The Supreme Court has held that the tax deposited by an assessee by way of advance tax or self-assessment is not liable to be refunded to him if the authorities fail to frame a regular assessment after the earlier assessment is set aside or nullified.
It overruled the MP High Court judgment which had held that the assessee was entitled to the refund. The apex court also resolved the conflict of views on this point among the high courts in the Commissioner of Income-Tax vs Shelly Products case.
The revenue department, which had appealed against the MP High Court ruling, did not dispute the position that if an assessment was framed, which was later nullified by a tribunal, any amount paid by way of the income-tax pursuant to the order of the assessment, over and above the advance tax and the self-assessment tax would become refundable under Section 240 of the Income-Tax Act.
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The dispute was about the refund of the advance tax and the self-assessment tax paid by the assessee on his own assessment of his liability and was based on the return of the income filed by him.
According to the authorities, the tax so paid represented the admitted liability of the assessee and failure or inability to frame another assessment after the earlier assessment was set aside did not entitle the assessee to claim refund because to that extent the assessee had admitted his liability.
The liability is calculated on the basis of the relevant Finance Act laying down the rates at which the tax is payable and provided for other matters relevant to the computation of tax.
Thus the tax is required to be paid in advance by the assessee, even before the assessment is made, and he himself is required to compute his liability having regard to the rates and exemptions applicable.
The Bench comprising Justice Santosh Hegde and Justice BP Singh agreed with this view. They said the law required the assessee to file a return of income disclosing his true income.
On the basis of the income so disclosed, the assessee was required to make a self-assessment and to compute the tax payable on such income and to pay the same in the manner provided by the Act.