1996 PLP 966 (PTD)

If the assessment order is set aside by a higher authority in its entirety and a direction is given to pass a fresh assessment order, the position will remain the same. The amount of advance tax paid by the assessee loses its character by virtue of section 199 as soon as the first assessment order is made and the advance tax is set off against the demand raised in the assessment order. If the assessment order is set aside, the adjusted amount of tax or the amount of tax refunded or refundable does not regain its character of advance tax once again The argument made on behalf of the Revenue that in such a case a fresh assessment may be treated as "regular assessment" is misconceived and is not in consonance with the scheme of the Act and the ,language of various sections dealing with regular assessment. (C) Income-tax is realised by deduction at source, payment of advance tax and also direct payment after assesment. If regular assessment is construed to mean the revised assessment, strange consequences may follow. For example if Rs.90.000 in all is collected from an assessee on account of his tax liability of a given year, consisting of Rs.30,000. by deduction at source. Rs.30,000 by advance payment of tax and Rs.30,000 by direct collection of the assessed amount and if as a result of any revised assessment pursuant to an appellate order Rs.50,000 becomes refundable to the assessee, the entire amount cannot be treated as refund of advance tax only. The refund that is paid pursuant to an appellate order is of income-tax paid pursuant to an assessment order. Tax collected at source and advance tax are treated and credited as payment of income-tax consequent upon the assessment order. The statute by section 199 has treated the amount of tax deducted at source as tax paid by the assessee and by section 209 has treated the amount of advance tax as payment of income-tax. ?Once the amount of advance tax is treated as payment of income-tax and dealt with as such in the assessment order, neither the amount which is retained and adjusted against the income-tax liability of the assessee nor the balance amount which has to be refunded can be treated as advance tax any longer. If any further refund becomes due and payable as a result of any appellate order, that refund will be of income-tax paid by the assessee or treated as having been paid by the assessee pursuant to the assessment order. (D) The legislative intent is apparent from the provisions dealing with interest payable by the assessee (sections 215, 216 and 217). Interest under section 215 is payable by an assessee only when he pays advance tax under section 212 on the basis of his own estimate. If an assesee pays advance tax pursuant to, a demand made by the Income-tax Officer under section 210, the assessee has no liability to pay interest even if the payment of advance tax fall short of the tax ultimately computed to be paid. The liability to pay interest on the shortfall in payment of advance tax arises only when the amount of advance, paid turns out to be less than seventy-five percent of the tax determined on the basis- of assessment after some statutory adjustments. The interest on the; deficient amount will have to be paid from the 1st April of the appropriate financial year to the date of the regular assessment. Here also, the interest-will not run beyond the date of the assessment order. If upon making an assessment, the Income-tax Officer finds that advance tax paid is less than seventy-five percent. Of the tax due from the assessee after making the statutory adjustments, then he will serve a notice of demand on the assessee, calling upon him to pay the tax due, to be paid by him. Thereafter, the tax will be recovered in accordance with the provisions of Chapter XVII-D. Collection and recovery (sections 220 to 231). If there is any delay in payment of the tax, the assessee may be liable to pay interest under subsection (2) of section

220. These provisions go to show that once an assessment order is made, liability to pay interest on the amount of the shortfall in payment of advance tax ceases under section 215. (E) The provisions of subsection (3) of section 215 are also of great significance in this connection. If the mount of advance tax, which was found deficient and on which interest was payable under section 215(1) by the assessee is reduced as a result of an order of rectification, appeal or revision, etc. the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded to the assessee. This provision is significant in two ways:-- (1) It was necessary to introduce the provisions, of subsection (3) because regular assessment in subsection (1) of section 215 only meant the first assessment made in regular course by, the Income-tax Officer. Prior to the insertion of subsection (3), the amount of interest charged under section 215 could not have been reduced as a result of any further proceedings under the Act whereby the quantum of assessment and consequently the tax payable stood reduced. (2) The other point of significance is that subsection (3) only speaks of reduction of interest when the amount on which itnerest was bayable has been reduced. It does not deal with the situation where the amount on which interest was payable has been enhanced as a result of an order of rectification, appeal or revision. This can only mean the interest payable under section 215(1) has to be calculated only with reference to the original order of assessment. The amount of shortfall determined in the original order of assessment will be the basis for levying interest. If the tax liability is increased as a result of any subsequent order of a higher authority, further interest under section 2.15 need not be paid by an assessee because the liability had crystallised on the date of assessment. The provisions of subsections (2), (3) and (4) of section 215 have been adopted in section 217 which deals with interest payable by an assessee, who has not hitherto been assessed to tax and has not sent the estimate required by section 212(3) of the Act. Here again, an assessee has to pay interest from the 1st of April of the relevant year to the date of the regular assessment. If the assessment is enhanced by any subsequent proceeding, the liability to pay interest is not increased, but by virtue of the provisions of subsection (3) of section 215 which has been incorporated in section 217, if there is a reduction in the amount of tax payable by the assessee subsequent to the assessment order, the assessee will get the benefit of that and interest will be reduced accordingly. If regular assessment' in. section 217' is construed to mean revised order of assessment passed pursuant to a direction of a higher authority, the consequences will be very harsh for the assessee under section 215 and also under section

217. Section 217 deals with a case where the assessee had not been hitherto assessed to tax and has not sent an estimate as required by subsection (3) of section

212. In such a case, the assessee has to pay interest on seventy-five percent. of the assessed tax, subject to adjustments made in accordance with the provisions of subsection (1) of section

215. If 'regular assessment' means the final revised assessment, then even in a case of in significant enhancement, the assessee will have to pay interest right up to the date of the revised assessment order. If such a construction is made then even if the assessee gets a small relief in appeal, the liability to pay interest may increase and the overall liability of the assessee will be larger. The argument, which was upheld in some of the cases now under appeal, is that it will be inequitable if the assessee does not get interest on the amount of advance tax paid, when the amount paid in advance is refunded pursuant to an appellate order. This is not a question of equity. There is no right to get interest on refund except as provided by the statute. The interest on excess amount of advance tax under section 214 is not paid from the date of payment of the tax. Nor is it paid till the date of refund. It is paid only up to the date of the regular assessment. No interest is at all paid on excess amount of tax collected by, deduction at source. Before introduction of section 244(1-A), the assessee was not entitled to get any interest from the date of payment of tax up to the date of the order as a result of which excess realisation of tax became refundable. Interest under section 243 or section 244 was payable only when the refund was not made within the stipulated period up to the date of refund. But, if, the assessment order was reduced in appeal, no interest was payable from the date of payment of tax pursuant to the assessment order to the date of the appellate order. Therefore, interpretation of section 214 or any other section of the Act should not be made on the assumption that interest has to be paid whenever an amount which has been retained by the tax authority in exercise of the statutory power becomes refundable as a result of any subsequent proceeding. (F) The word "assessment" has been construed under the Indian Income-tax Act, 1922, in a very wide sense. In the celebrated case of CIT v. Khemchand Ramdas (1938) 6 ITR 414, the Judicial Committee of the Privy Council observed (at page 416):-- "One of the peculiarities of most Income-tax Acts is that the word assessment' is used as meaning sometimes the computation of income, sometimes the determination of the amount of tax payable and sometimes the whole procedure laid down in the Act for imposing liability upon the taxpayer. The Indian Income-tax Act is no exception in this respect .... " This observation was cited with approval and applied by this Court in the case of C. A. Abraham v. ITO (1961) 41 ITR

425. It must be presumed that the Legislature was aware of the wide interpretation of the word 'assessment' given under the Indian Income-tax Act. A restricted meaning to the phrase 'regular assessment' was given in the case of Sarangpur Cotton Manufacturing Co. Ltd. v. CIT (1957) 31 ITR 698 (Bom.). 'Assessment' has been given an inclusive meaning in subsection (8) of section

2. It includes reassessment. 'Regular assessment' has been defined in section 2(40) to mean the assesment under section 143 or section

144. The procedure for making an assessment under section 143 or section 144 has been laid down in Chapter XIV of the Income Tax Act, 1961 (sections 139 to 158). Section 139 deals with the return of income. Section 140 lays down by whom and how a return has to be signed and verified. Section 141 provides for provisional assessment which may be made even before a regular assessment. Section 142 empowers the Income Tax Officer to make enquiry before assessment. Sections 143 and 144 lay down the manner in which the Income-tax Officer will make an assessment of income. Under subsection (1) of section 143, the Income Tax Officer will straightaway assess the total income or loss of the assessee and determine the sum payable by him or refundable to him on the basis of the return of income filed by the assessee, if he was satisfied that the return was correct and complete. No enquiry was necessary before passing an order under this subsection. But, if the Income-tax Officer was not satisfied with a return, he had to serve upon the assessee a notice requiring him to attend his office and produce any evidence on which he may rely in support of the return. After considering the evidence produced. by the assessee and after taking into account all relevant material which he had gathered, the Income-tax Officer had to pass an order assessing the total income or loss of the assessee and determine the sum payable by him or refundable to him on the basis of such assessment. A best judgment assessment under section 144 has to be passed, if the assessee had failed to make a return of income even when required by the Income Tax Officer to do so under subsection (2) of section 139 and had failed to make a return or a revised return under subsection (4) or subsection (5) of section

139. A best judgment assessment could also be made under section 144, if the assessee failed to comply with all the terms of a notice under subsection (2) of section

143. The assessment under section 143 or section 144 had to be completed within the time-limit prescribed by subsection (1) of section

153. After completion of the assessment, the Income-tax Officer had to issue a notice of demand, if any sum was payable in consequence of the assessment order or notify to the assessee the amount of loss computed in the assessment order under section

157. If an appeal was preferred against an order of assessment passed by the Income Tax Officer under section 143 or section 144 and the order had to be modified pursuant to 'he appellate order, that will clearly not be an order under section 143 or section 144 simpliciter. A regular assessment is complete as soon as the Income-tax Officer passes an order assessing the total income or loss of the assessee and determines the sum payable by him or refundable to him within the period prescribed by subsection (1) of section

153. There is no provision for making modification or variation pursuant to an order of the higher authority in section 143 or section 144 of the Act. In this connection, the language of section 153 is of significance. In subsection (1), it speaks of assessment made under section 143 or section 144 and a time-limit for passing such an order was laid down in that subsection. Subsection (3), however, speaks of the assessment, reassessment or recomdutation in consequence of or to give effect to any finding or direction contained in an order under sections 250, 254, 260, 262, 263 or

264. In subsection (3), the assessment made to give effect to any finding or direction given by a higher authority is not described as an assessment under section 143 or section

144. For this type of assessment, the time-limit laid down in section 153(1) will not apply. If every conceivable form of computation of income is to be treated as "regular assessment", then there was no need to define the phrase "regular assessment", to mean an assessment under section 143 or section

144. There is nothing in the Act to suggest that regular assessment has been used in any other sense than the first assessment made under section 143 or section

144. Any modified or revised assessment after completion of the order under section 143 or section 144 will be a fresh order passed to implement the direction of a higher authority. The order will be erroneous and liable to be set aside if the direction of the higher authority is not faithfully carried out. The jurisdiction to pass such an order is conferred by the order of the higher authority. If the first order of assesment is set aside and the Income ?tax Officer is directed to pass a fresh order of assessment, the position will be the same. The fresh assessment order will not be an order passed under section 143 or section 144 simpliciter. The time-limit laid down under section 1530) for passing an order under section 143 or section 144 will not apply Although, on behalf of the Revenue, it was not be disputed that such fresh assessment orders may be. treated as regular assessment, having regard to the scheme of the Act, we are of the view that this contention is misconceived. The language of the various sections of the statute and the underlying principle which we have explained in this judgment militate against such construction.. ?Section 140-A which was inserted by the Finance Act, 1964, required an assessee to make a self-assessment and imposed a duty on the assessee to pay tax on the basis of his return within thirty days of filing of the return. The tax payable ot1 self-assessment was deemed to have been paid towards the provisional or regular assessment. Excepting cases where a provisional or a regular assessment was made within thirty days of furnishing of the return, any default in payment of tax within the prescribed time incurred penlty. Regular assessment in this section could only mean the original order of? assessment under section 143 or section

144. Under section 141, the Income-tax Officer could make a provisional assessment of the tax on receipt of a return under section 139 in a summary manner. The tax realised. on the basis of the provisional assessment was deemed to have been paid towards regular assessment. The provisional assessment of a firm had to be done treating the firm as unregistered. But where the firm had been assessed as a registered firm in the latest completed assessment and had applied fox registration or had made a declaration under section 184(7) for the assessment year for which the provisional assessment was going to be made, then such a firm had to be treated as a registered firm. Where no regular assessment of the firm had been made in any previous year and the firm before the expiry of the prescribed period had filed its application for registration and made a declaration under section 184(7) for the assessment year for which the provisional assessment had to be made it could be assessed provisionally as a registered firm. In the context of these provisions, 'regular assessment' could only mean the original assessment made under section 143 or section

144. Section 141-A which was introduced by the Finance Act, 1968, laid down that in a case where the return was furnished under section 139 and the assessee claimed that the tax paid or deemed to have been paid exceeded the tax payable on the basis of the return, the Income-tax Officer, if he was of the opinion that the regular assessment of the assessee was likely to be delayed, could proceed to make a provisional assessment on the basis of the return. Here again, 'regular assessment' could have no other meaning than the original order of assessment passed under section 143 or section 144. (H) Chapter XVII deals with collection and recovery of tax. It provides for deduction of tax at source, payment of advance tax and also collection and recovery of tax pursuant to a notice of demand under section

156. Income-tax becomes payable only after computation of the total income and quantification of the tax by an assessment order and service of a notice of demand on the basis of the assessment. Section 190 lays down that Notwithstanding that the regular assessment in respect of any income is to be made in a later assessment year, the tax on such income shall be payable by deduction at source or by advance payment, as the case may be, in accordance with the provisions of this Chapter". Regular assessment' here can only mean the original order of assesment passed by the Income Tax Officer under section 143 or section

144. The phrase "regular assessment" has not been used at all in Part D of Chapter XVII (sections -220 - to 232), which lays down the procedure for realisation of tax after an assessment order has been passed, nor in Part B -?Deduction at source (sections 192 to 206-A). The phrase "regular assessment" has been used extensively in a number of sections in Part C -- Advance payment of tax (sections 207 to 219). The reason for this is obvious. A distinction has to be drawn between "regular assessment" and "computation of advance tax". If the assessment is understood in the broad sense in which it has been understood in a number of cases including the case of C.A. Abraham (1961) 41 ITR 425 (SC), an order of computation of advance tax will also be treated as an assessment order. Section 207 declares that tax shall be payable in advance in accordance with the provisions of sections 208 to

219. Section 210 lays down the condition of liability to pay advance tax and section 209 contains. the method of computation of advance tax. The first step in the computation of advance tax payable by an assessee will be ascertainment of "total income of the latest previous year in respect. of which he has been assessed by way 'of regular assessment". This will have to be adjusted in accordance. with the other provisions of that section. After computation of advance tax payable by an assessee, the-Income-tax Officer has to demand the payment of the tax and a notice of demand under section 156 will be issued for this purpose (section 210). An assessee has an option not to pay advance as demanded under section 210, but to pay according to his own estimate of tax payable (section 212). It will be seen from the aforesaid provisions that advance tax is not the same thing as income-tax payable, because of the charge imposed by section- 4 on the total income of the previous year of an assessee. Such income has to be computed under section 143 or section 144 in the manner laid down in Chapter XIV of the Act. Therefore, section 190 lays down that notwithstanding that the regular assessment in respect of any income is to be made in a later assessment year, the tax on such income shall be payable by deduction at source or by advance payment, as the case may be, in accordance with the provisions of this Chapter. "Regular assessment`" in section 190 can have no other meaning than the first order of assessment passed under section 143 or section

144. This section lays down that even though no order of assessment has, been passed under section 143 or section 144 for a given year, the tax in respect of the income of that year can be collected by deduction at source or by advance payment. There is no reason to presume that "regular assessment' in the other sections of-Part D of Chapter XVII has been used in any other sense. "Regular assessment" has been used in section 209 once again in the sense of the first assessment. The amount of advance tax payable by an assessee in the financial year has to be computed on the basis of, inter alia, "total income of the latest previous year in respect of which he has been assessed by way of regular assessment". Here, "regular assessment" cannot possibly mean a revised or a fresh order of assessment pursuant to an appellate order. For example, if for the assessment year 1971-72 (financial year 1970-71) advance tax is being computed and the Income-tax Officer finds that assessment for the assessment year 1970-71 has already been completed, he will take that assessment as the starting point for computation of advance tax payable by the assessee. Regular assessment in this section can only mean the first assessment and not ','revised assessment" or fresh assessment pursuant to an appellate order. If the assessee considers that the calculation of advance tax made by the income-tax Officer is excessive, he has an option to pay advance tax on the basis of his own estimate under section

210. Section 210 speaks of a person who has been previously assessed by way of regular assessment under this Act or under the Indian Income-tax Act, 1922. Such a person can be called upon by the Income-tax Officer to pay advance tax determined in accordance with the provisions of sections 207, 208 and

209. Any person who has not previously been assessed by way of regular assessment under this Act or under the Indian Income-tax Act may also be liable to pay advance tax under the provisions of subsection (3) of section

212. He has to make an estimate of his income in the manner laid down in that subsection and pay advance tax accordingly. Here again, "regular assessment" can have no meaning other than the first order of assessment., In the context of all these sections, the question legitimately arises, why should "regular assessment" in section 214 be given any meaning other than the first order of assessment? This section imposes an obligation upon the Central Government to pay interest "on the amount by which the aggregate sum of any instalments of advance tax paid during any financial year in which they are payable under sections 207 to 213 exceeds the amount of the tax determined on "regular assessment". As soon as an order under section 143 is passed and if it is found that the tax determined payable on regular assessment is less than the total amount of advance tax paid, interest will have to be paid on the excess amount only up to the date of assessment and not up to the date of refund of the amount. This section has to be contrasted with sections 215, 216 'and 217, which deal with payment of interest by the assessee. Unlike section 214, interest is payable under section 215 only in a case where the assessee had paid advance tax under section 212 on the basis of his own estimate, If the assessee pays in accordance with the demand made by the Income-tax Officer under section 210, there is no liability to pad- and interest under section

215. Under section 214, interest will be payable if there is an excess payment of advance tax pursuant to a demand made by the Income-tax Officer or on the basis of the estimate furnished by the assessee. Interest will have to be paid by an assessee, if the advance tax paid is less than seventy-five percent. of the tax determined on the basis of regular assessment, after giving credit to the assessee for the amount of tax deducted at source. The interest, however, will be paid only up to the date of the regular assessment. It clearly appears from the provisions of section 214 and section 215 that "regular assessment' cannot have any other meaning than the first order of assessment; that means the date of the first order of assessment. Since tax had been collected in advance, interest will have to be paid till the date of computation of that tax in regular course, pursuant to the charge on total income of an assessee imposed by section

4. That computation is done under section 143 or section

144. The amount of tax lying to the credit of the assessee, thereafter, is treated as tax paid pursuant to the assessment. If any excess amount of tax has been realised at source, then such excess has to be refunded with interest up to the date of the assessment. Thereafter, the excess amount becomes refundable by virtue of the provisions of section 143 or section

144. Likewise, even though there is a shortfall in payment of tax according to the calculation made in the order of assessment, the assessee is obliged to pay interest on the seventy-five percent. of the amount of shortfall only up to the date of the assessment order, i.e. the date on which the amount of advance tax was adjusted against the assessment order. Thereafter, if after adjustment in the assessment order of the advance tax against the tax demand raised any amount is found payable by the assessee that will be recovered by issuing a notice of demand in accordance with the provisions of Part D of Chapter XVII. (I) The position has been placed beyond doubt by the provision of subsection (3) of section 215, which lays down:-- ' "215. (3) Where as a result of an order under section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 264, the amount on which interest was payable under this section has been reduced, the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded." If "regular assessment" is to be understood as revised assessment, then it was not necessary to introduce subsection (3) in section

215. Subsection (3) only deals with the situation where the assessed tax has been reduced because of further proceedings. The interest payable by the assessee will have to be reduced in such circumstances. But, if the assessment is enhanced, the assessee will not be required to pay a larger amount of interest, because the amount of shortfall has to be computed on the date of the assessment on the basis of the tax determined in the regular assessment. If regular assessment is understood in the wide sense of revised assessment, then in a case of enhancement of assessment, the assessee will have to pay a higher amount of interest over a longer period of time. That is not the implication of the provisions of subsection (1) of section 215 and that has not been specifically provided by subsection (3). The provisions of subsection (3) of section 215 have been adopted in section

217. This section deals with liability to pay interest of a person who has not previously been assessed by regular assessment under this Act or under the Indian Income-tax Act, 1922, but has filed an estimate of income and paid tax accordingly under subsection (3) of section

212. As has been noted earlier in the judgment, "regular assessment" in this context cannot have any other meaning than the first assessment made under section 143 or section

144. Lastly, section 219 provides for credit to be given for advance tax in the regular assessment. This credit has to be given in the course of the first assessment under section 143 or section

144. After completion of the ?assessment; the excess amount of advance tax realised, if any, will have to be refunded. There cannot be any question of giving credit of advance tax at the stage of any revised assessment passed in consequence of the order of any higher authority. Penal consequence of failure to pay or shortfall in payment of advance tax is dealt with by section

273. If an assessee furnishes a false estimate of the advance tax payable by him or fails to pay advance tax in accordance with the requisition made by the Income-tax Officer, then penalty may be imposed under section 273 of the Act, as originally enacted, which provides:-- "

273. False estimate of or failure to nay advance tax.

If the Income-tax Officer, in the course of any proceedings in connection with the regular assessment, is satisfied that any assessee-- (a) has furnished under section 212 an estimate of the advance tax payable by him which he knew or had reason to believe to be untrue, or (b) has without reasonable cause failed to furnish an estimate of the advance tax payable by him in accordance with the provisions of subsection (3) of section 212, he may direct that such person shall, in- addition to the amount of tax, if any payable by him, pay by way of penalty a sum-- (i) which in the case referred to in clause (a), shall not be less than ten percent. but shall not exceed one and a half times the amount by which the tax actually paid during the financial year immediately preceding the assessment year under the provisions of Chapter XVII-C fall short of-- (1) seventy-five percent. of the tax determined on regular assessment, as modified under the provisions of section 215, or (2) where a notice under section 210 was issued to the assessee, the amount payable thereunder, whichever is less; and (ii) which, in the case referred to in clause (b), shall not be less than ten per cent but shall not exceed one and a half times the amount on which interest is payable under section 217. " In this section, proceedings in connection with the regular assessment shall, obviously, mean the initial order of assessment passed by the Income-tax Officer. Clause (b) deals with cases under section 212 under which a person, who has not been previously assessed by way of regular assessment, has to file an estimate. If such a person has failed to furnish an estimate, he may have to pay penalty as laid down in that section. It is difficult to see how regular assessment. in this section can have any meaning other than the first order of assessment. Moreover, where an assessee, who has hitherto been assessed to tax, furnishes an estimate under section 212, he will have to pay penalty in a case falling under clause (a). A further sum by way of penalty calculated on the basis of the amount of shortfall calculated "on the basis of the tax determined on regular assessment, as modified under the provisions of section 215". In other words, calculation of penalty will be made on the basis of tax determined on regular assessment. If after the regular assessment, there has been any reduction in the quantum of tax payable by the assessee by virtue of any other order, then the quantum of tax determined will have to be modified in accordance with the provisions of subsection (3) of section

215. In this section, modification under the, provisions of section 215 can only be of "tax determined on regular assessment". We do not see any reason why the phrase "regular assessment" should be understood in any other sense than the first assessment made in accordance with the provisions of Chapter XIV and within the period of limitation laid down in subsection (1) of section 153. (J) Even under section 153, a distinction has been drawn between assessments under section 143 or section 144 and any other types of assessments. Section 153 lays down: "

153. Time-limit for completion of assessments and reassessments.-- (1) No order of assessment shall be made under section 143 or section 144 at any time after-- (a) the expiry of four years from the end of the assessment year in which the income was first assessable; or (b) the expiry of eight years from the end of the assessment year in which the income was first assessable, in a case falling within clause (c) of subsection (1) of section 271; or (c) the expiry of one year from the date of the filing of a return or a revised return under subsection (4) or subsection (5) of section 139, whichever is latest (2) No order of assessment, reassessment or recomputation shall be made under section 147-- (a) where the assessment, reassessment or recomputation is to be made under clause (a) of that section, after the expiry of four years from the end of the assessment year in? which the notice under section 148 was served; (b) where the assessment, reassessment or recomputation is to be made under clause (b) of that section, after-- ?(i) the expiry of four years from the end of the assessment year in which the income was first assessable, or ' (ii) the expiry of one year from the date of service , of the notice under section 148,? whichever is later. (3) The provisions of subsections (1) and (2) shall not apply to the following classes of assessments, reassessments and re-computations which may be. completed at any time-- ' (i) where a fresh assessment, made under section 146; (ii) where the assessment, reassessment or recomputation is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 250, 254, 260, 262, 263 or 264; (iii) where in the case of a firm, an assessment is made on a partner of the firm in consequence of an assessment made on the firm under section

147. A time limit has been prescribed under subsection (1) for -an order of assessment ... ... under section 143 or section

144. The time-limit under subsection (2) is for "order of assessment, reassessment or recomputation under section 147". Subsection (3)(ii) speaks of assessment, reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order under section 250, 254, 260, 262, 263 or

264. This clearly goes to show that this type of assessment in consequence .of direction of a higher authority has not been treated or described as regular assessment under section 143 or section 144 in the Act. For all the above reasons -- particularly having regard to the scheme of the Act and use of the phrase "regular assessment" in various sections of the Act -- we are of the view that in section 214, 'regular assessment" has been used in no other sense than the first order of assessment passed under section 143 or section

144. If any consequential order has to be passed by the Income-tax Officer to give effect to an order passed by the higher authority, that consequential order cannot be treated as the "regular assessment" nor can the date of the consequential order be treated as the date of the regular assessment. THE INSTRISIC EVIDENCE FURNISHED BV SECTION 214 ITSELF We have, 3o far, mainly examined the scheme of the Act without taking into consideration the amendments made to section 214 from time to time. We shall now turn to the provisions in section 214 itself and in particular the amendments made in section 214 -- what we have called the "short-haul approach". (A) Section 214 contains unmistakable and irrefutable indications that "regular assessment' therein means the original assessment alone. They are: (i) subsection (1-A) as substituted by the Taxation Laws (Amendment) Act, 1984, with effect from April 1, 1985, says that "where as a result of an order under section 250... the amount on which interest was payable under subsection (1) has been increased or reduced, as the case may be ... " the interest shall also be increased or decreased corrdspondingly. Now, if regular assessment means the final assessment made after and pursuant to the appellate order under section 250 (In the interest of simplicity, we are omitting the several provisions mentioned in the subsection and are referring to only one among them, viz., section 250) then the subsection becomes meaningless. The subsection speaks of the amount on which interest is payable under subsection (1) being increased or decreased as a result of the appellate order, which necessarily means that the order of regular assessment referred to in subsection (1) is not the order of assessment made pursuant to the appellate order but the original assessment order; (ii) Explanation (2) introduced by the very same Amendment Act says that 'where, in relation to an assessment year, an assessment is made for the first time under section 147, the assessment so made shall be regarded as a regular assessment for the purposes of this section". Note the words "made for the first time under section 147". Even against an assessment made under section 147; there can be an appeal and revision just as against an assessment made under section 143 or section

144. If the assessment made for the first time under section 147 is to be the "regular assessment" for the purposes of subsection (1) of section 214, it cannot be otherwise in respect of the assessment made in the ordinary course under section 143 or section 144, spoken of in subsection (1) of section

214. Though these two provisions were introduced only in 1985, yet they furnish, in our opinion, unmistakable indication of the meaning attached by Parliament to the expression "regular assessment" in section 214(1). (B) The amendments made to section 214 from time to time also go to indicate that regular assessment in section 214, was used in the sense of the first assessment. The proviso to subsection (1) and subsection (1-A), were added to section 214 simultaneously with and in consequence of the introduction of section 141-A by the Finance Act, 1968. Under section 141-A, the assessee after K filing his return can claim refund of the amount of advance tax and tax deducted at source which was in excess of the tax payable by him on the basis of his return, accounts and documents. Here again, "regular assessment" can have no other sense than the first order of assessment. The Income-tax Officer had to make a provisional assessment in a summary manner within the said period of six months of` the sum of refundable to the assessee. Subsection (4) of section 141-A dealt with the manner in, which any amount refunded on the provisional assessment had to be dealt with. Where the sum refundable on regular assessment was equal to or exceeded the amount refunded tinder the provisional assessment, the amount so refunded was deemed to have been refunded towards the regular assessment. When no refund was found due on regular assessment or the amount refunded under the provisional assessment exceeded the amount refundable on regular assessment, the whole or the excess amount so refunded was deemed to be tax payable by the assessee. It was made clear by subsection (5) that nothing done or, suffered by reason or in consequence of any provisional assessment shall prejudice the determination, on the merits, of any issue in the course of the regular assessment. The Finance Act, 1968, amended sections 199 and, 219 to enable the assessee to get refund pursuant td the summary assessment under section 141-A. Section .199 was amended to enable the assessee to get credit for the tax deducted at source in the provisional assessment by providing that "regular assessment" in that section will include provisional assessment. Section 219, likewise, was amended to provide that the amount of advance tax collected should be treated to have been collected towards the provisional assessment. The amendments made in section 214 should be seen in the background of all these provisions introduced by the Finance Act, 1968. A proviso was added that "in respect of any amount refunded on a provisional assessment under section 141-A, no interest shall be for any period after the date of such provisional assessment". That means interest under section 214 will be paid on any refund made pursuant to a provisional assessment only up to the date of the provisional assessment, even though the "amount so refunded shall be deemed to have been refunded towards the regular assessment" under section 141-A(4). The proviso does not do away with the requirement of paying interest under subsection (1) of section 214 but only limits the period for which interest will be paid up to the date of the provisional assessment. Subsection (1-A) (as introduced in 1968) has to be read bearing in mind the implications of the proviso. It contemplates a situation where a provisional assessment has been made and the surplus amount of tax realised from the assessee has been refunded with interest up to the date of the provisional assessment. If, on completion of regular assessment, it is found that the amount refundable is less than what was refunded earlier on the basis of the provisional assessment, the amount of interest paid shall be reduced accordingly. The excess amount of interest paid, if any, shall be treated as tax payable by the assessee and recovered from the assessee in accordance with the provisions of this Act. This provision is complementary to subsections (4) arid (5) of section 141-A: "(4) After a regular assessment has been made, any amount refunded on provisional assessment made under subsection (1) shall be dealt with in the manner specified hereunder, namely:

(a) where the sum refundable on regular assessment is equal to or exceeds the amount refunded under subsection (1), the amounts so refunded shall be deemed to have been refunded towards the regular assessment. (b) where no refund is due on regular assessment or the amount refunded under subsection (1) exceeds the amount refundable on regular assessment, the whole or the excess amount so refunded shall be deemed to be tax payable by the assessee and the provisions of this Act shall apply accordingly. (5) Nothing done or suffered by reason or in consequence of any provisional assessment made under this section shall prejudice the determination; on the merits, of any issue which may arise in the course of the regular assessment. " ' The summary assessment made under section 141-A is made, inter alia, for the purpose of refunding the excess amount of tax realised from an assessee. This assessment under section 141-A cannot prejudice in any way the determination of the amount of refund payable to the assessee, if at all, ultimately in the regular assessment. If any excess amount of refund has been paid to an assessee with interest under section 214 pursuant to the provisional assessment, the excess amount so refunded shall be recovered by deeming the excess amount as tax payable by the assessee as. laid down by section 141-A(4). Consequently, if any excess amount of interest has been paid under section 214(1) read with the proviso, that amount will be recovered under section (1-A) of section 214, which was as under:-- "(1-A) Where on completion of the regular assessment, the amount on which interest was paid under subsection (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." This subsection was necessary in view of the provisions of subsection (4) of section 141-A and also the newly-added proviso to section

214. Any sum refunded on provisional assessment is deemed to have been refunded towards the regular assessment, but the interest under section 214 is payable only up to the date of the provisional assessment. Subsection (1-A) dealt with a case where refund has been made pursuant to a summary assessment made under section 141-A and interest has been paid on the refund amount up to the date. of the provisional assessment. Subsection (4)(b) of section 141-A provides that where no refund is due on regular assessment or the amount refunded on a summary assessment exceeded the amount refundable on regular assessment, the whole or the excess amount so refunded shall be deemed to be tax payable by the assessee. Subsection (1-A) of section 214 provides that in such a situation, if any, interest has been paid on the amount refunded, such interest shall also be reduced accordingly and the excess, if any, shall be deemed to be the tax payable by the assessee. The excess amount of refund made as well as the excess amount of interest paid will be recovered according to the provisions of this Act. These amendments, made by the Finance Act, 1968, go to show that "regular assessment" was used in the sense of first assessment and these amendments in section 214 can only be explained on that footing. Subsection (1-A) has been substituted altogether with effect from April'1, 1985. The 'substituted subsection (1-A) is not premised upon nor does it refer to provisional assessment. It not only refers to appellate orders under sections 250 and 254, but also to several other orders like the orders under sections 147, 154, 155, 260, 262, 263, 264 and 245-D. The present subsection (1-A) says that where as a result of the appellate order (used compendiously to denote all the orders referred to in the subsection), the amount on which interest is payable under subsection (1) (i.e. under the regular assessment) is increased or reduced, the interest shall also be increased or reduced accordingly and shall be recovered or refunded, as the case may be. It should also be noted that the new subsection (1-A) has taken note of not only increase, but also reduction of the amount on which interest was paid under section

214. Simultaneously with this, section 215, was amended and subsection (3) was recast on the lines of newly introduced subsection (1-A) of section 214 with effect from April 1, 1985. Under this provision, the amount of interest payable by an assessee had to be increased or reduced pari passu with the increase or reduction of the amount on which such interest was payable in consequence of an order of rectification or an order passed by a higher authority. In other words, section 214 and section 215, with effect from April 1, 1985, have brought about important changes in the scheme of payment of interest by the Central Government or the assessee, as the case may be. The period, therefore, for which the interest has to be paid remains the same, i.e., the first day of the relevant assessment year to the date of the regular assessment (first assessment). But, the quantum of interest payable will depend upon the amount of refund payable after the quantum of tax payable is finally determined in appeal, revision or any other proceeding. In this part, we shall examine the co-relation of the provisions relating to refund -- in particular, the provisions in section .244 -- to the provisions in section

214. Prior to the introduction., of subsection (1-A) in section 244, if any refund was payable pursuant to the order of regular assessment, that had to be paid in accordance with the provisions of section 243 of Chapter XIX of the Act. If the payment was delayed beyond the period mentioned in section 243 of the Act, interest had to be paid from the date of expiry of the aforesaid period to the date of the refund order.. If as a result of any of the appellate or other proceedings mentioned in section 240 the refund amount was enhanced, then the enhanced amount had to be paid within the period prescribed by section 244 failing which interest had to be paid from the first day after the expiry of the stipulated period till the date of the order of refund. This position was drastically altered by subsection (1-A) of section 244, which was inserted by the Taxation Laws (Amendment) Act, 1975, with effect from October 1, 1975. It provides:-- "244 (lA).

Where the whole or any part of the refund referred to in subsection (1) is due to the assessee, as a result of any amount having been paid by him after the 31st day of March, 1975, in pursuance of any order of assessment or penalty and such amount or any part thereof having been found in appeal or other proceeding under this Act to be in excess of the amount which such assessee is liable to pay as tax or penalty, as the case may be, under this Act, the Central Government shall pay to such assesee simple interest at the rate specified in subsection (1) on the amount so found to be in excess from the date on which such amount was paid to the date on which the refund is granted: Provided that, where the amount so found to be in excess was paid in instalments, such interest shall be payable on the amount of each such instalment or any part of such installment, which was in excess, from the date on which such instalment was paid to the date on which the refund is granted. Provided further, that no interest under this subsection shall be payable for a period of one month from the date of the passing of the order in appeal or other proceeding: Provided also that where any interest is payable to an assessee under this subsection, no interest under subsection (1) shall be payable to him in respect of the amount so found to be in excess." This subsection applies only to a case where an assessee has paid tax of penalty after March 31, 1975, in pursuance of any order of assessment of penalty. If, as a result of appeal or other proceedings under this Act, it is found that the amount of tax or penalty paid by an assessee is in excess of what the assessee is liable to pay, then the Central Government has to pay interest on the excess amount paid by the assessee. Such interest has to be paid up to the date on which the refund was granted. Subsection (1-A) of section 244 does not affect the operation of section 214 in any manner whatsoever. The period during which interest has to be paid under section 214 is the first day of the relevant assessment year to the date of the assessment order. The period covered by section 244(1-A) is the period commencing from the date of payment of tax or penalty. Under Chapter XVII of the Act, tax may be collected from an assessee by way of deduction at source, advance payment and by a notice of demand under section

156. But, the amount of tax deducted at source is treated as income-tax paid by the assessee upon the completion of the assessment proceedings [section 199(1)]. Similarly, the amount of advance tax paid has to be treated as payment of tax and credit for this amount has to be given to the assessee in the regular assessment (section 219). Any excess amount remaining to the credit of the assessee thereafter will have to be refunded to the assessee. The amount, which was retained by the Income-tax Officer and adjusted against the tax demand must be treated as payment of tax pursuant to the assessment order by the assessee. Advance tax or tax deducted at source loses its identity as soon as it is adjusted against the liability created by the assessment order and becomes tax paid pursuant to the assessment order. Therefore, the phrase "arty amount having been paid ... after March 31, 1975" occurring in subsection (1-A) of section 244 must be construed to mean not only the amount which has been paid directly pursuant to the order of assessment but will also include the amount of tax deducted at 'source and advance tax, which were lying to the credit of the assessee and were ultimately adjusted and set off against the tax demands raised in the assessment order. The excess amount of tax paid under subsection (1-A) of section 244 must be calculated by treating the amount of tax deducted at source and the amount of advance tax, which were adjusted against the assessee's liability to pay tax as well as the amount of tax paid directly upon the assessment under Chapter XVII of the Income-tax Act. In other words, so far as the amount of advance tax is concerned, it must be understood to have been paid "in pursuance of any order of assessment" only on the date of the original order of assessment -- and -not on the date of actual payment. The reason is obvious, on the day the advance tax amount is paid there is no assessment and, hence, it cannot be said to have been paid "in pursuance of any order of assessment". This view was also taken by the Punjab and Haryana High Court in the case of Leader Engineering Works (1989) 178 ITR

529. Interest under subsection (1-A) of section 244 is payable when the tax or penalty paid by an assessee pursuant to an order of assessment has been reduced in appeal or any other proceeding. In such a case, an excess amount of tax or penalty paid by the assessee will have to be refunded and the Central Government has to pay interest on the excess amount from the date on which such amount was paid to the date on which the refund was granted. Of course, there can be no question of paying interest both under section 214(1-A) and section 244(1-A) simultaneously. The rate of interest being the same under both the provisions, there would be no difference in the actual amount of interest payable, whichever provision is applied. This subsection substantially alters the scheme of payment of interest on refund contained in sections 243 and 244 of the Income-tax Act, but does not affect the scope of section 214 in any way. Section 214 deals with payment of interest on the amount of tax found to have been paid in excess of the tax determined as payable on the regular assessment. Interest will have to be paid from the first day of the relevant assessment year to the date of the regular assessment, i.e., the first assessment. If the amount on which the interest was payable was varied subsequent to the first assessment, then the quantum of interest had also to be increased or decreased accordingly. But the period for which the interest had to be paid was not altered by the newly-substituted subsection (1-A) of section

214. The position that emerges from the above analysis can be summarised finally as under:-- (i) Up to March 31, 1975, interest under section 214 is payable from the first day of April of the relevant assessment year to the date of the first assessment order. The amount on which the interest is to be paid is the amount of advance tax paid in excess of the tax payable by the assessee as calculated in the regular assessment (the first assessment order). The amount on which interest was payable did not vary due to the reduction or enhancement of tax as a result of any subsequent proceeding. But with effect from April 1, 1985, while the' period for which interest was payable remained constant, the amount on which the interest was payable, varied with the variation in the quantum of refund as a result of any subsequent orders. (ii). If any tax is paid pursuant to an assessment order after March 31, 1975 (which will include tax deducted at source and advance tax to the extent the same has been retained and treated by .the Income-tax Officer as payment of tax in discharge of the assessee's tax liability in the assessment order), becomes refundable wholly or in part as a result of any appellate or other order passed, the Central Government will have to pay the assessee interest on the refundable amount under section 244(1-A). For the purpose of this section, the amount of advance payment of tax and the amount of tax deducted at source must be treated as payment of income-tax pursuant to an order of assessment on and from the date when these amounts were set off against the tax demand raised in the assessment order, in other words, the date of the assessment order. (iii) With effect from April 1, 1985, interest payable under section 214 will increase or decrease in accordance with the variation in the quantum of the excess payment of tax brought about by orders passed subsequent to the regular assessment as mentioned in subsection? (1-A). . Accordingly, we approve the view taken by the Bombay, Allahabad, Andhra Pradesh, Patna and Delhi High Courts to the extent their views accord with the view taken herein. We may now deal with the facts of each appeal separately. Civil Appeal No.928 of 1980: ? ????????? Civil Appeal No.928 of 1980 is preferred by Modi Industries Limited directly against the orders of the Commissioner of Income-tax, Delhi, in a revision petition filed by the appellant under section 264 of the Act. The assessment year concerned is 1971-72. The Commissioner .held that the appellant is entitled to interest on the excess amount of advance tax paid only up to the original date of assessment and further that the said interest shall be calculated only on the excess advance tax amount paid as per the original assessment order. Having regard to the principles enunciated by us hereinabove, the appeal is liable to be dismissed and is accordingly dismissed to the extent indicated above. No costs. Civil Appeal No. 1395 of 1974: This appeal is preferred against the judgment of the Allahabad High Court in Sir Shadilal Sugar and General Mills Ltd's case (1972) 85 ITR

363. The assessment year concerned herein is 1960-61 and is governed by the Indian Income-tax Act, 1922. We have referred to the judgment under appeal in the body of the judgment and for the reasons recorded therein the appeal is dismissed. There shall be no order as to costs. Civil Appeals Nos. 5550 and 5551 of 1990 The assessment years concerned in these appeals are 1976-77 and 1977-78. Since the facts relating to both the assessment years are similar (except the amounts concerned) it would be enough if we state the facts relating to the assessment year 1976-77. The appellant paid an amount of Rs.9,62,500 by way of advance tax during the financial year relevant to the said assessment year. The Income-tax Officer made an assessment according to which tax payable was determined at Rs.29,56,

303. In the appeals preferred by the appellant, the Appellate Assistant Commissioner and the Tribunal granted reliefs to the appellant as a result of which the entire amount of Rs.9,62,500 (alongwith a sum of Rs.94,787 being the tax deducted at source) was refunded to the appellant. The controversy, however, arose with respect to the period for which interest is payable under section

214. In the light of the principles set out hereinabove, the appellant shall be entitled to interest under section 214(1) for the period commencing from April 1, 1976, up to the date of the "regular assessment" as interpreted by us hereinbefore on the amount of excess advance tax found to have been paid as per the "regular assessment". A similar direction will issue with respect to the assessment year 1977-78, with the difference that the date of commencement of interest will be the first day of that' assessment year. The Commissioner of Income-tax, Bombay, City-VI, respondent No.l, shall pass appropriate orders accordingly. The appeals are allowed in the above terms. No costs. It should, however, be noted that respondent No.l disallowed the assessee's claim for interest under section 214 and also under section 244(1-A). In the writ petition, challenging the aforesaid decision of the Commissioner, rule nisi was issued only in respect of non-payment of interest under section 244(lA). The question relating to payment of interest under section 214 was not entertained by the High Court. The assessee came up on appeal to this Court only on the question of non-payment of interest under section

214. If the writ petition before the High Court is pending on the question of section 244(1-A), it should be disposed of on the basis of the principles laid down in this case. Civil Appeal No.4581 of 1990; In this appeal, three assessment years are involved, viz. 1973-74, 1974-75 and 1975-76. The appeal is preferred against the judgment of a learned Single Judge of the Bombay High Court rejecting the writ petition (Writ Petition No. 1085 of 1985). The appeal is allowed and the matter remitted to the Income? tax Appellate Tribunal (Bombay Bench), Bombay, for passing appropriate orders in. accordance with the principles indicated here in above after verifying the facts relating to each assessment year. The appeal is accordingly allowed. No costs. M.B.A./1093/FC???????????????????????????????????????????????????????????????????? Order accordingly