Sabyasachi Mukharji, J.
1. In this reference under Section 256(1) of the I.T. Act, 1961, for the assessment year 1967-68, we are concerned with only one question, namely :
'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that no appeal lay before the AAC as the only point involved therein related to interest under Section 214 ?'
2. The ITO made provisional assessment under Section 141A on 3rd January, 1969, determining the excess advance tax refundable at Rs. 9,80,858. This order was rectified on February 26, 1969, and a further refund of interest of Rs. 1,40,260 under Section 214 was allowed to the assessee. On March 30, 1972, the ITO made an assessment under Section 143(3) computing the total tax payable at a figure of Rs. 79,506 which was adjusted against the refund due for the assessment year 1961-62.
3. The matter went up in appeal before the AAC, who gave some reliefs to the assessee. On December 29, 1972, the ITO gave effect to the AAC's order as a result of which a sum of Rs. 1,80,136 became refundable. The assessee filed an appeal to the AAC against this order of the ITO giving effect to the AAC's order. It may in this connection be mentioned that the ITO in his order dated May 30, 1972, had, inter alia, held as follows :
Rs.'Tax is calculated as under : Income-tax @ 55% 1,89,289Less : Rebate on export profit ofRs. 7,030 387
1,88,902Less : Advance tax paid 11,00,000
9,11,098Less : Amount already refunded u/s. 141A 9,80,858
69,760 Interest u/s. 2141,30,514 Less : Amount already refunded1,40,260
9,746
Total tax payable 79,506'
4. The only point taken up before the AAC was that interest under Section 214 was not properly granted. The appeal was dismissed by the AAC as incompetent as, according to the AAC, no appeal was provided against any order under Section 214.
5. Aggrieved by the decision of the AAC, the assessee went up in appeal before the Tribunal and the Tribunal held that the AAC was right in his decision that no appeal lay before him. The Tribunal, accordingly, found it unnecessary to go into the merits. The appeal was dismissed. Upon this, as mentioned hereinbefore, the question as indicated, has been referred to this court.
6. We have held in Income-tax Reference No. 132 of 1971, CIT v. Lalit Prasad Rohini Kumar, by the judgment delivered by us on January 27, 1978 (since reported in : [1979]117ITR603(Cal) ) that in so far as no appeal had been provided in Section 246 of the I.T. Act, 1961, in respect of orders passed under Sections 215 and 217 of the I.T. Act, 1961, where there was no challenge to the liability to pay interest as such but the only dispute was as to the quantum of interest to be paid, there was no appeal in view of the provisions of the Act. In this matter also under Section 246 of the I.T. Act, 1961, there is no specific provision giving any right of appeal to the assessee in respect of the orders made under Section 214, though in respect of other matters regarding interest, namely, in respect of orders under Section 216dealing with interest payable by the assessee in the case of under-estimate, under Clause (m) of Section 246 of the I.T. Act, 1961, a specific right of appeal has been given.
7. Counsel for the assessee, however, drew our attention to Sub-section (1A) of Section 214 of the I.T. Act which was inserted by Section 16 of the Finance Act, 1968, and came into effect from April 1, 1968. Though the assessment year involved is 1967-68, there is no dispute that Sub-section (1A) of Section 214 would be applicable in this case. Section 214 reads as follows :
'214. (1) The Central Government shall pay simple interest at nine per cent. per annum on the amount by which the aggregate sum of any instalments of advance tax paid during any financial year in which they are payable under Sections 207 to 213 exceeds the amount of the tax determined on regular assessment, from the 1st day of April next following the said financial year to the date of the regular assessment for the assessment year immediately following the said financial year, and where any such instalment is paid after the expiry of the financial year during which it is payable by reason of the provisions of Section 213, interest as aforesaid shall also be payable on that instalment from the date of its payment to the date of the regular assessment:
Provided that in respect of any amount refunded on a provisional assessment under Section 141A, no interest shall be paid for any period after the date of such provisional assessment.
(1A) Whereon completion of the regular assessment the amount on which interest was paid under Sub-section (1) has been reduced, the interest shall be reduced accordingly and the excess, if any, paid shall be deemed to be tax payable by the assessee and the provisions of this Act shall apply accordingly.
(2) On any portion of such amount which is refunded under this Chapter, interest shall be payable only up to the date on which the refund was made.'
8. It may be mentioned that Section 214 appears in Chap. XVII dealing with the collection and recovery of tax. Counsel for the assessee contended that as excess interest paid by the Govt. (excess because Govt. paid interest on the basis of the provisional interest which had to be reduced on regular assessment) has been deemed to be tax payable by the assessee and the provisions of the Act had been made applicable, accordingly if there has been any excess in the determination of such an excess interest paid and as such refundable to the assessee, the same would be a determination of the tax by the fiction introduced under Sub-section (1A) of Section 214 of the Act and, therefore, under Clause (c) of Section 246 an appeal would lie which permits an assessee to appeal objecting, inter alia, to the amount of tax determined.
9. It is apparent that where an ITO gives effect to the order of the AAC, he makes an order under Section 143(3) of the I.T. Act, 1961, and the determination of any excess interest paid would be a determination of tax to be paid by the assessee. Indeed, in this case, as we have noticed before, the ITO has proceeded accordingly and determined the excess interest paid in the assessment order in the manner which has been set out before. It was, therefore, urged that as Parliament has deemed it to be a tax and made the provisions of the Act applicable in respect of such matter, the determination of such tax payable would be appealable under Clause (c) of Section 246 of the I.T. Act, 1961.
10. It is a rule of interpretation well settled that in construing the scope of a legal fiction it would be proper and even necessary to assume all those facts on which alone the fiction can operate, We were reminded of the observations of Lord Asquith in the case of East End Dwellings Co. Ltd. v. Finsbury Borough Council [1952] AC 109, where Lord Asquith observed as follows :
'If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it. One of these in this case is emancipation from the 1930 level of rents. The statute says that you must imagine a certain state of affairs : it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs.'
11. In the case of CIT v. S. Teja Singh : [1959]35ITR408(SC) , the Supreme Court reiterated the said observation and further observed that a construction which defeats the very object sought to be achieved by the legislature must, if possible, be avoided. There, by a legal fiction, the failure of a person, not hitherto assessed, to send an estimate of tax' payable by him in accordance with Section 18A(3) of the Indian I.T. Act, 1922, was treated as a failure to furnish a return of income under Section 22 of the Indian I.T. Act, 1922. By reason of this fiction the notice required to be given under Section 22 must be deemed to have been, according to the Supreme Court, given, and the assessee must be deemed to have failed to comply with it. Thus, Section 28 of the Act would apply according to the Supreme Court on its own terms. The ITO was, therefore, competent to impose penalty under Section 28 read with Section 18A(9)(b) of the Indian I.T. Act, 1922, in respect of the failure to submit an estimate under Section 18A(3) of the said Act.
12. In the case of Addl. ITO v. E. Alfred : [1962]44ITR442(SC) , one E had died intestate leaving behind him a son, and eight daughters. For the assessment year 1946-47, a notice was issued to the son under Section 22(2)of the Indian I.T. Act, 1922, in regard to E's income and E was assessed under Section 24B(2) of the Act of 1922. As after service of the notice of demand the son defaulted in payment of the tax, penalties were imposed upon him under Section 46(1) of the said Act. The son thereafter challenged the levy of penalty and the High Court quashed the orders imposing penalty. On appeal, the Supreme Court reversed the decision of the High Court and held that the penalty could be imposed on the son as an assessee and that the orders levying penalties were valid. He was himself an assessee qua the assets and liability to tax of E ; and he was, therefore, an assessee in default and liable to the imposition of penalty for this default. The Supreme Court further observed that the generality of the definition of 'assessee' in Section 2(2) of the Indian I.T. Act, 1922, was sufficient to include even a legal representative who was to pay the tax, though out of the assets of the deceased person. By Section 24B(1) of the Indian I.T. Act, 1922, a legal representative was made liable to pay the tax which might have been assessed but not paid by the deceased person or which might be assessed after his death. It covered all situations and contingencies, and made the liability absolute, limited, however, to the extent to which the estate of the deceased was capable of meeting the charge. The word 'assessment' bore a different meaning. In one sense, it apprehended the entire process of computation and levy of tax. It was in this sense that the legal representative became an assessee by the fiction, and this fiction had to be fully worked out, according to the Supreme Court, to this logical conclusion. As the legal representative was an assessee by fiction he did not fall within the words 'other person' in Section 29 of the Indian I.T. Act, 1922.
13. Therefore, it was urged that by giving the logical effect to the fiction, such determination as in this case of excess interest paid would be determination of tax and, therefore, appealable under Clause (c) of Section 246 of the I.T. Act, 1961. On behalf of the revenue, it was, however, urged that the question of excess interest as contemplated in Sub-section (lA) of Section 214 was related to a provisional assessment under Section 141A(4) and such order of provisional assessment is not appealable, therefore, the determination under Sub-section (1A) of Section 24 should also not be treated as appealable. It is, however, not correct to state that the order under Section 214(1A) was in consequence of the provisional assessment. The same was in consequence of a regular assessment. As a matter of fact, there cannot be any scope for an appeal from the provisional assessment as the same is made on the basis of the return by the assessee. It was then contended that under Section 214(1) there was no appeal provided; similarly it should not be so construed that an appeal was provided under Sub-section (1A) of Section 214. This again proceeds on a misconception as to Sub-section (1) of Section 214 which deals with theinterest which is to be paid by the Government. That interest cannot be recovered from the Government by an assessee as a tax. Therefore, no question of making the same recoverable as tax arises and as such no question of providing an appeal therefrom would arise. Sub-section (1A) of Section 214 deals with excess interest paid which is recoverable from the assessee and that has to be treated as tax. Counsel for the revenue, then, contended that Section 214(1A) had made the excess interest tax only for the purpose of recovery. He drew our attention to the heading of Chap. XVII which deals with collection and recovery of tax. He, therefore, submitted that such excess interest was to be treated as tax only for the purpose of collection and recovery and not for appeal which is a matter of substantive right. It is, however, difficult to accept this contention because Parliament has not chosen to use the expression 'shall be deemed to be tax' for the purpose either of any specific section or of any specific chapter. Parliament has provided for two matters. It has provided that it shall be deemed to be tax payable by the assessee. That is one deeming that Parliament has enjoined. The other part of it is that Parliament has directed that the provisions of the Act shall apply accordingly, that is to say, it will apply as it applies to a tax payable by the assessee. Now, in order to be tax payable by an assessee, there must be a determination of the tax payable. An order of this nature for excess interest paid would be deemed to be tax payable and such a determination of tax payable has been made appealable under Clause (c) of Section 246 of the I.T. Act, 1961, and Parliament has clearly expressed its intention to treat such excess interest as tax payable by the assessee and has further directed that the provisions of the Act would be applicable accordingly.
14. Counsel for the revenue then drew our attention to the observations of the Supreme Court in the case of Govinddas v. ITO : [1976]103ITR123(SC) . There the Supreme Court was dealing with Clause (ii) of Section 297(2)(d) of the I.T. Act, 1961. The words 'all the provisions of this Act shall apply accordingly' in Clause (ii) of Section 297(2)(d) of the I.T. Act, 1961, the Supreme Court held, merely referred to the machinery provided in the new Act for the assessment of escaped income. These did not import any substantive provision of the new Act, which created rights or liabilities. The word 'accordingly', in the context, meant nothing more than 'for the the purpose of assessment' and clearly suggested that the provisions of the new Act, which were made applicable, were thus relating to the machinery of assessment. The substantive law to be applied for determining the liability to tax must necessarily be, according to the Supreme Court, the law under the old Act, for that was the law which applied during the relevant assessment years and it was that law which must govern the liabilities of the parties. The context in which the Supreme Court had to construe theexpression 'apply accordingly', in our opinion, was entirely different. Section 297 repealed the Indian I.T. Act, 1922. Provisions had to be made for the procedure to be followed for the assessments under the new Act and in making that provision for the procedure, Clause (d) had provided for different contingencies in respect of assessment year after the year ending on 31st March, 1940, in the two different sub-clauses, viz., (i) and (ii) of Clause (d) of Section 297. But there it is abundantly clear that only the machinery of assessment of escaped income was being contemplated. In the case of reopening either under Section 34 of the Indian I.T. Act, 1922, or the I.T. Act, 1961, it was never suggested that the substantive law would be anything different than the law prevalent for the relevant assessment year. In this case to hold that Section 214(1A) was merely made for excess income-tax paid for the purpose of recovery and collection would make this fiction redundant in view of the provisions of Section 229 of the Act. Section 229 of the Act reads as follows :
'229. Recovery of penalties, fine, interest and other sums.--Any sum imposed by way of interest, fine, penalty, or any other sum payable under the provisions of this Act, shall be recoverable in the manner provided in this Chapter for the recovery of arrears of tax.'
15. In view of this provision, if Parliament wanted that Sub-section (1A) of Section 214 would be only for the purpose of collection of revenue then such deeming as provided in Sub-section (1A) of Section 214 was wholly unnecessary. We cannot ascribe such redundancy to the expressions of the Legislature if it can be avoided. Furthermore, it appears that in some cases Parliament has made use of fiction for limited purposes as would be apparent from a reference to Section 12, Section 63, Section 69, Section 159(3), etc. Legal fiction can be created for limited purposes. Here the purpose is not limited except that it is for the purpose of the Act. This being the intention of the Legislature, in our opinion, it would be improper to restrict this fiction only to the limited purpose of collection of revenue as contended on behalf of the revenue.
16. Reliance was placed on behalf of the revenue in the case of CIT v. Bengal Home Industries Association [1963] 48 ITR 181 and also on the decision in the case of Shreeniwas & Sons v. ITO : [1974]96ITR562(Cal) . Those cases dealt with the question of tax and interest in a different context. There the court was not concerned with the deeming provision with which we are concerned in this reference. It, therefore, will serve no useful purpose to examine these decisions in any detail.
17. Counsel for the revenue also drew our attention to Section 237 of the I.T. Act, 1961, and urged that an appeal would lie if the assessee has not received the proper refund after the assessee has applied to the proper ITO for refund and satisfied him about the refund. It was submittedthat an order under Section 237 would be appealable under Clause (n) of Section 246 of the I.T. Act, 1961. If the assessee had applied for refund then the question would arise whether he was entitled to apply under Section 237 or not and if so whether he would have any right of appeal from any order of the ITO and this consequence in our opinion is beside the point and, even if he has any right of appeal under the procedure prescribed by Section 237 of the I.T. Act, 1961, read in conjunction with Clause (n) of Section 246 of the I.T. Act, 1961, in our opinion, it does not affect the question whether in view of Sub-section (1A) of Section 214 of the I.T. Act, 1961, the assessee has, in the facts and circumstances of the case, a right of appeal. We are of the opinion that in view of the said provisions he has, in the facts and circumstances of this case, the right of appeal.
18. Therefore, we answer the question in the negative and in favour of the assessee. Parties will pay and bear their own costs.
Sudhindra Mohan Guha, J.
19. I agree.