9911796707
TMI Blog1979 (5) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... ual instalments on September 15, 1960, December 15,1960, and March 15, 1961. The instalment due on September 15, 1960, was not paid by the assessee. On September 27, 1960, it, however, filed an estimate under s. 18A(2) estimating the tax payable at Rs. 15,000 and paid Rs. 5,000 on September 22, 1960, and Rs. 10,000 on December 26, 1960. Subsequently, on March 15, 1961, the assessee sent a cheque for Rs. 76,150 drawn on the Punjab National Bank Ltd., Ludhiana, along with a letter of even date. The ITO wrote a letter dated March 16, 1961, to the assessee asking it to submit a revised estimate of its total income. The assessee replied to this letter, vide letter dated March 20, 1961, that the payment was made on the basis of the demand notice under s. 18A(1) dated July 6, 1960. The cheque was endorsed by the ITO in favour of the State Bank of India, Ludhiana, on April 3, 1961, and was encashed on April 24, 1961. The assessse filed a return of its income declaring an income of Rs. 9,48,160 and the assessment was completed on a total income of Rs. 11,37,651. In consequence of the assessment a demand notice dated March 30, 1966, was issued to the assessee. As the estimate filed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide order dated April 4, 1974, partly accepted the prayer and directed the Tribunal to refer question No. 3 only out of the above-mentioned questions for the opinion of this court. This is how the matter is before us. It is contended by Mr. Gupta that the assessee paid the advance tax amounting to Rs. 76,150 as demanded by the ITO, on March 15, 1961, by a cheque drawn on the Punjab National Bank, Ludhiana, which was encashed when presented to the bank. He urges that payment by a cheque is deemed to be made on the date when the cheque is handed over and not on the date when it is encashed. According to the counsel, the Tribunal was not justified in holding that the payment of advance tax by cheque for Rs. 76,150 on March 15, 1961, could not be considered as payment towards it on the ground that the cheque would be deemed to have been encashed not earlier than March 16, 1961. On the other hand, Mr. Awasthy has strenuously argued that the question is of wide amplitude. He contends that the payment made by an assessee towards advance tax without a proper return is not payment under s. 18A of the 1922 Act. According to him, no return was filed by the assessee in the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings in connection with the regular assessment, is satisfied that any assessee has furnished under section 212 an estimate of advance tax payable by him which he knew or had reason to believe to be untrue. We have, therefore, to consider in this case whether the estimate of advance tax filed by the assessee was untrue and whether the assessee knew or had reason to believe that the estimate filed was untrue. It is common ground that the assessee filed only one estimate on September 27, 1960, wherein the total tax payable was calculated at Rs. 15,000. This is the only estimate which is a legal estimate and requires to be considered in this case. The assessee's own conduct shows that the estimate filed on September 27, 1960, was untrue because on 15th March, 1961, it was realised that the estimate filed was not correct and, therefore, a cheque for Rs. 76,150 was sent to the Income-tax Officer. Even when the cheque was sent to the Income-tax Officer on March 15, 1961, the assessee did not file any estimate. When the Income-tax Officer called upon the assessee to file a regular estimate the assessee filed a reply on 20th March, 1961, that the payment was being made on the basis of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egarding payment by cheque. The aforesaid fact shows that the question, as to whether a payment of advance tax without a return was good payment or not, was before the Tribunal. When the matter was argued by the counsel for the assessee before this court, in an application under s. 256(2) of the 1961 Act, he raised two arguments. First, that if the department accepted the cheque on March 15, 1961, then the encashment of cheque would relate back to that date, and, second, that the advance tax could be paid by the petitioner before the close of the financial year on March 31, 1961. After taking into consideration the arguments of the learned counsel and the order of the Tribunal, the above-said question was referred to this court. In our view, the question referred to is comprehensive enough to include the argument of Mr. Awasthy. The question specifically poses the query as to whether the payment of Rs. 76,150 by cheque on March 15, 1961, could be considered as payment of advance income-tax. The words " payment of advance income-tax " are important, which shows that it is to be decided as to whether payment of Rs. 76,150 could be considered towards payment of advance tax. If the arg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... really implicit therein. Relying upon the aforesaid judgment, a Full Bench of this court took the same view in Seth Balkishan Das's case [1966] 61 ITR 194. Briefly, the facts of that case are that 8 years' period fixed for a notice under s. 34(1) of the 1922 Act expired on March 31, 1956. Notice under the section was sent by registered post duly addressed to the assessee on March 28, 1956, and it was received by him on April 2, 1956. It was also sent through the process server but as the assessee refused to accept service of notice personally, service of notice by affixture was ordered. A copy of the notice was not, however, affixed in any of the conspicuous places in the court house or at the income-tax office. A question was referred to the High Court to the effect as to whether on the facts and circumstances of the case the service of the notice under s. 34 on the assessee was invalid in law as the copy of the notice was not affixed in any conspicuous place of the court house or in any conspicuous place of the income-tax office. A contention was raised by the learned counsel for the revenue that the service of the notice on the facts and circumstances of the case in any event w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that year, respectively, an amount equal to one-quarter of the income-tax and super-tax payable on so much of such income as is included in his total income of the latest previous year in respect of which he has been assessed, if that total income exceeded the maximum amount not chargeable to tax in his case by two thousand five hundred rupees. Such income-tax and super-tax shall be calculated at the rates in force for the financial year in which he is required to pay the tax, and shall bear to the total amount of income-tax and super-tax so calculated on the said total income the same proportion as the amount of such inclusions bears to his total income or, in cases where under the provisions of sub-section (1) of section 17 both income-tax and super-tax or super-tax are chargeable with reference to the total world income, shall bear to the total amount of income-tax and super-tax which would have been payable on his total world income of the said previous year had it been his total income the same proportion as the amount of such inclusions bears to his total world income.... (b) If the notice of demand issued under section 29 in pursuance of the order under clause (a) of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manded by the ITO, the submission of an estimate of tax is a prerequisite for deposit of the advance tax and if he deposits the amount without estimate, it cannot be considered to be payment towards advance tax. In this view, I get support from A. K. Bashu Sahib v. First ITO [1967] 66 ITR 20 (Mad) and Malavia Brothers and Co. v. CIT [1973] 91 ITR 371 (Guj). In Bashu Sahib's case [1967] 66 ITR 20 (Mad), the assessee had sent through his auditor on August 30, 1962, an estimate of income and probable tax for 1962-63 not in the prescribed form, which was, however, sent on the next day, namely, September 1, 1962, and was received by the officer on September 5, 1962, the intervening days being holidays. On the question, whether the assessee could avail of this estimate for payment of the first instalment of advance tax, the High Court of Madras held that as ss. 210 to 212 and 218 of the 1961 Act read together, make it manifest that, in order that an assessee may pay a particular instalment of advance tax in accordance with his estimate, the same must be sent in the prescribed form before the date on which that instalment became due, and that the assessee was not entitled to make the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment towards advance tax. The argument of Mr. Gupta, in view of the above conclusions, is of academic interest only. However, it will be proper to deal with it. According to the contention of Mr. Gupta, payment by a cheque dated March 15, 1961, shall be deemed to be payment made to the department on that date as the cheque was subsequently encashed. On the other hand, Mr. Awasthy contends that it is not so. He submits that the payment to the department shall be when the cheque was encashed and it cannot relate back to the date when the cheque was presented to the ITO. He further contends that the Act or the Rules do not provide payment by an assessee through a cheque and, therefore, payment by cheque cannot be considered to be good payment unless the cheque was encashed. We have given thoughtful consideration to the respective arguments of the learned counsel. We find force in the contention of Mr. Gupta. It is a settled proposition of law that if payment by any cheque is accepted and the cheque on presentation is encashed, the payment relates back to the date when the cheque had been received. The cheque, however, is a waste paper if it is not honoured by the bank. In the afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive payment by the receipt of the cheques. The position, therefore, is that in one view of the matter there was, in the circumstances of this case, an implied agreement under which the cheques were accepted unconditionally as payment and on another view, even if the cheques were taken conditionally, the cheques not having been dishonoured but having been cashed, the payment related back to the dates of the receipt of the cheques and in law the dates of payments were the dates of the delivery of the cheques. " The observations of the Supreme Court in another case Damadilal v. Parashram [1976] 4 SCC 855; AIR 1976 SC 2229, may also be read with advantage. In that case, the defendants had tendered arrears of rent by a cheque within the prescribed time. A question arose whether that was a lawful tender. The High Court took the view that in the highly developed society, payment by cheque has become a more convenient mode of discharging one's obligation. If a cheque is an instrument which represents and produces cash and is treated as such by businessmen, there is no reason why the archaic principle of the common law should be followed in deciding the question as to whether the handing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cepts the cheque then he is paid, although the payment may not be an unconditional discharge. " It is further observed that the only condition is that, if the cheque is not cashed, then the liability of the debtor will continue, but if the cheque is cashed, then the payment is not as of the date when the cheque is cashed but it is of the date when the cheque was given to the creditor. Mr. Awasthy has argued that the aforesaid cases are distinguishable as they related to commercial transactions and were not with regard to the payment of income-tax to the department. According to him, the observations in the above cases will not be applicable in case payments were made by cheques to the department. He has made a reference to Shri Jagdish Mills Ltd. v. CIT [1959] 37 ITR 114 (SC) and Azamjahi Mills Ltd. v. CIT [1976] 103 ITR 449 (SC). No doubt the above cases referred to by the counsel for the assessee related to commercial transactions. Both the cases referred to by Mr. Awasthy also related to commercial transactions. In those cases the question involved was as to whether payment by cheques sent by post by the Government of India to the assessee working in a princely State were ..... X X X X Extracts X X X X X X X X Extracts X X X X
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