ROSHANLAL S JAIN & OTHERS (A O P) vs. DEPUTY COMMISSIONER OF INCOME-TAX (ASSESSMENT)

The petitioner, an Association of persons, has preferred this petition challenging :[i] the calculation of interest and the notice of demand for the three Assessment Years under consideration as bad in law to the extent there is an overcharging of interest; [ii] Section 234A of the Income Tax Act,1961 (the Act) is ultravires to the extent the said section provides for charging of interest evenafter the payment of tax; [iii] Sections 234A and 234B of the Act of the Act are ultravires to the extent both the provisions charge interest for the same period making the petitioner liable to interest @ 48%.

Assessment Years in question are 1991-92, 1992-

The prayers made in the petition read as under: “12.In the premises aforesaid, the petitioner prays that : (1)this Hon'ble Court be pleased to call for the records

The learned Counsel for the petitioner has submitted that the calculation of interest and notices of demand are bad in law to the extent there is overcharging of interest in each of the years under consideration which is to the extent of following amounts : “A.Y. 1991-92 5,93,316/- A.Y. 1992-93 75,582/- A.Y. 1993-94 16,04,423/- ----------- Total 22,73,321/- ----------- “ In regard to the challenge raised, the petitioner has summarised difference of opinion between the petitioner and the respondent in the following words : “(i) Regarding interest u/s 234A, according to the petitioner interest can be charged on tax payable from the due date of filing of the return of income to the date of payment of tax but according to the department the interest is payable not upto the date of paying off of the tax but even thereafter till the date of filing of the return of income. (ii) In respect of charging of interest u/s SCA/8976/1995 6/37 234B, the department has charged the interest on interest whereas the petitioner contends to the contrary. (iii)According to the department for some part of common period 48% interest is payable under the Act which means interest becomes chargeable for some part of the period both u/s 234A and u/s 234B whereas according to the petitioner, the interest is not to be charged for any part of the period under both these sections simultaneously, which means no part of the dues will suffer more than 24% of interest”.

In relation to the challenge to constitutional validity of the two sections the submission, in the alternative, is that in the event the interpretation placed by the petitioner on the provisions of Sections 234A and 234B of the Act is not accepted, then the provision of section 234A of the Act to the extent the interest runs evenafter payment of tax falls foul of Article 14 of the Constitution of India as being irrational, arbitrary and the provision cannot be justified for any imaginable reasons. Similarly in relation to section 234B of the Act it was submitted by the learned Counsel, again in the alternative, that where the interest is payable under SCA/8976/1995 7/37 both the provisions viz. sections 234A and 234B of the Act there would be double charging of interest and hence section 234B of the Act should be read down to save the provision from the very same charge of irrationality and unconstitutionality, or either both the provisions or any one of them be declared as ultavires the Constitution to the extent the provisions impose liability of paying interest over again for the same period amounting to interest being charged at the rate of 48%.

The contentions raised on behalf of the petitioner can be broadly divided into two categories : the first being on the interpretation SCA/8976/1995 8/37 tax had not been deposited prior to the due date of the filing of the return. It was submitted that the said decision dealt with all the issues relating to operation of section 234A of the Act and was a complete answer to the stand of the department. That the Court should therefore hold that in sofaras interest charged u/s. 234A of the Act is concerned, once it is found that prior to the date of filing of return of income the entire tax had been paid no interest could be charged. It was submitted that as held by the following two decisions of the Apex Court and the decision of Karnataka High Court payment of interest was compensatory in nature and therefore also no interest should be levied and collected in relation to the amount which had already paid to the Revenue. (1986)160 ITR 961 – Central Provinces Manganese Ore. Co. Ltd. Vs. CIT, - with special reference to observations at page No.966 of the report. (1988)169 ITR 221 – Ganesh Dass Sreeram Vs. Income Tax Officer,-with special emphasis as to observations at page No.230 of the report.

3

4 It was therefore urged that the interest charged under the two provisions to the extent there was overcharging in each year be held to be bad in law and/or ultravires the Constitution.

5 An incidental contention was also raised based on provisions of sections 59 to 61 of the Indian Contract Act, 1872 to submit that the respondent authority had erred in law in not treating the amount of tax paid as tax and appropriating the same towards interest and thus charging interest on an amount which in fact had already been paid as tax. For this purpose attention was invited to certain challans of payment to point out that the said challans specifically denoted that the amount paid under the said challans was towards tax and not interest. That in fact both the respondent authority and the assessee had understood the said aspect of the matter in same sense as could be seen from the final part of the respective assessment orders where the SCA/8976/1995 14/37 respondent authority had directed to give credit for SCA/8976/1995 15/37 Assessing Authority, as well as Apex Court decision in the case of Umesh S. Bangera Vs. Union of India & Ors.

3 Responding to the contention that interest was being charged for the same period over again, the learned Counsel pointed out that both the defaults u/Ss. 234A and 234B of the Act are in respect of separate civil obligations and therefore cannot be held to be either bad in law or unconstitutional.

4 Lastly, it was contended that in absence of any contract between the petitioner and the respondent

For the purpose of appreciating the contentions raised it is necessary to consider the provisions of sections 234A and 234B of the Act. The relevant extracts relatable to the Assessment Years in question read as under: “Interest for defaults in furnishing return of income. 234A.(1) Where the return of income for any assessment year under sub-section (1) or sub-section (4) of section 139, or in response to a notice under sub-section (1) of section 142, is furnished after the due date, or is not furnished, the assessee shall be liable to pay simple interest at the rte of two percent for every month or part of a month comprised in the period commencing on the date immediately following

On a plain reading of the aforesaid two provisions, it is apparent that section 234A of the Act is in relation to liability to pay interest for default in late furnishing of return or non furnishing of return, while section 234B of the Act pertains to liability to pay interest for default in payment of advance tax. However, in both the provisions interest is payable on the amount which is the difference between the amount of tax payable on the total income as determined u/s. 143(1) of the Act or on regular assessment as reduced by the advance tax paid, deducted at source, or collected at source.

Therefore, one has to consider what is the meaning of advance tax, tax deducted at source and tax collected at source. The definition of the term 'advance tax' appears in section 2(1) to mean advance tax payable in accordance with provisions of Chapter XVIIC. Before adverting to Chapter XVIIC of the Act, a look at section 4 of the Act would be helpful. The said provision deals with Charge of SCA/8976/1995 20/37 income tax and provides that income tax shall be charged for any Assessment Year at the prescribed rates in accordance with and subject to the provisions of the Act in respect of the total income of the previous year of every person. Sub-section (2) of Section 4 of the Act lays down that in respect of income chargeable under sub-section (1) income tax shall be deducted at source or paid in advance, where it is so deductible or payable under any provision of the Act. Therefore, the scheme that emerges is that income tax is chargeable for any Assessment year in relation to total income of the previous year and such income tax is payable by the mode of deduction at source or by the mode of payment in advance as prescribed. Previous year in relation to any Assessment Year has been defined under sub-section (2) of section 3 to mean the period which begins with the date immediately following the last day of the previous year relevant to the Assessment Year commencing on 1st April and ending on 31st March.

Chapter XVII relates to COLLECTION AND RECOVERY

Part 'C' of Chapter XVII deals with Advance payment of tax and under section 207 of the Act the Liability for payment of advance tax is prescribed.

Section 208 of the Act stipulates that advance tax shall be payable during a Financial Year in every case where the amount of such tax payable by the assessee during that Financial Year, as computed in SCA/8976/1995 23/37 accordance with the provisions of Chapter XVII of the Act, is one thousand five hundred rupees or more (at the relevant point of time). It is not the case of the petitioner-assessee that the tax payable during any of the three years in question was less than one thousand five hundred rupees. Therefore, statutorily liability was cast on the petitioner assessee to pay advance tax during the Financial Year as provided by the legislative scheme considered hereinbefore. In the circumstances, it is not necessary to deal with the mode and manner by which advance tax is to be computed or the point of time when the payment is to be made. However, section 211 of the Act lays down the limit with the corresponding date on which an instalment of advance tax is due and the amount which is to be paid as advance tax. Even on this count, the petitioner-assessee has not stated that any payment as such had been made. In fact in the petition itself there is an indication that interest levied u/s. 234C of the Act by the respondent authority is not disputed by the petitioner as averred in paragraph No.2 of the petition. Section SCA/8976/1995 24/37 234C of the Act relates to liability to pay interest for deferment of advance tax, viz. where there is short fall in payment of advance tax considering the prescribed percentage which is payable on each of the due dates commencing from 15th September and ending on 15th March of every Financial Year.

It is in the backdrop of the aforesaid legal position and the facts which have come on record that the contentions raised by the petitioner have to be examined. The petitioner does not dispute that there is default in payment of advance tax. In other words there is a short fall of advance tax by the stipulated percentage as prescribed by section 234B of the Act. The petitioner also does not dispute that there is a short fall in payment of advance tax on the due dates prescribed u/s. 211 of the Act. Admittedly, payments of tax on which the petitioner is resting his case are the payments made beyond the Financial Year. The payments so made are therefore contrary to the legislative scheme. In the circumstances, the question that will have to be SCA/8976/1995 25/37 posed and answered is whether an assessee who has acted contrary to the legislative scheme can seek equity.

In this context the illustrations given by the learned Advocate for the petitioner during course of hearing may not be apposite to the issue at hand. Admittedly, Central Board of Direct Taxes has issued circulars whereby an assessee who is prevented by circumstances beyond his control can seek full or partial waiver of interest levied under any of the provisions. (Reference[1997]225 ITR(St.)101 as modified on 30.1.1997). Therefore, interpretation of the provisions cannot be based on such hypothetical instances where an assessee, if facts are proved, can seek relief by way of waiver. The petitioner cannot be heard to say that the petitioner has violated the requirements laid down by the statute, considering the scheme of payment of tax in light of the charge fastened on the total income of the previous year u/s.4 of the Act, but should be yet treated differently, i.e. different from other assessees who

As noted hereinbefore even for the purpose of computing interest u/s. 234A of the Act, the difference of the amount on which interest becomes payable has to be worked out by deducting the advance tax paid including any tax deducted or collected at source from the tax on the total income determined at the time of assessment. The default of filing of return of income beyond the prescribed date is also admitted. Therefore, it is not possible to accept the contention of the petitioner assessee that the amount paid beyond the Financial Year should be deducted from the tax on the total income as determined on regular assessment. This has to be so considering the definition of the term “ advance tax” as appearing in section 2 of the Act which categorically stipulates that “advance tax” means the advance tax

Coming to section 234B of the Act, the said provision directly deals with payment of interest for defaults in payment of advance tax. In fact the provision itself fastens liability to pay interest on the basis of liability to pay advance tax u/s. 208 of the Act and failure to pay such tax or where the advance tax paid by the assessee under the provisions of section 210 is less than the prescribed percentage of the assessed tax. Therefore, even for the purpose of section 234B of the Act the petitioner cannot seek credit for the amounts paid beyond the Financial Year. Merely because the amounts have been paid before the return of income is filed the petitioner cannot seek any relief on that count.

Section 140A of the Act provides for Self

Thus considering the legislative intent which unfolds on a conjoint reading of the aforesaid provisions it is not possible to agree with the petitioner that the petitioner had not incurred any liability to pay interest either u/s. 234A or u/s. 234B of the Act. The petitioner also cannot contend

In fact, when one considers this contention the other

Thus, no case is made out by the petitioner for equitable relief. The contention based on various judgments cited in support of principles of interpretation also cannot carry the case of the petitioner any further in light of the statutory scheme laid down by the Act. It is true that the Court must interpret the provisions of the statute upon ascertaining the object of the legislation through the medium or authoritative forms in which it is expressed. It is settled law that the Court should, while interpreting provisions of the statute, assign its ordinary meaning. It is also a cardinal

Insofar as the contention regarding the provisions being ultravires the Constitution no case is made out by the petitioner. It is true that the nature of the levy is compensatory in character but from that it is not possible to come to the conclusion that there is any arbitrariness or unreasonableness which would warrant striking down the provision. Even otherwise, the position in law is SCA/8976/1995 34/37 well settled. A taxing statute enjoys a greater latitude. An inference in regard to contravention of Article 14 of the Constitution would, however, ordinarily be drawn if the provision seeks to impose on the same class of persons similarly situated a burden which leads to inequality. That is not the case here. As already recorded hereinbefore, the petitioner also cannot successfully contend that there is any unreasonable classification considering majority of assessees who comply with the statutory requirements.

The other contention that is required to be considered is based on provisions of sections 59 to 61 of the Indian Contract Act. The same also cannot carry the case of the petitioner any further. As noticed hereinbefore, the statutory scheme provides u/s. 140A of the Act to make payment of tax and interest for the stated defaults before the return is filed and therefore, to contend that the respondent authority could not have appropriated the amount paid towards interest does not merit acceptance. The SCA/8976/1995 35/37 Explanation under sub-section (1) of section 140A of the Act specifically provides that where the amount paid by the assessee under the said sub-section falls short of the aggregate of the tax and interest payable under sub-section (1), the amount so paid shall first be adjusted towards the interest payable as aforesaid and the balance, if any, shall be adjusted towards the tax payable. In light of this specific provision under the Act the general law under the Contract Act cannot be pressed into service by the petitioner. The said contention also therefore does not merit acceptance.

The submission based on uniformity of expression of opinion on the ground of wise judicial policy also does not deserve acceptance. There can be no dispute about the proposition that in income-tax matters which are governed by an all -India statute, when there is a decision of a High Court interpreting a statutory provision, it would be a wise judicial policy and practice not to take a different view. However, this is not an absolute proposition and SCA/8976/1995 36/37 there are certain well-known exceptions to it. In cases where a decision is sub silentio, per incuriam, obiter dicta or based on a concession or takes a view which it is impossible to arrive at or there is another view in the field or there is a subsequent amendment of the statute or reversal or implied overruling of the decision by a High Court or some such or similar infirmity is manifestly perceivable in the decision, a different view can be taken by the High Court. This is clearly borne out from the decision of this Court in Arvind Boards and Paper Products Ltd. v. CIT [1982] 137 ITR 635, which had also taken into consideration the Bombay decision in the case of Maneklal Chunilal and Sons Ltd. [1953] 24 SCA/8976/1995 37/37

In the circumstances, on none of the grounds pleaded in the petition or at the time of hearing, the petition merits acceptance. The petition is accordingly rejected. Rule discharged. Interim relief stands vacated. There shall be no order as to costs. (D.A.Mehta, J.) (B.N.Mehta, J.) M.M.BHATT