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TMI Blog1984 (2) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessed by way of regular assessment as per section 209 of the Act. It was also stated that section 209A of the Act was introduced in the Act only from 1-6-1978 and the assessee's case, therefore, was covered by the position prior to insertion of that section and that position was that if an existing assessee was not served with a notice under section 210 to pay advance tax, he was not under any legal obligation to file an estimate of advance tax payable and to pay the same as envisaged under section 212(3A) of the Act. The assessee's counsel then put forward his legal objection that the advance tax notice under section 210 dated 6-6-1974 was not a valid notice as in accordance with the decision of the AAC dated 27-5-1974, the assessee will be having a loss of Rs. 7,253 instead of the income of Rs. 66,420. It was pointed out by Shri Gandhi that the order of the AAC was to have effect on the income of the three assessment years 1969-70 to 1971-72 and in support of his submission that after giving effect to the order of the AAC, the income of the assessment year 1971-72 will get converted to a loss he relied on the appeal effect orders subsequently passed by the ITO himself and these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Dashmesh Transport Co. (P.) Ltd. It was contended that according to this ruling, the High Court has held that once a notice under section 210 was issued by the ITO demanding advance tax from an assessee on the basis of income assessed of a particular year, the same cannot be amended if the income of that year underwent any change subsequently. It was also stated that amended notice in that case was held to be invalid and not the first notice. The second authority was cited as it was contended that wrong taking of the figure of quantum of income on which advance tax demand was made was a mere case of irregularity. This authority was a decision of the Tribunal, Amritsar Bench dated 6-2-1982 in the case of IAC v. Ganesh Das Bhoj Raj [IT Appeal No. 705 (Asr.) of 1980]. 3. On a careful consideration of the rival submissions, we find that the arguments of the assessee's counsel have force on the facts and in the circumstances of the case. It is an undisputed position that the order of the ITO merges into the order of the AAC. The AAC appears to have decided the appeals of the assessee for the assessment years 1969-70 and 1970-71 by his order dated 27-5-1974. This had the effect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b and Haryana High Court in Dashmesh Transport Co. (P.) Ltd.'s case has emphasised that an order passed by the ITO under section 210(3), which was contrary to law, had to be struck down. The Madras High Court in Rajlakshmi Mills Ltd.'s case has clearly laid down that the rectification of the assessment order under section 154 of the Act had the effect of making the original assessment order passed on 29-1-1970 the regular assessment order or the correct assessment order. It was further held that in other words, the original assessment was made regular in truth and in fact as a result of the rectification. These observations will perhaps have the effect of taking the rectification even back to the date of original assessment and in the instant case whereas the ITO has given appeal effect to the order of the AAC for the first two assessment years acting under section 250/143(3) of the Act, for the assessment year 1971-72, he has referred to section 154/155 of the Act. For the purpose of deciding the question in hand, even this will be sufficient that the assessment order was modified on the date the order of the AAC was passed for the earlier two assessment years. We may point out th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the return filed for the assessment year 1974-75 benefit of carry forward loss of Rs. 50,000 only. It was submitted that the appeals were pending for the earlier years and the position was not clear about the ultimate figure of loss and the assessee having paid advance tax already of certain amount estimated the loss at Rs. 50,000 without any particular basis but keeping in mind the fact that it may not be called upon to pay any further advance tax. 4.1 The second circumstance to which Shri Gandhi invited attention with the help of a chart was that goods booking receipts for the assessment year 1975-76 become unduly high in the last two months of the accounting year, viz., November 1974 and December 1974. The figures for those two months were Rs. 4.77 lakhs and Rs. 10.34 lakhs. It was pointed out with the help of comparative figures of earlier year that goods booking per month averaged between Rs. 2 to 3 lakhs. It was submitted that increases in the months of November and December could not be visualised and further the figures were received from 36 booking offices after passage of much time after the due date for filing of the estimate which was 15-12-1974. It was emphasised th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessment year 1974-75 showing an income of Rs. 1,47,350 after adjustment of losses on 27-9-1974, one cannot appreciate how he could derive any support from a consideration of previous year's losses for which appeals were pending. The plea was raised no doubt before the Commissioner (Appeals) and he had recorded a finding in para 4 of his order, which is stated as under : "From the records I find that for the assessment year 1974-75, a return of income was submitted on 27-7-1974 declaring an income of Rs. 1,47,350. This income was arrived at by adjusting a sum of Rs. 50,000 estimated to be brought forward losses of earlier years. This fact is clear from the Note No. 2 which is at the bottom of the statement of the assessable income filed along with return. Thus, on the date on which this return was submitted, i.e., towards the end of September 1974 the benefit of carried forward losses that the assessee anticipated in respect of the earlier years was Rs. 50,000 and this amount was taken into account in arriving at the returned income of Rs. 1,47,350." 10. Therefore, I am unable to appreciate how a consideration of the losses could stand in the way of the assessee making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or November the receipt was Rs. 4.77 lakhs. That means that for the 11 months total receipts stood at Rs. 32 lakhs. Could not the assessee on these facts proceed to make a rough estimate for the month of December and file an estimate by the date of last instalment which fell on 15-12-1977. That the assessee had 35 branches cannot be a reason for not making an estimate. In years to come he may have more branches. Accepting his plea would mean that the provisions contained in section 212 which obliges a taxpayer to file an estimate would not be made applicable to the assessee not only in this year but also in subsequent years when he may be having the same number of branches or more. It has not been realised by the learned Accountant Member that the management of big organisations always kept themselves regularly posted with the day to day affairs by obtaining, if not daily statements but weekly and fortnightly statements of receipts and expenditure. They always know the receipt and expenses position. They have to know it in order to keep a close watch on the running of their business. Therefore, it is not possible for me to accept the plea that the assessee could not make an estimat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his naturally called for adjustment in the assessment for the year 1971-72 on which advance tax assessment was made for the year in issue in spite of total income of Rs. 66,420 assessed by the ITO and adopted for the advance tax assessment of the year in issue. The result was a loss of Rs. 7,253. According to the assessee, this made the basis adopted by the ITO for advance tax assessment an erroneous basis. According to his submission, adoption of this income invalidated the notice so that the assessee was not obliged to file an estimate even when he was served with a notice under section 210. No doubt he was obliged to file an estimate but that was only when the notice issued under section 210 was valid. To the objection of the departmental representative that the appellate orders for the assessment years 1969-70 and 1970-71 were received on 2-7-1974 only when the advance tax assessment had been made on 6-6-1974 was, in his view, to be considered, as of no consequence. According to him, as soon as the order was passed by the AAC on 27-5-1974, the assessments made by the ITO for 1969-70 and 1970-71 had got merged in his appellate order and had ceased to exist so that the advance ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the decision. (7) On the disposal of the appeal, the Appellate Assistant Commissioner shall communicate the order passed by him to the assessee and to the Commissioner." Sub-section (6) provides that the order of the AAC shall be in writing while sub-section (7) provides that the AAC shall communicate the order to the assessee and the Commissioner. Both the steps are to be taken by the AAC or the Commissioner (Appeals), according to the procedure laid down to dispose the appeal. No effect, therefore, can be attributed to any order which is not communicated to the parties and remains the secret preserve of the AAC's record. Therefore, an appeal is not disposed of when the AAC or the Commissioner (Appeals) conceives of the order in his mind nor when he pronounces the order before the parties in course of bearing nor when he dictates the order and signs it. He has to communicate the order in writing to the assessee and the ITO to dispose of the appeal. Only then the appellate order can be claimed to take effect. I may refer to the disposal of the appeal by the Tribunal. Sub-section (3) of section 254 of the Act provides that the Tribunal shall send a copy of any orders passed u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to be communicated to the parties concerned. Therefore, the view that the appellate order became effective as soon as it was passed on 27-7-1974, irrespective of the fact that it was communicated after notice under section 210 was issued on 6-6-1974, is based on an erroneous appreciation of the statutory provisions contained in the Act. The view relied upon by the learned Accountant Member if adopted besides not finding any support in law will make the operation of section 210 almost impossible as was correctly pointed out by the learned departmental representative. He correctly emphasised the difficulties an ITO would be facing when he would be called upon to issue a notice under section 210. In order to issue a notice under section 210 in respect of a taxpayer, he must not only check his assessment records but also make an enquiry from all appellate and revisional authorities and also the Courts, if any order has been passed by them in respect of the proceeding not only for the year on which advance tax assessment is going to be based but also in respect of the earlier years. A construction of a provision which makes a provision unworkable has to be avoided in order to under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cated to the parties and the ITO as provided in clause (ii) of sub-section (3) of section 153 had not 'assessed, reassessed or recomputed the income'. Therefore, the rule of Chitra Cinema which considered the notice under section 210 to be invalid and, therefore, inoperative did not apply to the facts of the case in hand. In this connection, a reference is to be made to the decision in the case of Dashmesh Transport Co. (P.) Ltd. relied on by the revenue. In this case, their Lordships of the Punjab and Haryana High Court held that once a notice under section 210 based on the total income of the last assessee was made, the ITO could not amend it except when the assessment of a subsequent year was made. To apply the rule to the facts of the case, the ITO could not, even after the communication of the appellate orders for the assessment years 1969-70 and 1970-71, amend the notice already issued by him. In my view, the plea of the assessee that the notice under section 210 was invalid and, accordingly, the assessee was not obliged to make any estimate has to be rejected as of no substance. 23. As the assessee had failed in respect of both his pleas, there is no justification in inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TO ought to have himself rectified the demand made even if it was made in ignorance of the order of the AAC. Reliance is placed on the decisions in Rajalakshmi Mills Ltd.'s case and CIT v. Premier Auto Finance (P.) Ltd. [1981] 128 ITR 540 (Delhi). The decision in Sarupchand Hukum chand v. Union of India [1953] 23 ITR 382 (MB) (FB), specially the observations at page 410, according to the learned counsel for the assessee, supports him. On the factual basis, it is pointed out that there were large amounts of brought forward losses from the earlier years. Appeals were pending before several authorities including the Tribunal. If these had been decided, the assessee's total income for the year 1971-72 would have been negative, Referring to the business receipts of the assessee, it is pointed out that whereas the average receipts per month came to about Rs. 2 lakhs and odd, there were receipts in the last two months of nearly Rs. 15 lakhs. The income, therefore, even for the year under appeal was to a very large extent contributed by the receipts towards the end of the year. Having regard to the fact that the full information about these receipts could be received only after a month a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... According to the learned counsel, the ITO had jurisdiction to properly issue the notice on 6-6-1974, which he did. The brought forward loss has been adjusted in working out this income and this adjustment has been made on the basis of the assessee's own figures. 5. The two issues requiring consideration are whether the notice under section 210 is invalid having been issued by an ITO having no jurisdiction to issue it and secondly, whether the assessee had factually any reasons not to make an estimate. On the first point, reference has been made to the merger of the ITO's order with that of the appellate authority and similar concepts to give a thrust to the jurisdictional issue. In my opinion, without getting involved into legal technicalities as regards merger, the clear facts as to this matter renders the notice under section 210 invalid. The ITO issued the notice on 6-6-1974. On 27-5-1974, there was an order of the AAC reducing the income for 1971-72 which formed the basis of the issue of notice to a figure of loss. Reference was made by the learned counsel for the assessee to certain decisions stating that when the High Court or the Supreme Court delivered a judgment, they c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of making an estimate to anticipate as large an income as he returned. A study of the monthly receipts justifies this. The returned income came to Rs. 5,70,000. The abnormal extent of receipts during the last month alone came to Rs. 8 lakhs. The excess in the previous month was Rs. 2 lakhs above the average. Even in the best administered concerns, monthly receipt reports even from a few branches could be received only after a month. When the branches are as many as 36, the consolidation of receipts for all branches would certainly take more time. If the information about the receipts of the last month even if not delayed would not have in the present case enabled the assessee to anticipate the abnormal increase in the receipts for the last month, before the date for filing the estimate. Even without, therefore, taking into account the assessee's contentions about bad debts and the earlier years receipts about sale of vehicles, he could not be charged with realising his full profit position at the time of making the estimate. Levy of penalty is justified only if there is a contumacious conduct. If the assessee is in such a mental condition which justifies a way of thinking not lea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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