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TMI Blog1985 (7) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... ht in law in holding that the order passed by the Income-tax Officer on the assessee's petition dated August 2, 1973, is an order under section 154 and not an order under section 214 of the Income-tax Act, 1961, and hence an appeal will lie before the Appellate Assistant Commissioner? " The answer to the first question depends upon the construction of the much debated phrase regular assessment " occurring in s. 214(1) of the Act. The identical question arose for decision before a Division Bench of this court in Devaki Amma v. ITO [1980] 122 ITR 272. Bhaskaran J., as he then was, held (headnote): " In the absence of any specific provision, if regard be had to the scheme of the Act, the Legislature meant the Central Govt. to pay interest under the section only on the amount of advance tax paid in excess of the tax determined on regular assessment made at the first instance by the ITO unaffected by the reduction in tax, if any, subsequently allowed on recomputation in pursuance of the direction given by a superior authority. " This decision, it was felt by another Division Bench before which the present references came up for hearing, calls for a closer examination since differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le on the reasoning that in view of the theory of merger, there will be a mistake apparent from the record if it is found that the calculation of interest under s. 214 is on a lesser quantum than warranted by figures and such a mistake can be rectified under s. 154. The aforesaid findings of the Tribunal have given rise to the questions of law referred. According to the Revenue, regular assessment for the purpose of payment of interest under s. 214 is only the first order of assessment made by the ITO under s. 143 or under s. 144 and not the assessments made as a result of an order in appeal, and s. 214 does not provide for enhancement of the interest in consequence of any subsequent reduction of the tax payable. The assessee has maintained that s. 214 takes within its sweep the consequential order of assessment after the decision in appeal, because that is an order of assessment under s. 143 and the assessee would, therefore, be entitled to interest on the excess over the tax then determined and up to the date of such assessment. Sri P. K. R. Menon, the learned counsel for the Revenue, relied on the decisions in Sarangpur Cotton Manufacturing Co. Ltd. v. CIT [1957] 31 ITR 698 (B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funded on a provisional assessment under section 141 A, no interest shall be paid for any period after the date of such provisional assessment. (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 the excess, if any, paid shall be deemed to be tax payable by the assessee and the provisions of this Act shall apply accordingly. (2) On any portion of such amount which is refunded under this Chapter, interest shall be payable only up to the date on which the refund was made. " By the Taxation Laws (Amendment) Act, 1984, w.e.f. April 1, 1985, sub-s. (1A) has been replaced by a new sub-section which provides for modification of the interest payable, consequent on changes in the assessment as a result of an order of rectification, appeal, revision or reference. Sub-s. (1) of s. 214 declares the liability of the Government to pay interest to the assessee on advance tax found to be in excess of the tax determined on regular assessment, from April 1, next following the financial year during which the advance tax is paid to the date of the regular assessment. The t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regular assessment is dealt with in s. 219. That section provides that any sum paid by or recovered from an assessee as advance tax shall be treated as a payment of tax in respect of the income for the relevant assessment year and credit therefor shall be given to the assessee in the regular assessment. Under the scheme of payment of advance tax, the term " regular assessment " in the sequence in which it appears in all the relevant sections is used so as to mean the same. It means the final process which completes the levy, viz., the assessment made in the regular course contemplated under the provisions of the Act. In the process of assessment, the first step after payment of advance tax is the filing of the return by the assessee and the final step is the assessment order made by the assessing authority. The term "regular assessment" is used in the statute in contradistinction to a self-assessment under s. 140A, a provisional assessment under s. 141 before its deletion and an assessment or reassessment under s. 147. " Regular assessment" in the context connotes the original or first order of assessment made by the ITO determining the tax payable by the assessee on computation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f recovery. The I.T. Act enacts the charge and provides for the entire machinery for levy and collection of tax. Section 143 is a machinery section under which the ITO makes an assessment of the total income and determines the tax due. To enable the assessing authority to make the assessment, the assessee is obliged to file a return under s. 139 of the Act. The next step is the assessment. In the case of an assessee who has paid advance tax, the sum payable by the assessee or refundable to him is determined with reference to the advance tax paid only at that stage. The ITO has to give credit to the amount paid as advance tax and make demand, if such payment is deficit. In that case, the assessee is to pay interest. In case there is excess payment, the excess is refundable to the assessee and the excess carries interest as provided in s. 214. Once that process is over by an order under s. 143, the amount paid as advance tax change; its character as advance tax and partakes the character of tax paid as per demand. What is credited is treated as tax paid. In subsequent assessment order, as a result of modification in appeal, the ITO determines the sum payable by the assessee or refund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose decisions. In Devaki Amma v. ITO [1980] 122 ITR 272 (Ker), the question that arose before this court was whether the assessee would be entitled to interest on the advance tax refundable as a result of the decision of the AAC reducing the total income determined by the ITO. The Division Bench after examining the scheme of the Act and reviewing the relevant decisions rendered so far, concluded that the assessee is not entitled to claim interest under s. 214(1) of the Act on the amount which was not ordered to be refunded by the ITO on regular assessment, at the first instance, but ordered by him subsequently on a recomputation of the income and tax in pursuance of the direction given by the AAC. . In interpreting the section, this court expressly dissented from the decision in Chloride India Ltd. v. CIT [1977] 106 ITR 38 (Cal) and followed the line of reasoning adopted by the Bombay High Court in Sarangpur Cotton Manufacturing Co. Ltd. v. CIT [1957] 31 ITR 698 and by the Allahabad High Court in Sir Shadilal Sugar and General Mills Ltd. v. Union of India [1972] 85 ITR 363 and in Lala Laxmipat Singhania v. CIT [1977] 110 ITR 289 and said that the scheme of the Act provides suffici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectric Supply Co. Ltd. [1983] 142 ITR 872 (P H). In all these decisions, the expression " regular assessment " occurring in s. 214 has been construed as the assessment made by the ITO at the first instance as held by this court in Devaki Amma v. ITO [1980] 122 ITR 272. We have now to refer only to the decision of the Gujarat High Court in Bardolia Textile Mills v. ITO [1985] 151 ITR 389, where the Full Bench considered the scope of s. 214 in a writ petition under article 226 of the Constitution of India. Following the decision of the Calcutta High Court in Chloride India Ltd. v. CIT [1977] 106 ITR 38, they held (headnote of 151 ITR 389): " Interest on the excess of advance tax refunded under s. 214(1) of the I.T. Act, 1961, has to be paid up to the date of "regular assessment" When the first assessment of the ITO is final, that is the 'regular assessment' for purposes of s. 214(1). Where the first assessment is set aside by the AAC on appeal and a fresh assessment is made, the excess will be determined with reference to such fresh assessment and interest has to be paid up to the date of such revised assessment. Even when on an appeal from the first assessment, the AAC does no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and legally recoverable. Therefore, there is no logic in construing s. 214(1) as creating a liability for interest even after the first order of assessment by the ITO. The learned Chief Justice had chosen to follow the decisions of the Calcutta High Court in Chloride India Ltd. v. CIT [1977] 106 ITR 38 and General Fibre Dealers Ltd. v. ITO [1979] 116 ITR 40 (Cal), in preference to all other decisions. The only reason that weighed with the Calcutta High Court in construing the term " regular assessment " in s. 214 as referring to the revised assessment also is that the revised assessment too is an assessment under s. 143. The point of time at which the refund of advance tax is to be made and interest has to be computed or the character of the payment after the adjustment of the amount, had not been adverted to either by the Calcutta High Court or by the Gujarat High Court. We are, therefore, unable to subscribe to the view held in those decisions on the construction of the section. In conclusion, we state that the liability of the Government under s. 214, as it stood before the amendment in 1984, to pay interest on the advance tax paid is limited to the period up to the date of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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