My assessment was reduced in appeal and more advance tax turned out to be excess. Does section 214 interest run to the date of the revised assessment?
No. The Supreme Court, resolving a conflict that had divided almost every High Court, read regular assessment in section 214 as the first assessment order made by the Income-tax Officer under section 143 or section 144. Interest under section 214(1) therefore runs from 1 April following the financial year to the date of that first assessment, and the excess is measured against the tax determined by it, not against the tax as reduced later in appeal or revision. Excess tax thrown up by an appellate or revisional order is dealt with by the refund provisions instead, in particular section 244(1A).
Decided by the Supreme Court (Supreme Court of India - B.P. Jeevan Reddy, S.C. Sen and S.B. Majmudar, JJ (judgment by Jeevan Reddy, J)) on 1995-09-15, reported as (1995) 6 SCC 396; (1995) 216 ITR 759; JT 1995 (6) 549; 1995 AIR SCW 3958. It bears on section 214, section 2(40), section 244(1A), section 143 of the Income Tax Act 1961, in Refunds, Interest & Condonation and Assessment & Scrutiny matters.
Section 214 had produced an unusually bad split - Bombay, Kerala, Allahabad, Punjab and Haryana, Andhra Pradesh and Gauhati reading regular assessment as the first assessment, Calcutta, Gujarat, Rajasthan, Karnataka and Madras reading it as the revised assessment made on an appellate order, and Delhi taking a middle course - and this three-judge decision settles it. Its importance now is structural rather than practical: it establishes that pre-assessment interest on advance tax and post-assessment interest on money found excess in appeal are separate schemes with separate provisions, and that the first stops when the first assessment order is made. That division survives in the current law, where section 244A carries the second limb.
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The batch raised a single question of construction on which the High Courts were irreconcilably divided: what regular assessment means in section 214. The Court set out the history. Advance tax was introduced by section 18A of the 1922 Act in 1944, and from 1952 interest was payable only on the amount by which the instalments exceeded the tax determined on regular assessment, an expression the 1922 Act did not define. Section 2(40) of the 1961 Act defines it as an assessment under section 143 or section 144. The Court framed the problem by illustration: where an assessee is entitled to Rs 10,000 on the original assessment and to Rs 15,000 after a revised assessment made on an appellate order, is interest payable on Rs 10,000 or Rs 15,000, and does it run to the date of the first assessment or of the revised one. It then traced the amendments to section 214 - the proviso and sub-section (1A) added in 1968 with section 141A, and the substituted sub-section (1A) and Explanations of 1985 - and the refund provisions in Chapter XIX, including section 244(1A) inserted from 1 October 1975.
The Court held that regular assessment in section 214 is used in the sense of the first assessment - the assessment order passed by the Income-tax Officer under section 143 or section 144 - and not the revised assessment made to give effect to an appellate, revisional or reference order. Both the original and the revised assessment are relatable to those sections, so the definition in section 2(40) does not by itself answer the question; the answer comes from the way Parliament has used the expression across the Act. The Court pointed to sub-section (1A) as substituted in 1985, which provides for the interest to be increased or reduced where an order under section 147, 154, 155, 250, 254, 260, 262, 263 or 264 alters the amount on which interest was payable: that machinery would be unnecessary if the revised assessment were itself the regular assessment. It also read the 1968 proviso, which limits interest to the date of a provisional assessment under section 141A, as consistent only with regular assessment meaning the first order of assessment.
The Court's method was to test each reading against the rest of the statute. Sections 143 and 144 speak only of assessment, and an assessment revised on an appellate order is made under the same sections, so the definition in section 2(40) does not distinguish between the first order and a later one; the question is whether regular assessment is used merely in contrast to a provisional assessment or carries a narrower sense. Two sets of amendments answered it. First, the provisions inserted in 1985 - sub-section (1A) of section 214 and the Explanations - assume that an order under section 147, 250, 254, 263 or 264 alters an interest liability already worked out on the regular assessment, and provide machinery to increase or reduce it and to recover any excess by a notice of demand. That structure presupposes that the regular assessment is an earlier and different thing from the order that alters it. The Court treated these as an unmistakable indication of the sense Parliament attached to the expression in section 214(1). Second, the 1968 amendments, made together with section 141A, point the same way: interest is paid on an amount refunded on provisional assessment only up to the date of that provisional assessment, and sub-section (1A) as then framed dealt with what happens when the regular assessment shows the refund to have been too large. Both make sense only if the regular assessment is the first order of assessment. Alongside this the Court set out Chapter XIX, where section 240 and section 244(1A) provide interest on amounts found excess in appeal or other proceedings, showing that the excess produced by an appellate order has its own provision.
The amendments made to Section 214 from time to time also go to indicate that regular assessment in Section 214 was used in the sense of the first assessment.
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Handle my notice → Ask a CA on WhatsAppNo. The Supreme Court, resolving a conflict that had divided almost every High Court, read regular assessment in section 214 as the first assessment order made by the Income-tax Officer under section 143 or section 144. Interest under section 214(1) therefore runs from 1 April following the financial year to the date of that first assessment, and the excess is measured against the tax determined by it, not against the tax as reduced later in appeal or revision. Excess tax thrown up by an appellate or revisional order is dealt with by the refund provisions instead, in particular section 244(1A). This was decided by the Supreme Court (Supreme Court of India - B.P. Jeevan Reddy, S.C. Sen and S.B. Majmudar, JJ (judgment by Jeevan Reddy, J)) and bears on section 214, section 2(40), section 244(1A), section 143 of the Income Tax Act 1961. It is reported as (1995) 6 SCC 396; (1995) 216 ITR 759; JT 1995 (6) 549; 1995 AIR SCW 3958. Section 214 had produced an unusually bad split - Bombay, Kerala, Allahabad, Punjab and Haryana, Andhra Pradesh and Gauhati reading regular assessment as the first assessment, Calcutta, Gujarat, Rajasthan, Karnataka and Madras reading it as the revised assessment made on an appellate order, and Delhi taking a middle course - and this three-judge decision settles it. Its importance now is structural rather than practical: it establishes that pre-assessment interest on advance tax and post-assessment interest on money found excess in appeal are separate schemes with separate provisions, and that the first stops when the first assessment order is made. That division survives in the current law, where section 244A carries the second limb. If it applies to you, the first step is this: Compute interest on excess advance tax against the tax determined by the first assessment order, and stop the period at the date of that order.
The batch raised a single question of construction on which the High Courts were irreconcilably divided: what regular assessment means in section 214. The Court set out the history. Advance tax was introduced by section 18A of the 1922 Act in 1944, and from 1952 interest was payable only on the amount by which the instalments exceeded the tax determined on regular assessment, an expression the 1922 Act did not define. Section 2(40) of the 1961 Act defines it as an assessment under section 143 or section 144. The Court framed the problem by illustration: where an assessee is entitled to Rs 10,000 on the original assessment and to Rs 15,000 after a revised assessment made on an appellate order, is interest payable on Rs 10,000 or Rs 15,000, and does it run to the date of the first assessment or of the revised one. It then traced the amendments to section 214 - the proviso and sub-section (1A) added in 1968 with section 141A, and the substituted sub-section (1A) and Explanations of 1985 - and the refund provisions in Chapter XIX, including section 244(1A) inserted from 1 October 1975. The matter was decided on 1995-09-15 by the Supreme Court (Supreme Court of India - B.P. Jeevan Reddy, S.C. Sen and S.B. Majmudar, JJ (judgment by Jeevan Reddy, J)). On those facts the Supreme Court held as follows. The Court held that regular assessment in section 214 is used in the sense of the first assessment - the assessment order passed by the Income-tax Officer under section 143 or section 144 - and not the revised assessment made to give effect to an appellate, revisional or reference order. Both the original and the revised assessment are relatable to those sections, so the definition in section 2(40) does not by itself answer the question; the answer comes from the way Parliament has used the expression across the Act. The Court pointed to sub-section (1A) as substituted in 1985, which provides for the interest to be increased or reduced where an order under section 147, 154, 155, 250, 254, 260, 262, 263 or 264 alters the amount on which interest was payable: that machinery would be unnecessary if the revised assessment were itself the regular assessment. It also read the 1968 proviso, which limits interest to the date of a provisional assessment under section 141A, as consistent only with regular assessment meaning the first order of assessment.
The Court's method was to test each reading against the rest of the statute. Sections 143 and 144 speak only of assessment, and an assessment revised on an appellate order is made under the same sections, so the definition in section 2(40) does not distinguish between the first order and a later one; the question is whether regular assessment is used merely in contrast to a provisional assessment or carries a narrower sense. Two sets of amendments answered it. First, the provisions inserted in 1985 - sub-section (1A) of section 214 and the Explanations - assume that an order under section 147, 250, 254, 263 or 264 alters an interest liability already worked out on the regular assessment, and provide machinery to increase or reduce it and to recover any excess by a notice of demand. That structure presupposes that the regular assessment is an earlier and different thing from the order that alters it. The Court treated these as an unmistakable indication of the sense Parliament attached to the expression in section 214(1). Second, the 1968 amendments, made together with section 141A, point the same way: interest is paid on an amount refunded on provisional assessment only up to the date of that provisional assessment, and sub-section (1A) as then framed dealt with what happens when the regular assessment shows the refund to have been too large. Both make sense only if the regular assessment is the first order of assessment. Alongside this the Court set out Chapter XIX, where section 240 and section 244(1A) provide interest on amounts found excess in appeal or other proceedings, showing that the excess produced by an appellate order has its own provision. In the words reproduced by the source cited on this page: "The amendments made to Section 214 from time to time also go to indicate that regular assessment in Section 214 was used in the sense of the first assessment."
It was decided by the Supreme Court on 1995-09-15 and is reported as (1995) 6 SCC 396; (1995) 216 ITR 759; JT 1995 (6) 549; 1995 AIR SCW 3958. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 214, section 2(40), section 244(1A), section 143, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. The Court held that regular assessment in section 214 is used in the sense of the first assessment - the assessment order passed by the Income-tax Officer under section 143 or section 144 - and not the revised assessment made to give effect to an appellate, revisional or reference order. Both the original and the revised assessment are relatable to those sections, so the definition in section 2(40) does not by itself answer the question; the answer comes from the way Parliament has used the expression across the Act. The Court pointed to sub-section (1A) as substituted in 1985, which provides for the interest to be increased or reduced where an order under section 147, 154, 155, 250, 254, 260, 262, 263 or 264 alters the amount on which interest was payable: that machinery would be unnecessary if the revised assessment were itself the regular assessment. It also read the 1968 proviso, which limits interest to the date of a provisional assessment under section 141A, as consistent only with regular assessment meaning the first order of assessment. It arises in Refunds, Interest & Condonation and Assessment & Scrutiny matters, on section 214, section 2(40), section 244(1A), section 143 of the Income Tax Act 1961, and was decided by Supreme Court of India - B.P. Jeevan Reddy, S.C. Sen and S.B. Majmudar, JJ (judgment by Jeevan Reddy, J). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. For the further excess that emerges when an appellate or revisional order reduces the assessment, claim under the refund provisions rather than under section 214. Work from the current sections when the year is recent - this judgment construes section 214 and section 244(1A) as they stood before section 244A, and the words tax determined on regular assessment were replaced by assessed tax from 1 April 1985. When an assessment is set aside and made afresh, identify which order is the first assessment for the year before arguing about the terminal date.
Still good law. I read the legislative history, the framing of the question and the part of the Court's reasoning that survives on the harvested page. This is a three-judge decision given to settle a conflict among the High Courts. I checked no later authority in this session, and the interest and refund provisions have since been recast around section 244A. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The harvested page is doubly incomplete: about 65,000 characters of the middle are missing, and the text is cut off at 110,000 characters before the end. The operative order, any numbered conclusions, and the Court's disposal of the individual appeals in the batch are therefore not on this record, and the record above states only what the surviving reasoning establishes about the meaning of regular assessment in section 214. In particular I cannot say from this text how the Court dealt with credit for tax deducted at source or self-assessment tax, or what it said about interest on the further excess arising after appeal beyond describing section 244(1A). The favours field is entered as mixed for that reason: the construction adopted restricts interest under section 214, but the disposal of the appeals is not visible. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The Court held that regular assessment in section 214 is used in the sense of the first assessment - the assessment order passed by the Income-tax Officer under section 143 or section 144 - and not the revised assessment made to give effect to an appellate, revisional or reference order. Both the original and the revised assessment are relatable to those sections, so the definition in section 2(40) does not by itself answer the question; the answer comes from the way Parliament has used the expression across the Act. The Court pointed to sub-section (1A) as substituted in 1985, which provides for the interest to be increased or reduced where an order under section 147, 154, 155, 250, 254, 260, 262, 263 or 264 alters the amount on which interest was payable: that machinery would be unnecessary if the revised assessment were itself the regular assessment. It also read the 1968 proviso, which limits interest to the date of a provisional assessment under section 141A, as consistent only with regular assessment meaning the first order of assessment.
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