1982 (10) TMI 54 - AT - Income Tax

Summary

Issues Involved:
1. Whether the provisional assessment under the Business Profits Tax Act, 1947 survives after the quashing of a regular assessment.
2. The jurisdiction of the IAC in reviving the demand of provisional assessments and penalties.
3. The retention of tax collected under provisional assessments when regular assessments are quashed.
4. The adjustment of penalties against refunds due to the assessee.

Issue-wise Detailed Analysis:

1. Survival of Provisional Assessment:

The core issue was whether a provisional assessment made under the Business Profits Tax Act, 1947 survives after the quashing of a regular assessment. The Tribunal was divided on this matter, leading to a reference under Section 255(4) of the IT Act, 1961.

The ld. J.M. argued that provisional assessments do not survive the quashing of regular assessments, emphasizing the differences between provisional assessments under the IT Act and the Business Profits Tax Act. He noted that provisional assessments under Section 13 of the Act could be made without a return and were intended to be temporary until a regular assessment was made. He concluded that once a regular assessment is quashed, the provisional assessment ceases to exist.

Conversely, the ld. A.M. contended that provisional assessments under the Business Profits Tax Act are distinct and independent from regular assessments. He drew parallels with Section 23B of the IT Act, asserting that provisional assessments remain valid even if regular assessments are quashed. He cited the Allahabad High Court decision in Jagannath Rameshwar Prasad vs. ITO, which held that provisional assessments do not merge with regular assessments and remain valid if the latter is void.

The deciding member agreed with the ld. A.M., stating that there is no material difference between the schemes of provisional assessments under the IT Act and the Business Profits Tax Act. He cited the Calcutta High Court decision in Sriram Jhabarmull, which held that setting aside a final assessment does not affect the provisional assessment or its recovery. Consequently, the provisional assessments survive the quashing of regular assessments.

2. Jurisdiction of the IAC:

The assessee argued that the IAC exceeded his jurisdiction by reviving the demand of provisional assessments and penalties after the Tribunal quashed the regular assessments. The CIT(A) and the Tribunal upheld the IAC's actions, stating that the provisional assessments were not quashed by the Tribunal and remained valid.

3. Retention of Tax Collected Under Provisional Assessments:

The assessee contended that the tax collected under provisional assessments should be refunded once the regular assessments were quashed. The CIT(A) disagreed, stating that only the excess tax collected under regular assessments should be refunded, while the tax collected under provisional assessments remains valid. The Tribunal upheld this view, supported by the Allahabad High Court decision in Jagannath Rameshwar Prasad, which held that provisional assessments remain valid even if regular assessments are void.

4. Adjustment of Penalties Against Refunds:

The IAC had revived penalties for non-payment of tax and adjusted these penalties against the refunds due to the assessee. The assessee challenged this, arguing that once the regular assessments were quashed, the penalties should also be void. The CIT(A) upheld the IAC's actions, stating that the penalties were valid as the provisional assessments remained valid. The Tribunal supported this view, noting that the penalties were not quashed by the Tribunal and remained enforceable.

Conclusion:

The deciding member concluded that the provisional assessments under the Business Profits Tax Act, 1947 survive the quashing of regular assessments. The IAC acted within his jurisdiction in reviving the demand of provisional assessments and penalties. The tax collected under provisional assessments remains valid, and the penalties can be adjusted against refunds due to the assessee. The case was referred back to the Bench for passing an order in conformity with this view.