Court affirms 'regular assessment' under Income-tax Act includes final assessment; Interest payable up to final assessment order

Commissioner Of Income-Tax And Others Versus Chloride India Limited

Commissioner Of Income-Tax And Others Versus Chloride India Limited - [1990] 186 ITR 217 Issues Involved:
1. Interpretation of 'regular assessment' under Section 214 of the Income-tax Act, 1961.
2. Date up to which interest is payable by the Government on advance tax paid.
3. Applicability of appellate or revisional orders in determining 'regular assessment'.

Issue-wise Detailed Analysis:

1. Interpretation of 'regular assessment' under Section 214 of the Income-tax Act, 1961:
The primary issue in this appeal concerns the interpretation of the term 'regular assessment' as used in Section 214 of the Income-tax Act, 1961. Section 214 mandates that the Central Government shall pay simple interest at twelve percent per annum on the amount by which the aggregate sum of advance tax paid exceeds the tax determined on regular assessment. The term 'regular assessment' is defined under Section 2(40) of the Income-tax Act as 'the assessment made under section 143 or section 144.' The court had to determine whether 'regular assessment' refers to the first order of assessment made by the Income-tax Officer or the final operative order after any appellate or revisional proceedings.

2. Date up to which interest is payable by the Government on advance tax paid:
The court examined the period up to which interest is payable by the Government on the excess advance tax paid. The key question was whether interest should be calculated up to the date of the original assessment order made by the Income-tax Officer or up to the date when the appellate order is passed, which may modify or reverse the initial assessment.

3. Applicability of appellate or revisional orders in determining 'regular assessment':
The court also had to consider whether the term 'regular assessment' includes the assessment made by the Income-tax Officer to give effect to the appellate or revisional orders. The court referred to various judgments, including Kooka Sidhwa and Co. v. CIT, which held that an order passed by the Income-tax Officer to implement the appellate authority's directions is a regular assessment under Section 143 of the Income-tax Act.

Detailed Judgment Analysis:

1. Interpretation of 'regular assessment':
The court held that the term 'regular assessment' as used in Section 214 should not be confined to the initial assessment made by the Income-tax Officer. Instead, it includes the final assessment made by the Income-tax Officer after considering the appellate or revisional orders. This interpretation aligns with the definition provided in Section 2(40) and ensures that the term 'regular assessment' encompasses all assessments made under Sections 143 and 144, including those modified by appellate authorities.

2. Date up to which interest is payable:
The court determined that interest is payable up to the date when the final assessment order is made, which includes the date of the appellate or revisional order. This interpretation prevents any injustice to the assessee, who would otherwise be obligated to pay advance tax based on an erroneous initial assessment. The court emphasized that the legislative intent was not to restrict the meaning of 'regular assessment' to the initial assessment but to include the final assessment after appellate proceedings.

3. Applicability of appellate or revisional orders:
The court concluded that the order passed by the Income-tax Officer to give effect to the appellate authority's directions is a regular assessment. This conclusion was supported by various judgments, including the case of General Fibre Dealers Ltd. v. ITO, where it was held that 'regular assessment' should be understood as the assessment made by the Income-tax Officer pursuant to the appellate authority's directions. The court also referred to the Full Bench decision in Bardolia Textile Mills v. ITO, which supported the view that the term 'regular assessment' includes the revised assessment made after appellate proceedings.

Conclusion:
The court dismissed the appeal, upholding the view that 'regular assessment' under Section 214 of the Income-tax Act includes the final assessment made by the Income-tax Officer after considering the appellate or revisional orders. Consequently, interest on excess advance tax paid is payable up to the date of the final assessment order. The court found no reason to differ from the learned trial judge's interpretation and reasoning, thus affirming the judgment with no order as to costs.