Full Judgment Text
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PETITIONER:
INCOME-TAX OFFICER & ANOTHER, BOMBAY
Vs.
RESPONDENT:
THE SIMPLEX MILLS LTD., BOMBAY
DATE OF JUDGMENT:
15/11/1962
BENCH:
ACT:
Income Tax-Reassessment-Validity-Advance payment of tax
found refundable in part on assessment-Payment of legal
interest to aseessee-Amendment of law reducing amount-
Recovery of excess-Indian Income-tax Act, 1922 (11 of 1922),
34, 18 A (1), (5)) (8), (11).
HEADNOTE:
The assessee respondent made advance payment of tax under s.
18 A (1) of the Income-tax Act’ for the assessmetn
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year 1952-53. A part- of the amount paid was found refund-
able on regular assessment on August 30, 1952. On September
11, 1952, a sum of Rs. 14,720-14-0 was paid to the
respondent as interest under s. 18 A (3), on the amount
refundable as it then stood. The sub-section was amended on
May 24, 1953, with retrospective effect from April 1, 1932.
Under the law as it stood after the amendment the assessee
was entitled to Rs. 9,404-5-0 and no more. The Income-tax
Officer issued a notice under s. 34 (1) (b) proposing to
recover the excess paid by way of reassessment on the
grounds that the respondent bad been under-assessed and also
that it had been allowed excessive relief. By an order made
by him based on the latter ground, he directed recovery of
the excess. The respondent moved the High Court under Art.
226 of the Constitution and that court set aside the order.
Held, that S. 34 of the Act had no application. None of the
conditions for its applicability had been fulfilled in the
present case.
The case was not one of under-assessment but really one of
over-assessraent though provisional for more had been paid
in advance as tax than was found payable. Neither was the
case one of grant of excessive.relief for the interest paid
by the Government on the amount paid by the assessee in
excess of what was found to be due, was not a grant of
relief to the assessee at all. Excess payment of such
interest cannot, therefore, be a case where excess relief
has been allowed to an assessee,
Sub-sections (8) and (11) of s. 18 A deal with interest
payable by an assessee and do not show that interest payable
by the Government under s. 18 A (3) is part of tax payable
by the assessee so as to lead to a contention that excess
allowance of such interest was in substance grant of excess
relief to the assesse.
It could not also be said that the interest payable by the
Government to an assessee for tax paid in advance was a tax
paid by the, assessce.
M. Chockalingam v. Commissioner of Income-tax, Madras,
[1963] Supp. 1 S.C.R. 599, explained and distinguished.
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JUDGMENT:
CIVIL APPELLATE, JURISDICTION : Civil Appeal No. 165 of
1962.
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Appeal by special leave from the judgment and order dated
March 11, 1959 of th e Bombay High Court in Appeal No. 60 of
1958.
N. D.Karkhanis and R. N. Sachthey, for the appellants.
R. J. Kolah, J. B. Dadachanji, O C. Hatkw and Ravinder
Narain for the respondent.
1962. November 15. The judgment of the Court was delivered
by
SARKAR, J. This appeal is entirely without substance. It
arises out of an application under Art’. 226 of the
Constitution Mack by the respondent assessee for a writ
quashing an order of assessment made under s. 34 of the
Income-tax Act, 1922.
The respondent made advance payment of tax under s. 18 A (1)
of the Income-tax Act for the assessment year 1952-53. On
August 30, 1952, regular assessment for this year was made
and a part of the tax paid in advance was thereupon found
refundable to the respondent. Under the provisions of sub-
s. (5) of s. 18A, as it then stood, interest at a certain,
rate was payable on the amount paid in advance by an
assessee under this section. Rupees 14,720-14-0 were found
payable to the respondent under this provision ’arid this
sum was paid sometime in September 1962. On May 24’ 1953,
subs. (5) of s. 18A ’Was amended with effect from April 1,
1952, It is not necessary to refer to this amendment in
detail and it is enough to state that under it the
Government was to have paid to the respondent Rs. 9,404-5-0
instead of Rs. 14,720-14-10.
On March 18, 1957, a notice was issued under s. 34 (1) (b)
stating that as the Income tax Officer had reason to believe
that the respondent’s income for the assessment year ending
March 31, 1953 had
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been under-assessed and had been the subject of excessive
relief, he proposed to re-assess the said income. The
respondent protested but notwithstanding the protest, the
re-assessment under s.34 was made on July 30, 1957. The
order of reassessment stated: ""As per the amended
provisions of Section 18A (5) the assessee was entitled to
interest Pr a much smaller amount than what has been allowed
to him during the original assessment. As excessive relief
has been allowed to the assessee in the original assessment,
u/s. 23 (3) and in order to enable me to recover the excess
interest allowed action under section 34 was taken Hence 1
will proceed to recover the excess interest allowed to the
assessee during the original assessment." On the application
of the respondent under Art. 226. of the-Constitution this
order was set aside by the High Court of Bombay. Hence this
appeal.
Section 34 of the Act: under which the impugned order was
made so far as material for our_purposes is in these terms:
S. 34. (1) "If-
(a)....................................
(b)...................................the
Income-tax Officer has reason to believe that
income, profits or gains chargeable to income-
tax have escaped assessment for any year, or
have been under-assessed or assessed at too
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low a rate, or have been made the subject of
excessive relief under this Act, or that,
excessive loss or depreciation allowance has
been computed,
he may...... proceed to assess or re-asses s
such income, profits or, gains or recompute
the loss or depreciation allowance ;"
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The assessment, reassessment or recomputation under this
section is to be made according to the provisions of the Act
as if it was pursuant to a notice under s. 22 of the Act.
Under this section, therefore, an assessment earlier made
can be re-opened if income, profits or gains have escaped
assessment or have been ’under-assessed or assessed at too
low a rate or have been made’ the subject of excessive
relief or excessive loss or depreciation has been computed.
It does not seem to us that any of these conditions can be
said to have’ been fulfilled in the present case. The
notice under s. 34 stated all these grounds but only two of
them have been mentioned in the notice which has been
earlier set out by us because counsel for the appellants has
not relied on any other ground. With the other grounds we
are not, therefore, concerned in this case. The two that
have been relied on are cases where income has been under-
assessed or has been made the subject of excessive relief.
It may be noticed here that the order of July 30, 1957 was
based only on the ground that excessive relief had been
allowed. It did not hold that the income had been under
assessed.
It does not seem to us that it is a case where the
respondent’s income was under-assessed or where excessive
relief was granted in computing that income. It is a case
where tax had been paid ’in advance and upon subsequent
regular assessment for the period for which the tax had Seen
paid it was found that what had been paid was in excess of
what was actually due. This is really a case of over-
assessment though only provisional and not of under-
assessment at all. The payment of interest was in no sense
a relief granted in computing income, it was paid at the
rate calculated according to the law then in force. No
doubt in view of the subsequent amendment of the law and in
view of this amended provision being given retrospective,
operation covering the date. when the
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original assessment :had: been made, if ’the interest has to
be computed according to the amended law then a smaller-sum
might have been payable as interest. but when it was
computed, the new law was not in fact there and, therefore,
the, computation had been according to the law then in
force. That computation cannot be re-opened under s. 34
because it cannot be said that it ’is a case either of under
assessment or of excessive relief having been granted. It
is really a case where the statutory liability of the State
to pay interest was reduced from a higher figure to a lower
one. Therefore, quite clearly it was not a case within s.
34.
We were referred to the form of the notice of demand for the
tax. It was contended that the form showed that in
computing the tax interest under s. 18A had to be taken into
account. Therefore, it was said, interest was a part of the
tax and when more interest had been paid to the assessee
than was due, it had been given excessive relief. As was
rightly pointed out by Mr. Kolah appearing for the
respondent, this is a wrong reading of the form. The form
specified the net amount of the tax payable and thereafter
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provided for deduction of certain interest to show the
amount of the demand. Therefore the interest which had to
be deducted in accordance with it in arriving at the demand
is not a part of the tax. At least it is not so treated in
the form. That is enough to dispose of this argument.
We were then referred to sub-ss. (8) and (11) of s. 18A.
Sub-section (8) provides for payment of certain interest by
an assessee and sub-s. (II) says that any sum other than a
penalty or interest paid by an assessee under the provisions
of s. 18A shall be treated as a payment of tax. It was
contended that. the provisions of these two sub-sections
show that the interest with which we are concerned is a part
of the tax, and therefore, when more interest was allowed
to an assessee than was due, he was
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given encessive relief. This is obviously fallacious The
sub-sections deal with interest payable by an assessee and
we are concerned. in this case ’with interest payable by the
Government.
Lastly, our attention was drawn to M. Chockalingam v.. The
Commissioner of Income tax, Madras (1), in which referring
to the proviso to s. 35 of the Income-tax Act this Court
observed "The learned counsel for the Departrnent raised
the, forlorn argument that the addition of penal interest is
not enhancement of assrssment as stated in the proviso. We
do not see what else it could be. "; Itwas contended that
this showed that the penal interest was part of the tax. We
do not think so. In any event, we are not concerned with a
case of penal interest here. It cannot obviously be
suggested that the interest payable by the Government to the
assessee for amounts paid by the assessee as tax in.
advance, is a tax paid by the assessee.
At the hearing learned counsel for the State sought leave to
contend that the, order of July 30, 1957, could be supported
under s. 35 of the, Income-tax Act. This leave was refused
for such a point was not raised in the Court below and the
action by the revenue authorities had expressly been taken
under s. 34 of the Act.
This appeal must, therefore, be dismissed with costs and we
order accordingly.
Appeal dismissed.
(1) [1963] SUPP. 1 S.C.R. 599.
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