Law: Income Tax Act, 1961

Section: 139

Income-tax----Refund---Assessment---Self-assessment---Advance tax---Annulment of assessment of 1976-77---Refund had to be made of tax including advance tax and tax paid on self-assessment---Indian Income Tax Act, 1961, Ss.4, 139, 140-A, 156 & 240---Constitution of India, Art. 265.---[Saurashtra Cement and Chemical Industries Ltd. v. ITO (1992) 194 ITR 659 (Guj.) dissented from]. Under the scheme of the Income Tax Act, 1961, the amount of tax is recoverable under section 156 by way of demand, only when the liability to tax has been assessed by the competent Authority. If the assessment has been made and any amount has been found to be due from the assessee, then alone the law confers a power on the Assessing Authority to recover the same. The tax can only be recovered under the law according to the method provided therein. If the assessment under which the tax is due to the State from the assessee is quashed and it is declared to be null and void, there is no authority to recover any tax under the Act, and the assessee,, prior to the insertion of proviso (b) to section 240 of the Act, automatically became entitled to refund of the tax deposited by him, with interest. The self-assessment made by the assessee is not final. It is only a self-assessment which is subject to adjudication by the Taxing Authority. The self-assessment will become a regular assessment only when the same is adjudicated. Therefore, the factum of adjudication is an essential and integral part in the scheme of the Act, and when the assessment is nullified, there remains no lawful authority in the Revenue to retain that amount. Payment of advance tax is a mere convenience of collection which is liable to be adjusted against the actual tax due when the final assessment order is made. The whole of the advance tax paid may become refundable if the assessee is ultimately found not liable to pay tax after the assessment proceeding are completed. Such a possibility cannot be ruled out. Therefore, the mere fact of compulsion of payment under section 210 does not mean that by the operation of that section the tax has been levied, assessed and collected. Assessment is the final process which…

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