1. The petitioner, Sir Shadi Lal Sugar and General Mills Ltd., manufactures and sells sugar, confectionery and other sugar products.

2. During the financial year 1960-61, the petitioner paid a total sum of Rs. 5,47,002 in four instalments as advance tax under Section 18A, Indian Income-tax Act, 1922. Subsequently, the Income-tax Officer," Special Investigation Circle A, Meerut, completed the assessment for the assessment year 1961-62 and made an assessment order dated March 30, 1966, under Section 23(3) of the Act. The total income was assessed at Rs. 15,37,580. By an order dated February 12, 1968, the figure was revised to Rs. 15,39,048. The petitioner appealed against the assessment. On February 27, 1969, the Appellate Assistant Commissioner of Income-tax, Range III, Meerut, reduced the figure of assessable income considerably and directed the Income-tax Officer to give effect to the reduction and modify the assessment accordingly. On July 15, 1969, the Income-tax Officer, Central Circle IV, Meerut, who was now seized of the case, made an order purporting to give effect to the appellate order. The assessable income was now shown at Rs. 8,88,154. A revised assessment form was drawn up, showing that a sum of Rs. 2,92,902 was refundable to the petitioner after taking into account the advance tax deposited by the petitioner during the financial year 1960-61,

3. The petitioner applied to the Income-tax Officer on December 2, 1969, pointing out that consequent upon effect being given by the Income-tax Officer to the 6rder of the Appellate Assistant Commissioner it appeared that advance tax had been paid in excess by Rs. 1,52,819, and claimed that he was entitled to interest on this excess payment. The petitioner informed him that his application should be treated as one made under Section 154 of the Income-tax Act, 1961, for rectification of the order dated July 15, 1969. On April 27, 1970, the Income-tax Officer stated in reply:

"(1) The application could not be considered as made under Section 154 of the Act of 1961, because the assessment for the year 1961-62 was completed under the Act of 1922.

(2) There was no mistake apparent from the record. Whether interest under Section 18A(5) was payable could be determined at the time of regular assessment only and on that date no interest could be said to be payable." The petitioner now applies for relief under Article 226 of the Constitution.

4. The relevant provisions of Section 18A(5) read-

"The Central Government shall pay simple interest-

(i) at 2 per cent. per annum on any amount payable in accordance with the provisions of this section before the 1st day of April, 1955, and paid accordingly;

(ii) at 4 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 :

Provided that on any portion of such amount which is refunded under the foregoing provisions of this section interest shall be payable only up to the date on which the refund was made :

Provided further that for any period beginning with the 1st day of April, 1952, interest shall be payable only on the amount by which the aggregate sum of any instalments paid during any financial year in which they are payable under this section exceeds the amount of the tax determined on regular assessment calculated as hereunder-

(i) in respect of such instalments paid in any financial year before the said date, from the said date to the date of the regular assessment;

(ii) in respect of such instalments paid after the said date, from the beginning of the financial year next following to the date of the regular assessment."

5. To truly comprehend the scope of this provision, its legislative history may be referred to. Section 18A(5) as it originally stood provided :

"The Central Government shall pay on any amount paid under this section simple interest at 2 per cent. per annum from the date of payment to the date of the assessment (hereinafter called the regular assessment) made under Section 23. . . .."

6. Under that provision an assessee was entitled to interest at 2 per cent. per annum on the entire amount of advance tax paid by him. After some minor changes, the second proviso set out above was added by the Indian Income-tax (Amendment) Act, 1953, with effect from April 1, 1952. The effect of inserting this proviso was that interest for the period beginning April I, 1952, would be payable only on the excess amount of the advance tax over the tax determined on regular assessment. So far as the period before April 1, 1952, was concerned, interest continued to be payable on the whole amount of the advance tax paid. Then, by the Finance Act, 1955, the substantive provision of Section 18A(5) was substituted by the language existing at present, so that the rate of interest at 2 per cent. was confined to payments made before April 1, 1955, and as regards payments made after that date it was raised to 4 per cent. per annum.

7. The contention on behalf of the petitioner is that where reference has been made in Section 18A(5) to the date of the assessment made under Section 23, also referred to in the sub-section as the "regular assessment", it is the date of the assessment order which finally quantifies the assessable income of the assessee and determines his tax liability and that, it is said, is the order finally passed by the Income-tax Officer giving effect to the order of the appellate or other superior authority. In the present case, it is pointed out, it is the order made by the Income tax Officer on July 15, 1969. In giving effect to the order of the Appellate Assistant Commissioner, the Income-tax Officer finally determined the assessable income of the petitioner and held it, entitled to a refund of the advance tax paid by it. We have carefully considered the matter, and in our opinion the contention cannot be accepted.

8. Section 18A was inserted in. 1944 in the Indian Income-tax Act. As was observed by the Supreme Court in Purshottamdas Thakurdas v. Commissioner of Income-tax, [1963] 48 I.T.R. (S.C.) 206, 33 Comp. Cas. 351, [1963] Supp. 2 S.C.R. 668 (S.C.) :

"It was introduced as a war measure probably to combat inflation. The section attempts to reconcile the principle of advance payment of tax with the scheme of the Act which is to tax the income of the previous year. The basis of the section is the principle of 'pay as you earn', that is, paying tax by instalments in respect of the income of the very year in which the tax is paid."

9. Ordinarily, the liability to make payment of tax arises upon the making of an assessment order and the issue of a consequent notice of demand. That was the view taken by the Privy Council in Doorga Prosad v. Secretary of State, [1945] 13 I.T.R. 285 (P.C.) . Although the liability to tax, it is well-settled, is fixed by the charging provision, it is only after the liability has been quantified and a demand for payment is made that an obligation upon the assessee to pay the amount arises. By the scheme introduced under Section 18A the assessee is required to pay an amount by way of tax in advance, that is, before an assessment order is made and a demand is issued for payment of the tax determined against him. Section 18A(5), as enacted originally, obliged the Central Government to pay to an assessee interest on the amount of advance tax paid by him. This was in recognition of the fact that the assessee had been deprived of money belonging to him and which he was entitled to retain and utilise so long as an assessment order was not made. From this it will be clear that when Section 18A(5) speaks of the date of the assessment made under Section 23 and refers to it as the "regular assessment" it is the first or, as one might say, the original assessment order made by the Income-tax Officer for that year which is intended. As soon as the original assessment order is made, and a notice of demand issued, the assessee is under an obligation to pay the tax demanded and no question then can arise of his being compensated by interest for any payment made by him in satisfaction of that demand. The compensation is intended only for the period during which there is no obligation to pay tax and the assessee does so only because of the scheme specially providing for recovering the tax in advance. The scheme, as we have already shown, is a departure from the basic principle underlying the Indian Income-tax Act that the charge is levied for an assessment year upon the income of the previous year. The question was considered by the Bombay High Court in Sarangpur Cotton Manufacturing Co. Ltd. v. Commissioner of Income-tax, [1957] 31 I.T.R. 698,703 (Bom.) and observations of Chagla C.J., who spoke for the court, may be set out:

"The scheme of the section seems to be that interest is payable for the period during which there is no liability to pay upon the assessee. But once the order of assessment is made, the liability to pay arises, and even though the order may be subsequently set aside, there is no obligation upon the department to pay any interest in respect of the amounts which they recovered as tax under the original assessment order."

10. We have been referred by learned counsel to Kooka Sidhwa and Co. v. Commissioner of Income-tax, [1964] 54 I.T.R. 54 (Cal.), Gopi Lal v. Commissioner of Income-tax, [1967] 65 I.T.R. 477 (Punj.).

and to certain observations of the Supreme Court in Dwarka Nath v. Income-tax Officer, [1965] 57 I.T.R. 349 ; [1965] 3 S.C.R. 536 (S.C.). In these cases, it has been held that when an assessment order is made by the Income-tax Officer for the purpose of giving effect to an appellate order, it is Section 23 under which that assessment order is made. The submission is that, therefore, the expression "the date of the assessment made under Section 23" in Section 18A(5) should be construed to include the assessment order made for the purpose of giving effect to the order of a superior authority. The observations made in the cases mentioned above were made while discussing the proposition whether an appeal lay against an assessment order which was made consequent upon an appellate order. These observations, in our opinion, have no validity while considering the interpretation of Section 18A(5). What is meant by "the date of the assessment made under Section 23" has to be decided by reference to the context in which those words occur and, as we have shown, reference could only have been intended to the date of the first or original assessment order for that year.

11. It is then urged that when regard is had to the second proviso to Section 18A(5) it will be found that interest is payable under that provision only on the amount of advance tax which exceeds the tax determined on regular assessment, and there is no warrant for applying the logic that the legislature intended to compensate the assessee for being compelled to pay tax in advance of the determination of his tax liability. It is said that inasmuch as the second proviso provides for payment of interest on the excess amount of advance tax only, it can reasonably be construed to cover the entire period up to the final determination of the tax liability of the assessee, that is, when ha had exhausted the remedies by way of appeals, revision and reference available to him. It is contended that the expression "the date of the regular assessment" bears a different meaning in the second proviso to what can be understood by it in the substantive provision of section 18a(5). The argument is difficult to accept. When regard is had to the legislative history of Section 18A(5), which we have traced out above, it will be clear that the legislature intended that interest should be paid on the entire amount of advance tax for the period before April 1, 1952, and for the period thereafter it should be paid only on the excess amount of advance tax. In 1955, when the substantive provision of Section 18 A(5) was amended, it was amended essentially for the purpose of providing for two different rates of interest, two per cent. per annum on amounts paid before April, 1, 1955, and four per cent. on amounts paid after that date. The operation of the second proviso continued unaffected by the amendment in 1955. It will also be observed that the substantive provision of section 18a(5) mentions that the assessment made under Section 23 is called thereafter the "regular assessment". Therefore, wherever the words "regular assessment" occur thereafter in Section 18A, they must bear the same meaning as the words "the assessment made under Section 23" have in the substantive provision of section 18a(5), that is to say, the first or original assessment made under Section 23.

12. At this stage we may also refer to the provisions of section 18a(6). That sub-section provides for payment by the assessee of interest on the amount by which the advance tax paid by him on the basis of his own estimate falls short of 80 per cent of the tax determined on regular assessment (reduced by the tax deductible under Section 18). This is a provision converse to Section 18A(5), and normally it would have been expected that the same principle would be adopted, namely, that for the purpose of determining the quantum of interest payable, reference must be made to the first or original assessment order. The legislature, however, departed from that principle for the purpose of giving some relief to the assesses, and it did so by enacting the third proviso to that sub-section. The third proviso declares that where the amount on which interest is payable by the assessee is reduced as the result of an appeal under Section 31 or Section 33 or of a revision under Section 33A or of a reference to the High Court under Section 66 the interest will be reduced accordingly and the excess interest will be refunded together with the amount of income-tax that is refundable. The express enactment of this provision points to the conclusion that in its absence the computation of the interest would ordinarily have to be made by reference to the date of the original assessment order.

13. It seems to us that no other position is possible if regard be had to the central fact that the scheme of Section 18A is concerned essentially with payment of tax during the financial year immediately preceding the assessment year, in other words with payment made during a period prior to the date of the first or original assessment order made under Section 23 for the assessment year. The tax payable during that year is "advance tax". After the assessment order under Section 23 has once been made, all payments of tax made thereafter must be attributed to the debt created by the demand consequent to the assessment order or resulting from an enhancement of the tax liability in appeal or revision or reference.

14. In our judgment, the right of the petitioner to interest in respect of the excess amount of advance tax paid by it must be determined by reference to the date of the first or original assessment order for the year and not the date of the order passed consequent to the appellate order. Having regard to the second proviso to Section 18A(5), no interest is payable because the instalments paid during the financial year did not exceed the tax determined by the original assessment. The Income-tax Officer is right in holding that no question of interest under Section 18A(5) arises in the present case.

15. In the circumstances, we consider it unnecessary to decide whether the application by the petitioner to the Income-tax Officer could have been considered under Section 154 of the Income-tax Act, 1961. We also do not think it necessary to consider the objection of the respondents that an equally efficacious alternative remedy by way of revision application to the Commissioner of Income-tax was available to the petitioner against the impugned order of the Income-tax Officer.

16. The petition fails and is dismissed with costs.