1986 PLP (Trib (PTD)

FERHAT ALI KHAN (MEMBER).‑‑ The facts of this appeal give rise to yet another interesting point regarding interpretation of Section 18‑A of the repealed Income‑tax Act. The respondent, a public limited company, was originally assessed on 28th June, 1986 under, S.23(3) of the repealed Income‑tax Act, hereinafter referred to as "the Act", and the Income‑tax Officer also recorded a separate order, section 18‑A(6) on the same date whereby he levied additional tax amounting to Rs.1,62,

337. The respondent felt aggrieved and went up in appeal but the learned Appellate Assistant Commissioner by his order, dated 3‑1‑1977 set aside the assessment order and sent the matter back to Income‑tax officer for de novo assessment. Complying with the direction of learned Appellate Assistant Commissioner the Income‑tax officer framed fresh assessment on 11th December, 1979. However, this time he did not record any order under section 18‑A of the Act. The respondent again felt aggrieved and went up in appeal and the learned Appellate Assistant Commissioner by his order, dated 16th February, 1980, granted some relief s to the respondent. The matter again came back before Income‑tax Officer for giving appeal effect. By his order, dated 6th January, 1981, recorded under section 31 of the Act, he gave relief to the respondent as per direction of the aforesaid order of the learned Appellate Assistant Commissioner but at the same time recorded a separate order under section 18‑A(7) and levied additional tax amounting to Rs.7,

257. The order of the Income‑tax Officer reads as under:‑‑ "The assessee‑company has deferred the payment of advance tax (i.e. 2nd instalment) on the basis of his own estimate, dated 15‑9‑1972 under section 18‑A(2) of the I.‑T. Act, therefore, charge additional tax under section 18‑A(7) as under:‑‑ Tax as per revised order Rs. 8,72,984 80% of the above tax comes to Rs. 6,98,387 Therefore, instalments comes to Rs.1,74,597. 1st quarterly instalment paid Rs.1,95,000 (i.e. excess of Rs.20,403) Rs. 20,403 2nd instalment quarterly made deferred payments (i.e. 1,74,597 ‑ 33,239 + 20,403) = Rs.l 20,955 Charge additional tax @ 2$ p.m., w.e.f. 15‑12‑1972 to 15‑3‑1973 on Rs.1,20,955 which comes to: Rs.7,257 Tax as per I.T. 30, Issue Demand Notice accordingly." This time again the respondent felt aggrieved and went up in appeal. It was contended inter alia, before learned Commissioner of Income‑tax (Appeals) that the order being under section 35 of the Act though received by Income‑tax Officer under section 18‑A(7) on 6th January, 1981., was time barred because it was recorded after four years from the date of th e assessment order. The period of limitation was calculated from the date of the original assessment order recorded on 28th June, 1976. It was further argued at the first appellate forum that the order was illegal inasmuch as the notice required under section 35 of the Act was never served on the respondent. The respondent further urged before learned Commissioner of Income‑tax (Appeals) that the Income‑tax Officer was not competent to levy additional tax while giving appeal effect under section

31. Without prejudice to aforesaid argument the respondent further canvassed before Commissioner of Income‑tax (Appeals) that the order of Income‑tax Officer levying additional tax was illegal inasmuch as ‑ "(a) The company was required to pay a sum of Rs.1 95,000 by way of the second instalment of advance tax for the year 1973‑

74. In view of the C.B.R. Circular No. 11 of 1972 dated 28th November, 1972, the tax on the East Pakistan income for the previous year ended on 30th November, 1970 (assessment year 1971‑72) is to be kept in abeyance till 30th June, 1974. (b) The tax on East Pakistan income for the assessment year 1971‑72 amounted to Rs.1,79,950 which was already paid by the company in the relevant assessment year. Since such tax (in accordance with Circular 11 of 1972) was to be kept in abeyance till June, 1974, 'the company adjusted Rs.1,61,761 (out of total amount of Rs.1,79,950 paid for assessment year 1971‑72) against the second instalment of advance tax for the assessment year 1973‑74 due to December 15, 1972. However, the amount (Rs.1,61,761) was subsequently paid by the company on June 15, 1973. The I.T.O. treated this as default in payment of advance tax and levied additional tax under section 18‑A(7). (c) The levy of additional tax is also wrong because the deferment in payment of advance tax was in accordance with the Board Circular 11 of 1972 (copy enclosed). As the concession granted by the C. B. R. was of a general nature, it should apply not only in cases where the taxes for the year 1971‑72 on East Pakistan income have not been paid, or have been only partially paid, but also in cases where the taxes for that year have been paid in full. This is because it would be grossly unjust on the one hand to deny a certain concession to a group of assessee because they complied with the requirements of the law and paid their taxes in full when due, while on the other hand to grant the same concession to another group of assessees who had managed to postpone payment of all or a portion of their taxes. Those who paid their taxes in full did so at the cost of borrowing at higher rates of interest, reduction in working capital and the utilisation of funds which could more profitably have been utilised elsewhere. Such assessees are, therefore, more than deserving of the concession granted by the Board." The learned Commissioner of Income‑tax (Appeals) accepted the appeal and ordered deletion of the additional tax with the following observation: "Apart from the intricacies of law involved in the point in issue as pointed out by the learned authorised representative, the reason for which I am deleting the additional tax levied by the assessing officer is that the order levying additional tax was passed on 6th January, 1981, while the original order under section 23(3) was passed on 28th June, 1976 and as such the period of limitation under section 35 of the repealed Act expired on 27th June, 1980. The additional tax of Rs.7,257 levied under section 18‑A(7) is deleted for the reasons discussed above." This time the Department felt aggrieved and has come up in second appeal.

2. Mr. Ather Saeed Khan, the learned Departmental Representative, vehemently argued before us that learned Commissioner of Income‑tax Appeals) seriously erred in holding that the order levying additional tax was time‑barred. Elaborating his submission the learned Departmental Representative pointed out that the learned Appellate Assistant Commissioner who set aside the original order by his order, dated 3rd January, 1977, directed the Income‑tax Officer to frame de novo assessment. According to learned Departmental Representative, the Income‑tax Officer framed de novo assessment on 11th December, 1979 and the learned Commissioner of Income‑tax (Appeals) should have computed the period of 4 years from this date. Mr. Soli Parekh appearing for the respondent, on the other hand, argued that since section 18‑A(7) ;peaks of regular assessment the learned Commissioner of Income‑tax (Appeals) was right in computing the period of 4 years from 28th June, 1976 as it was the order of regular assessment. According to learned authorised representative of the respondent the assessment framed on 11th December, 1979 was not the regular assessment order inasmuch as it was recorded under section 23(3), read with section 31 of the Act. Mr. Soli Parekh contended that regular assessment was that which was framed under section 23(3) of the Act. The learned authorised representative for the respondent also attacked the order recorded under section 18‑A(7) on the ground that it was an order under clause (b) of section 18‑A(7) of the Act, as the order under section 18‑A(7) referred to "deferred payment of advance tax". Elaborating his argument further the learned authorised representative submitted that since aforesaid clause (b) referred to subsection (4) which dealt with any income in the nature of commission receivable periodically and since the respondent did not receive any income in the nature of commission, the order was illegal.

3. We have heard both the learned Departmental Representative as well as learned authorised representative at length. Before turning to the merits of the submissions it would be advantageous if subsections (1), (4), (7) and (8) of section 18‑A are reproduced for easy reference: "18‑A. Advance payment of tax.‑‑(1) In the case of income other than income to which the sixth Schedule applies and income in respect of which provision is made under subsections (2) and (2‑B) of section 18 for deduction of income‑tax at the time of payment, an assessee shall pay quarterly to the credit of the Central Government on the fifteenth day of March and the fifteenth day of December, the fifteenth day of March and the fifteenth day of June in each financial 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 years in respect of which has been assessed under section 23‑B, or where no assessment under section 23 has been made under section 23‑B, as case may be, if the at total income exceeded twenty‑five thousand rupees, such income‑tax and super‑tax shall be calculated at the rates in force in respect of the 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 subsection (1) of section 17 tax is chargeable with reference to the total world income, shall bear to the total amount of 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. The tax so calculated shall be reduced by the amount of the tax deducted during the said year under subsection (3), (3‑A), (3‑B), (3‑BB), (3‑C) or (3‑ E) of section 18: Provided that, where the previous year of the assessee in respect of any source of income ends after the thirty‑first day of March and before the thirty‑first day of July, the payment of income‑tax and super‑tax on that source of income shall be made in three payments of equal amount to be made on the fifteenth day of December, the fifteenth day of March, and the fifteenth day of June, respectively: Provided further that, if the assessee is a partner of a registered firm and an assessment of the firm has been completed for a previous year later than that for which the assessee's last assessment has been completed, his share in the profits of the firm shall, for the purposes of this subsection, be included in his total income on the basis of the latest assessment of the firm: Provided further that, if before the fifteenth day of May of the year, an assessment of the assessee, or of the registered firm of which he is a partner, is completed in respect of a previous year later than that on the basis of which the tax was computed under this clause, the assessee shall pay in one instalment on the specified date, or in equal instalments on the specified date if more than one falling alter the date of the said assessment, the tax computed on the revised basis as reduced by the amount, if any, paid in accordance with the original computation . . . . . . . . . . . . . . . . Where part of the income to which subsection (1), (2) or (3) apply consists of any income of the nature of commission which is receivable periodically and is not received or adjusted by the payer in the assessee's account, before any of the quarterly instalments of tax become due, he may defer payment of tax on that part of his income to the date on which such income would be normally received or adjusted and if he does so he shall communicate to the Income‑tax Officer the date to which such payment is deferred: Provided that, if the tax of which the payment is deferred is not paid within fifteenth days of the date on which such income or part thereof is received or adjusted by the payer in the assessee's account he shall, without prejudice to any other consequences which may follow, be deemed to be an assessee in default in respect of such tax and shall pay an additional amount of tax thereon at the rate of two per cent per mensem from the date of such receipt or adjustment to the date of payment of tax. (7) Where, on making the regular assessment, the Income‑tax officer finds that any assessee has:‑‑ (a) under subsection (2) or subsection (3) underestimated the tax payable by him and thereby reduced the amount payable in any of the first three instalments, or (b) under subsection (4) wrongly deferred the payment of tax on a part of his income, he may direct that the assessee shall pay an additional amount of tax at two per cent per mensem, in the case referred to in clause (a) for the period during which the payment was deficient on the difference between the amount paid in each such instalment and the amount which should have been paid having regard to the aggregate tax actually paid under this section during the year, and in the case referred to in clause (b) for the period during which the payment of tax was wrongly deferred on the amount of which the payment was so deferred: Provided that for the purposes of this subsection any instalment due before the expiry of six months from the commencement of the six months from the commencement of the previous year in respect of which it is to be paid shall be deemed to have become due fifteen days after the expiry of the said six months: (8) Where, on making the regular assessment, the Income‑tax Officer finds that payment of tax has not been made in accordance with the foregoing provisions of this section, additional tax calculated in the manner laid down in subsection (6) shall be added to the tax as determined on the basis of the regular assessment." Since it can be disposed of summarily we take up the second submission of Mr. Soli Parekh and feel no hesitation in rejecting it being wholly devoid of any merit. It is true that the Income‑tax Officer has used the word "deferred" in his order, dated 6th January, 1981, but it is in context of Circular 11 of 1972, dated 28th November, 1972. By any stretch of imagination it cannot be treated an order under clause (b) of subsection (7) of section 18‑A of the Act, simply because the word "deferred" has been used in it. As such, subsection (4) of section 18‑A does not come into picture at all.

4. We should, therefore, now turn to the main submission of the learned Departmental Representative as well as the learned Authorised Representative. From their submissions it appears that the fate of the anneal actually depends on the interpretation of the words "on making the regular assessment" which find place in subsection (7) and subsection (8) of section 18‑A of the Act. This Bench in a recent decision recorded in I.‑T.A. No. 1696/KB of 1982‑83, dated 17th July, 198b, has answered the question as to at what point of time an order under section 18‑A should be recorded? We have observed:‑‑ "Now to conclude, we hold that the Income‑tax Officer is required to record an order under section 18‑A either along with the regular assessment or within a reasonable time and for reasonable cause but, in any case, before notice of demand is issued."

5. In that case the point before the Bench was as to whether an order purported to have been recorded under section 18‑A(6) read with subsection (8) was, in fact, an order under section 35 of the Act, and as such, the appeal filed by the assessee was competent? We held in that case that if Income‑tax Officer made an order on making the regular assessment, the appeal was prescribed by section 30, but if the Income‑tax Officer rectified the mistake, the appeal was still competent under section 30 of the Act. In this case, however, we have to decide as to what the expression "regular assessment" means

6. The word assessment was used in the Act conveying different meaning, with reference to, or in context of its use. Sometimes it meant computation of income, but sometimes it meant determination of tax also and, at some other place, it implied the procedure laid down in the Act for imposing liability upon the tax‑payer. Unlike Income‑tax Ordinance the word assessment was not defined by the Act. Under the Income‑tax Ordinance, 1979, hereinafter referred to as "the Ordinance", the word "assessment" includes re‑assessment and additional assessment. This definition has perhaps given effect to an Indian Supreme Court decision reported as A.N. Luxman Shenoy v., I.‑T.O., (1958) 34 I T R 275, where Their Lordships held that the word "assessment" included re‑assessment also. In the instant case, however, we are not called upon to define the word "assessment" alone but the expression "regular assessment" requires to be interpreted.

7. Now, before we examine the respective contentions of Mr. Ather Said Khan and Mr. Soli Parekh, let us reproduce sections 23(1) and section 23‑B(5) and (7) of the Act:‑‑ "

23. Assessment.‑‑(1) Where the return of total income and total world income has been furnished by an assessee under subsection (1) of section 22, the Income‑tax Officer may, by order in writing made before the thirteenth day of June of the financial year next following the previous year for which the return has been furnished, determine the total income and total world income of the assessee and the tax payable by him on the basis of such return and the accompanying documents, and in determining such total income and the total world income and the tax payable by the assessee, he may make such adjustments as may be necessary, including adjustments under paragraph (b) of the proviso to clause (vi) of section 10 and subsection (2) of section 24." "23‑B. ............................ (5) For the avoidance of doubt, it is hereby declared that the provisions of section 42 (except the first provision), section 45‑A and section 46 apply in relation to any tax payable in pursuance of provisional assessment made under subsection (1) as if it were a regular assessment made under section 23. (7) After a regular assessment has been made under section 23, any amount paid or deemed to have been made towards a provisional assessment made under subsection (1) shall be deemed to have been paid towards the regular assessment; and where the amount paid or deemed to have been paid towards the provisional assessment exceeds the amount payable under the regular assessment, the excess shall be refunded to the assessee." From perusal of above quoted provisions it appears that the worn "regular assessment" has been used in contrast with the word "provisional assessment". Thus, it is clear that regular assessment is that which is made under section 23 of the repealed Act. The most salient feature of regular assessment in the relevant assessment year was that the Income‑tax Officer had to frame it, in any case, before the expiry of few years from the end of the assessment year next following the previous year for which the return had been furnished. On the contrary, the assessment framed pursuant to the appellate order of making de restriction. It, therefore, inevitably framed under section 23 had at least one the assessment framed under section 23,E the Act. Although both the assessments were but strictly speaking the regular assessment made exclusively under section 23 of the Act. not appear to be end of the matter. If we carefully look at the scheme of the Act and the context in which the words "regular assessment" are used in section 18‑A, it becomes quite obvious that in those cases where the originally framed assessment is set aside in appeal with the direction that de novo assessment should be framed, the "regular assessment" stands merged in the appellate order. What then, the assessment order framed pursuant to appellate order be called? In our judgment it would also be called "regular assessment" though strictly speaking it would be "revised regular assessment". We think that it would also be "regular assessment" because it is made pursuant to an appellate order which has already absorbed the originally framed regular assessment in itself.

8. In India also different High Courts have adopted the same interpretation of the words "regular assessment" although it is in context of the claim of the interest by assessee on the amount refunded by Income‑tax Officer as per direction of the appellate Courts. In Chloride India Ltd. v. C.I.T. (1977) 106 I T R 38 Calcutta High Court is of the view that assessment made by Income‑tax Officer pursuant to direction of Appellate Assistant Commissioner on appeal was a regular assessment for the purposes of section 214(1) of the Indian Income‑tax Act. A Division Bench of Kerala High Court has, however, held in (1980) 122 I T R 272 and Dabaki Amma and others v. Income‑tax Officer that the words regular assessment as used in section 214(1) of the Indian Income‑tax Act, mean either "original regular assessment" or "revised regular assessment". According to their Lordships it would depend on the context in which the word was used. In that case, a refund was ordered by Appellate Assistant Commissioner and the assessee claimed interest thereon and their Lordships held that no interest was payable on the amount refunded to the assessee pursuant to the revised assessment made as per direction of the Appellate Assistant Commissioner. Similarly, a Division Bench of Andhra Pradesh High Court has also taken the same view in Trustees of H. E. H. Nizam's Religious Endowment v. Income‑tax Officer (1981) 131 I T R

239. In this case also there fund was ordered by Income‑tax Officer on making consequential order recorded by him as a result of an order in appeal and the assessee had claimed the interest, but it was turned down by the learned Judges. In National Agricultural Co‑operative Marketing Federation of India Ltd. v. Union of India (1981) 130 I T R 928., the Division Bench of Delhi sigh Court also held that the words regular assessment as used in section 114 of the Indian Income‑tax Act, should be construed referring only to the first and initial assessment and not to subsequent nullification thereof made pursuant to the appellate order.

9. From all this discussion it is thus clear that the regular assessment in the instant case was framed on 28th June, 1976 whereas un 11th December, 1979, revised assessment order was made de novo pursuant to an appellate order. Thus learned C.I.T. (Appeals) erred n holding the appeal time barred. However, apart from the discussion made above there is yet another angle of the dispute.

10. In the instant case, the order under section 18‑A(7) of the Act was made on 6th January, 1981 at the time when the Income‑tax Officer was giving appeal effect. Thus, his order was not actually under section l8‑A(7) but under section 35 of the Act. Let us mention again that we have discussed this aspect in our decision recorded in I.T.A. No. 1696/KB/1982‑83, dated 17th July, 1986 in detail. Now if this order was under section 35 and we again hold that it was, we should therefore, look to section

35. It reads as under:‑‑ "

35. Rectification of mistake.‑‑The Commissioner or Inspecting Assistant Commissioner may, at any time within four years from the date of any order passed by him in appeal or, in revision, as the case may be, and the Income‑tax Officer may, at any time within four years from the date of any assessment order or refund order passed by him, on his oven motion rectify any mistake apparent from the record of the appeal, revision assessment or refund, as the case may be, and shall within the like period rectify any such mistake which has been brought to his notice by an assessee, or in the case of an order in appeal, by any party to such appeal: Provided that no such rectification shall be made, having the effect of enhancing an assessment or reducing a refund unless the Commissioner, the Assistant Commissioner or Income‑tax Officer, as the case may be, has given notice to the assessee of his intention to do so and has allowed him a reasonable opportunity of being heard." From perusal of this provision of law it appears that an Income‑tax Officer may, at any time within four years from the date of any assessment order or refund order passed by him, rectify any mistake apparent from the record of the appeal. It is pertinent to note that in it his subsection the words used are "any assessment order" and not "'regular assessment order". We have already discussed what is regular assessment order or in other words we have held that revised assessment Border pursuant to direction of appellate Court is also a regular assessment order. But by any stretch of imagination we cannot say that the expression "any assessment" would not include the revised assessment order within its fold. Thus, the order made by Income‑tax Officer on 11th December, 1979, even if for the sake of argument was not a regular assessment order, is definitely falling within the ambit of the expression "any assessment order". Since the Income‑tax Officer, on 6‑1‑1981 has purported to record an order under section 18‑A(7), which is in fact and in law an order under section 35 of the Act, it is within four years from the date of the "any assessment order", namely, the fresh assessment order made on 11th December, 1979 pursuant to the direction of learned Appellate. Assistant Commissioner.

11. The upshot of all this discussion, therefore. is that the finding of learned Commissioner of Income‑tax (Appeals) that the order levying additional tax on 6th January, 1981 was time‑barred, is patently illegal. We, therefore, set aside the order of learned Commissioner of Income‑tax (Appeals) and send the matter back to him to record his finding firstly on the point as to whether notice under section 35 of the Act was given or not and secondly regarding the effect of Central Board of Revenue's Circular No. 11 of 1972, which the respondent agitated before him and which he has reproduced in paragraphs (a), (b) and (c) of page 2 of the impugned order.

12. The appeal thus stands disposed of as indicated above. M. Y. H. Appeal accepted