Advance tax demand must stay within the same financial year; next-year demand was invalid, but current-quarter demand stood.

Advance tax under section 3(10) of the Bihar Finance Act, 1981 could be demanded only for the same financial year for which liability was being estimated, because "year" meant a financial year unless a valid notification fixed a different period; accordingly, a demand raised in one financial year for the next was beyond statutory authority and invalid. However, the provision also permitted collection of estimated tax in instalments within the current financial year, so the demand for the fourth quarter of that year was within the statute and legally sustainable.

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Issues: (i) Whether advance tax under section 3(10) of the Bihar Finance Act, 1981 could be demanded for the next financial year during the current financial year; (ii) Whether demand of estimated tax for the fourth quarter of the current financial year was sustainable.

Issue (i): Whether advance tax under section 3(10) of the Bihar Finance Act, 1981 could be demanded for the next financial year during the current financial year.

Analysis: Section 3(10) authorises estimation and collection of tax in advance only during the same year for which the liability is being estimated. The term "year" is defined as a financial year, and in the absence of any notification fixing a different period, the provision confines advance collection to the relevant financial year. A demand for advance tax for 2005-06 raised during 2004-05 therefore exceeded the statutory authority.

Conclusion: The demand for advance tax for the financial year 2005-06 raised in the financial year 2004-05 was unlawful and was quashed, in favour of the petitioner.

Issue (ii): Whether demand of estimated tax for the fourth quarter of the current financial year was sustainable.

Analysis: The provision permits collection of tax in advance within the same financial year by instalments, and the estimate for the fourth quarter of January to March 2005 fell within that statutory field. The Court found no legal infirmity in the demand relating to the current financial year.

Conclusion: The demand of estimated tax for the fourth quarter of the current financial year was upheld, against the petitioner.

Final Conclusion: The challenge succeeded only in part: the demand relating to the next financial year was invalid, while the demand for the current quarter remained valid.

Ratio Decidendi: Where a fiscal provision authorises advance collection of tax for "each year" and defines year as a financial year, advance tax can be demanded only for the same financial year unless a valid notification fixes a different period.

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