Income-tax---

----Advance tax---Interest payable by assessee---Advance tax less than seventy-five percent. of "assessed tax "--Interest levied under S.215---Assessed tax means tax determined on "regular assessment" ---Regular assessment refers to first order of assessment---Reduction of tax due to appellate order---Interest under S.215 can re charged even if advance tax Paid is not less than 75 % of tax determined in pursuance of appellate order-- Indian Income Tax Act, 1961, S. 215.

It is clear from subsection (1) of section 215 of the Income Tax Act, 1561, that the liability to pay interest arises if, in any financial year, the advance tax paid by the assessee falls short of seventy-five-percent. of the assessed tax. In that event, interest is payable on the deficient amount from the first day of April of the next financial year up to the date of regular assessment: "Assessed tax" has been defined in subsection (5) to mean the tax determined on the basis of the "regular Assessment". Thus, both for the P4rposes of determining the liability of the assessee to pay interest under this section and also the date up to which intercept is to be charged, the material assessment is the "regular assessment". Regular assessment means and refers to the original assessment made under section 143 or 144 of the Act.

For the assessment year 1976-77, the advance tax paid by the assessee was less than 75 percent. of the Assessed tax and, therefore, the Income-tax Officer levied interest under section 215 from the 1st day of the assessment year up to the date of assessment- The Commissioner of Income- tax (Appeals) partly allowed the appeal of the assessee so that there was reduction of the tax payable by the assessee. This resulted in the reduction of the difference between the assessed tax and the advance tax paid by the assessee. The Income-tax Officer, accordingly, reduced the interest levied under section 215 of the Act as contemplated by subsection (3) of section 215. The assessee was aggrieved by the reduction of the interest as, according to him, the liability to pay interest under section 215 itself should have been re-determined with reference to the tax determined on the basis 01 the revised assessment and on such computation, he should have been lick not to be liable to pay interest under section 215(1) as the advance tax paid by the assessee was not less than seventy-five percent. of the tax assessed pursuant to the revised order of assessment passed giving effect to the appellate order. The Tribunal accepted the contention of the assessee and held that the expression "regular assessment" would include an order passed by the Income-tax Officer pursuant to the direction of the appellate authority. On a reference:

Held, reversing the order of the Tribunal, that the levy of interest under section 215 of the Income Tax Act, 1961, can be maintained even when the advance tax paid by the assessee is not less than 75 percent. of the tax assessed in pursuance of the order of an appellate or revisional authority.

Modi Industries Ltd. v. CIT (1995) 216 ITR 759 (SC) fol.

Chloride India Ltd. v. CIT (1977) 106 ITR 38 (Cal.) held no longer good law.

CIT v. Carona Sahu Co. Ltd. (1984) 146 ITR 452 (Bom.) ref.

T. U. Khatri with J. P. Keodhar instructed by H. D. Rathod for the Commissioner

K. B. Bhujle with C. B. Mehta for the Assessee.

JUDGMENT

DR. B. P. SARAF, J.---By this reference under section 256(1) of the Income Tax Act, 1961, the Income-tax Appellate Tribunal has referred the following question of law to this Court for opinion at the instance of the Revenue:

"Whether, on the facts and in the circumstances of the case and in law, the levy of interest under section 215(1) of the Income Tax Act, 1961, can be maintained when the advance tax paid by the assessee is not less than 75 percent. of the tax assessed in the pursuance of the order of an appellate revisional authority.

This reference pertains to the assessment year 1976-77, the relevant previous year being the year ended March 31, 1976. For this assessment year, the assessee was assessed by the Income-tax Officer by his order of assessment, dated May 28, 1979, and the total income was computed at Rs.8,31,250 and the tax payable was determined at Rs.6,11,019. As the advance tax paid by the assessee was less than seventy-five percent of the assessed tax, simple interest at the rate of twelve percent. per annum from the 1st day of the assessment year up to the date of assessment was levied by the Income-tax Officer on the amount of Rs.2,87,916 by which the advance tax of Rs.3,23,103 paid by the assessee fell short of the assessed tax. The amount of interest so levied was Rs.1,07,268. The assessee appealed against the order of assessment to the Commissioner of Income-tax (Appeals). The appeal of the assessee was partly allowed. As a result thereof, the tax payable by the assessee was re-determined at Rs.4,84,427. This resulted in the reduction of the difference between the assessed tax and the advance tax paid by the assessee. The Income-tax Officer accordingly reduced the interest levied under section 215 of the Act as contemplated by subsection (3) of section 215 of the Act. The assessee was aggrieved by the reduction of the interest as according to him, the liability-to pay interest under section 215 itself should have been re-determined with reference to the tax determined on the basis of the revised assessment and on such computation he should have been held not to be liable to pay interest under section 215(1.) of the Act as the advance tax paid by the assessee was not less than seventy-five percent. of the tax assessed pursuant to the revised. order of assessment passed in pursuance of the appellate order. The assessee, therefore, appealed to the Commissioner of Income-tax ' (Appeals). The Commissioner (Appeals) rejected the appeal of the assessee as he was of the opinion that interest under section 215(1) can be reduced under subsection (3) of section 215 in proportion to the reduction in the shortfall but it cannot be recomputed with reference to the reduced income. The assessee appealed to the Income-tax Appellate Tribunal ("the Tribunal"). The Tribunal accepted the contention of the assessee and held that having regard to the scheme of the Act and the context in which it appeared in section 215, the expression "regular assessment" would include an order passed by the Income-tax Officer pursuant to the direction of the appellate authority. The Tribunal relied upon the decision of the Calcutta High Court in Chloride India Ltd. v. CIT (1977) 106 ITR 38 and observed that interest under section 215(1) cannot be maintained when the advance tax paid by the assessee is not less than seventy-five percent. of the tax assessed determined pursuant to the order of the appellate or revisional authority and, accordingly, held that the advance tax paid by the assessee being not less than seventy-five percent. of the tax finally determined as payable pursuant to the order of the appellate authority, no interest under section 215 was payable by the assessee. Hence this reference at the instance of the Revenue.

We have heard learned counsel for the parties. Section 215 of the Income-tax Act, so far as is relevant, as it stood. at the material time, reads as follows:

"215., Interest payable by assessee.-(1) Where, in any financial year, an assessee has paid advance tax under section 212 on the basis of his own estimate, and the advance tax so paid is less than seventy five per cent of the assessed tax simple interest at the rate of twelve percent. per, annum from the 1st day of April next following the said financial year up to the date of the regular assessment shall be payable by the assessee upon the amount by which the advance tax so paid falls short of the assessed tax...

(3) Where as a result of an order under section 154 or section 155 or section 150 or section 254 or section 260 or section 262 or section_264sthe amount on which interest was savable under this section has been reduced the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded.

(5) In this section and sections 217 and 273, assessed tax' means the tax determined on the basis of the regular assessment (reduced by the amount of tax deductible in accordance with the provisions of sections 192 to 194, section 194A, section 194C, section 194D and section 195) so far as such tax relates to income subject to advance tax and so far as it is not due to variations in the rates of tax made by the Finance Act enacted for the year for which the regular assessment is made." (emphasis supplied)

It is clear from subsection (1) of section 215 of the Act that the liability to pay interest arises if, in any financial year, the advance tax paid by the assessee falls short of seventy-five percent. of the assessed tax. In that event, interest is payable on the deficient amount from the first day of April of the next financial year up to the date of the regular assessment. "Assessed tax" has been defined in subsection (5) to mean the tax determined on the basis of the "regular assessment". Thus, both for the purposes of determining the liability of the assessee to pay interest under this section and also the date tip to which interest is to be charged, the material assessment is the "regular assessment".

There was a controversy in regard to the meaning of the expression "regular assessment" appearing in section 215 of the Act. There was a divergence of opinion between the different High Courts. Though the Bombay High Court had throughout been of the view that "regular assessment" means the first assessment made by the Income-tax Officer or the original order of assessment, a contrary view was expressed by some of the High Courts, including the Calcutta High Court and the Gujarat High Court. However, this controversy now no more res integra in view of the latest decision of the Supreme Court in Modi Industries Ltd. v. CIT (1995) 216 ITR 759, wherein, construing an identical expression in section 214 of the Act, the Supreme Court held that "regular assessment" means and refers to the original assessment made under section 143 or 144. The Supreme Court also referred to the provisions of subsection (3) of section 215 of the Income-tax Act which provides that if the amount of advance tax which was found deficient and on which interest was payable under section 215(1) by the assessee is reduced as a result of an order of rectification , appeal or revision, etc., the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded to the assessee and observed that it was necessary to introduce the above provisions because "regular assessment" only meant the first assessment made in the regular course by the Income-tax Officer. It was observed that, prior to the insertion of subsection (3), the amount of interest charged under section 215 could not have been reduced as a result of any further proceedings under the Act whereby the quantum of assessment and consequently the tax payable stood reduced. The Supreme Court clearly held that -the expression "regular assessment" in various sections of the Act had been used in no other sense than the first order of assessment passed under section 143 or 144. If any consequential order has to be passed by the Income-tax Officer to give effect to the order passed by the higher authority, that consequential order cannot be treated as the "regular assessment" nor can the date of the consequential order be treated-as the date of "regular assessment". The above decision is clear and unambiguous and leaves no scope for any controversy in regard to the true meaning of the expression "regular assessment". In the face of this decision, the contention of the assessee in this case that "assessed tax" should be construed to mean the tax determined pursuant to the last operative order of assessment is wholly untenable. The decision of the Calcutta High Court in Chloride India Ltd. 's case (1977) 106 ITR 38 relied upon by the Tribunal is no more a good law in view of the decision of the Supreme Court in Modi Industries Ltd.'s case (1995) 216 ITR 759.

Reference may also be made in this connection to the decision of the Full Bench of this Court in CIT v. Carona Sahu Co. Ltd. (1984) 146 ITR 452 (Bom.), wherein on a review of the decisions of the various High Courts, Bharucha, J. (as his Lordship then was), speaking for the Full Bench, held that the words "regular assessment" in both sections 214 and 215 mean only the original assessment and not the last operative order or the assessment made pursuant to the appellate/revisional order. While arriving at the above conclusion, this Court dissented from the contrary view taken by the Calcutta High Court in Chloride India Ltd.'s case (1977) 106 ITR 38 which now stands impliedly overruled by the decision of the Supreme Court in Modi Industries Ltd.'s case (1995) 216 ITR 759.

It is clear from the above discussion that the expression "regular assessment" appearing in section 215 of the Act has been used in no other sense than the first order of assessment passed under section 143 or 144 of the Act. That being so, the Tribunal was not justified in this case in holding that interest under section 215(1) of the Act cannot be maintained when the advance tax paid by the assessee is not less than seventy-five percent. of the tax assessed in pursuance of the order of the appellate or revisional authority.

The question referred to us is, therefore, answered in the affirmative, i.e., in favour of the Revenue and against the assessee.

Reference is disposed of accordingly with no order as to costs.

M.B.A./3377/FC Reference disposed.