1968 PLP 53 (PTD)

8. The dispute really centres round the words "regular assessment" used in section 18‑A(5) of the Income‑tax Act. In the opinion of the Tribunal, "regular assessment" was used in contrast to the "provisional assessment" which could be made by the Income‑tax Officer under section 23‑B. It may be that "regular assessment" has to be made a number of times by taking action under section

34. In the opinion of the Tribunal, the assessment made by the Income‑tax Officer on 30th March 1948, is the first "regular assessment." It may have been set aside on a later date but on the date when the order was passed it was a valid assessment. The order of the Tribunal is Annexure "A" and forms part of the case. The assessment orders of the Income‑tax Officer dated 30th March 1948, and 25th January 1954, are Annexures "B" and "C" and form part of the case.

9. The Commissioner of Income‑tax, Bombay North, Kutch and Saurashtra, the respondent, has raised a question of law as to the validity of the order passed by the Tribunal. The assessee objects to the question raised by the Department on the ground that no application for stating a case to the High Court was made by the Commissioner of Income‑tax within the period prescribed by law. As the question raised arises out of the order of the Tribunal and is a question of law, we think that it should be referred to the High Court.

10. Relying upon the case of Commissioner of Income‑tax, Bombay City v. Jagadish Prasad Ramnath ((1955) 27 I T R 192), the Departmental Representative contended that no appeal lay to the Tribunal as the order passed by the Appellate Assistant Commissioner was not an order made under section 31 of the Income‑tax Act. The Tribunal disagreed with that view. In the opinion of the Tribunal, computation of interest had to be made in order to ascertain the assessee's liability to tax in respect of the assess ment year under reference. Interest due to the assessee on payment made under section 18‑A had to be allowed as a deduc tion before ascertaining the assessee's liability to tax. The Tribunal therefore held that the order passed by the Appellate Assistant Commissioner was an order under section 31 and therefore an appeal lay to the Tribunal. The order of the Appellate Assistant Commissioner dated 30th September 1954, is Annexure "D" and from part of the case.

11. The questions of law which arise are: "(1) Whether on the facts and in the circumstances of the case, the assessee‑company is entitled to claim interest, in respect of deposit made under section 18‑A amounting to Rs. 12,95,508, from the date of the payment to 30th March 1948, or to 25th January 1954? (2) Whether on the facts and circumstances of the case the order passed by the Appellate Assistant Commissioner dated 30th September 1954, is an order under section 31 of the Income‑tax Act and whether an appeal lay from the said order to the Tribunal?"

12. Both the assessee and the Department accept the state ment of the case and have no suggestions to offer. N. A. Palkhivala with Kaka for the Assessee. G. N. Joshi with Advocate‑General for the Commissioner. CHAGLA, C. J.‑The assessee paid advance tax under section,18‑A and its assessment under section 23 was completed on the 30th of March 1948. The assessee appealed against the order of assessment and that order was set aside by the Appellate Assistant Commissioner on the 15th of November 1951, and he directed the Income‑tax Officer to make a fresh assessment. This fresh assessment was made on the 25th of January 1954. The Income‑tax Officer allowed the assessee interest on the advance payment from the date of payment till the 30th of March 1948. The contention of the assessee was that he was entitled to interest up to the 25th of January 1954. This contention was rejected by the Tribunal and hence the reference. Now under section 18‑A interest is allowable to the assessee from the date of payment to the date of the assessment made under section 23; and the discussion before us has revolved round the proper meaning to be given to the expression "the date of the assessment." Prima facie it may appear that the date of the assessment must mean the date of a valid and effective assess ment, and what was urged by Mr. Palkhivala was that the only valid and effective assessment for the purpose of this section was the assessment order made on the 25th January 1954. It is said that although there was an assessment on the 30th of March 1948, it was not a valid or effective assessment ; that once it was set aside by the Appellate Assistant Commissioner that assess ment could not be looked upon as an assessment for the purpose of this section ; and that it was only when a proper assessment was made pursuant to the direction of the Appellate Assistant Commissioner on the 25th of January 1954, that there was an assessment and it is this assessment which must be looked at for the purpose of determining what interest is permissible to the assessee. When one looks at the matter a little more closely, it becomes clear that, when the Income‑tax Officer made the order on the 30th of March 1948, under the provisions of this section, interest ceased to run. At that date the order made by the Income‑tax Officer was the only effective "and valid assess ment. Can it be said that, if interest had ceased to run, the running of interest was revived when that order of assessment was set aside and a different terminus was fixed for the calculation of interest? It seems to us that what the Legislature contem plated in using the expression "the date of the assessment" was the factual date of the assessment and it was not considering the legality or the validity of the assessment made. It wanted to fix two terminii for the calculation of interest. With regard to one terminus there was no difficulty : that was the date of payment of advance tax by the assessee. The other terminus had to be fixed and the other terminus was the date when the regular assessment was made. That terminus having been fixed, it could not be altered by any subsequent event or by the vicissitudes through which the assessment order might pass. If there had been no appeal and if the assessment order had not been set aside, obviously this would have been the only terminus. The Legislature did not contemplate that the terminus should be altered because the assessee chose to appeal and because the Appellate Assistant Commissioner set aside the order. Let us look at this order from another point of view. When the order of assessment was made, it was competent to the Taxing Authorities to recover the tax, and the liability to refund would only arise when the assessment order was set aside. But the Taxing Department would have the use of the assessee's money from the date when the amount was paid till the Taxing Authori ties chose to refund the money. Could it be suggested that the position would be different with regard to advance payment of tax? The liability to pay the tax arose as soon as the assess ment order was made ; and that liability would cover not only the advance tax already paid, but also any additional amount that might have to be paid by the assessee. In this very case the assessee paid an additional amount of Rs. 6 lakhs. Although it put forward a claim for interest on this amount also, that claim was ultimately abandoned. Therefore, if we were to give the construction to section 18‑A as suggested by Mr. Palkhivala, then the advance tax would stand on a different footing from the pay ment of Rs. 6 lakhs, which was paid by the assessee under the order of the assessment. 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 assess ment is made, the liability to pay arises, and even though the order may be subsequently set aside, there is no obligation upon the Department to pay any interest in respect of the amounts which they recovered as tax under the original assessment order. If we are right in this view, then the further question that arises need not be decided. The question is whether an appeal from the order of the Income‑tax Officer refusing to give to the assessee interest for the longer period was appealable to the Appellate Assistant Commissioner, and the Department's conten tion is that the appeal does not fall within the terms of section 30 of the Income‑tax Act. What has been urged by Mr. Joshi is that an assessee can only object to the amount of tax determined under section 23 and the determination of the interest payable is not the determination of tax. It is said that after the tax is determined credit is given to the assessee in respect of the interest to which he is entitled and the giving of credit does not constitute determination of the tax therefore no appeal lies in respect of the quantum of credit for interest given to the assessee. In our opinion, it is unnecessary to decide this question as on the merits we have taken the view that the Department is right. The result is that we must answer the first question referred to us : "Up to the 30th of March 1948". Question No. (2) does not arise. Assessee to pay the costs. Reference answered accordingly.