The Hindu : Advance tax could be demanded by AO

Online edition of India's National Newspaper
Monday, Aug 19, 2002

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Business

Advance tax could be demanded by AO

Q: The Finance Bill, 2002 proposes to amend with effect from June 1, 2002, the provisions of Sec. 210 to empower the assessing officer to issue an order in writing, to require any person to pay advance tax as prescribed in the notice. Does this amendment imply that the assessee would be forced to pay the advance tax demanded even if according to his own estimate, the liability is nil or a much lesser amount?

A: It was always possible for the Income-tax Department to issue notice of advance tax, notwithstanding the fact that it is a matter of voluntary compliance. Sec. 210(3), as worded prior to amendment, authorises issue of notice only for those who have not paid any advance tax. By removal of the words "and who has not paid advance tax under sub-section (1)," it would appear that such notice could be issued even for those who have paid say, one or two instalments, if the amount paid in earlier instalment is not proportionate to the demand payable on the basis of last return/ last completed assessment.

Where the assessing officer issues notice, it has to be based on the tax on income on the last completed assessment or the last return filed by the assessee, whichever is higher. The object is that, where advance tax paid is lesser than the tax that would be payable on the past basis, the assessing officer can issue a notice of demand as per law, so that the assessee could be called upon to pay advance tax on the basis of the assessing officer's notice. Even so nothing prevents the assessee to pay according to his own estimate of current income as provided under sub-section (5) of Sec. 210. But in such a case, he should send an intimation in Form 28A, so that the demand in excess of the tax on the current income as estimated will stand reduced. If he does not send an estimate and does not pay according to the advance tax demand notice, it can be recovered like any other normal demand. It may also be pointed out that the demand notice for advance-tax does not spare the responsibility to pay advance tax, if the current income is more than the amount demanded. If not so paid, the interest for short payment of tax under Sec. 234B and short payment of instalments due under Sec. 234C, at any rate, will be payable.

Even prior to the present amendment, where no advance tax had been paid in any instalments, the Department has not been exercising right to issue any notice under Sec. 210(3), just as it had not been issuing notice calling for return under Sec. 142(1) to non-filers. Such omission may well account for uncollectible arrears, because what is not demanded and paid as and when the income is earned may not be possible of payment after sometime. Amendment to law enlarging the scope of the power under Sec. 210 on paper by itself may not be enough, unless the Department is activised to take prompt action on non-filers and those who have not paid advance tax, whenever the records indicate liability with reference to past incomes. Taxpayers, who comply with law, do expect the tax administration to exert itself to enforce compliance on the part of others, who do not.

S. Rajaratnam

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Advance tax could be demanded by AO