1971 (4) TMI 23 - HC - Income Tax

Summary

Issues Involved:

1. Applicability of Section 154 of the Income-tax Act, 1961.
2. Entitlement to interest on excess advance tax paid under Section 18A(5) of the Indian Income-tax Act, 1922.
3. Interpretation of the term "regular assessment" under Section 18A(5).
4. Availability of alternative remedy by way of revision application to the Commissioner of Income-tax.

Detailed Analysis:

1. Applicability of Section 154 of the Income-tax Act, 1961:

The petitioner contended that his application for interest on excess advance tax should be considered under Section 154 of the Income-tax Act, 1961, for rectification of the order dated July 15, 1969. The Income-tax Officer rejected this by stating that the assessment for the year 1961-62 was completed under the Indian Income-tax Act, 1922, and thus Section 154 of the 1961 Act was not applicable. The court did not find it necessary to decide on this issue due to the resolution of the primary issue regarding interest entitlement.

2. Entitlement to Interest on Excess Advance Tax Paid under Section 18A(5):

The petitioner claimed interest on the excess advance tax paid, arguing that the final determination of assessable income was made by the Income-tax Officer on July 15, 1969, after giving effect to the appellate order. The court examined Section 18A(5) and its legislative history, noting that interest is payable from the date of payment to the date of the "regular assessment" made under Section 23. The court concluded that "regular assessment" refers to the original assessment order made by the Income-tax Officer, not the order passed after an appellate decision. Therefore, the petitioner was not entitled to interest on the excess advance tax paid, as the instalments did not exceed the tax determined by the original assessment.

3. Interpretation of the Term "Regular Assessment" under Section 18A(5):

The court analyzed the term "regular assessment" in the context of Section 18A(5) and concluded that it refers to the first or original assessment order made under Section 23. The court emphasized that the scheme of Section 18A was designed to reconcile advance payment of tax with the principle of taxing the income of the previous year. The court cited the Supreme Court's observation in Purshottamdas Thakurdas v. Commissioner of Income-tax, which highlighted that the section was introduced to combat inflation and was based on the principle of "pay as you earn." The court also referred to the Bombay High Court's decision in Sarangpur Cotton Manufacturing Co. Ltd. v. Commissioner of Income-tax, which supported the view that interest is payable only for the period during which there is no liability to pay tax.

4. Availability of Alternative Remedy by Way of Revision Application to the Commissioner of Income-tax:

The respondents argued that the petitioner had an equally efficacious alternative remedy by way of a revision application to the Commissioner of Income-tax against the impugned order of the Income-tax Officer. The court did not find it necessary to address this objection, as the primary issue regarding the entitlement to interest was resolved against the petitioner.

Conclusion:

The court dismissed the petition, holding that the petitioner was not entitled to interest on the excess advance tax paid, as the term "regular assessment" referred to the original assessment order. The court also did not find it necessary to address the applicability of Section 154 of the Income-tax Act, 1961, or the availability of an alternative remedy. The petition was dismissed with costs.