1984 (9) TMI 31 - HC - Income Tax

Summary

Issues Involved:
1. Refund of tax on provisional assessment under section 141A of the Income-tax Act, 1961.
2. Interpretation of the mandatory nature of section 141A.
3. Impact of setting aside the regular assessment on the provisional assessment.

Detailed Analysis:

1. Refund of Tax on Provisional Assessment under Section 141A:
The petitioner, a private limited company, sought a writ of mandamus to direct the respondents to refund tax on provisional assessment under section 141A for the assessment year 1973-74. The company had paid advance tax amounting to Rs. 2,13,095 and declared a loss of Rs. 1,65,200 in its return filed on October 16, 1973. The company argued that since no regular assessment was made within six months of filing the return, the Income-tax Officer (ITO) was obligated under the proviso to section 141A to refund the pre-paid taxes immediately after the six-month period, which ended on April 15, 1974.

2. Interpretation of the Mandatory Nature of Section 141A:
The petitioner contended that the use of the word "shall" in the proviso to section 141A indicated a mandatory duty for the ITO to make a provisional assessment if the regular assessment was delayed beyond six months. The court agreed with this interpretation, noting that the distinction between "may" and "shall" in the same provision indicated that the latter was mandatory. The legislative history, including assurances given during the debate on the Finance Bill, 1968, and the subsequent amendment by the Taxation Laws (Amendment) Act, 1970, reinforced this mandatory nature.

3. Impact of Setting Aside the Regular Assessment on the Provisional Assessment:
The regular assessment made on September 23, 1976, was set aside by the Commissioner of Income-tax (Appeals) on October 30, 1981, and the case was remanded for a de novo assessment. The petitioner argued that this situation was equivalent to no assessment being made, thereby reviving the ITO's duty to make a provisional assessment under section 141A. However, the court noted that a fresh draft assessment order had already been issued on March 15, 1984, computing the total income at Rs. 1,82,290. Given this context, the court found no purpose in directing the ITO to make a provisional assessment for a refund.

Conclusion:
The court concluded that while the ITO had a mandatory duty under section 141A to make a provisional assessment if the regular assessment was delayed beyond six months, the specific circumstances of this case did not warrant granting the relief sought by the petitioner. The writ petition was dismissed with no order as to costs, as the fresh draft assessment order rendered the request for a provisional assessment moot.