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TMI Blog1971 (4) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... x Officer to give effect to the reduction and modify the assessment accordingly. On July 15, 1969, the Income-tax Officer, Central Circle IV, Meerut, who was now seized of the case, made an order purporting to give effect to the appellate order. The assessable income was now shown at Rs. 8,88,154. A revised assessment form was drawn up, showing that a sum of Rs. 2,92,902 was refundable to the petitioner after taking into account the advance tax deposited by the petitioner during the financial year 1960-61. The petitioner applied to the Income-tax Officer on December 2, 1969, pointing out that consequent upon effect being given by the Income-tax Officer to the order of the Appellate Assistant Commissioner it appeared that advance tax had been paid in excess by Rs. 1,52,819, and claimed that he was entitled to interest on this excess payment. The petitioner informed him that his application should be treated as one made under section 154 of the Income-tax Act, 1961, for rectification of the order dated July 15, 1969. On April 27, 1970, the Income-tax Officer stated in reply: "(1) The application could not be considered as made under section 154 of the Act of 1961, because the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n assessee was entitled to interest at 2 per cent. per annum on the entire amount of advance tax paid by him. After some minor changes, the second proviso set out above was added by the Indian Income-tax (Amendment) Act, 1953, with effect from April 1, 1952. The effect of inserting this proviso was that interest for the period beginning April 1, 1952, would be payable only on the excess amount of the advance tax over the tax determined on regular assessment. So far as the period before April 1, 1952, was concerned, interest continued to be payable on the whole amount of the advance tax paid. Then, by the Finance Act 1955, the substantive provision of section 18A(5) was substituted by the language existing at present, so that the rate of interest at 2 per cent. was confined to payments made before April 1, 1955, and as regards payments made after that date it was raised to 4 per cent. per annum. The contention on behalf of the petitioner is that where reference has been made in section 18A(5) to the date of the assessment made under section 23, also referred to in the sub-section as the "regular assessment", it is the date of the assessment order which finally quantifies the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iginal assessment order made by the Income-tax Officer for that year which is intended. As soon as the original assessment order is made, and a notice of demand issued, the assessee is under an obligation to pay the tax demanded and no question then can arise of his being compensated by interest for any payment made by him in satisfaction of that demand. The compensation is intended only for the period during which there is no obligation to pay tax and the assessee does so only because of the scheme specially providing for recovering the tax in advance. The scheme, as we have already shown, is a departure from the basic principle underlying the Indian Income-tax Act that the charge is levied for an assessment year upon the income of the previous year. The question was considered by the Bombay High Court in Sarangpur Cotton Manufacturing Co. Ltd. v. Commissioner of Income-tax, and observations of Chagla C.J., who spoke for the court, may be set out: "The scheme of the section seems to be that interest is payable for the period during which there is no liability to pay upon the assessee. But once the order of assessment is made, the liability to pay arises, and even though the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision of section 18A(5). The argument is difficult to accept. When regard is had to the legislative history of section 18A(5), which we have traced out above, it will be clear that the legislature intended that interest should be paid on the entire amount of advance tax for the period before April 1, 1952, and for the period thereafter it should be paid only on the excess amount of advance tax. In 1955, when the substantive provision of section 18A(5) was amended, it was amended essentially for the purpose of providing for two different rates of interest, two per cent. per annum on amounts paid before April, 1, 1955, and four per cent. on amounts paid after that date. The operation of the second proviso continued unaffected by the amendment in 1955. It will also be observed that the substantive provision of section 18A(5) mentions that the assessment made under section 23 is called thereafter the "regular assessment ". Therefore, wherever the words "regular assessment" occur thereafter in section 18A, they must bear the same meaning as the words "the assessment made under section 23" have in the substantive provision of section 18A(5), that is to say, the first or original assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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