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Judgment
D.K. Kapur, J.—For the assessment year 1964-65, the following question has been referred to this Court:
Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that the interest allowed in favour of the assessee could not be withdrawn under the provisions of section 154?
The facts of the case are somewhat complex in this particular reference, this is because some of the facts are not clearly apparent from the statement of the case. The assessee paid a sum of Rs. 1,31,768 as advance tax before 15-3-1964. The assessment was completed on 26-6-1968, on an income of only Rs. 320. This meant that a very large sum out of the advance tax had to be refunded to the assessee. On this sum, interest amounting to Rs. 33,763 was allowed by the ITO u/s 214 of the income tax Act, 1961 (''the Act'') It may be mentioned that the assessee had filed returns for 1962-63 and 1963-64, but the first assessment, i.e., for 1962-63, was completed on 27-2-1967, and, thus, this was a case in which an estimate had to be filed by the assessee u/s 212(3) of the Act. It may be stated for clarification that, that section requires an estimate to be filed by an assessee who was not previously regularly assessed. The present assessee had not been previously assessed and so it would appear that an estimate was necessary, but it also appears that no estimate was, in fact, filed.
There is considerable confusion before us as to how the advance tax was paid in this particular case. Section 212(3) requires the advance tax to be paid after the estimate has been filed. Also, it is not clearly understandable how advance tax amounting to Rs. 1,31,768 was paid when the assessment was only for Rs. 320. We had asked the learned counsel for certain clarifications which were given to us to some extent, but it is not part of the statement of case. We cannot rely on the same nor are these facts mentioned in the orders of the ITO, the A AC or the Tribunal itself. Per curiam, it may be mentioned that according to the learned counsel for the assessee, there was a difference between the ITO and the assessee as to which was the relevant previous year for the purposes of this assessee. According to the assessee, the year was from August to August, but the ITO adopted the financial year. It is also mentioned to us that a return had been filed showing income of over Rs. 2,00,000 on the basis of an August to August previous year, but then a return was later filed taking the financial year as the previous year, i.e., from 1st April to 31st March. Whatever these facts may be, the advance tax amounting to Rs. 1,31,768 was paid, but the assessment was only for Rs. 320.
The facts are further confused by the order u/s 154 of the Act which states that originally the assessment was on an income of Rs. 320, which was revised on a net loss of Rs. 97,453. After the rectification order was passed on 28-10-1970, the income became Rs. 3,525 profit (sic). So, it is not clear as to what was the returned income and how the advance tax was calculated when paid by the assessee. In any event, the advance tax was refunded along with the interest of Rs. 33,763.
There was then a revenue audit objection to the effect that no estimate had been filed u/s 213(3) and, therefore, interest was not payable u/s 214 because it was a voluntary payment of advance tax.
As a result of the action taken by the ITO u/s 154, the interest was withdrawn. The order itself does not show the basis on payment of the advance tax initially nor does it say that interest was withdrawn because no estimate was filed.
There was an appeal to the AAC by the assessee, who took the view that interest u/s 214 cannot be allowed. According to the AAC, there was a mandatory provision of law which left no option or discretion to the taxing authority.
On appeal by the assessee to the Tribunal, a reference was made to a previous order relating to the same assessee for the assessment year 1966-67. In that year also, there was a payment of advance tax without an estimate u/s 212(3). The Tribunal reached the conclusion that though interest was payable, it was not a mistake which could be rectified u/s 154 as it was not a mistake apparent from the record.
In the assessee''s appeal for the assessment year 1964-65, which was heard later than the appeal for the assessment year 1966-67, it was held that all mistakes were not mistakes apparent from the record, and even if advance tax was paid without an estimate, it could be treated as advance tax for the purpose of allowing interest. On the question of the nature of the mistake directing rectification, the Tribunal stated as follows:
But section 154 is not to rectify every type of mistake that might have crept into the original assessment but only such mistakes as are apparent from the record. The mistake must be glaring and must be patent on the face of record and should not be one as could be deduced by a process of elucidation or reasoning or one with regard to which there could conceivably be more than one opinion. The question that, therefore, arises is whether the instant case is one in which it can be held that an apparent mistake has crept into the original assessment.
It is on these facts and these circumstances, that we have to answer the reference. As stated earlier in this judgment, there is some confusion on facts which will become more obvious on further analysis, but at this stage, it may be convenient to set out Mr. Wadhera''s cogent arguments on whether there is a mistake which is apparent on the record. He submits that this is a case in which the assessee has made a voluntary payment of advance tax without any estimate. This means that the assessee enjoys interest u/s 214 from the Government without being required to pay any advance tax and this means that, in fact, the section is being used to get wrongful gain from the Government. The argument is that the income was either a loss or at the most a small one and so no advance tax was payable without an estimate. It is surprising that none of the parties took the trouble of finding out how the advance tax was paid in this case. However, assuming that there was a wrongful payment of advance tax on a voluntary basis, it is contended that this is not payment of advance tax and it is not a payment under this chapter. On the other hand, there is no doubt that the amount has been refunded to the assessee as advance tax by the ITO and it has also been paid by the assessee as advance tax. The learned counsel for the assessee contended that the payment was made as advance tax and he refers to the refund order which is Annexure ''C to the statement of the case. This document shows that the payment was made u/s 210 of the Act. It may be mentioned here that section 210 allows the ITO to make an order directing the assessee to pay advance tax. It is contended by Mr. Wadhera that no such order was passed. This leaves us in a state of confusion as to whether in fact an order was passed by the ITO or, whether there was a mistake in the framing of the assessment refund order regarding the manner in which the advance tax was paid. There is no mention of this fact in any of the three orders annexed to the statement of the case.
In order that the provisions of section 154 should be attracted, there should be a mistake apparent on the record and the first question that must naturally arise is, as to what was the mistake? This leads one to find out how the advance tax was paid, how it was treated by the department and how the interest was allowed to be refunded in the first place? As all these facts have not been gone into by the authorities concerned, we are in a doubt as to what was the nature of the mistake and who committed it. We can ask several questions in this case which are not readily answered from the documents now before us in the statement of the case. Firstly, we have to ask why the amount of Rs. 1,31,768 was paid as advance tax. We have to ask whether this amount was voluntarily paid u/s 212(3) or, whether it was paid as a result of the ITO''s order u/s 210. This leads to some further questions, i.e., did the assessee file a return initially for more than Rs. 2,00,000 and was there a later direction by the ITO that the ''previous year'' should be amended to the period 1st April to 31st March resulting in an amended return showing a loss? We are unable to answer these questions and, therefore, we are unable to find out what was the mistake and who committed it.
As noted by the Tribunal in its order, the jurisdiction u/s 154 extends only to mistakes apparent on record. If a mistake is apparent from the record, it should also be possible to determine what was that mistake. According to the department, the mistake was by the assessee initially, in depositing a sum of Rs. 1,31,768 without first filing an estimate. If this was so, how did it happen that the ITO treated this payment as one u/s 210 which relates to deposits made as a result of the ITO''s order. In this connection, it may be mentioned that section 210 only applies to persons who have been previously regularly assessed. But, if the assessee can make a mistake, so can the ITO. So, if the mistake was made by the ITO in demanding advance tax by an order u/s 210, possibly, the mistake was made by the ITO initially No body has ascertained whether an order u/s 210 was passed or not; this discussion is merely on the state of the record. The record, in fact, shows that an order u/s 210 was passed because it is mentioned in the refund order.
It was urged by the learned counsel for the assessee that even if advance tax is paid without an estimate, it can be argued that it remains advance tax. The basis of this argument is that advance tax is payable u/s 212(3) after filing an estimate. If the assessee pays the advance tax without filing an estimate, it still remains a payment of advance tax. It is urged by the learned counsel for the department that such payment is not advance tax.
This raises a contentious and a debatable point as to whether advance tax paid by an assessee, under a particular provision without fully complying with that provision, is to be treated as advance tax or not. A sum of Rs. 1,31,768 is not a small amount, and this payment as advance tax, if not fully in compliance with section 212(3), may still be treated as advance tax, or payment of advance tax not fully in accord with the section. After all, the purpose of section 212(3) is not to get the estimate, but to get the advance tax. The purpose is that the assessee should file an estimate and then also pay the advance tax. A mere estimate is hardly of any utility to the Government; it is the advance tax that is the important element of the section as far as the revenue is concerned. So, it can be urged that a payment of advance tax without filing an estimate is also advance tax.
Shortly put, this appears to be a debatable question and, therefore, the Tribunal appears to be right in coming to the conclusion that this was not a case for action u/s 154.
We would add that in case it was found out why a sum of Rs. 1,31,768 was paid in this case, we would be in a much better position to determine whether it was payment of advance tax or payment of a sum merely to earn interest from the Government. We think that it should have been determined as to why such a large sum was paid and also as to why it was refunded by the initial order along with interest. As mentioned by the Tribunal, the ITO had applied his mind at the initial stage and had treated the same as advance tax paid u/s 210. Why this was done and what were the facts leading to this, have not been gone into. So the matter remains debatable both on facts as well as in law. We would, accordingly, come to the conclusion that this was not a fit case for rectification u/s 154 in the circumstances of this case. What would have been the result if other circumstances had been different, we would not like to say? The answer to the question referred is, therefore, in the affirmative, in favour of the assessee and against the department. But the answer is based entirely on the facts and in the circumstances of the present case, where there is a debatable question both as regards the facts as well as the law applicable to those facts. In the circumstances, we leave the parties to bear their own costs.