1995 (9) TMI 324 - SC - Income Tax

Supreme Court Defines 'Regular Assessment' for Income Tax Interest Calculation

The Supreme Court clarified that 'regular assessment' under Section 214 of the Income-tax Act refers to the original assessment under Section 143 or ... Interest Payable By Government - expression, 'regular assessment', occurring in section 214 - conflicting - for purpose of calculating interest u/s 214, the ' regular assessment ' means original assessment made u/s 143/144 - appeal is allowed and the matter remitted to tribunal Issues Involved:1. Interpretation of 'regular assessment' under Section 214 of the Income-tax Act, 1961.2. Legislative background and amendments to Section 214.3. Payment of interest on excess advance tax.4. Judicial precedents and varying High Court interpretations.5. Co-relation of Section 214 with other sections like 215, 244, and 219.6. Specific case judgments.Analysis:1. Interpretation of 'regular assessment' under Section 214 of the Income-tax Act, 1961:The term 'regular assessment' has led to significant judicial conflict. It was first interpreted by the Bombay High Court in 1957, and various High Courts have since expressed differing opinions. The Supreme Court concluded that 'regular assessment' refers to the original assessment made under Section 143 or Section 144. This interpretation is based on the legislative intent, the language of the statute, and the scheme of the Act.2. Legislative background and amendments to Section 214:The concept of advance tax was introduced in 1944 under Section 18A of the 1922 Act, which later evolved into Section 214 of the 1961 Act. The amendments to Section 214 over time, including the introduction of sub-sections (1A) and Explanations, indicate that 'regular assessment' refers to the original assessment. The amendments were designed to address specific issues like provisional assessments and the period for which interest is payable.3. Payment of interest on excess advance tax:Interest on excess advance tax is payable from the first day of April of the relevant assessment year to the date of the original assessment order. This is irrespective of subsequent appellate or revisional orders. The interest is compensatory, and there is no statutory provision for interest beyond the date of the original assessment.4. Judicial precedents and varying High Court interpretations:High Courts have differed in their interpretations:- Bombay, Allahabad, Kerala, Punjab and Haryana, Andhra Pradesh, and Gauhati High Courts: Interest is payable only up to the original assessment date.- Calcutta, Gujarat, Rajasthan, Karnataka, and Madras High Courts: Interest is payable up to the date of the revised assessment.- Delhi High Court: A mixed approach, partly agreeing with both views.5. Co-relation of Section 214 with other sections like 215, 244, and 219:- Section 215: Interest is payable by the assessee if advance tax falls short of the assessed tax. The period for which interest is payable is up to the date of the regular assessment.- Section 244: Deals with interest on refunds due to appellate/revisional orders. Sub-section (1A) of Section 244, introduced in 1975, provides for interest on tax or penalty paid after March 31, 1975, if found in excess in appeal or other proceedings.- Section 219: Advance tax is treated as payment of tax for the relevant previous year and credit is given in the regular assessment.6. Specific case judgments:- Civil Appeal No. 928 of 1980: The Supreme Court upheld the Commissioner's decision that interest on excess advance tax is payable only up to the original assessment date.- Civil Appeal No. 1395 of 1974: The appeal against the Allahabad High Court's judgment was dismissed, affirming the view that interest is payable only up to the original assessment date.- Civil Appeals Nos. 5550 and 5551 of 1990: The appellant is entitled to interest under Section 214(1) from April 1, 1976, up to the date of the original assessment on the excess advance tax.- Civil Appeal No. 4581 of 1990: The matter was remitted to the Income-tax Appellate Tribunal for orders in accordance with the principles laid down by the Supreme Court.Conclusion:The Supreme Court's judgment clarifies that 'regular assessment' under Section 214 refers to the original assessment made under Section 143 or Section 144. Interest on excess advance tax is payable from the first day of April of the relevant assessment year to the date of the original assessment order. The judgment aligns with the views of the Bombay, Allahabad, Andhra Pradesh, Patna, and Delhi High Courts, providing a consistent interpretation across jurisdictions.