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Petitioner: SAURASHTRA CEMENT AND CHEMICAL INDSUTRIES LTD. VS Respondent: INCOME-TAX JUDGMENT
Court Name: Gujarat High Court Judge(s): S. B. Majmudar, R. K Abichandani, R. O. Mankad Title:SAURASHTRA CEMENT AND CHEMICAL INDSUTRIES LTD. vs INCOME-TAX
JUDGMENT
Reported As: 1993 PTD 392 Result: Petitions dismissed Judgment JUDGMENT ' R.K. ABICHANDANI, J.---This group of writ petitions raise a common question as to whether the assessee, in whose case provisional assessment for the purpose of refund is made under section 141A of the Income Tax Act, 1961 (hereinafter referred to as "the said Act"), or who has paid advance tax and/or self-assessm ent tax, is entitled to refund of the entire tax amount paid by him if, for any reason, the regular assessm ent becomes time-barred or is annulled. The Division Bench which was seized of these matters found that the question arising in these matters had a far-reaching effect and, therefore, these matters have been referred to the Full Bench. Since the petitions involve a common question, they have been heard together and are being disposed of by this common judgment. ' Before dealing with the legal contentions raised in these matters, the facts of each of these petitions may briefly be set out as under: Special Civil Application No,6656 of 1987: ' The petitioner, Saurashtra Cement and Chemical Industries Ltd., filed a return of income for the assessm ent year 1980-81, on June 12, 1980, declaring a total income of Rs,88,15,660. The petitioner had paid tax by way of advance tax and/or tax deducted at source to the tune of Rs,52,40,000. On an application made by the petitioner for making a provisional assessment under section 141A of the said Act, the Income-tax Officer, Jamnagar, passed an order under section 141A on September 23, 1980, at Annexure 'A' to the petition and worked out the tax payable on the returned income at Rs,52,12,221, ordering refund of the excess tax of Rs,27,779, which figure was subsequently rectified to
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Rs,29,687 by an order dated December 12, 1980, passed by the Income-tax Officer and that amount was refund to the petitioner. On February 22, 1983, a revised return was filed by the petitioner for the said year showing total income at Rs,74,15,660 as against Rs,88,15,660 disclosed in the original return. The difference of Rs,14,00,000 in the total income disclosed in the revised return was alleged to be on account of trading loss alleged to have been suffered by the petitioner due to embezzlement and, according to the petitioner, the refund due under section 141A would have come to Rs,8,26,336. Thereafter, a draft assessment order was prepared and forwarded by the Income-tax Officer to the Inspecting Assistant Commissioner, Central Range-II, Ahmedabad, who gave directions under section 144B of the said Act which were received by the Income-tax Officer on June 15, 1984. Thereafter, the Income-tax Officer passed the assessment order on June 29, 1984, assessing the total income of the petitioner at Rs,90,33,160 and after adjusting the tax already paid against the total tax amount of Rs,53,40,814, issued demand for the balance amount of Rs,1,30,077. The petitioner preferred an appeal before the Commissioner of Income-tax (Appeal), who upheld the assessm ent made by the Income-tax Officer under section 143(3) read with section 144B of the said Act. Thereafter, the petitioner-assessee preferred an appeal before the Income-tax Appellate Tribunal ("the Tribunal" for short) contending that the assessment order, dated June 29, 1984, was beyond time as the revised return was filed on February 22, 1983, and the Inspecting Assistant Commissioner had concurrent jurisdiction in the matter. The Tribunal, upholding the said contentions by its order dated March 17, 1987, at Annexure 'B' to the petition, annulled the order passed by the Income-tax Officer as having been passed beyond the prescribed time. Thereafter, the Income-tax Officer issued a further refund order for Rs,1,76,783 by his order dated April 21, 1987, which was the amount of tax paid by the petitioner, on the basis of the assessment order dated June 29, 1984. The petitioner, thereafter, filed a miscellaneous application before the Tribunal contending that in view of the fact that the assessment order was annulled, directions should be issued to the Income-tax Officer to refund the entire tax collected by the Department by way of deduction at source and advance tax. That application was rejected by the Tribunal on October 27, 1987, by order at Annexure 'A' to the petition. The petitioner has prayed for a writ of mandamus or any other appropriate writ, order or direction for getting refund of a sum of Rs,52,12,221 with interest at the rate of 15% till the date of the actual refund of that amount and, in the alternative, has prayed for refund of Rs,8,27,751 on the basis of the revised return filed by it. Special Civil Application No,5944 of 1987: ' In this matter, the petitioner, who carries on business in the manufacture of woollen and blended fabrics, filed a return of total income of Rs,1,07,66,520 for the assessment year 1981-82, on July 27, 1981, and on the petitioner's making an application under section 141A of the said Act, the Income- tax Officer on August 20, 1981, made a provisional assessment granting refund of Rs,34,72,101. Thereafter, on March 17, 1984, the Income-tax Officer made a draft assessment order under section 144B of the Act and forwarded the same to the Inspecting Assistant Commissioner who, by his order, dated September 18, 1984, gave instructions pursuant to which the Income-tax Officer passed the assessm ent order on September 19, 1984, assessing total income of the petitioner at Rs,1,38,85,270. On appeal to the Commissioner of Income-tax, certain disallowances made by the Income-tax Officer were upheld and the appeal was dismissed. Thereafter, the Tribunal, on further appeal, by its order dated September 15, 1987, upholding the assessee's contention that the assessm ent order dated September 19, 1984, was passed beyond time and, therefore, was void, annulled the said order on January 15, 1987. The Tribunal held that the provisions of section 144B of the Act were not applicable in the instant case since the Commissioner of Income-tax (Central) had directed that the Inspecting Assistant Commissioner shall perform concurrently all the functions of the Income-tax Officer under the said Act. Thereafter, by his order dated February 25, 1987, the Income-tax Officer gave effect to the Tribunal's order by giving refund only of the demand
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which was raised. According to the assessee, the entire tax amount which was paid by it ought to have been refunded since the assessment order was annulled. Thereafter, the Tribunal, by its order dated July 22, 1987, rejected the miscellaneous application filed by the petitioner seeking a clarification and direction for refund of the entire amount of tax collected by the Department. The Tribunal held that there was no justification for modifying the earlier order and, if the Income-tax Officer did not grant refund in accordance with the provisions of section 240 of the said Act, the remedy lay elsewhere and not by making such application before the Tribunal, meaning thereby that such an order of the Income-tax Officer was appealable. The petitioner has prayed for a refund of Rs,63,41,906 with interest at 15% per annum on the basis of the order of the Tribunal. Special Civil Application No,1638 of 1980: ' In this matter, for the assessm ent year 1973-74, the petitioner filed a return on August 14, 1973, declaring a total income of Rs,30,169. The petitioner had paid advance tax of Rs,3,635 and self- assessm ent tax under section 140A of Rs,3,663. According to the petitioner, the regular assessment order ought to have been passed in view of the time limit prescribed by section 153 within two years, i,e, before March 31, 1976, but the Income-tax Officer did not take any proceedings. However, he issued notice under section 148 read with section 147(b) on March 29, 1976, requiring the petitioner to deliver the return within 30 days on the ground that the income had escaped assessm ent. It appears that, thereafter the writ petition filed by the petitioner was rejected and the petitioner submitted another return in response to that notice. The petitioner requested the Income-tax Officer to drop the proceedings on the ground that the notice was invalid. Eventually, the Income-tax Officer passed an assessment order on August 8, 1977, and demand notice was issued under section 143(3) for Rs,10,704. Thereafter, the Appellate Assistant Commissioner, by his order, dated January 11, 1979, held that the notice under section 147(a) and the proceedings pursuant thereto were invalid and annulled the assessment order made on August 8, 1977. Thereafter, the petitioner applied for refund of the advance tax and the tax paid on self- assessm ent. The Income-tax Officer passed an order on August 27, 1979, issuing a refund order for the tax paid by the petitioner other than payment under section 140A and the advance tax. The petitioner seeks relief for getting refund of the advance tax and the tax paid on self-assessment under section 140A of the Act. Special Civil Application No,7835 of 1988: ' In this matter, for the assessm ent year 1984-85, the petitioner had applied for extension of time for filing his return up to September 30, 1984, and on July 31, 1984, the petitioner filed a return of income showing total income of Rs,66,63,487. According to the petitioner, during the previous year ending on March 31, 1984, the petitioner had won the first prize in the Sikkim Super Lottery of Rs,40 lakh and had received Rs,32,37,671 from the Directorate of Lotteries, Sikkim. According to the petitioner, he had paid a sum of Rs,5,96,000 on June 25, 1984, in accordance with section 140A of the Act. Before furnishing the return, advance tax to the tune of Rs,14,061 was also paid by June 25, 1984. The Income-tax Officer issued a notice under section 143(2) on August 19, 1985, requiring the petitioner to attend the office on September 13, 1985, and October 17, 1985. However, no order came to be passed under section 143(3) of the Act. Since the assessment order was not passed within two years from the end of the assessme nt year, according to the petitioner, the assessment became barred by limitation and the petitioner wrote a letter dated January 19, 1988, to that effect to the Income-tax Officer and thereafter claimed refund of the entire tax collected by the Department. According to the petitioner, the tax amount is retained by the Department without the authority of law since the final assessm ent was not made and thereafter, the entire amount aggregating to Rs,10,99,935 should be paid back to the petitioner. At the hearing of the petition, it was, however, submitted that the petitioner was not claiming Rs,10,99,931 but was claiming Rs,7,40,843 after
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reducing the amount which was recovered by the Sikkim Government under the Sikkim Government Income-tax Rules. Mr. J.M. Thakore, the learned Advocate-General appearing for the petitioner in Special Civil Application No,6656 of 1987, contended that no liability to pay the tax crystallised in the instant case nor was it quantified since a regular assessment was not made under the provisions of the Act. He submitted that payments by way of advance tax or tax deducted at source or even, for that matter, the tax paid by way of self-assessment were all ad hoc payments which were ultimately to be adjusted when the regular assessment was made under section 143 by the Income-tax Officer. He submitted that, even though liability to tax arises under section 4, no liability to pay the tax can arise until the regular assessm ent is made. When the regular assessment cannot be made by virtue of its having become time-barred, the charge itself would fail since the tax payable cannot be quantified or determined and no recovery can be made when regular assessment cannot be made in accordance with law and the playability of tax cannot be determined and, therefore, the ad hoc recoveries made pending the regular assessment cannot be adjusted towards such regular assessm ent as required by the provisions of law, the necessary corollary should be to refund the entire tax collected by the Department by way of advance tax or tax deducted at source or self-assessm ent, as the case may be. He submitted that the tax collected by way of provisional assessm ent under section 141 or by way of self-assessment under section 140A or the advance tax and the tax deducted at source would all be analogous to an interim order which cannot be sustained if a final order cannot be made. He submitted that the process of collection of tax in these modes pending regular assessment would become abortive on the impossibility of making a regular assessm ent due to lapse of time. He, therefore, submitted that any retention of such amount collected towards the tax which could not be ultimately determined would violate the provisions of Article 265 of the Constitution of India since such a recovery would become a levy and collection of tax without the authority of law. He, therefore, submitted that the entire amount of tax collected by the Department ought to be refunded to the assessee in such cases. He also submitted that the provisions of section 237 of the Act were not applicable in the case of a person who has filed returns but would apply to cases where returns have not been filed. The other counsel appearing in other matters, Mr. K.H. Kaji, Mr. J.P. Shah and Mr. K.C. Patel, adopted the arguments canvassed by Mr. J.M. Thakore. Mr. Kaji added that, if the computation machinery fails, the charge itself fails and that the charge and computation must go together. He submitted that the charge under section 4 of the Act is to be worked out by computation and assessment to be made by the Income-tax Officer. Mr. J.P. Shah added that, wherever there is no assessment, it is a case of escaped assessm ent attracting section 147 and submitted that a case of time-barred assessm ent was also a case of escaped assessment because, despite payment of advance tax on income, that income which ought to have been assessed did not come to be assessed and such case would fall under section 147 subject to the conditions being fulfilled. Mr. K.C. Patel, however, submitted that, in the case of his petitioner, there was no attempt made to reopen the assessment and there were no chances of revival of demand. He submitted that, even according to the communication received by the assessee from the Income-tax Officer, the regular assessment was time-barred. Mr. M.J. Thakore, appearing for the Department, contended that, in view of the definition of total income in section 2(45), computation can be done even by the assessee when he files the return of income in which the total income has to be mentioned. He submitted that the provisions pertaining to computation of income are to be kept in mind when the return is filed by the assessee who works out the total income as mentioned in the form prescribed while filing the return under section 139 or the Act. He submitted that the tax payable becomes crystallised on the last day of the financial year and assessment is nothing but a procedure to recover the tax which has already become due and payable as per rates which are made applicable for the relevant
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year. He submitted that, what is contemplated by the Act is computation of income to be first done by the assessee and thereafter to be checked by the Assessing Officer. He submitted that there was no warrant for the contention that the Assessing Officer can alone compute the income. He submitted that taxability is not dependent on the regular assessment. He submitted that only such amount as was paid in excess or which was not payable according to law was required to be refunded under the scheme of the Act and the tax which was payable and collected by the Department which was not wrongly recovered or was not an excess recovery was not required to be refunded even if a regular assessment was not made. Mr. Thakore also argued that the draft assessm ent order should be considered as final assessment order when the final assessment order was not passed within the time prescribed by section 153. He finally contended that a writ of mandamus should not be issued in favour of the persons who were otherwise liable to pay tax in accordance with law for refund of the tax amount which was payable under the Act and duly collected by them. ' For appreciating the rival contentions raised in these matters, it would be appropriate to refer to the relevant provisions of the Act and their effect. Under section 23B of the Indian Income-tax Act, 1922, power was given to the Income-tax Officer to make a provisional assessment in advance of regular assessm ent at any time after the receipt of a return filed under section 22 by proceeding in a summary manner. Such assessm ent was to be made on the basis of the return and the accounts and documents, if any, accompanying it after giving due effect to the allowance referred to in paragraph (b) of the proviso to clause (vi) of subsection (2) of section 10 and any loss carried forward under section 24(2) of that Act after a regular assessment. Such amount paid towards provisional assessm ent was deemed to have been paid towards regular assessment. Similar provisions were effect from April 1, 1971. Under subsection (5) of section 141, it was also provided that, where the amount paid or deemed to have been paid towards the provisional assessment exceeded the amount payable under the regular assessment, the excess was required to be refunded to the assessee. Any tax deducted at source under sections 192 to 195 or paid in advance under sections 207 to 212 was deemed to have been paid towards the provisional assessment in view of section 234 as it stood at that time and credit for the same was given to the assessee in the provisional assessm ent. Section 141A, having a bearing on provisional assessment for refund, was inserted by the Finance Act, 1968, with effect from. April 1, 1968, and subsection (1) was substituted with effect from April 1, 1976, by the Taxation Laws (Amendment) Act, 1975. Under the said provision, where the assessee claimed that the tax paid or deemed to have been paid under Chapter XVII-B or Chapter XVII-C exceeded the tax payable on the basis of the return and the accounts and documents accompanying it, the Income-tax Officer, where he was of the opinion that the regular assessm ent was likely to be delayed, was empowered to make a provisional assessment of the sum refundable to the assessee in a summary manner after making adjustments as provided therein. In cases where the regular assessment was not made within six months from the date of receipt of the return, the Income-tax Officer was required to make a provisional assessment under subsection (1) as substituted with effect from April 1, 1976. In making the provisional assessment for refund under subsection (1) of section 141A, the Income-tax Officer was required to make adjustments as provided in subsection (2), which, inter alia, include disallowance of any deduction, allowance or relevant claim in the return which on the basis of information available in such return, accounts and documents accompanying it, is prima facie inadmissible. In view of subsection (6) of section 141A, there was no right of appeal against a provisional assessment made for refund under subsection (1). It would, however, be seen that apart from the provisional assessment, for refund under section 141A (now omitted with effect from 1-4-1989), the question of refund may also arise under section 237 of the said Act which provides that, if any person satisfies the Income-tax Officer that the amount of tax paid by him or on his behalf or treated as paid by him or on his behalf, for
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any assessm ent year exceeds the amount with which he is properly chargeable under this. Act for that year, he shall be entitled to a refund of the excess. Section 239(2) prescribes the period within which a claim for refund under Chapter XIX can be made by a person and sub-clause (c) lays down that the claim in respect of any income which is assessable for any assessment year other than those covered in clauses (a) and (b), namely, before April 1, 1967, and the assessment year commencing on April 1, 1968, respectively, cannot be allowed unless it is made within two years from the last day of the assessm ent year. It will thus be seen that though a period is prescribed for making a claim for refund under Chapter XIX, no period is prescribed for exercise of power by the Income-tax Officer for deciding the question of refund. It also would appear that the decision by the Income-tax Officer under section 141A on the question of refund by making a provisional assessm ent would not bar a person from making a claim under section 237 and claiming refund by satisfying the officer that the amount paid by him exceeded the amount with which he was properly chargeable under the Act for the relevant year. Therefore, when a claim is made within the period prescribed under section 239(2) for refund, the Income-tax Officer can decide the question as to whether the person concerned had paid any amount which was in excess of the tax which was properly chargeable under the Act and such an enquiry can result only either in the upholding of the claim for refund of excess if it is shown that the amount paid exceeded the tax with which he was properly chargeable or rejection of such claim if he does not establish that fact, but it cannot give rise to any liability to pay further amounts as tax. In other words, the satisfaction of the Income-tax Officer contemplated by section 237 would only be in respect of ascertaining whether the person concerned had paid any amount in excess of tax that was properly chargeable. A claim for refund is required to be made in a prescribed form and verified in the prescribed manner as provided in subsection (1) of section 239 and such form is prescribed by rule 41 of the Income-tax Rules. It would, however, appear to us that even when a revised return is filed under section 139(5) of the Act raising a claim to refund, it should be treated as a claim made in the prescribed form for the purpose of section 239(2) because even the revised return is required to contain all the particulars and verification as are prescribed in the form prescribed under rule 41 of the Rules. An order which is made under section 237 of the Act is appealable under section 246. Thus, even where a regular assessm ent is not made by virtue of lapse of time as prescribed by section 153 of the Act, a person who may have been granted refund on provisional assessment under section 141A, though not entiteld to appeal, can still claim under section 237 of the Act that the tax paid by him exceeds the amount with which he is properly chargeable under the Act though such a claim has to be made within the time prescribed under section 239(2) in the form prescribed or may be contained in a revised return filed under section 139(5). ' It was, however, contended on behalf of the petitioners that, where refund for any amount became due to the assessee as a result of any order passed in appeal or other proceeding under the Act, the Income-tax Officer was bound to refund the entire amount collected as tax to the assessee without his having to make any claim in that behalf under section 240 as it stood before the addition of a proviso to it with effect from April 1, 1989, which, inter alia, provided that, where the assessm ent is annulled, the refund shall become due only of the amount, if any, of the tax paid is in excess of the tax chargeable on the total income returned by the assessee. It was contended on behalf of the petitioners that the provision to section 240 could not be given any retrospective effect and it indicated that the refund was confined to the excess of tax chargeable only after the date when the proviso came into force. It, however, appears to us that section 240, even as it stood before the addition of the proviso, made the refund of any amount becoming due as a result of an order passed in appeal or other proceeding under the Act, subject to other provisions in the Act. This is reflected from the phrase "except as otherwise provided in this Act". There is no indication in section 240 as it stood prior to the addition of the proviso that the entire amount of tax which was
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properly chargeable under the Act was required to be refunded. If such an interpretation is given to section 240, it would directly be in conflict with the provisions of section 237 which envisage that only the amount which was in excess of the tax which was properly chargeable under the Act was required to be refunded. It…
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