JUDGMENT
RAJAMANNAR, C.J. – These appeals under the Letters Patent are from the judgment of Panchapakesa Ayyar, J., disposing of W.P. Nos. 864 to 869 of 1957, A common question of law arises in these appeals. The appellant was an assessee on the file of the Income-tax Officer, III Additional Circle, Karaikudi. The assessments on the appellant for the years 1947-48 to 1952-53 were originally completed on different dates, which it is not material to mention, on particular total incomes. These assessments were made under section 23(3) of the Indian Income-tax Act. Subsequently, the Income-tax Officer reopened the assessments under section 34 of the Act and recomputed the appellants total incomes for the different years at figures, which were in excess of the original figures. There is no dispute as regards this reopening and reassessment under section 34 of the Act. But, in the demands based on the reassessment dated February 28, 1957 the Income-tax Officer included certain sums as interest payable under section 18(6) of the Act. The appellant took exception to this charge of interest. At the same time he applied to the Inspecting Assistant Commissioner, Madurai Range, to get relief under the proviso to section 18A(6) which runs thus :
“Provided further that in such cases and under such circumstances as may be prescribed, the Income-tax Officer may reduce or waive the interest payable by the assessee.”
Rule 48 is the material rule. This application was, however, rejected. Thereupon the appellant filed the writ petitions out of which these appeals arise for the issue of the writs of certiorari or such other appropriate rules or orders to quash the imposition of the penal interest as per the said reassessment orders. The main contentions raised on behalf of the appellant in his writ petitions was that section 18A(6) of the Act will not in terms apply to an assessment made under section 34 of the Act. The learned judge held against this contention. There was also another contention raised before him that the Assistant Commissioner of Income-tax before whom an application had been filed to reduce or waive the interest levied on the appellant had not properly disposed of the application, because he had not assigned any reasons for declining to exercise his discretion in favour of the appellant. This contention also was rejected by the learned judge.
Mr. Srinivasan, learned counsel for the assessee before us, practically confined his argument to the first contention, though he did not abandon his second contention. His argument was that the expression “regular assessment” in sub section (6) of section 18A of the Act will not apply to a reassessment after reopening the original assessment under section 34 of the Act. The learned counsel for the Department contended that the assessment under section 34 would also fall within the category of regular assessments. Panchapakesa Ayyar, J., disposed of this controversy in a very simple manner. He observed :
“I fail to see how a reassessment will not be a regular assessment. Surely, it is not an irregular assessment.”
He compared the reassessment to an amended decree. To us the matter does not appear to be so simple as it appeared to the learned judge. We do not read the words “regular assessment” to mean and signify only valid assessment. Evidently the learned judge thought that “regular” meant “valid”, i.e., not irregular. But with respect to the learned judge, an irregularity does not always result in invalidity. There are several irregularities in procedure, which may not affect the validity of the substantial order. If a regular assessment means and signifies an assessment made in the regular course contemplated by the provisions of the Indian Income-tax Act, then surely an assessment under section 34 is not a regular assessment. There is difference between an assessment not being a regular assessment and an assessment being an irregular assessment.
Neither learned counsel for the assessee, not learned counsel for the Department, has been able to bring to our notice any direct authority on the question, which falls to be decided in these appeals. Mr. Srinivasan relied upon what he called the definition in the statute itself of a regular assessment in sub-section (5) of section 18A. That sub-section runs thus :
“The Central Government shall pay simple interest – (i) at two per cent. per annum on any amount payable in accordance with the provisions of this section before the first day of April, 1955, and paid accordingly; (ii) at four per cent. per annum on any amount payable in accordance with the provisions of this section after the 1st day of April, 1955, and paid accordingly;
from the date of payment to the date of the provisional assessment made under section 23B, or if no such assessment has been made to the date of the assessment (hereinafter called the regular assessment) made under section 23 of the income, profits and gains of the previous year for an assessment for the year next following the year in which the amount was payable.”
The “regular assessment” therefore, which occurs in the next sub-section, i.e., sub-section (6), must bear the same meaning namely, “an assessment made under section 23 of the income….” etc.
Learned counsel for the Department met this argument in two ways : (1) by pointing out that the expression “regular assessment” in sub section (5) of section 18A must be understood in the context as distinct from the provisional assessment made under section 23B. (2) By contending that reassessment under section 34 of the Act, or even an assessment for the first time under section 34 of the Act, would also be an assessment under section 23 of the Act. He relied upon the ruling of this court in Govindarajulu Iyer v. Commissioner of Income-tax. That decision, however, did not directly deal with this point. That related to the power of the Income-tax Officer to levy a penalty under section 28(1)(a) for failure without reasonable cause to furnish a return pursuant to the general notice under section 22(1) of the Act in proceedings taken under section 34 of the Act. Observations in the course of the judgment that proceedings under section 34 in that case relate to the same proceedings, which must be deemed to have commenced with the publications of the general notice under section 22(1), should not be stretched to cover the argument raised by the learned counsel for the Department. Mr. Srinivasan referred us to a decision of the Bombay High Court in Sarangpur Cotton Manufacturing Co. Ltd. v. Commissioner of Income-tax. That related to the converse case where the Department is under a liability to pay interest under section 18A(5). It suffices to state the following facts in that case. The assessee paid advance tax under section 18A and assessment under section 23 was completed on March 30, 1948. The assessee appealed against the order of assessment. That order was set aside by the Appellate Assistant Commissioner on November 15, 1951, and he directed the Income-tax Officer to make a fresh assessment. Such fresh assessment was made on January 25, 1954. The Income-tax Officer allowed the assessee interest on the advance payment from the date of payment till March 30, 1948. The contention of the assessee was that he was entitled to interest up to January 25, 1954. The contention on behalf of the assessee was that the date of the regular assessment, i.e., the date of the assessment under section 23 of the Act, must mean the date of a valid and effective assessment and such assessment was only the assessment made after remand on January 25, 1954. There was no doubt a prior assessment on March 30, 1948, but that was not a valid or effective assessment and that would not be the assessment, which would fall within the terms of sub-section (5) of section 18A. The learned judges refused to accept this contention. Dealing with it, Chagla, C.J., said :
“When one looks at the matter a little more closely, it becomes clear that, when the Income-tax Officer made the order on the 30th of March, 1948, under the provisions of this section, interest ceased to run. At that date the order made by the Income-tax Officer was the only effective and valid assessment. Can it be said that, if interest had ceased to run, the running of interest was revived when that order of assessment was set aside and a different terminus was fixed for the calculation or interest ? It seems to us that what the Legislature contemplated in using the expression the date of the assessment was the factual date of the assessment and it was not considering the legality or the validity of the assessment made. It wanted to fix two termini for the calculation of interest. With regard to one terminus there was no difficulty : that was the date of payment of advance tax by the assessee. The other terminus had to be fixed and the other terminus was the date when the regular assessment was made. That terminus having been fixed, it could not be altered by any subsequent event or by the vicissitudes through which the assessment order might pass.”
Though this decision does not deal directly with sub-section (6) of section 18A, we consider that the ratio decidendi of the decision will apply equally to the appeals before us. Sub-section (6) also contains two termini. One is fixed in Sub-section (6), namely, the first day of January in the financial year in which the tax was paid. The other terminus is the date of the regular assessment. There is also another condition in sub-section (6), which throws some light and that is this. Interest under this sub-section is payable only where in any year an assessee has paid tax under sub-section (2) or sub-section (3) on the basis to his own estimate and the tax so paid is less than 80 percent. of the tax determined on the basis of the regular assessment. Now, if a regular assessment under section 23 has been made, as it was made in this case, it is then that you ascertain whether this condition is satisfied. The two material amounts of tax are the amount of tax paid on the basis of the assessees own estimate on the one had and the tax as determined on the basis of the regular assessment on the other. If the former is less than 80 percent, of the latter, then only the liability under sub-section (6) arises. On the analogy of the decision in Sarangpur Cotton Manufacturing Co. Ltd. v. Commissioner of Income-tax we hold that once sub-section (6) has been applied, as in this case, and the amount ascertained on the basis of the regular assessment under section 23 as originally made, there was a finality, subject only to the provision contained in the second provisio, which relates to the reduction of the amount on which interest is payable as a result of an appeal, revision or a reference. There is no provision to meet the contingency where the amount of tax payable by the assessee is increased by proceedings taken under section 34 of the Act.
We confess that a different view can also be taken. But we should follow the well established rule that in construing a fiscal enactment like the Income-tax Act unless the language is so clear that it could bear only one construction, the assessee will be entitled to, what one may call, “the benefit of the doubt.” We should not be understood, however, as having a doubt with regard to the construction of sub-section (6) of section 18A, which we have reached above.
In the result, we allow the appeals and quash the orders of the Income-tax Officer dated February 28, 1957, in so far as they include the payment of statutory interest under sub-section (6) of section 18A up to the date of the re-assessment orders. The appellant will be entitled to his costs, but so far as the advocates fee is concerned, it will be Rs. 100 for the entire batch.
Appeals allowed.
