1989 (8) TMI 44 - HC - Income Tax

Issues Involved:
1. Entitlement to interest on excess payment of advance tax.
2. Interpretation of "regular assessment" under Section 214 of the Income-tax Act, 1961.
3. Applicability of rectification proceedings to "regular assessment."
4. Impact of amendments to Section 214 on the interpretation of "regular assessment."

Detailed Analysis:

1. Entitlement to Interest on Excess Payment of Advance Tax:

The petitioner, an income-tax assessee, sought interest on the excess payment of advance tax up to the date of rectification (January 5, 1981). Initially, a sum of Rs. 813 was found refundable, which was later modified to Rs. 35,696 after rectification. The Commissioner of Income-tax refused to pay interest up to the date of rectification, leading to this petition.

2. Interpretation of "Regular Assessment" under Section 214 of the Income-tax Act, 1961:

The core issue was whether the term "regular assessment" in Section 214 refers only to the first order of assessment or includes subsequent modifications due to rectification or appellate orders. Section 214(1) states: "The Central Government shall pay simple interest at twelve per cent. per annum on the amount by which the aggregate sum, any instalments of advance tax paid during any financial year... 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 regular assessment for the assessment year immediately following the said financial year..."

Section 2(40) defines "regular assessment" as an assessment made under Section 143 or Section 144.

3. Applicability of Rectification Proceedings to "Regular Assessment":

The Department argued that "regular assessment" refers to the first order, while the assessee contended it includes assessments made pursuant to rectification or appellate orders. The court examined various precedents:
- Sarangpur Cotton Manufacturing Co. Ltd. v. CIT [1957]: Held that the first assessment order determines the liability to pay, and subsequent assessments do not entitle the assessee to interest on advance tax.
- Sir Shadilal Sugar and General Mills Ltd. v. Union of India [1972]: Affirmed that "regular assessment" refers to the first assessment order.
- Chloride India Ltd. v. CIT [1977]: Contrarily, it held that "regular assessment" includes modified assessments pursuant to appeals.
- Lala Laxmipat Singhania v. CIT [1977]: Disagreed with Chloride India Ltd., maintaining that "regular assessment" means the first assessment order.

4. Impact of Amendments to Section 214 on the Interpretation of "Regular Assessment":

The court referenced the Full Bench decision in CIT v. Carona Sahu Co. Ltd. [1984], which concluded that "regular assessment" means the first order of assessment. The court also considered Section 214(1A), introduced in 1984, which mandates refunding excess amounts if reduced by rectification or appellate orders. However, this provision does not alter the interpretation of "regular assessment" in Section 214(1).

Conclusion:

The court concluded that "regular assessment" in Section 214(1) refers to the first assessment order under Section 143(1), as modified by any order under Section 143(3). Rectification proceedings under Section 154 are not part of "regular assessment." Therefore, the petition was dismissed, and the Revenue's stand was upheld.

Separate Judgments:

H. K. SEMA J. concurred with the judgment.

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