9911796707
TMI Blog1993 (1) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, the assessee filed an estimate of its income before the Income-tax Officer on June 15, 1972, showing the advance tax payable at Rs. 58,695. On the basis of the estimate filed, the assessee paid two instalments of Rs. 19,565 each on June 16, 1972, and September 18, 1972. Before the third instalment was due to be paid, the assessee filed another estimate on December 30, 1972, wherein the income and the tax payable were shown at nil. The assessee filed the return on June 16, 1973, admitting a loss of Rs. 313. The Income-tax Officer determined the total income of the assessee at Rs. 41,188 in his assessment order dated January 27, 1976, and the tax payable at Rs. 28,110. In the notice of demand issued by the Income-tax Officer on the basis of the aforesaid assessment order, the Income-tax Officer allowed interest of Rs. 3,731 to the assessee under section 214 of the Act in respect of the excess advance tax paid being the sum of Rs. 11,020. Aggrieved by the assessment, the assessee preferred an appeal and the Appellate Assistant Commissioner, in his order dated October 3, 1977, allowed relief of Rs. 39,969. Before the Appellate Assistant Commissioner passed his order, the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment of advance tax of Rs. 27,725 and allowed the appeal. Before us, Sri N. K. Poddar, learned counsel for the assessee, placed reliance on the following decisions in support of the contention that the words " regular assessment " as appearing in section 214 should mean and include not only the original order of assessment passed by the Income tax Officer but also all subsequent orders modifying the assessment including an order of rectification as held in Chloride India Ltd. v. CIT [1977] 106 ITR 38 (Cal) ; Kooka Sidhwa and Co. v. CIT [1964] 54 ITR 54 (Cal) ; General Fibre Dealers Ltd. v. ITO [1979] 116 ITR 40 (Cal) Binod Mills Co. Ltd. v. S. A. Kadre, EPTO [1980] 122 ITR 778 (Bom) CIT v. Rajalakshmi Mills Ltd. [1980] 125 ITR 141 (Mad) ; Rayon Traders (Pvt.) Ltd. V. ITO [1980] 126 ITR 135 (Mad) ; Bardolia Textile Mills v. ITO [1985] 151 ITR 389 (Guj) [FB] and CIT v. John Falming and Co. Ltd. He urged that the matter is already covered by a number of decisions of this court holding that the connotation of the expression " regular assessment " extends not merely to the first assessment made by the Assessing Officer but also to all subsequent modifications in the course of appeal, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority. But since the Bombay High Court in CIT v. Carona Sahu Co. Ltd. [1984] 146 ITR 452 [FB] and in CIT v. India Reinsurance Corporation Ltd. [1984] 146 ITR 477 (Bom) [FB] and the Kerala High Court in CIT v. G. B. Transports [1985] 155 ITR 548 [FB], all Full Bench decisions, have taken a contrary view, it is necessary to have a closer look into the controversies on the issue. The view taken in those decisions is that the Income-tax Act is a self-contained code and the principles of equity, justice and conscience have no place, in interpretation. It is the context that governs the meaning of the words and expressions used and no words can be read in isolation or detachment from the context. According to these courts, the context of section 214(1) requires the meaning of regular assessment to be limited to the first order of assessment passed by the Assessing Officer. The provisions of the Act call for adjustment of the advance tax which is paid during the currency of the financial year prior to the assessment year. Once the assessment is made under section 143, the advance tax sheds its character as advance tax and takes on the character of tax paid as per demand. The amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in those decisions is that interest is recomputable only where the statute in terms authorises it. The provisions of the Act as it obtained in the relevant assessment year did not provide for enhancement of interest under section 215 payable by the assessee to the Central Government in cases where the amount on which interest is payable by the assessee was enhanced pursuant to any order in subsequent proceedings. The provisions of sections 139(8), 215(3) and 214(1A) are referred to in this connection. It is only by amendment under the Taxation Laws (Amendment) Act of 1984 that provisions have been made for enhancement of interest either payable by the assessee or payable by the Central Government consequent upon modification of the tax liability. The amendment has effect from April 1, 1985. It is, therefore, to be inferred that, prior to the amendment, the law entitled the assessee to receive interest under section 214 only on such amount as falls refundable on the first assessment made by the Assessing Officer under section 143. The subsequent reduction in the quantum of tax and the consequential increase in the amount of refund is not entitled to any interest where the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also an order of regular assessment, the court considered the question whether regular assessment must be taken as the first assessment or the last operative order of regular assessment. In dealing with this question, the one and only reference made was to the scheme of section 215 of the Act. It found that having regard to the interpretation of section 215 and the similar objectives of sections 214 and 215, a strong case was made out for reading 'regular assessment' in section 214 as the first order of regular assessment and not as the last operative order of regular assessment ; (c) While the above two were the reasoning presented in support of the Revenue's case, the court proceeded to consider certain other approaches made on behalf of the assessee to support the claim for interest. The main argument of the assessee's counsel in that case was that section 214(2) enabled interest to be claimed up to the date of refund and, therefore, even assuming that the term 'regular assessment' in section 214(1) referred to the first assessment, by operation of section 214(2) interest till the date of refund will be due. This was dealt with in the light of the scheme of section 214(1A) and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an order under section 143, for the purpose of appeal, it is equally so for other purposes. Finally, the Gujarat High Court concluded that the decision of the Bombay High Court that the revised order of assessment is not one of regular assessment is not correct. The second point-point (b) - relates to the question whether, even it the revised order be an order of regular assessment, it is to be taken as such even for the purpose of section 214(1). The Bombay High Court, inter alia, rejected such proposition. It relied upon the scheme of section 215. The broader construction of the expression "regular assessment" in the context is inconsistent with the scheme of section 215 which also deals with interest on advance tax where the interest is payable by the assessee for the shortfall. But the Gujarat High Court held that section 215 is not similar to section 214. Section 214 deals with refund due to the assessee, such refund that is due at the first assessment and that could be found further due at the revised assessment, for a revised assessment is passed on proceedings resorted to for reducing the tax liability and not for enhancing it ( at page 430 of 151 ITR ) : " In the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id on the basis of the first assessment. That is provided for in sub-section (3) of section 215. That is fair enough. But, in the case of payment of interest by the Central Government on the excess advance tax paid by the assessee, he would get refund only on the basis of the first assessment order of the Income-tax Officer, if the Bombay view is adopted as the correct view. He gets relief in appeal. On the basis of such relief, he is found entitled to refund of excess not found by the Incometax Officer. If we adopt the approach of the Bombay decision, it would mean that the assessee would not get interest for the period after the first assessment. In other words, while the Central Government would get interest only for real deficit and not deficit under the first order by reason of section 215(3), the Central Government will not pay interest for the real excess, but only for the excess under the first assessment and that too up to the date of the first assessment only. If the scheme of section 214 is similar to that in section 215, this result should not follow. Hence, assumption of a similar scheme in the two sections and emphasis on it to understand section 214 may not be warran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er have contemplated that such a result should follow. This amply illustrates the fallacy of the approach of the Revenue. So, the Gujarat High Court held that this necessarily leads to not only a fallacious situation but also to an invidious discrimination on grounds of hypertechnicality. The Full Bench of the Kerala High Court has noticed the possibility of such an anomalous situation but has observed that anomalies are, in any case, inherent to occur even otherwise. It was pointed out by the Kerala High Court that, in cases where the assessee has paid advance tax as well as additional amounts as assessed in the initial assessment and subsequently becomes entitled to refund out of both payments, he would be receiving interest under section 214 on the excess of the advance tax up to the date of final order while interest on the additional amounts paid would be under section 244 for a limited period after the final order. But the Gujarat High Court does not accept that such a situation presents an anomaly. Section 214(1) speaks of payment of interest on excess payment of advance tax. On the other hand, section 244(1A) deals with payment of interest where the whole or any part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee could have a right to the compensation on equal terms. Section 215 conferred on the Central Government no right to recompute the interest on a higher amount where the base amount, i.e., tax payable, is increased as a result of the final assessment in appeal, revision, etc. The presumption of the Gujarat High Court that final assessment in appeal, revision or rectification cannot augment the tax liability is not correct. It can in many cases reduce the excess of advance tax. But section 215 before its Amendment Act, 1984, did not envisage enhancement of the interest chargeable under section 215. Sub-section (3) of section 215 only provides for the reduction of the interest payable by the assessee following the reduction of the tax payable in consequence of rectification or adjustment or appeal order or result of reference or revision. Again, if we read the unamended section 214 we only find that there is no provision at all to reduce the interest on reduced excess of advance tax consequent upon the enhancement of the tax liability in appeal or rectification or adjustment subsequent to the first assessment under section 143. Nor is there any provision for enhancing the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduce results not wholly to be desired. But we cannot read into the law beyond what the words of the law would permit. As for the inequitous results flowing from the plain reading of the provision, we may say that this aspect later dawned on the Legislature and the discrepancy was removed by amending both sections 214 and 215. The amended provision of both the sections now provide for revision of the interest both upwards and downwards following the result in appeal, rectification, reference and revision, etc., and the discrepant situations earlier prevailing are now eliminated. This only shows that the law as obtaining before the amendment itself created the inequitous situation. The extracts of the amended sub-section (1A) of section 214 and sub-section (3) of section 215 would show that the Legislature itself has accepted the imperfection of the earlier law. This indirectly lends support to the view taken by the Bombay High Court as well as the Kerala High Court, Provisions before amendment: " 214. (1A) Where on completion of the regular assessment the amount on which interest was paid under sub-section (1) has been reduced, the interest shall be reduced accordingly and th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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