1987 (10) TMI 5 - HC - Income Tax

Tax payment required before filing return, court invalidates assessment order

Kamalpur (Assam) Tea Estate Private Limited And Another Versus Superintendent Of Taxes, Jorhat, And Others

The court held that the return submitted without tax payment was invalid, following the precedent that tax payment before filing the return is mandatory. ... Refund, Return Issues Involved:1. Validity of the return submitted without depositing the tax due.2. Refund of the amount already deposited.Detailed Analysis:1. Validity of the Return Submitted Without Depositing the Tax Due:The petitioner-company challenged the notices of demand issued by the Superintendent of Taxes, Jorhat, for taxes under the Assam Taxation (on Goods Carried by Roads or Inland Waterways) Act, 1954. The company had submitted a voluntary return for the period ending December 31, 1959, but did not accompany it with the required tax payment. The assessment was made under section 9(3) of the 1954 Act, and a notice of demand was issued. The company partially complied by depositing Rs. 3,439.86.The court examined whether the return submitted without the tax payment was valid. It referred to the precedent set in Bormahjan Tea Company Ltd. v. Superintendent of Taxes [1974] ALR 115, which held that a return must be submitted within 30 days after the completion of the return quarter and must be accompanied by the tax payment. Failure to comply renders the return non est (invalid) for initiating assessment proceedings. The Supreme Court upheld this principle in Superintendent of Taxes v. Bormahjan Tea Co. Ltd. [1978] 1 SCC 513, emphasizing that the payment of tax before furnishing the return is mandatory.In the present case, the court found that the return submitted by the petitioner-company was non est because it was not accompanied by the required tax payment. Consequently, the assessment order and the notices of demand based on this return were deemed invalid.2. Refund of the Amount Already Deposited:The petitioner-company sought a refund of the amount deposited pursuant to the invalid assessment order. The respondents argued that the liability to pay tax existed under the Act and that the assessment order, though initially invalid, had been validated by the Assam Taxation (on Goods Carried by Road or on Inland Waterways) Act, 1961.The court considered the principle of unjust enrichment, which mandates that the State should not retain amounts not due to it. Section 23 of the 1961 Act provides for refunds of sums paid in excess of the due amount. The court held that this provision applies even when no tax is payable but some amount has been paid. It was determined that the petitioner-company was entitled to a refund of the Rs. 3,439.86 deposited.The court also addressed the principle of restitution, which requires that a party who has paid money under an invalid law is entitled to a refund. This principle is supported by Article 265 of the Constitution of India, which states that no tax shall be levied or collected except by authority of law. The court cited several precedents, including STO v. Kanhaiya Lal Makund Lal Saraf [1958] 9 STC 747 (SC) and Orient Paper Mills v. State of Orissa [1961] 12 STC 357 (SC), which support the right to a refund of taxes paid under an invalid law.The court concluded that the assessment order and the notices of demand were invalid, and the petitioner-company was entitled to a refund of the amount deposited. The petition was allowed, and the rule was made absolute, directing the respondents to refund Rs. 3,439.86 to the petitioner-company. The parties were directed to bear their own costs.Separate Judgments:S. N. PHUKAN J. concurred with the judgment.