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Gates Foam and Rubber Co. Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberIncome-tax Reference No. 49 of 1970
Judge
Reported in[1973]90ITR422(Ker)
ActsIncome Tax Act, 1961 - Sections 2(40), 143, 144, 147 and 273
AppellantGates Foam and Rubber Co.
RespondentCommissioner of Income-tax
Appellant Advocate C.K. Viswanatha Iyer, Adv.
Respondent Advocate P.A. Francis and; P.K.R. Menon, Advs.
Cases ReferredNatarajan Chettiar v. Income
Excerpt:
.....taxation - reassessment - sections 2 (40), 143, 144, 147 and 273 of income tax act, 1961 - whether reassessment made under section 147 (a) not regular assessment so provisions of section 273 not validly applied to such case - as per section 2 (40) assessment, reassessment or re-computation after resort to section 147 not regular assessment - regular assessment in section 273 means assessments made under section 143 or section 144 - section 273 not applicable to reassessment under section 147 - question answered in negative. - - 65,130. thereafter, the income-tax officer again initiated proceedings under section 273(b) on the same ground that the assessee had failed to file an estimate under section 212(3) of the act and also defaulted in paying advance tax. the assessee contended..........appellate tribunal, cochin bench, has referred the following question to this court:'whether the reassessment made under section 147(a) of the income-tax act, 1961, was not a regular assessment and, therefore, the provisions of section 273(b) could not be validly applied to such a case ?'2. the assessee is a registered firm. it filed a return disclosing a total income of rs. 34,480 for the assessment year 1966-67. the assessment was completed on november 18, 1966, and the total income was fixed at rs. 37,250. the assessee had not filed an estimate of income as required by section 212(3) of the income-tax act, 1961 (shortly referred to hereafter as 'the act') and had not also paid advance tax. the income-tax officer, therefore, initiated penalty proceedings under section 273(b) of the.....
Judgment:

Govindan Nair, J.

1. The Income-tax Appellate Tribunal, Cochin Bench, has referred the following question to this court:

'Whether the reassessment made under Section 147(a) of the Income-tax Act, 1961, was not a regular assessment and, therefore, the provisions of Section 273(b) could not be validly applied to such a case ?'

2. The assessee is a registered firm. It filed a return disclosing a total income of Rs. 34,480 for the assessment year 1966-67. The assessment was completed on November 18, 1966, and the total income was fixed at Rs. 37,250. The assessee had not filed an estimate of income as required by Section 212(3) of the Income-tax Act, 1961 (shortly referred to hereafter as 'the Act') and had not also paid advance tax. The Income-tax Officer, therefore, initiated penalty proceedings under Section 273(b) of the Act before completing the assessment.

3. Subsequently, the Income-tax Officer took action under Section 147 and there was reassessment, which was completed on September 11, 1967, and the total income was fixed at Rs. 65,130. Thereafter, the Income-tax Officer again initiated proceedings under Section 273(b) on the same ground that the assessee had failed to file an estimate under Section 212(3) of the Act and also defaulted in paying advance tax. The assessee contended that the provisions of Section 273(b) will apply only in the case of 'regular assessment' as the section itself says, and that the reassessment completed on September 11, 1967, was not a 'regular assessment' and, therefore, no action could have been taken under Section 273(b). This contention was negatived by the Income-tax Officer as well as the Appellate Assistant Commissioner; and in second appeal the Tribunal upheld the view taken by the Income-tax Officer and the Appellate Assistant Commissioner.

'Regular assessment' is defined in Section 2(40) of the Act thus :

''Regular assessment' means the assessment made under Section 143 or Section 144; '. The expression 'regular assessment' is used in Section 273; the relevant part of that section is in these terms ;

'If the Income-tax Officer, in the course of any proceedings in connection with the regular assessment, is satisfied that any assessee-- . . .

(b) has without reasonable cause failed to furnish an estimate of the advance tax payable by him in accordance with the provisions of subsection (3) of Section 212, he may direct that such person shall, in addition to the amount of tax, if any, payable by him, pay by way of penalty a sum-- . ..

(ii) which, in the case referred to in Clause (b), shall not be less than ten per cent, but shall not exceed one and a half times the amount on which interest is payable under Section 217.' Section 147 (corresponding to Section 34 of the Indian Income-tax Act, 1922) provides that:

'If-

(a) the Income-tax Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or

(b) notwithstanding that there has been no omission or failure as mentioned in Clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, or

he may, subject to the provisions of sections 148 - 153 assess or re-assesss such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned.'

4. Section 148 enjoins that, before making the assessment, reassessment or recomputation under Section 147, the Income-tax Officer shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under Sub-section (2) of Section 139. On such notice being issued, the section further states, the provisions of the Act shall, as far as may be, apply accordingly as if the notice were a notice issued under that sub-section.

5. Section 153(2) also speaks of an order of assessment, reassessment or recomputation under Section 147,

6. The Explanation to Section 271 specifically refers to income assessed under Section 143, 144 or 147; and Section 246 provides for appeals from the various orders mentioned therein.. Orders of assessment under Section 143 or Section 144 fall under Clause (c) of that section, and Clause (c) separately provides for an order of assessment, reassessment or recomputation under Section 147 or Section 150.

7. A notice issued under Section 148, which may include the requirements under Sub-section (2) of Section 139, is really not a notice under Section 139, because Section 148 itself states that the provisions of the Act will apply as if the notice issued was under Sub-section (2) of Section 139, So the assessment that follows cannot strictly be said to be an assessment tinder Section 143 of the Act. Apart from this, sections 147, 148, 153, 271 and 246 specifically refer to assessment under Section 147. Assessments made after resort to the provisions in Section 147 appear under the scheme of the Act to be assessments under Section 147 and therefore not assssments under Section 143. If this be so, 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. When an expression is defined in the Act and when that expression again occurs in that statute, it is axiomatic that the meaning of the definition must be given to that expression wherever it occurs in the Act. So it seems to us to be evident that the expression 'regular assessment' in Section 273 can only mean assessments made under Section 143 or 144. In this case the section--Section 273--cannot apply to the reassessment that has been made on September 11, 1967, which was under Section 147.

8. We are not aided in coming to the above conclusion by any specific decision which has considered the above provisions in the Act. Our attention has been drawn to a decision of the Madras High Court in Natarajan Chettiar v. Income-tax Officer, Karaikudi, [1961] 42 I.T.R. 29 (Mad.) and a later decision of the same High Court in Gopalaswami Mudaliar v. Fifth Addl. Income-tax Officer, Coimbatore, [1963] 49 I.T.R. 322 (Mad.). In both these cases the section that was considered was Section 18A(6) of the Indian Income-tax Act, 1922. In the former decision the view taken was that 'regular assessment' mentioned in Section 18A(6) will refer only to assessment made without resort to Section 34 of that Act. This view appears to have been practically dissented from in the decision in Gopalaswami Mudaliar v. Fifth Addl. Income-tax Officer, Coimbatore, and a distinction has been sought to be drawn between cases where there has been a previous assessment and cases in which there had been no previous assessments. The decision in Gopalaswami Mudaliar v. Fifth Addl. Income-tax Officer, Coimbatore, related to a case where there had not been any previous assessment and it was held therein that interest can be charged under Section 18A(6). In the later decision it was suggested that when there had been no previous assessment, the assessment made by resort to Section 34 is a regular assessment and that, therefore, Section 18A(6) will apply to such assessment; but that section may not apply to a case where there had been previous assessment, before action was taken under Section 34 of the Act. It is not for us to consider whether any such distinction can be drawn on the basis of the provisions of the Indian Income-tax Act, 1922, nor are we called upon to consider the correctness of the view taken in Natarajan Chettiar v. Income-tax Officer, Karaikudi.

9. These two decisions have been referred to by Kanga and Palkhivala in the Law and Practice of Income-tax, 6th edition, volume 1, page 67 without any critical comment. Sundaram in his commentary to the same Act (Law of Income-tax in India), 10th edition, volume 1, page 186, suggests that in view of the definition in Section 2(40) of the Act, the assessment after resort to the provision in Section 147 of the Act may not be a regular assessment under Section 143 or Section 144.

10. We are of the view that considering the specific reference made in the various sections of the Act including Section 148 to ' assessment under Section 147'and the definition in Section 2(40) of the Act, an assessment under Section 147, that is, assessment, reassessment or re computation made after resort to Section 147 would not be a 'regular assessment'.

11. We, therefore, answer the question referred to us in the negative, that is, in favour of the assessee and against the department. We direct the parties to bear their respective costs.

12. We wish to make it clear that this answer to the question does not and cannot affect any proceedings initiated under Section 273(b) of the Act on the basis of the assessment made on November 18, 1966.

13. A copy of the judgment under the seal of this court and the signature of the Registrar will be sent to, the Income-tax Appellate Tribunal, Cochin Bench.


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