Back
HIGH COURT OF CALCUTTA
Sinha
SRIRAM JHABARMUL - Appellant
Versus
S. C. DAS GUPTA - Respondent
Civil Revn. 2675 Of 1952
Decided On : JANUARY 27, 1954
EXCESS PROFITS TAX - ASSESSMENT - PROVISIONAL ASSESSMENT - EFFECT OF SETTING ASIDE FINAL ASSESSMENT - CONSTITUTIONALITY OF SECTION 46 (2), INCOME TAX ACT AND BENGAL PUBLIC DEMANDS RECOVERY ACT 3 OF 1913 - DISCRIMINATION - ARTICLE 14 OF THE CONSTITUTION.
Fact of the Case:
The assessee, a Hindu undivided family, was assessed to excess profits tax for the chargeable accounting period 26-3-1942 to 13-4-1943. A provisional assessment was made on 10-9-1947, and a demand notice was issued on 10-10-1947. As the assessee defaulted in payment, a requisition was made on 10-3-1948, under Section 46 (2), Income Tax Act, which has been made applicable under Section 21, E. P. T. Act. A final assessment was made on 31-1-1949, and a second demand notice was issued for the balance amount. The assessee appealed against the final assessment, and on 15-1-1952, the Appellate Assistant Commissioner of Excess Profits Tax directed that the E. P. T. assessment should be made afresh. The assessee challenged the provisional assessment order, arguing that it had merged with the final assessment order and could not stand independently after the final assessment was set aside. The assessee also challenged the constitutionality of Section 46 (2), Income Tax Act and the Bengal Public Demands Recovery Act 3 of 1913, arguing that they were discriminatory and offended Article 14 of the Constitution.
Finding of the Court:
The court held that the provisional assessment order did not merge with the final assessment order and could stand independently. The court also held that Section 46 (2), Income Tax Act and the Bengal Public Demands Recovery Act 3 of 1913 were not discriminatory and did not offend Article 14 of the Constitution.
Issues: 1. Whether the provisional assessment order merged with the final assessment order and could not stand independently after the final assessment was set aside? 2. Whether Section 46 (2), Income Tax Act and the Bengal Public Demands Recovery Act 3 of 1913 were discriminatory and offended Article 14 of the Constitution?
Ratio Decidendi: 1. The court held that the provisional assessment order did not merge with the final assessment order and could stand independently because: * The scheme of Section 14a, E. P. T. Act is that it enables a provisional assessment to be made and steps taken for its realization, without waiting for the final assessment. * It is meant to expedite the process of assessment and realization of tax. * Under Section 14a (6) and (7), the completion of a "regular assessment", does not get rid of the temporary assessment. * If the regular assessment amounts to more, it is to be reduced by the amount of the temporary assessment, which is another way of saying that it is effective only for the excess amount. * This shows that the provisional assessment is not "set aside" in that sense, when a final assessment is made, nor is there any question of merger. 2. The court held that Section 46 (2), Income Tax Act and the Bengal Public Demands Recovery Act 3 of 1913 were not discriminatory and did not offend Article 14 of the Constitution because: * Section 46 (2), Income Tax Act does not by itself lay down any provision of law which is discriminatory. * It merely says that the certificate may be realized as arrears of land revenue. * It is only in the application of it that there can be any question of discriminatory treatment. * The classification into areas is by no means a rare classification and is not necessarily unreasonable. * The guarantee of equal protection does not prevent the State from applying different laws or different systems of judicature to different parts or local sub-divisions of the Country. * The classification is not arbitrary but is founded on an intelligible differentia and the differentia has a rational relation to the object sought to be achieved by the Act.
Final Decision: The court discharged the rule and vacated all interim orders. There was no order as to costs.
( 1 ) THIS application concerns the assessment of excess profits tax (hereinafter referred to as the E. P. Tax) under the Excess Profits Tax Act, 1940 (Act 15 of 1840) (hereinafter referred to as the E. P. T. Act), of the firm of Sriram Jhabarmull for the chargeable accounting period, 26-3-1942 to 13-4-1943. The firm has been assessed on the footing of a Hindu undivided family, of which the Karta is Nandram Agarwalla.
( 2 ) THE original E. P. T. Act did not contain any provision for provisional assessment. This was introduced by Ordinance No. 16 of 1943 which introduced Section 14a. As this provision is not generally found in the current text books, I set it out below :"14a. 'power to make provisional assessments'. (1) The Excess Profits Tax Officer before proceeding to make an assessment (in this Section referred to as the provisional assessment) under Section 14, may at any time after the expiry of the period specified in the notice issued under Sub-section (1) of Section 13 as that within which the return therein referred to is to be furnished, and whether the return has or has not been furnished, proceed to make in summary manner a provisional assessment of the amount by which the profits of the chargeable accounting period, exceed the standard profits, and the amount of excess profits tax payable thereon. (2) Before making such provisional assessment the Excess Profits Tax Officer shall give notice in the prescribed form to the person on whom, assessment is to be made of his intention to do so, and shall with the notice forward a statement of the amount of the proposed assessment, and the said person shall be entitled to deliver to the Excess Profits Tax Officer at any time within fourteen days of receipt of the said notice a statement of his objections, if any, to the amount of the proposed assessment. (3) On expiry of one month from the date of service of the notice referred to in Sub-section (2), or earlier if the assessee agree to the proposed assessment, the Excess Profits Tax Officer may, after taking into account the objections, if any, made under Sub-section (2), make a provisional assessment, and shall furnish a copy of the order of assessment to the assessee. Provided that assent to the amount of assessment, or failure to make objection to it, shall in no way prejudice the assessee in relation to the regular assessment. (4) In making any such provisional assessment the Excess Profits Tax Officer shall make allowances for any deficiencies of profits for previous chargeable accounting periods which are under the provisions of Section 7 to be set off against the excess profits of the chargeable accounting period in respect of which the assessment is being made. Provided that where such deficiencies of profits have not been determined under Sub-section (1) of Section 14, the Excess Profits Tax Officer shall estimate the amount thereof to the best of his judgment. (5) There shall be no right of appeal against a provisional assessment under this section, and it shall, until a regular assessment is made in due course under Section 14, determine the amount of excess profits tax due from the assessee. (6) If when a regular assessment is made in due course under Section 14, the amount of Excess Profits Tax payable thereunder is found to exceed that determined as payable by the provisional assessment, it shall be reduced by the amount determined as payable by the provisional assessment. (7) If when a regular assessment is made in due course under Section 14, the amount of Excess Profits Tax payable thereunder is found to be less than that determined as payable by the provisional assessment, any excess of tax paid as a result of the provisional assessment shall be refunded to the assessee together with interest at 5 per cent. per annum calculated from, the date of payment of such excess tax to the date of the order of refund, both days inclusive. "
( 3 ) ON 10-9-1947, the E. P. T. Officer by a provisional assess
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
