Payment of Advance Tax by itself not Proof of Disclosure of Income
SUPPOSE you pay advance tax, but do not file the return within time. In the meantime, the friendly income tax officers come for a search and find that you have income, which was not disclosed. You plead that you had all good intentions of disclosing the income in the return; that you are going to file the return and that is why you paid advance tax. AO would believe none of this and charges you with non-disclosure of income. Tribunal thought that payment of advance tax was good intention. So did the High Court, which observed, "the income disclosed by the assessee on payment of advance tax would be an income disclosed to the Revenue and cannot be treated as an income undisclosed for the relevant assessment year".
Revenue took the matter to the Supreme Court. The Apex Court observed,
a. The only way of disclosing income, on the part of an assessee, is through filing of a return, as stipulated in the Act, and therefore an "undisclosed income" signifies income not stated in the return filed.
b. Payment of Advance Tax and filing of return are functions of completely different notions of income i.e. estimated income and total income respectively. The payment of Advance Tax is based on an estimation of the total income that is chargeable to tax and not on the total income itself.
c. Advance Tax is based on estimated income, and hence, it cannot result in the disclosure of the total income assessable and chargeable to tax.
d. Since the Advance Tax payable by an assessee is an estimate of his "current income" for the relevant financial year, it is not the actual total income, to be disclosed in the return of income. To repeat, the vital distinction being that the "current income" is an estimation or approximation, which may not be accurate or final; whereas the "total income" is the exact income disclosed in a valid return, assessable by the Revenue. The fact that the "current income" is an estimation implies that it is not final and is subject to further adjustments in the form of additions or reductions, as the case may be, and would have to be succeeded by the disclosure of final and total income in a valid return.
e. If we were to hold that the payment of Advance Tax reflects the intention of the assessee to disclose its income, it could result in a situation where the mandatory obligation of filing a return for disclosure of income under the provisions of the Act, would not be necessary.
And the Supreme Court found that the concurrent findings of the Tribunal and High Court were not correct and allowed the Revenue appeal with costs of Rs. 50,000/- in each appeal - there were six appeals covered by this common judgement.
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