MOHEEMA LTD Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE petitioner is an income -tax assessee. Its assessment for the year 1977 -78 was completed on 22nd March, 1979 under S. 143(3) of the INCOME TAX ACT, 1961, (for short "the Act"), and a sum of Rs. 813 was found refundable on account of excess payment of advance tax. A rectification proceeding was subsequently initiated. This was relatable to the loss of the previous year which was not set -off. The assessment was, accordingly, modified and a sum of Rs. 35,696 became refundable. The petitioner claimed interest up to the date of rectification, which was 5th Jan., 1981. This was disallowed. A revision was thereafter preferred before the CIT who also refused to pay interest up to the date of rectification. Feeling aggrieved, this petition has been filed by the assessee.

(2.) THE question for determination is whether interest in a case of the present nature was payable till the date of rectification, or the entitlement of the assessee to receive interest was confined to the date of assessment first made under S. 143(3) of the Act. The answer to this question depends on the interpretation of the expression "regular assessment" finding place in S. 214 of the Act. Let us read the section as it stood at the relevant time:

(3.) THERE has been a cleavage of opinion among the different High Courts of the country right from 1957 which had dealt with the present question in the context of IT Act, 1922. The first decision which is cited in this connection is that of Chagla, C.J., in Sarangpur Cotton Manufacturing Co. Ltd. vs. CIT (1957) 31 ITR 698 (Bom) : TC4R.364. It was held in this Division Bench decision that the mere fact that an assessment made under S. 23 of the old Act was set aside on appeal by the AAC and a fresh assessment was made on a subsequent date would not entitle the assessee to interest on the advance tax up to the date of subsequent assessment, inasmuch as, liability to pay arises once an assessment is made. This decision was referred with approval in Sir Shadilal Sugar & General Mills Ltd. vs. Union of India (1972) 85 ITR 363 (All) : TC4R.367. This decision held that the expression "regular assessment" refers to the first or, one might say, original assessment order made by the ITO. It was pointed out that after the original assessment order is made and a notice of demand is issued, the assessee is under an obligation to pay the tax demanded and no question can arise of his being compensated by way of interest for any payment made by him in satisfaction of the demand. The compensation is intended only for the period during which there was no obligation to pay the tax, that is, up to the date of first assessment by the ITO.