Sabyasachi Mukharji, J.:— On December 19, 1966, the Income-Officer, E-Ward, Companies District, Calcutta, made an assessment for the assessment year 1964-65 in respect of the petitioner. The petitioner is a public limited company. In making the said assessment the Income-tax Officer treated the petitioner as a company in which the public were not substantially interested and charged the rate of tax on that basis making an additional demand of Rs. 2,62,239. On appeal on May 4, 1970, the Appellate Assistant Commissioner held that the petitioner was a company in which the public were substantially interested and the petitioner fulfilled all the conditions laid down under section 2(18)(b) of the Income-tax Act, 1961. Pursuant to the order of the Appellate Assistant Commissioner on January 12, 1972, the Income-tax Officer revised the assessment and computed the amount refundable to the petitioner at Rs. 4,28,260.40. In making the computation, however, the Income-tax Officer refused to allow interest payable on the sum paid by the petitioner and refused the claim for interest made by the petitioner under section 214 and section 244 of the Income-tax Act, 1961. The said computation was made by the Income-tax Officer on January 12, 1972. Aggrieved by the aforesaid order, the petitioner made an application for revision under section 264 of the Income-tax Act, 1961, to the Commissioner of Income-tax, claiming interest of Rs. 48,280 under section 244 and Rs. 23,752 under section 214 of the Income-tax Act, 1961. The Commissioner passed an order on November 7, 1972, and allowed the claim for interest under section 244 of the Act but rejected the claim for interest under section 214. In passing the said order, the Commissioner observed, inter alia, as follows:
“An assessee is entitled to receive interest under section 214 when on a regular assessment it is found that the advance tax paid by the assessee exceeds the tax determined on assessment. In the present case no part of the advance tax became refundable to the assessee on the basis of the regular assessment made on December 19, 1966, and hence no interest was paid as section 214 was not applicable. According to the assessee interest under section 214 should have been allowed when the assessment was revised in accordance with the direction of the A.A.C as the A.A.C's order modified the assessment made by the I.T.O I am unable to agree with this submission. This very point was considered by the Allahabad High Court in the case of Sir Shadilal Sugar & General Mills Ltd. v. Union of India, [1972] 85 ITR 363 (All). In this case the court explained the meaning of the words ‘regular assessment’ appearing in section 18A(5) of the Indian Income-tax Act, 1922. The words ‘regular assessment’ also appear in section 214 of the Income-tax Act, 1961, and they mean the first or the original assessment order made by the I.T.O for that year. As no amount was refundable to the assessee in the present case in accordance with the order under section 143(3) dated December 19, 1966, the assessee is not entitled to any interest under section 214.”
2. It is the propriety of the aforesaid direction or order of the Commissioner which is under challenge in this application under article 226 of the Constitution. section 214 of the Income-tax Act, 1961, enjoins the Central Government to pay interest on the amount by which the aggregate amount of advance tax paid during the financial year exceeds the amount of tax determined on regular assessment. Therefore, the obligation is to pay interest on the amount by which the advance tax paid exceeds the tax determined on regular assessment. The question involved in this application is, what is the “tax determined on regular assessment”. Section 2(40) of the Income-tax Act stated that unless the context otherwise requires regular assessment would mean an assessment made under section 143 or section 144 of the Act. The first question is whether the order which the Income-tax Officer passed to give effect to the order of the Appellate Assistant Commissioner is an order of assessment under section 143 or section 144 of the Income-tax Act, 1961. This question was considered by the Division Bench of this court in the case of Kooka Sidhwa & Co. v. Commissioner of Income-tax, [1964] 54 ITR 54 (Cal). There it was contended that the order passed by the Income-tax Officer in carrying out the direction of the Appellate Assistant Commissioner was not an order of assessment from which an appeal lay. This was rejected by the Division Bench which held that where pursuant to the direction of the Appellate Tribunal in an order under section 33(4) of the Indian Income-tax Act, 1922, to revise or amend the assessment made by the Income-tax Officer, the Income-tax Officer revised the assessment, the order passed by the Income-tax Officer took the character of a fresh assessment order and was only referable to section 23 of the Indian Income-tax Act, 1922, which corresponds to sections 143 and 144 of the Income tax Act, 1961. It was, accordingly, held that an appeal would lie under section 30 of the old Act against such order of the Income-tax Officer. Therefore, it appears that an order which is passed by the Income-tax Officer to give effect to the order of the Appellate Assistant Commissioner is an order of assessment under section 143 of the Income-tax Act, 1961. If that is the position then, in view of section 2(40) of the Act, the regular assessment as contemplated by sub-section (1) of section 214 should be assessment made by the Income-tax Officer initially or the first assessment made by the Income-tax Officer if there is no appeal therefrom, but in case there is an appeal, the order passed by the Income-tax Officer finally to give effect to the direction, if any, of the appellate authority. That order by the Income-tax Officer would be an order of assessment and passed in the regular course of business. In my opinion, unless the context otherwise requires, regular assessment should not be given any other meaning. The question is, whether the context in this case in which the expression has been used in section 214 requires otherwise. I am of the opinion that, far from requiring otherwise, the context of the section indicates that this meaning should be given to the expression “regular assessment”. The expression “regular assessment” is mentioned in several sections in Part C dealing with payment of advance tax. Section 209 of the Act imposes an obligation upon the assessee to pay advance tax computed on the basis of his total income of the latest previous year in respect of which there has been assessment by way of regular assessment. Section 210, similarly, enjoins that where a person has been previously assessed by way of regular assessment, the Income-tax Officer may after first April in the financial year, by an order in writing, require him to pay to the credit of the Central Government advance tax determined in accordance with the provisions of sections 207, 208 and 209 of the Act. Therefore, the effect of the sections is that the Income-tax Officer should serve notice of demand based on total income as computed on the basis of the regular assessment of the latest previous year. If by regular assessment was meant the first assessment only, then the effect would be that in case where after the first assessment there was an appeal and in the appeal the assessment has been modified or reduced and the Income-tax Officer has passed an order giving effect to such modification or reduction, still the Income-tax Officer would be obliged to make the demand for advance tax not on the basis of the amount reduced by the direction of the appellate authority but on the basis of the first assessment order made by the Income-tax Officer. The assessee under section 208 would also be obliged to pay advance tax on that basis. The Income-tax Officer will then be free to modify the demand for the subsequent year but for the year in question he would have to proceed on the basis of demand raised in the first assessment. This would seem to be an anomalous situation and unless the language of the section compels one to make that construction, one should avoid making that construction. It has to be borne in mind that the expression “regular assessment” has been used in several sections. In all the sections similar meaning should be given to that expression unless the context otherwise demands. Having regard to the scheme of the sections I am of the opinion that the context does not require otherwise. Regular assessment is certainly different from the first assessment or provisional assessment. But regular assessment is not confined to first assessment. When an assessment is modified pursuant to the order of the appellate authority or direction, the subsequent order will be regular assessment and must supersede and replace the earlier assessment order. Having regard to the scheme of the Act and the context in which the expression has been used, in my opinion, regular assessment under section 214 would include in the particular facts and circumstances of the case an assessment made by the order of the Income-tax Officer pursuant to the direction of the Appellate Assistant Commissioner.
3. On behalf of the revenue reliance had been placed on several sections, specially on sub-section (1A) of section 214 and sub-section (3) of section 215. In my opinion, these sections are not indicative of the fact that the expression “regular assessment” in the catena of sections should be confined only to first assessment. Sub-section (1A) of section 214 and sub-section (3) of section 214 had been inserted in order to give the revenue as well as the assessee right to claim moneys in the contingencies contemplated by those two sub-sections. Clause (1A) of section 214 proceeds on the basis that there can be more than one regular assessment. Sub-section (1A) deals with the situation where interest first allowed under sub-section (1) of section 214, which is on tax determined on “regular assessment”, is subsequently reduced on completion of “regular assessment”. If the subsequent order made pursuant to the order of the revisional or appellate authority cannot be treated as “regular assessment” this clause would become nugatory.
4. Reliance was also placed on behalf of the revenue on several decisions. Reliance was placed on the case of Sarangpur Cotton Manufacturing Co. Ltd. v. Commissioner of Income-tax, [1957] 31 ITR 698 (Bom). That was a case where the Division Bench of the Bombay High Court was concerned with the expression “date of assessment Under section 23” up to which interest was payable to an assessee on advance tax under section 18, A of the Indian Income-tax Act, 1922. It was held that the said date referred to the first assessment. The mere fact that assessment made under section 23 was set aside in appeal by the Appellate Assistant Commissioner and a fresh assessment was made on a subsequent date would not entitle the assessee, according to the Division Bench, to interest on advance tax up to the date of subsequent assessment. The Division Bench was concerned primarily with the question of the “date of assessment” and not really on the question as to what was the “tax determined on regular assessment”. The excess of advance tax paid cannot be determined nor the claim for payment of interest arise unless the tax determined on regular assessment is first ascertained. The Division Bench of the Bombay High Court had no occasion to consider this aspect of the matter. Furthermore, the Division Bench was concerned with the provisions of the 1922 Act, which did not contain the definition of regular assessment as provided for in Section 2(40) of the Income-tax Act, 1961. Relevant provision of section 18A of the 1922 Act provided for payment of interest from the date of payment to date of pro visional assessment made under section 23B and if no such assessment was made, to the date of assessment referred to as regular assessment made under section 23 of the Income-tax Act, of incomes, profits and gains of the previous year. Reliance was also placed on the decision in the case of Gopalaswami Mudaliar v. Fifth Additional Income-tax Officer, [1963] 49 ITR 322 (Mad.). There the Madras High Court observed that where an assessee had failed to submit any return of income during the relevant assessment year and an assessment was for the first time made on him under sec tion 34(1)(a) read with section 23, interest under section 18A(6) might be charged for failure on the part of the assessee to pay advance tax in accordance with section 18A(3). In cases where no return was submitted by the assessee the expression “regular assessment” in section 18A(6) referred to an assessment made under section 23 after the issue of a special notice under section 22(2) during the year of the assessment itself as well as the assessment by the issue of a notice analogous to one under section 22(2) in proceedings initiated under section 34(1)(a). In either count it was nothing more than a regular assessment in the sense that it was an initial assessment made upon the assessee and not an assessment which had once been made but was reopened. The observations of the court were made entirely in a different context. The court was not concerned with the question as to whether the regular assessment was confined to the first or initial assessment. The question was, however, again considered by the Allahabad High Court in the case of Shadilal Sugar & General Mills Ltd. v. Union of India, [1972] 85 ITR 363 (All). There also the question was dependent upon the construction of the provisions of section 18A(5) of the Income-tax Act, which, as mentioned hereinbefore, provided as follows:
“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;……
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. The court was also not concerned with the question as to the tax determined on the regular assessment. The context in which the expression “the date of assessment, hereinafter referred to as regular assessment” had been used was different. Therefore, the observation of the courts in the three cases referred to hereinbefore in my opinion cannot be availed of on the construction of the expression “regular assessment” in sub-section (1) of section 214 of the Income-tax Act, 1961, specially in view of the definition provided by sub-section (40) of section 2 of the Act. Counsel for the revenue contended that Parliament should be deemed to have known the interpretation and when in that context had used the expression “regular assessment” in sub-section (1) of section 214, it must have meant the initial assessment. I am unable to accept this contention. Firstly, there was no judicial interpretation of the expression “regular assessment” as such. What was interpreted was the date of the assessment referred to as the “regular assessment” for the purpose of section 18A(5) of the Indian Income-tax Act, 1922. Knowing the said interpretation when in the new Act Parliament has deliberately chosen to define the regular assessment by meaning assessment made under sections 143 and 144 and not to confine to initial assessment, in my opinion it cannot be said that the legislative intent was to confine the meaning of regular assessment to initial or first assessment as indicated in the judgment referred to hereinbefore. In the aforesaid view of the matter, in my opinion, the Commissioner, in holding that the regular assessment was confined to the initial or first assessment, committed an error of law apparent on the face of the order. The order of the Commissioner dated the 7th November, 1972, in so far as it held that the petitioner was not entitled to interest under section 214 of the Income-tax Act, 1961, is set aside and quashed and the Commissioner is directed to reconsider the matter in accordance with law and in accordance with the observations made herein. The rule is made absolute to the extent indicated above.
6. There will be no order as to costs. Operation of this order is stayed for six weeks.