1967 (3) TMI 44 - HC - Income Tax

Order of the assessment was set aside - demand of advance tax was not valid - If the assessment of that total income has been set aside, it is not open to the ITO to consider that total income for the purpose of computing the amount of advance tax

Summary

Issues:
1. Assessment of income status of a partnership firm.
2. Validity of order under section 210 of the Income-tax Act, 1961 for advance tax payment.
3. Consideration of total income for advance tax computation after assessment set aside.
4. Relief against recovery proceedings for advance tax.

Analysis:
1. The judgment dealt with a case where the petitioner, a partnership firm involved in exhibiting cinematograph films, was assessed by the Income-tax Officer as an association of persons instead of a partnership firm. The Appellate Assistant Commissioner and the Income-tax Appellate Tribunal affirmed this assessment, leading to a reference to the High Court. The petitioner challenged the assessment status, claiming the income belonged to an individual partner. The judgment highlighted the ongoing dispute regarding the assessment status of the petitioner.

2. The Income-tax Officer passed an order under section 210 of the Income-tax Act, 1961, requiring the petitioner to pay advance tax for the financial year 1963-64. The petitioner contested this order, arguing that since the assessment order for the previous year had been set aside, the Income-tax Officer could not consider the total income assessed for determining advance tax. The judgment analyzed the provisions of section 209 regarding the computation of advance tax and emphasized that an assessment set aside cannot be the basis for computing advance tax.

3. The judgment delved into the legal aspect of considering the total income for advance tax computation after an assessment has been set aside. It emphasized that the starting point for computing advance tax is the total income of the latest previous year in which a regular assessment was made. Since the assessment had been set aside, the Income-tax Officer was not entitled to consider that total income for computing advance tax. The judgment rejected the argument that the petitioner was still liable to pay advance tax despite the assessment being set aside.

4. The judgment addressed the petitioner's delay in challenging the order under section 210 but ultimately granted relief by quashing the order, notice of demand, and recovery proceedings. It noted the potential harm to the petitioner's business due to the attachment of cinema furniture. The court intervened due to the illegality of the order under section 210 and the consequential recovery proceedings, emphasizing the need to prevent further harm to the petitioner's business.