This is a petition under articles 226 and 227 of the Constitution filed by Roshan Lal Kuthiala challenging the legality of a notice dated January 30, 1963, issued by the Income-tax Officer for the payment of advance tax under the provisions of section 210 of the Income-tax Act, 1961.
According to the allegations of the petitioner, on December 31, 1962, the Income-tax Officer, Special Investigation Circle, Ambala, respondent, had passed an assessment order for the year 1958-59 purporting to be under section 23 (3)/34 of the Indian Income-tax Act, 1922, and had issued a demand notice for the payment of Rs. 2,66,794.32 nP. on an income of about Rs. 3,13,630. On January 30, 1963, the said Income-tax Officer issued a notice for the payment of advance tax under section 210 of the Income-tax Act, 1961, requiring the petitioner to pay by March 1, 1963, a sum of Rs. 2,32,081 determined to be payable for the financial year 1962-63 on the basis of the assessment order dated December 31, 1962. Since this notice was illegal, the petitioner made representations to the Income-tax Officer and the Commissioner of Income-tax, but without any result. This led to the filing of the present writ petition on February 28, 1963.
In the return filed by the respondent, two preliminary objections have been raised. Firstly, it was stated that the petition was misconceived. The payment of advance tax on income during the relevant year of account was the statutory liability of an assessee and failure to pay the same visited him with statutory consequences. The respondent had merely quantified the amounts payable by the assessee with reference to the last completed assessment. If the assessee thought that that figure was higher than what was justified on his actual income in the relevant accounting period, he had the statutory remedy of giving his own estimates and making payment of advance tax for the period accordingly. The petitioner had, therefore, effective remedies open to him under the Income-tax Act. Secondly, it was mentioned that the object of the writ petition seemed to be to put off the petitioners statutory liability. A valid assessment having been completed, a lawful demand had been made by the respondent. The petitioner had his remedies under the Income-tax Act against the assessment. The remedy resorted to by the petitioner by invoking the jurisdiction of this court on the extraordinary side was not open to him. On the merits, it was stated that the total income of the petitioner was assessed at Rs. 3,44,668 and not Rs. 3,13,630, as mentioned by him. It was further mentioned that the advance tax for the period in question was demanded by the respondent by an earlier order dated August 18, 1962, as well. That order was subsequently revised on January 30, 1963, as a result of the completion of the assessment for the year 1958-59. It was admitted that the petitioner had made representations to the Commissioner of Income-tax, but the latter had declined to interfere in the matter. It was asserted that the fresh notice of demand issued by the respondent on January 30, 1963, was perfectly bona fide, legal and within jurisdiction and did not in any way infringe any rights of the petitioner, fundamental or otherwise.
On April 3, 1964, the petitioner put in an application (Civil Misc. No. 947 of 1964) under section 151, Civil Procedure Code, stating that, after the filing of the writ petitioner, the respondent allowed the petitioner to send by December 31, 1963, the return of his income for the assessment year 1963-64. A return in the prescribed form declaring an income of Rs. 1,00,000 was duly filed with the respondent by the aforesaid date. The respondent had, by virtue of his order dated January 15, 1964, passed under section 141 of the Income-tax Act, 1961, made a provisional assessment of the tax payable by the petitioner. In pursuance of this assessment, the respondent had created a demand of Rs. 33,900.23 nP. for which a notice was issued on January 15, 1964. In view of these facts, it was submitted that the petitioner was not liable to made the payment of the advance tax, and, consequently, the notice dated January 30, 1963, issued by the respondent had become infructuous. It was also stated that, after the making of the provisional assessment, no advance tax under the law could be demanded. Under the circumstances, it was prayed that these additional grounds might be allowed to be raised in the writ petition already filed. This application was granted subject to just exceptions with notice to the respondent by Jindra Lal J. on April 7, 1964.
Learned counsel for the petitioner argued the following three contentions before me :
(1) That the notice of demand dated January 30, 1963, issued under section 210 of the Income-tax Act, 1961, was illegal, because the same was bad on the assessment order dated December 31, 1962, which was only a provisional assessment and not a regular one. It was well established that a demand for advance payment of tax under section 210 could not be made on a basis of provisional assessment;
(2) that this notice was invalid also because the income-tax authorities had demanded the payment of the entire advance tax by March 1, 1963, in contravention of the proviso to section 211(1) of the Income-tax Act, 1961, according to high tax could have been paid by March 15, 1963; and
(3) that after the filing of the writ petition, the income-tax authorities had made the provisional assessment for the financial year 1962-63, and, consequently, the impugned notice dated January 30, 1963, had become infructuous, because after the making of the provisional assessment, the advance tax liability of an assessee ceased and no such tax could be demanded.
With regard to the first contention, the case of the income-tax department is that the advance tax is being claimed for the financial year 1962-63 (assessment year 1963-64). In the first instance, a notice of demand under section 210 of the Act was issued to the petitioner on August 18, 1962, for the payment of the advance tax on the basis of the regular assessment for the year 1957-58. At that time the assessment with regard to the year 1958-59 was, however, pending. On May 8, 1962, the petitioner filed the return with regard to the assessment year 1958-59, and on the basis of the same, the Income-tax Officer made the provisional assessment on May 23, 1962. The regular assessment for this year was made on December 31, 1962, and on its basis the revised advance tax demand notice was issued on January 30, 1963. The petitioner contends that the order dated December 31, 1962, is with regard to the provisional assessment while the case of the department is that it relates to the regular assessment for the year 1958-59. Learned counsel for the petitioner in support of his contention relies on the following two recitals in this order :
'(1) 0-8-0 share from M/s. Roshan Lal Kuthiala, Yamunanagar, is taken provisionally as per return of the firm. The assessment of that firm has not yet been completed. The correct share of income of the assessee will be included in his income under section 154 on completion of the assessment of the firm.
(2) 0-4-0 share in the above-noted firm in the name of the assessees minor son, Sh. Ravinder Lal, is also provisionally taken as per return of the firm. The correct share of his income will be included in the income of the assessee under section 154 on completion of the assessment of the firm.'
The argument of the learned counsel is that the use of the word 'provisional' in both these terms, clearly shows that the Income-tax Officer was making a provisional assessment and not a regular one. Section 141 of the Income-tax Act, 1961, deals with provisional assessment and lays down that the Income-tax Officer may, at any time after the receipt of a return under section 139, proceed to make in a summary manner a provisional assessment of the tax payable by the assessee on the basis of his return and the accounts and documents, if any, accompanying it. This assessment has to be made strictly on the basis of the assessees return. For instance, if the assessee claims, however wrongly, in his return that certain income is exemption from tax, the provisional assessment cannot purport to bring such income to charge. There is no power to make any assessment under this section unless a return has been filed by the assessee or by the firm in which the assessee is a partner (vide Kangas Income-tax Act, 5th edition, volume I, page 627). Regular assessment is governed by the provisions of section 143 of the Income-tax Act, 1961, which is equivalent to section 23 of the Income-tax Act, 1922). Under this section, the total income of the assessee has to be determined and on the basis of the me the tax is levied. The difference between the two types of assessments is that in the case of the former, the Income-tax Officer merely assesses the tax on the basis of the income shown by the assessee. At that stage, he does not determine as to whether that income has been correctly or incorrectly shown by him. He will take that figure to be correct and levy the tax thereon. While in the case of a regular assessment, the Income-tax Officer goes through the return of the assessee, determines whether the same is correct or not and, after following the procedure laid down in section 143, assesses his total income. In the present case, the order itself shows that the petitioner filed the return on May 8, 1962. Thereafter, notice under section 23(2) of the Income-tax Act 1922, was served on him and he appeared before the Income-tax Officer, who then computed the income of the assessee. If by the order dated December 31, 1962, only provisional assessment was being made, then there was no necessity of issuing any notice to the petitioner after he had filed the return. It is only if the regular assessment has to be made and the Income-tax Officer is not satisfied with the return filed by the assessee that a notice is sent to him. Moreover, the case of the income-tax authorities is that the provisional assessment had already been made on May 23, 1962. No doubt, the Income-tax Officer has used the word 'provisional' in items (1) and (2) mentioned above, but this had to be done, because he was assessing the share of the petitioners income in the two firms whose assessment had yet to be completed and in such cases there was no other alternative, since the assessment of the petitioner could not be postponed till the completion of the assessment of those firms. If, later on, it was found on the finishing of the assessment of the firms that an additional tax was due from the assessee, the same could be recovered from him by having resort to the provisions of section 34 or 35(5) of the 1922 Act (section 147 or 155 of the 1961 Act). In Second Additional Income-tax Officer, Guntur v. Atmala Nagaraj, their Lordships of the Supreme Court held thus :
'The assessment of the assessee was completed on January 22, 1952. As the assessment of a firm in which the assessee had a share was not completed at that time, a certain amount was included as his share in the firm and the assessment orders were passed with a note that action under section 35 of the Income-tax Act would be taken when the correct share-income was known.
The assessment of the firm was completed in 1954 and it was discovered that the share income of the assessee was much higher, and thereupon revised assessment orders were made under section 35(5). Held that the fact that a note was added that action under section 35 would be taken after the firms assessment could not make final assessment a provisional one.'
Similarly it was observed by Falshaw J. in a Bench decision of this court in Dharam Vir Virmani v. Commissioner of Income-tax :
'It was suggested on behalf of the assessee that if at the time of the original assessment the Income-tax Officer would not accept the assessees figures regarding his income from shares in the partnerships, it was his duty to postpone the completion of the assessment, if necessary for several years, to wait for the assessment of the partnerships. But in my opinion there must be so many cases of this kind that such a course would result in great inconvenience both to the assessees and to the revenue department and on the whole I am inclined to take the view that there is nothing illegal in the Income-tax Officers concluding the assessment at the time to the best of his ability on the available date, even in a case where he may have reason to suspect that on full and reliable information becoming available the assessment may have to be reopened.'
It is thus clear that the Income-tax Officer in the present case by his order dated December 31, 1962, was making a regular assessment for the year 1958-59 and not a provisional one. There is, therefore, no force in this contention.
Coming to the second contention, it would be proper to set down the provisions of section 211 of the 1961 Act. They are :
'211. (1) Subject to the provisions of this section and of section 212, advance tax shall be payable in equal installments on the 1st day of June, 1st day of September, 1st day of December and 1st day of March in the financial year :
Provided that, where the previous year of the assessee in respect of any source of income ends after the 31st day of December and before the 30th day of April, the advance tax on that source of income shall, subject as aforesaid, be payable in three equal installments on the 1st day of September, the 1st day of December and the 15th day of March, respectively.
(2) If the notice of demand issued under section 156 in pursuance of the order under section 210 is served after any of the date on which the instalments specified therein are payable, the advance tax shall be payable in equal instalments on each of such of those dates as fall after the date of the service of the notice of demand, or in one sum on the 1st day of March, if the notice is served after the 1st day of December.'
This objection was also raised by the petitioner before the income-tax authorities and the reply given by the department has been summarised in paragraph 4 of the written statement, which is under :
'That paragraph 4 of the petition is admitted in so far as the petitioner by his letter, dated February 21, 1963, which was received by hand on February 28, 1963, represented that the advance tax in respect of the sources of income during the previous year which ended between 31st December and 30th April was payable by 15th March. The respondent by his letter dated March 4, 1963, told the petitioner that his contention was incorrect. According to section 211(2), if the notice of demand in pursuance of section 210 is served after 1st of December, then the advance tax is payable in a limp sum on the 1st day of March. The petitioner was also informed that as the previous year in respect of the share of Rs. 39,455 from Messrs. Roshan Lal Kuthiala, Yamuna Nagar, alone ended after 31st December, therefore, and advance tax only on this part of the income was payable on 15th March, while the advance tax in respect of the remaining income of Rs. 3,05,213.00, being the share from Messrs. Roshan Lal Kuthiala, Pathankot, was payable on the 1st day of March. The petitioner was further informed that, in order to avoid unnecessary controversy, he was allowed to pay the entire demand by 15th March, 1963 (true copies of the petitioners letter and the respondents reply thereto are attached as annexure R-1 and R-2 hereto). It is correct that the petitioner made representations to the Commissioner of Income-tax also in this connection but the Commissioner declined to interfere in the matter.'
The contention of the learned counsel for the petitioner is that after issuing the demand notice, the department could not change the date of payment of the tax from March 1, 1963, to March 15, 1963. No provision of law or any decided case was, however, brought to my notice in support of this contention. The department, on the other hand, informed the petitioner that his contention was incorrect, but in order to avoid any unnecessary controversy on this score, they changed the date from March 1, 1963, to March 15, 1963. It is significant to mention that this point was not taken in the writ petitioner. Under these circumstances, no interfere is called for in these proceedings on this ground.
In order to appreciate the third contention of the learned counsel for the petitioner, it is necessary to give some further facts of the presents case. The present writ petition was filed on February 28, 1963, challenging the validity of the revised advance tax notice dated January 30, 1963. On December 31, 1963, the petitioner submitted his return of income for the financial year 1962-63, the petitioner submitted his return of income for the financial year 1962-63 (assessment year 1963-64). Thereupon, the Income-tax Officer made a provisional assessment on the basis of this return on January 15, 1964. Thereafter, on April 3, 1964, the petitioner filed Civil Misc. No. 947 of 1964 in the present writ petition seeking permission to raise the additional ground, which has given rise to the third contention under discussion. In the first place, learned counsel for the petitioner has not been able to cite any provision of law under the Income-tax Act or any decision thereunder to the effect that, after the provisional assessment for a particular year has been made, no advance tax can be recovered for that year and the notice issued for the recovery of the same becomes infructuous. Secondly, it is not understandable as to how the making of the provisional assessment ipso facto invalidates the advance tax notice, which is the only point with which we are concerned in the third contention. The advance tax notice is invariably issued furring the financial year, while the provisional assessment is made during the next year, which is called the 'assessment year', after the assessee has submitted his return. An assessee is, therefore, bound to pay the advance tax during the currency of the financial year, otherwise he becomes an assessee in default within the meaning of section 218 and is liable to penalty under section 221 of the Act. In the present case, the petitioner had become an assessee in default long before the provisional assessment was made on January 15, 1964. There is thus no force in this contention also.
Apart from what has been stated above, I would like to mention that the conduct of the petitioner in this case is such that I would not like to interfere with the impugned notice in these writ proceedings. The original advance tax notice, as already mentioned above, was issued on August 18, 1962, and the petitioner did not comply with the same and kept silent till the revised notice was issued on January 30, 1963. Again, he failed to make payment of the tax within the prescribed time. In case the demand was excessive he should have availed of the remedies provided to him under the Act by giving his own estimate of income, etc., and then made the payment in accordance with the same. He did nothing of the kind but filed a writ petition in this court on February 28, 1963, in order to further delay the payment of the tax.
The result is that this petition fails and is dismissed. In the circumstances of this case, however, I will make no order as to costs in these proceedings.