Case: M/s. Jaipur Udyog Limited &amp; Another Vs. Commissioner of Income Tax, Delhi, Rajasthan &amp; Another

of the claim in making a provisional assessment. In our judgment, if it be granted that the Income-tax Officer has jurisdiction to hold an enquiry into disputed matters, the expression "provisional assessment" may lose all significance: the Income-tax Officer may under a summary assessment without giving an opportunity to the assessee to explain his claim negative it and the assessee has no redress under the Act against any erroneous or arbitrary action. The Court would not, unless compelled by the phraseology of the statute or by the clear implication arising therefrom, be justified in accepting that view. The clearest implication of S. 141 bars an enquiry at the stage of making a provisional assessment into disputed questions of law and fact: it is a matter of no moment that the dispute raised is complicated or is easy of solution. In our judgment, once a dispute is raised by the assessee the Income-tax Officer has no discretion. By sub-section (2) of S. 141 the Income-tax Officer is enjoined to give effect to the provisions of Ss. 32 (2), 72 (1), 73(2) and 74 (1) of the Act: Sub-s. (2) does not enlarge his jurisdiction under sub-s. (1).8. The High Court was of the view that the basic scheme of the Act is that tax is to be charged at the rate or rates prescribed for the year on the total income of the assessee and in accordance with the provisions of the Act, and that this basic scheme applies alike to a provisional assessment as to a regular assessment. Consequently in construing the provisions of S. 141 of the Act, assessment of tax must also be made in accordance with and subject to the provision of the Act, i. e. in making a provisional assessment the "necessary facts" about the income of the assessee must be taken by the Income-tax Officer from the return and the documents accompanying it and he should not travel beyond, but in making the provisional assessment he cannot ignore the other statutory provisions: he must apply the law correctly to the admitted facts as per return. The High Court proceeded to observe:"The combined effect of the two sections, namely, Sections 72 and 80 of the Act, is that a business loss can be carried forward to the subsequent assessment years only when it has been determined in pursuance of a return filed under Section 139 of the Act."The claim of the Company that it was entitled to the benefit of carry forward losses of previous years, merely because it had shown such losses in the returns, could not, in the view of the High Court, be accepted: to give effect to the claim of the Company, in the view of the High Court will be to ignore the provisions of S. 80 which apply both to a regular assessment and a provisional assessment under S. 141.9. We are unable to accept the opinion of the High Court. If it be assumed that provisional assessment has to be made in accordance with and subject to the provisions of the Act, distinction between a provisional assessment and a regular assessment gets completely blurred. The scheme of S. 141 is to call upon the assessee to pay tax provisionally at the appropriate rate on what he admits is his taxble income, subject to the benefit of the allowances under sub-s. (2). The section does not permit an enquiry to be made whether the total income returned by the assessee exceeds the amount admitted by him, nor whether the allowances or deductions claimed are admissible. If there be a discrepancy between the return made and the accounts and documents accompanying the return, the Income-tax Officer may ask the assessee to explain the discrepancy, but he must make a provisional assessment on the basis of the return initially made or clarified and the accounts and documents filled. He cannot make a provisional assessment by holding that certain claims made by the assessee are in law unjustified. If it transpires that the assessee has without reasonable cause concealed particulars of his income or has furnished inaccurate particulars of his income, it may be open to the Income-tax Officer to impose penalty upon him after the regular assessment is completed. But it is not open to him to determine whether there has been any concealment of particulars of income or to decide whether claims which have been made are unwarranted. In the view we have expressed, the Income-tax Officer was not justified in holding that the claim made by the Company for carrying forward and seeking to debit against Rs. 74 lakhs odd an amount of Rs. 103 lakhs odd was liable to be rejected.10. For the same reasons in making the provisional assessment for the year 1964-65 the Income-tax Officer was not entitled to ignore the claim made by the Company that against the income of Rs. 59,89,757/- returned, Rs. 36,01,735/- should be permitted to be debited. The order demanding tax of Rs. 17,32,768-60 for the year1964-65 also was, in our view, erroneous.11. For the year 1965-66 the Income-tax Officer demanded payment of advance tax on the provisional assessment for the year 1964-65.It is true that under subs. (3) of S. 210 as inserted by Act 13 of 1963 and later modified by Act 31 of 1964 the Income-tax Officer is entitled to make an order for payment of advance-tax on the basis of provisional assessment made under S. 141, and he is not obliged to demand advance-tax only for the amount provisionally assessed by way of regular assessment in respect of any previous year. Sub-section (3) of S. 210, however, predicates a valid provisional assessment on the basis of which advance-tax may be demanded.But the provisional assessment for the year 1964-65 made by the Income-tax Officer was invalid, and tax could not be demanded on that invalid assessment. No order for payment of advance-tax for the year 1965-66 could then be made, relying upon the provisional assessment for the year 1964-65.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]8. The High Court was of the view that the basic scheme of the Act is that tax is to be charged at the rate or rates prescribed for the year on the total income of the assessee and in accordance with the provisions of the Act, and that this basic scheme applies alike to a provisional assessment as to a regular assessment. Consequently in construing the provisions of S. 141 of the Act, assessment of tax must also be made in accordance with and subject to the provision of the Act, i. e. in making a provisional assessment the "necessary facts" about the income of the assessee must be taken by the Income-tax Officer from the return and the documents accompanying it and he should not travel beyond, but in making the provisional assessment he cannot ignore the other statutory provisions: he must apply the law correctly to the admitted facts as perclaim of the Company that it was entitled to the benefit of carry forward losses of previous years, merely because it had shown such losses in the returns, could not, in the view of the High Court, be accepted: to give effect to the claim of the Company, in the view of the High Court will be to ignore the provisions of S. 80 which apply both to a regular assessment and a provisional assessment under S. 141.9. We are unable to accept the opinion of the High Court. If it be assumed that provisional assessment has to be made in accordance with and subject to the provisions of the Act, distinction between a provisional assessment and a regular assessment gets completely blurred. The scheme of S. 141 is to call upon the assessee to pay tax provisionally at the appropriate rate on what he admits is his taxble income, subject to the benefit of the allowances under sub-s. (2). The section does not permit an enquiry to be made whether the total income returned by the assessee exceeds the amount admitted by him, nor whether the allowances or deductions claimed are admissible. If there be a discrepancy between the return made and the accounts and documents accompanying the return, the Income-tax Officer may ask the assessee to explain the discrepancy, but he must make a provisional assessment on the basis of the return initially made or clarified and the accounts and documents filled. He cannot make a provisional assessment by holding that certain claims made by the assessee are in law unjustified. If it transpires that the assessee has without reasonable cause concealed particulars of his income or has furnished inaccurate particulars of his income, it may be open to the Income-tax Officer to impose penalty upon him after the regular assessment is completed. But it is not open to him to determine whether there has been any concealment of particulars of income or to decide whether claims which have been made are unwarranted. In the view we have expressed, the Income-tax Officer was not justified in holding that the claim made by the Company for carrying forward and seeking to debit against Rs. 74 lakhs odd an amount of Rs. 103 lakhs odd was liable to be rejected.10. For the same reasons in making the provisional assessment for the year 1964-65 the Income-tax Officer was not entitled to ignore the claim made by the Company that against the income of Rs. 59,89,757/- returned, Rs. 36,01,735/- should be permitted to be debited. The order demanding tax of Rs. 17,32,768-60 for the year1964-65 also was, in our view, erroneous.11. For the year 1965-66 the Income-tax Officer demanded payment of advance tax on the provisional assessment for the year 1964-65.It is true that under subs. (3) of S. 210 as inserted by Act 13 of 1963 and later modified by Act 31 of 1964 the Income-tax Officer is entitled to make an order for payment of advance-tax on the basis of provisional assessment made under S. 141, and he is not obliged to demand advance-tax only for the amount provisionally assessed by way of regular assessment in respect of any previous year. Sub-section (3) of S. 210, however, predicates a valid provisional assessment on the basis of which advance-tax may be demanded.But the provisional assessment for the year 1964-65 made by the Income-tax Officer was invalid, and tax could not be demanded on that invalid assessment. No order for payment of advance-tax for the year 1965-66 could then be made, relying upon the provisional assessment for the year 1964-65.