Judgment:
Jain, J.
1. Messrs. J. K. Synthetics Ltd., the petitioner, is a company duly incorporated under the Companies Act, 1956. Its registered office is at Kamla Tower, Kanpur (U.P.), and administrative office at Ashoka Estate, Barakhamba Road, New Delhi. Its accounting year ends on March 31. The dispute is regarding its liability to pay the advance tax for the assessment year 1988-89 corresponding to the financial year ending March 31, 1988.
2. For appreciating the facts and the controversy between the parties, it will be proper if we briefly notice the various relevant provisions contained in the income tax Act relating to the payment of advance tax. These provisions appear in Part 'C' of Chapter XVII of the Income tax Act, 1961 (hereinafter referred to as 'the Act'). Section 20. provides that tax shall be payable in advance in accordance with the provisions of sections 208 to 219 in the case of income except certain incomes mentioned therein. Under section 208, advance tax is payable by a company if its income exceeds Rs. 2,500. Section 209 provides the method for computation of advance tax. Every person, where he has been previously assessed by way of regular assessment, is enjoined, under section 209A, to send a statement of advance tax payable by him computed in the manner laid down in section 209. Where he has not previously been assessed by way of regular assessment, he is required to send an estimate of the current income and advance tax payable by him on the current income calculated in the manner laid down in section 209 and to pay the advance tax as accords with the estimate in three equal Installments prescribed under section 211 of the Act. As the accounting year of the petitioner ends on March 31, its Installments for the assessment year 1987-88 fell due, the first, on or before September 15, 1987, the second, on or before December 15, 1987, and the third, on or before March 15, 1988. Section 210 empowers the Income-tax Officer to require a person, who has been previously assessed by way of regular assessment, by order in writing to pay advance tax determined in accordance with the provisions of sections 207, 208 and 209. Section 212 allows such an assessed, to send to the Income-tax Officer, an estimate of his income and advance tax payable by him on or before the date on which the last Installment of advance tax was due. If he estimates that his income is likely to be less than the income on which the advance tax payable by him under section 210 has been computed or for any other reason, the advance tax payable by him would be less than the amount which he is so required to pay, then, he shall pay advance tax as accords with his estimate. Under section 215, an assessed is liable to pay simple interest at 15% per annum from April 1, next following the said financial year up to the date of the regular assessment, if the advance tax paid by him is less than 75% of the assessed tax. If the Income-tax Officer, on making the regular assessment, finds that the assessed has underestimated the advance tax payable by him, he may, under section 216, direct the assessed to pay simple interest at 15% per annum. An assessed is also liable to pay interest under section 216 where he does not file any estimate. Section 218 provides that an assessed would be deemed to be an assessed in default if he has sent a statement or an estimate or revised estimate but has failed to pay any Installment or Installments in accordance therewith. An assessed in default or who is deemed to be in default is also liable to pay penalty under section 221.
3. The petitioner, allegedly under the belief that its total income in the assessment year 1988-89 will not exceed Rs. 2,500, did not file any estimate and did not pay any advance tax on or before September 15, 1987, i.e., the date on which the first Installment was due. The petitioner, however, on or about December 11, 1987, sent an estimate computing its income as Rs. 450 lakhs and paid a sum of Rs. 93,12,500 as advance tax. This income was computed on the basis that section 115J of the Act, which was inserted by the Finance Act, 1987, with effect from April 1, 1988, was applicable for payment of advance tax. However, the petitioner, on March, 11, 1988, i.e., before the date on which the last Installment became due, filed a revised estimate in Form No. 29, copy of which is exhibit 'E', computing its income as 'nil'. The petitioner, it is averred, showed 'nil' income on the premise that the provisions contained in the newly inserted section 115J were not applicable as per the legal advice and opinion of Mr. N. A. Palkhivala. Along with the estimate, the petitioner submitted a letter explaining the said position and annexed therewith the opinion of Mr. Palkhivala.
4. On receipt of the estimate dated March 11, 1988, accompanied by the letter and the opinion of Mr. Palkhivala, the Income-tax Officer, Central Circle-xviii, New Delhi, made the impugned order dated March 17, 1988. The relevant portion of this order reads as under :
'In this connection, your attention is drawn to the Explanationn to section 209A of the Income-tax Act, according to which 'current income' means the total income as defined in section 2(45) of the Income-tax Act. According to section 2(45), the total income means total amount of income computed in the manner laid down in this Act (including section 115J). You are, thereforee, requested to make the payment of Rs. 93,12,500. However, you are informed that a refund of Rs. 32,70,981 determined for the assessment year 1984-85 is being adjusted against this demand and the challan is enclosed for the balance demand of Rs. 60,41,519. You are requested to make the payment on or before March 24, 1988, and show proof of payment on March 25, 1988. Notice under section 221(1) of the Income-tax Act, is enclosed herewith.'
5. Along with this order, the Income-tax Officer sent a notice, copy exhibit 'G', to the petitioner to show cause why penalty should not be levied under section 221(1) of the Act.
6. Feeling aggrieved, the petitioner has brought this petition assailing the said order and the show-cause notice and seeking an appropriate writ for quashing the same and for restraining the respondents from taking any action or step in pursuance, or in furtherance, of the said order and notice. This relief has been claimed mainly on two grounds, namely : (1) the petitioner having filed a revised estimate of its current income in Form No. 29 in terms of the provisions contained in section 209A(3) of the Act, the earlier estimate dated December 11, 1987, stood superseded. Consequently, the petitioner could not be deemed to be in default. The Income-tax Officer was not competent to adjust the refund amount of Rs. 32,70,981 or to demand a sum of Rs. 60,41,519 or to issue show-cause notice under section 221(1) of the Act; and (2) that the provisions contained in section 115J of the Act were not attracted and/or in and or any were ultra virus the Act and beyond the legislative competence and unconstitutional.
7. The respondent resisted the petition. The main-defense is contained paragraph 14 of the reply affidavit, the relevant portion of which reads under :
'Although an assessed is entitled to file a fresh or revised estimate of advance tax before the date on which the last Installment of advance tax is due, such a fresh estimate or revised estimate has to be in accordance with the provisions of the Act. If it is not, then it is not an estimate the eye of law. Since Form No. 29 enclosed with petitioner No 1's letter dated March 11, 1988, purporting to be a revised estimate, was not in accordance with the provisions of section 209A of the Act, it was a void estimate and as such could not be taken cognizance of. It did not, as such supersede the earlier estimate of advance tax filed by petitioner No. 1 on December 11, 1987. I say that under the circumstances, the Assessing Officer was not bound in law to accept Form No. 29 filed by petitioner No. 1 on March 11, 1988. It was of no consequence and the petitioner company was bound to pay the Installment of advance tax falling due on March 15, 1988, as per its estimate filed on December 11, 1987.'
8. In the view we are taking, we need not examine the second ground of attack raised by the petitioner. Without expressing any opinion whatsoever we shall, for the purpose of disposing this petition, presume that the provisions contained in section 115J of the Act were attracted and in the revised estimate filed by the petitioner on March 11, 1988, the petitioner had underestimated its income.
9. Mr. Soli Sorabjee, learned counsel for the petitioner, contended that the petitioner, no doubt, on or about December 11, 1987, had filed an estimate computing its income as Rs. 450 lakhs and paid Rs. 93,12,500 by way of advance tax. It was, however, only an estimate, i.e., rough or approximate calculation. After December 11, 1987, and before March 15, 1988, there could intervene many factors justifying revised computation. A person may suffer huge losses during the three months reducing its income to 'nil'. He may be better advised regarding the method of computation of his income and so on. In any case, section 209A(3) of the Act permitted the petitioner to file a revised estimate on or before March 15, 1988. The petitioner was, thereforee, entitled to file the revised estimate and it did file the same on March 11, 1988. The petitioner was liable to pay the advance tax in accordance with this estimate and not in accordance with the estimate filed on or about December 11, 1987. It was further contended that there was no provision in the Act empowering the Income-tax Officer to determine the correctness or otherwise of the revised estimate or to determine the income on which the advance tax is payable or to raise a demand and initiate penalty proceedings at this stage. The liability of the petitioner was to pay advance tax in accordance with the estimate or revised estimate. In this case, the income in the revised estimate being 'nil', the petitioner was not liable to pay any advance tax. The question whether the income shown in the revised estimate was correct or has been underestimated could be determined only at the time of making the regular assessment.
10. Mr. D. K. Jain, learned counsel appearing for respondents, did not dispute the right of the petitioner to file the revised estimate on or before March 16 1988. In paragraph 14 of the counter-affidavit, it has been admitted that 'although an assessed is entitled to file a fresh or revised estimate of advance tax before the date on which the last Installment of advance tax is due, but such a fresh estimate or revised estimate has to be in accordance with the provisions of the Act.'
11. It cannot be disputed that the petitioner was liable to pay advance tax in accordance with the revised estimate. It is clear from a perusal of the provisions contained in section 212 of the Act which says '... shall pay such amount of advance tax as accords with his estimate.' The petitioner could be deemed to be an assessed in default under section 218 of the Act only if he does not pay advance tax as accords with the revised estimate. Also, there is no provision in the Act empowering the Income-tax Officer to determine the correctness or otherwise of the estimate filed by an assessed. Income subject to tax could be determined only at the time of regular assessment on filing the return. Mr. Jain, learned counsel appearing for the respondents, as a matter of fact, did not contest these propositions of law.
12. Learned counsel for the respondent however, drew our attention to the provisions contained in section 218 of the Act which provided that if an assessed has sent an estimate or revised estimate of the advance tax payable by him but has not paid any Installment or Installments in accordance therewith on the date or dates specified in section 211, he shall be deemed to be an assessed in default in respect of such Installment/Installments. It was urged by Mr. Jain that the revised estimate filed by the petitioner on March 11, 1988, was not an estimate in the eye of law as it was accompanied by the letter of the petitioner and the opinion of Mr. Palkhivala. It had not the effect of superseding the estimate filed on December 11, 1987, argued learned counsel, and, consequently, the demand could be raised by the Income-tax Officer on the basis of the estimate filed on or about December 11, 1987.
13. On a careful examination, we do not find any substance in this contention of learned counsel for the respondents.
14. Rule 39 of the Income-tax Rules, 1962, provides as under :
'39. Estimate of advance tax. - The estimate which an assessed has to send to the Income-tax Officer under sub-section (1) or sub-section (2) or sub-section (3) or sub-section (3A) of section 212 shall be in Form No. 29.'
15. The revised estimate filed by the petitioner on March 11, 1988, copy exhibit 'E', is in Form No. 29. Admittedly, it was accompanied by a letter dated March 11, 1988, from the petitioner addressed to the Income-tax Officer. In this letter, copy exhibit 'D', it was explained that the petitioner in its estimate dated December 11, 1987, had computed its income as Rs. 450 lakhs considering that the provisions contained in section 115J were applicable. But it had received the legal opinion of Mr. Palkhivala, Senior Advocate, that the fiction in section 115J of the Act, has no application for the purpose of advance tax and, accordingly, it had filed a revised estimate in Form No. 29 ignoring the provisions of section 115J of the Act. The opinion of Mr. Palkhivala was also annexed.
16. The estimate dated March 11, 1988, in our considered opinion, would not cease to be an estimate only because it was accompanied by the said letter and the opinion. There was a huge difference between the two incomes. In the estimate dated December 11, 1987, the income has been computed at Rs. 450 lakhs while in the estimate dated March 11, 1988, the income computed was 'nil'. In such circumstances, to our mind, it was but natural for the petitioner to explain its position and give reasons for the vast difference. It was open to the respondent to accept or reject the said reasons at that stage by intimating to the petitioner that the stand taken by it was incorrect. It could reject or accept the version of the petitioner at any other relevant stage. But the revised estimate did not cease to be an estimate in the eye of law because of the Explanationn submitted by the petitioner for the huge difference between the two incomes.
17. Learned counsel for the respondent submitted that the letter and the opinion were sent along with the estimate to make out a case of good faith and to avoid penalty, and that the action of the petitioner was mala fide. This plea is not relevant in these proceedings. The respondents may, if so permitted in law, ignore this Explanationn or treat it as mala fide when the occasion arises. The fact remains that the revised estimate which was in Form No. 29 as required under rule 39 remained a valid revised estimate.
18. We, consequently, hold that the revised estimate dated March 11, 1988, was a valid estimate. It had superseded the estimate filed on or about December 11, 1987, and, thereforee, the petitioner could not be deemed to be an assessed in default. As a result, the learned Income-tax Officer was not competent to raise any demand or initiate penalty proceedings. The impugned order dated March 17, 1988, copy annexure 'F', is liable to be quashed.
19. Mr. Soli Sorabjee, learned counsel for the petitioner, contended that the respondents may be directed to refund Rs. 32,70,981 which amount had been adjusted in the impugned order. We are afraid, we cannot accede to this request as no such relief has been specifically claimed in the writ petition.
20. In conclusion, we make the rule absolute, quash the impugned order dated March 17, 1988, copy exhibit 'F', as well as the show-cause notice dated March 17, 1988, copy annexure 'G' issued under section 221(1) of the Act. Respondents are restrained from taking any action pursuant to the said order as well as the notice both dated March 17, 1988.
21. We may, however, make it clear that this order shall, in no way, stand in the way of the respondents charging interest or initiating penalty proceedings or imposing penalty or taking any other action against the petitioner in accordance with law.
22. Keeping in view the special circumstances of the case, the parties are left to bear their own costs.
23. Petition allowed.