Landmark Decision On Tax Jurisprudence

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: A judgment delivered by the Supreme Court (SC)in May this year constitutes a landmark in the field of tax jurisprudence. The decision in the case C.I.T. v Shelly Products (129 Taxmann 271) was given in the context of the situation where an earlier assessment order was annulled in appellate proceedings and a subsequent assessment order was not passed. In such an event the question which came up before the SC was whether the aggregate amount of tax paid by way of advance tax and self-assessment tax was to be refunded, since the original assessment was annulled and no fresh assessment was made.

The apex court held that section 4 of Income-tax Act, 1961 creates the charge and provides, inter alia, for payment of tax in advance or deduction of tax at source. The Act provides for the manner in which advance tax is to be paid and penalises any assessee who makes a default or delays payment thereof. Similarly, the deduction of tax at source is also provided for in the Act and failure to comply with the provisions attracts penal provisions against the person responsible for making the payment. The Act also enjoins upon an assessee the duty to file a return of income disclosing his true income. On the basis of the income so disclosed, the assessee is required to make a self-assessment and compute the tax payable on such income and pay the same in the manner provided by the Act. The liability to pay income-tax chargeable under section 4(1), does not depend on the assessment being made. According to the Court, as soon as the Finance Act prescribes the rate or rates for any assessment year, the liability to pay the tax arises. The assessee is himself required to compute his total income and pay the income-tax thereon which involves a process of self-assessment. Since all this is done under the authority of law, there is no scope for contending that Article 265 is violative of the Constitution.