Life Bond Fabric Pvt. Ltd. Vs. Commissioner of Income-tax - Court Judgment

Excerpt:
direct taxation - advance tax - sections 139, 207 and 208 to 219 of income tax act, 1961 - whether payment made by assessee after closing of relevant financial year could be regarded as advance tax for purpose of calculating interest chargeable under section 139 - in order to recognize payments of tax as advance tax it is necessary that said tax must be paid in financial year immediately preceding assessment year - it must be paid in accordance with provisions of sections 207 to 213 - so payment made by assessee after closing of relevant financial year could be regarded as advance tax for purpose of calculating interest chargeable under section 139. head note: income tax rectification under s. 154--mistake apparent--computation of interest. ratio & held : mistake in computing interest imposable under s. 139(8) by wrongly allowing credit in respect of payment of advance tax made after due date, is a mistake apparent from record rectifiable under s. 154. case law analysis : t. s. balaram, income tax officer v. volkart brothers (1971) 82 itr 50 (sc) applied. application : not to current assessment years. a. y. : 1972-73 income tax act 1961 s.139(8) income tax act 1961 s.154 - - in view of the provisions of sections 207 to 219 of the act, the term 'advance tax' has a clearly defined meaning and cannot be equated with 'tax paid in advance'.no controversy seems to have arisen on the question that payments made by an assessee after the close of the relevant financial year cannot be regarded as advance tax.j.m. panchal j.1. at the instance of the assessee, i.e., life bond fabric pvt. ltd., the income-tax appellate tribunal, ahmedabad bench 'a' ('the tribunal', for short), has made the present reference under section 256(1) of the income-tax act, 1961 ('the act', for short), to this court, as the tribunal agreed that two questions of law arise for the opinion of this court out of the order dated june 17, 1980, passed by it in i.t.a. no. 503/(ahd.) of 1979. 2. facts : this reference relates to the assessment year 1973-74. on the completion of regular assessment, the income-tax officer charged interest amounting to rs. 648 under section 139(8) of the act for the delay on the part of the assessee in furnishing the return of total income. while calculating the interest payable under section 139(8) of the act, the income-tax officer took into account payments of amounts which were described as advance tax and allowed credit for the amounts of rs. 750, rs. 25,000 and rs. 24,989, respectively, paid on march 23, 1973, july 19, 1973, and april 15, 1973. 3. while recomputing the total income pursuant to the order dated november 29, 1976, passed by the appellate assistant commissioner, the income-tax officer noticed the fact that the aforesaid last two payments were made after the dates for payment of instalment of advance tax as specified in section 211 of the act and could not have been taken into account while determining the amount of interest payable under section 139(8) of the act. the income-tax officer, therefore, initiated proceedings under section 154 of the act with a view to recalculating the interest under section 139(8) by issuing a notice dated december 27, 1976. after considering the objections raised by the assessee, the income-tax officer took the view that the tax of rs. 50,737 was paid after the expiry of the financial year immediately preceding the assessment year and, therefore, cannot be regarded as payment of 'advance tax' within the meaning of sections 207 to 213 of the act. he, therefore, concluded that contrary to the legal position, interest payable was calculated under section 139(8) of the act by wrongly reducing an amount of rs. 50,737 and increased the amount of interest payable under section 139(8) of the act from rs. 648 to rs. 5,965. 4. the assessee carried the matter in appeal before the appellate assistant commissioner of income-tax. the appellate assistant commissioner took the view that the action of the income-tax officer was not covered within the ambit of section 154, as it was not a mistake of law apparent from the record and in that view of the matter, allowed the appeal filed by the assessee. 5. the revenue, being aggrieved by the abovereferred order, filed an appeal before the tribunal. the tribunal noted that there is some controversy on the question whether the payments which have not been strictly made by the dates specified in section 211 of the act can be regarded as 'advance tax' or not, but there is no controversy that for the purpose of sections 211 and 215, etc., the payments made by the assessee after the close of the relevant financial year cannot be regarded as 'advance tax'. in that view of the matter, the tribunal held that while the sum of rs. 750 paid by the assessee on march 23, 1973, during the financial year 1972-73 should be regarded as 'advance tax' but the remaining two amounts paid after the expiry of the aforesaid financial year cannot be treated as 'advance tax' for the purpose of calculating the interest chargeable under section 139(8) of the act. the tribunal, therefore, allowed the appeal filed by the revenue in part and directed that the interest chargeable under section 139(8) of the act should be recalculated accordingly. 6. thereupon the assessee moved an application before the tribunal requiring it to refer questions of law arising out of the order passed by it in the appeal filed by the revenue. the tribunal agreed that the two questions of law arise for the opinion of this court and, therefore, has made reference of the following questions for our opinion : '1. whether, on the facts and in the circumstances of the case, the tribunal was justified in law in holding that, the question that payments made by an assessee after the close of the relevant financial year could not be regarded as advance tax, was not a question in regard to which two interpretations were reasonably possible 2. if the answer to question no. 1 is in the affirmative, whether, on the facts and in the circumstances of the case, the tribunal was justified in law in holding that the payments made by the assessee after the end of the financial year 1972-73 could not be regarded as advance tax for the purpose of calculating the interest chargeable under section 139(8) of the income-tax act ?' 7. the question whether the payments made by the assessee after the close of the relevant financial year could be regarded as 'advance tax' or not would depend upon the answer to the question as to whether with a view to rectifying any mistake apparent from the record, the regular assessment order in which the income-tax officer had charged interest amounting to rs. 648 under section 139(8) of the act could have been amended or not. under section 154 of the act rectification would be permissible when there is a mistake apparent from the record and not when two interpretations are reasonably possible on the question of the mistake sought to be rectified. in the case of t. s. balaram, ito v. volkart brothers : [1971]82itr50(sc) the supreme court considered the scope of section 154 of the act in connection with the provisions of section 17(1) of the indian income-tax act, 1922. while considering the provisions, the supreme court has held that a mistake apparent on the record is an obvious and patent mistake and not something which can be established by a long-drawn process of reasoning on points on which there may be conceivably two opinions and a decision on a debatable point of law is not a mistake apparent from the record. the questions, therefore, which require to be examined and answered are, (1) whether the interpretation of the term 'advance tax' is a debatable point of law; and (2) whether the original assessment order in which the income-tax officer had charged interest amounting to rs. 648 under section 139(8) of the act suffered from the vice of a mistake apparent from the record which was an obvious and patent mistake and not something which was required to be established by a long-drawn process of reasoning on points on which there were conceivably two opinions the provision regarding advance tax has been made in sections 207 to 219 of the act. section 207 of the act, at the relevant time, was as under : '207. advance tax and income subject to advance tax. - (1) tax shall be payable in advance in accordance with the provisions of sections 208 to 219 in the case of income other than - (a) income chargeable under the head 'capital gains'; and (b) income referred to in sub-clause (ix) of clause (24) of section 2. (2) such income is hereinafter in this chapter referred to as 'income subject to advance tax', and such tax is hereinafter in this chapter referred to as 'advance tax'.' 8. thus, in view of the provisions of section 207 of the act, tax was payable in advance in accordance with the provisions of sections 208 to 219 of the act. section 208 of the act required that advance tax was payable during the financial year. so also, section 209 of the act provided the manner of computation of advance tax to be paid by the assessee in the financial year. in view of the provisions of sections 207 to 219 of the act, the term 'advance tax' has a clearly defined meaning and cannot be equated with 'tax paid in advance'. no controversy seems to have arisen on the question that payments made by an assessee after the close of the relevant financial year cannot be regarded as advance tax. it may be noted that as per the provisions of section 139(8) of the act, the amount of tax on which interest is to be calculated is required to be reduced by the advance tax, if any, paid, and any tax deducted at source. in order to recognise payments of tax as advance tax, it is necessary that the said tax must be paid in the financial year immediately preceding the assessment year and it must be paid in accordance with the provisions of sections 207 to 213 of the act. unless the payment of advance tax is made in the manner provided for in the act, it cannot be deemed that advance tax payment has been made. therefore, the question that payments made by the assessee after the close of the relevant financial year could not be regarded as 'advance tax' was not a question in regard to which two interpretations were reasonably possible. in that view of the matter, the income-tax officer was justified in coming to the conclusion that as there was a mistake apparent from the record, the order of regular assessment in which the interest amounting to rs. 648 was charged under section 139(8) of the act required to be rectified. as noted earlier, no controversy seems to have arisen on the question that payments made by the assessee after the close of the relevant financial year cannot be regarded as 'advance tax'. therefore, the mistake which has been rectified by the income-tax officer was apparent on the record, as not only was it an obvious and patent mistake, but it did not require to be established by a long-drawn process of reasoning on points on which there might conceivably be two opinions. 9. the contention that the assessee is liable to pay interest for a period from the specified date to the filing of the return and, therefore, payment of tax made up to the specified date should be regarded as 'payment of advance tax' and thus, two reasonable opinions being conceivable on the interpretation of the term 'advance tax', the income-tax officer could not have exercised the powers under section 154 of the act, has no substance. the reference to the term 'specified dates' is made in section 139(8) of the act for the purpose of taking into consideration the period for which the assessee would be liable to pay interest. it has nothing to do with the interpretation of the term 'advance tax' appearing in the said section. the last two payments which were made after the end of the relevant financial year cannot be considered to be payments by way of advance tax. therefore, question no. 1 is answered in the affirmative, i.e., in favour of the revenue and against the assessee. 10. in view of our answer to question no. 1, it becomes apparent that, on the facts and in the circumstances of the case, the tribunal was justified in law in holding that payment made by the assessee after the end of the financial year 1972-73 could not be regarded as 'advance tax' for the purpose of calculating the interest chargeable under section 139(8) of the act. apparently, after the payment of advance tax of rs. 750 which was made on march 25, 1973, the assessee had paid the rest of the amount after the expiry of the financial year immediately preceding the assessment year. further, the payments of amount on july 19, 1973, and april 16, 1974, were not effected on due the dates as contemplated by section 211 of the act. unless the payment of advance tax is made in the manner provided for in the act, it must be deemed that no advance tax payment has been made. in this view of the matter, payment of rs. 49,989 made by the assessee could not have been regarded as 'payment of advance tax' within the meaning of sections 207 to 213 of the act and the said amount could not have been taken into consideration while calculating interest under section 139(8) of the act. in view of the above position, we are of the opinion that, on the facts and in the circumstances of the case, the tribunal was justified in law in holding that the payments made by the assessee after the end of the financial year 1972-73 could not be regarded as 'advance tax' for the purpose of calculating the interest chargeable under section 139(8) of the act. therefore, the second question referred to us is also answered in the affirmative, i.e., in favour of the revenue and against the assessee. 11. the reference stands disposed of accordingly, with no order as to costs.