage of an assessee's ignorance to collect more tax out of him than is legitimately due from him.

6. In view of the observations of their Lordships of the Hon'ble Supreme Court as also the Circular (Instructions reproduced as above), read with the categorical finding of the learned Commissioner (Appeals), we are of the opinion and do hold accordingly, that the orders of the lower authorities merit to be set aside, which we do.

However, we restore the issue to the file of the learned assessing officer with the directions that the issue be decided afresh and correct rate of tax charged on the assessee in accordance with and subject to the provisions of the Act. In the interest of justice the assessee will be called upon to place on his file the material required for fresh and correct determination of the issue involved. The appeal by the assessee shall be taken to have been allowed for statistics.


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