Income Tax Appellate Tribunal - Amritsar
Assistant Commissioner Of Income Tax vs Satia Paper Mills Ltd. on 31 January, 2006
Equivalent citations: (2006)100TTJ(ASR)526
ORDER
Joginder Pall, A.M.
1. By this order, we shall dispose of this appeal filed by the Revenue against the order of CIT(A), Bathinda, for the asst. yr. 2001-02.
2. The only effective issue raised in this appeal relates to the fact that CIT(A) was not justified in cancelling the order passed by the AO under Section 154 for charging interest under Sections 234B and 234C of the IT Act, 1961 (in short "the Act"). The facts of the case are that assessee had filed the return of income declaring therein income under Section 115JB and paid the tax to the tune of Rs. 9,88,658. This included an amount of TDS of Rs. 3,72,942 and payment made under Section 140 amounting to Rs. 6,12,040. The return was processed under Section 143(1)(a) and interest under Sections 234B and 234C was not charged. Subsequently, the AO issued a show-cause notice under Section 154 of the Act proposing to charge interest under Sections 234B and 234C. In response to such show-cause notice, the assessee by relying on the judgment of Karnataka High Court in the case of Kwality Biscuits Ltd. v. CIT and the decision of Tribunal, Delhi Bench, in the case reported in Tej International (P) Ltd. v. Dy. CIT (2000) 69 TTJ (Del) 650 submitted that interest under Sections 234B and 234C could not be charged in a case where income was computed under Section 115J or 115JB. However, the AO referred to CBDT's Circular No. 13, dt. 9th Nov., 2001 as per which interest under Sections 234B and 234C was specifically directed to be charged in a case where income was computed as per provisions of Section 115JB and accordingly rectified the order under Section 154 and charged the interest under Sections 234B and 234C amounting to Rs. 56,614 and 46,360, respectively.
3. Being aggrieved, the assessee filed an appeal against the order of AO before the CIT(A). It was argued before the CIT(A) that exercise of computing the income as per provisions of Section 115JB could be made only after the close of the accounting year and therefore, the assessee could not ascertain the liability for advance tax at the time when the same was due. Reliance was placed on the judgment of Karnataka High Court in the case of Kwality Biscuits Ltd, v. CIT (supra). After considering the submissions of the assessee, the learned CIT(A) held that issue whether interest under Sections 234B and 234C should be charged or not was debatable where two views were possible. Therefore, the same fell outside the scope of provisions of Section 154 of the Act. The relevant findings recorded by the CIT(A) on p. 4 of the impugned order are as under: "I have examined the legal position discussed by the learned Counsel for the appellant as well as the details of the order under Section 154. I am in agreement with the learned Counsel to the effect that two views are clearly available on the issue as to whether interest under Sections 234B and 234C should be charged or not. This is apparent from the various case laws cited above by the learned Counsel. I, therefore, hold that the provisions of Section 154 are not applicable on account of various judgments, the mistake is not apparent from the records. The issue becomes debatable on account of various judgments quoted as above including the Tax Commentary by Dr. Avadesh Ojha.
In view of the above, I hereby cancel the order under Section 154 and restore the original position before this order.
Revenue is aggrieved by the order of CIT(A). Hence, this appeal before us.
4. The learned Departmental Representative referred to the order passed by the AO under Section 154 of the Act and submitted that as per Board's Circular No. 13, dt. 9th Nov., 2001 ((2001) 171 CTR (St) 45) interest under Sections 234B and 234C is chargeable in a case where income is computed as per provisions of Section 115JB. He submitted that Board's instructions are binding on the Revenue authorities and, therefore, the AO was justified in rectifying the order passed under Section 143(1)(a) under Section 154 of the Act.
5. The learned Counsel for the assessee, on the other hand, heavily relied on the order of CIT(A) and reiterated the submissions made before the authorities below. He submitted that it is settled law that scope of powers of the AO under Section 154 of the Act is limited only to mistakes of law or facts which are apparent from record. The issue which is debatable and where two views are possible falls outside the purview of Section 154. In this regard, he relied on the judgments of Supreme Court in the cases of T.S. Balaram, ITO v. Volkart Brothers and Keshavji Ravji & Co. v. CIT and Kerala High Court in the case of ITO v. Travancore Rayons Ltd. . He further relied on the judgment of Punjab & Haryana High Court in the case of CIT v. Rajesh Talkies where it was held that whether interest chargeable in case of returns filed pursuant to notices under Section 148 was debatable and, therefore, rectification for deletion of interest was not possible. He further stated that issue whether the interest under Sections 234B and 234C could be charged in a case where profit is determined as per provisions of Section 115JB was also debatable. He relied on the judgment of Karnataka High Court in the case of Kwality Biscuits Ltd. v. CIT (supra) where it was held that interest under Sections 234B and 234C could not be charged in such a case. He further submitted that this decision was followed by Tribunal, Delhi Bench in the case reported in (2000) 69 TTJ (Del) 650 (supra). When the attention of the learned Authorised Representative was drawn to the recent judgment of jurisdictional High Court of Punjab & Haryana in the case of CIT v. Upper India Steel Mfg. & Engg. Co. Ltd. (2004) 192 CTR (P&H) 385 : (2005) 279 ITR 123 (P&H) where it was held that charging of interest under Sections 234B and 234C in a case where income was computed as per provisions of Section 115J was mandatory and could be charged at the time of processing the return under Section 143(1)(a), the learned Authorised Representative still maintained that this issue was debatable at the time when return was processed as the judgment of Punjab & Haryana High Court did not exist on the date when AO passed the order under Section 154 of the Act. He also relied on the recent judgment of Punjab & Haryana High Court in the case of CIT v. P.K. Bhardwaj where the High Court held that since the order of the jurisdictional High Court came later than the date when AO passed an order under Section 154, the issue was debatable when AO passed an order under Section 154. He further submitted that Revenue has already initiated reassessment proceedings against the assessee by issue of notice under Section 148 on 18th June, 2004 and, therefore, there would be no loss to the Revenue. His attention was drawn to the judgment of Punjab & Haryana High Court, Full Bench in the case of CIT v. Smt. Aruna Luthia (FB) where it was held that if there is a judgment of jurisdictional High Court or the Supreme Court, the same would relate back to the date when a particular section was inserted in the statute and provisions of Section 154 of the Act would be applicable even though such judgment did not exist on the date when order in dispute was passed. The learned Authorised Representative relied on the judgment of Andhra Pradesh High Court in the case of CIT v. K. Venkateswara Rao (1988) 67 CTR (AP) 136 : (1988) 169 ITR 330 (AP) in support of the contention that if the judgment of jurisdictional High Court did not exist on the date when order under Section 154 was passed, the subsequent judgment of jurisdictional High Court on the issue would make the matter debatable and the same is not a mistake apparent from record.
6. We have heard both the parties at some length and given our thoughtful consideration to the rival submissions, examined the facts, evidence and material placed on record and gone through the orders of authorities below, The undisputed facts of the case are that in the return of income filed income was declared as per provisions of Section 115JB, The same was processed under Section 143(1)(a) and interest under Sections 234B and 234C which was otherwise chargeable on the basis of income declared under Section 115JB, the same was not charged. The AO charged the same as per order dt. 23rd June, 2003 passed under Section 154 of the IT Act, 1961. The learned CIT(A) has deleted the same by relying on the judgment of Karnataka High Court in the case of Kwality Biscuits Ltd. v. CIT (supra). However, in the case of CIT v. Upper India Steel Mfg. & Engg, Co. Ltd. (supra), the Hon'ble jurisdictional High Court of Punjab & Haryana has dissented from the view taken by the Karnataka High Court in the case of Kwality Biscuits Ltd. v. CIT (supra) and has held that interest under Sections 234B and 234C is inescapable even in a case where income is computed as per provisions of Section 115J (now Section 115JB). The Court has further held that charging of interest under these sections does not fall in the category of adjustments mentioned under Section 143(1)(a) and, therefore, it cannot be equated with adjustments. The relevant findings recorded by the Hon'ble High Court on p. 125 of 279 ITR (headnotes) are as under :
Held, that the Tribunal was required to resolve the issue solely on the merits and could not have granted the relief on the ground that the issue was debatable. If the explanation of the assessee that the profits under Section 115J could only be determined after the close of the year were to be accepted, then no assessee who maintains regular books of account, would be liable to pay advance tax as in those cases also, income could only be determined after the close of the books of account at the end of the year. The Tribunal had wrongly equated the AO's action in levying interest under Sections 234B and 234C with an adjustment referred to in Section 143(1)(a). Thus, the tests applicable to examine the validity of adjustments permissible under Section 143(1)(a) had been wrongly applied by the Tribunal for quashing the levy of interest under Sections 234B and 234C.
Therefore, as per the judgment of Punjab & Haryana High Court in the above case, the order of CIT(A) deserves to be set aside.
6.1 Now the next question that requires to be considered by this Bench is whether the judgment of Hon'ble Punjab & Haryana High Court in the above case which was delivered on 25th Sept., 2004 and the order under Section 154 was passed by the AO on 23rd June, 2003 and therefore, the judgment could be held to apply to the date when AO passed an order under Section 154 of the Act. This issue came to be considered by the Hon'ble Punjab & Haryana High Court (Full Bench) in the case of CIT v. Smt. Aruna Luthra (supra) where it was held that Section 154 does not provide that the error has to be seen in the order with reference to the date on which it was passed. The Court further held that power under Section 154 can be invoked even when an issue is decided by the jurisdictional High Court or a superior Court after the order had been passed. It was held that if the order of the jurisdictional High Court or Supreme Court is of later date, the same would relate back to the date when the section was inserted in the statute and the order giving rise to such dispute was passed, In this respect, it would be appropriate to reproduce herein the relevant paras on p. 80 of 252 ITR where the Court observed as under :
There is another aspect of the matter. In a given case, on an interpretation of a provision, an authority can take a view in favour of one of the parties. Subsequent to the order, the jurisdictional High court or their Lordships of the Supreme Court interpret the same provision and take a contrary view. The apparent effect of the judgment interpreting the provision is that the view taken by the authority is rendered erroneous. It is not in conformity with the provision of the statute. Thus, there is a mistake. Should it still be perpetuated ? If the contention raised on behalf of the assessee were accepted, the result would be that even though the order of the authority is contrary to the law declared by the highest Court in the State or the country, still the mistake could not be rectified for the reason that the decision is subsequent to the date of the order.
Only the dead make no mistake. Exemption from error is not the privilege of mortals. It would be a folly not to correct it, Section 154 appears to have been enacted to enable the authority to rectify the mistake. The legislative intent is not to allow it, to continue. This purpose has to be promoted. The legislature's will has to be carried out. By placing a narrow construction, the object, of the legislation shall be defeated. Such a consequence should not be countenanced.
Still further, it deserves mention that Parliament has prescribed a period of four years for correction of the mistake. While an assessment under Section 143 or 144 has to be normally made within a period of one or two years, the mistake can be rectified at any time during the period of four years. The obvious intention of the legislature is that if the mistake has come to the notice of the authority within the prescribed time, it should not be allowed to continue. It should be rectified. Regardless of the fact, that the limitation for passing an order of assessment or filing an appeal has elapsed, Still further, the provision has in-built safeguards. It provides for the issue of notice. It ensures the grant of an opportunity. It limits the jurisdiction of the authority. The action can benefit the assessee as well as the Revenue. In this situation, there appears to be no ground for placing an unduly restricted interpretation on the provision.
Thus, it is clear that even if the impugned order of the CIT(A) was passed before the date of judgment of the Punjab & Haryana High Court, yet the same was erroneous and contrary to the provisions of the Act as interpreted by the Punjab & Haryana High Court/Therefore, the same deserves to be set aside and that of AO is to be restored.
6.2 The learned Counsel has relied on the later judgment of Punjab & Haryana High Court in the case of CIT v. P.K. Bhardwaj (supra) where it was held that the decision rendered by jurisdictional High Court on subsequent date on 27th Oct:, 1998 would not justify invoking of provisions of Section 154 to assess amount in November, 1993. This judgment is no doubt in favour of the assessee because in this case also order under Section 154 was passed on 23rd June, 2003. The AO had. not relied on the judgment of Punjab & Haryana High Court in the case decided by the High Court on 25th Sept., 2004 (supra). But in the present case of CIT v. P.K. Bhardwaj (supra), the judgment of Full Bench of Punjab & Haryana High Court in the case of CIT v. Smt. Aruna Luthra (supra) was not cited before the High Court. Therefore, in a later case the Hon'ble Punjab & Haryana High Court did not have the benefit of referring to earlier judgment which was specifically on the issue of scope of powers under Section 154 and the effect of subsequent judgment of the jurisdictional High Court or Supreme Court. Moreover, it is settled law that the judgment of Full Bench/larger Bench gets precedence over the judgment of Division Bench/smaller Bench of the same High Court. It is also settled law that, the judgment of the jurisdictional High Court is binding on all the authorities falling in its jurisdiction even though there is a judgment of some other High Court taking a contrary view. Therefore, with utmost respect to the judgment of Andhra Pradesh High Court in the case of CIT v. K. Venkateswara Rao (supra.) and the judgment of Division Bench of the Punjab & Haryana High Court in the case CIT v. P.K. Bhardwaj (supra), we rely on the judgment of Full Bench of Punjab & Haryana High Court in the case of CIT v. Smt. Aruna Luthra (supra) and hold that view taken by the CIT(A) is erroneous and contrary to the provrsions of law. Therefore, the order of CIT(A) is set aside and that of AO is restored. The grounds of appeal of the Revenue are allowed.
7. In the result, the appeal of the Revenue is allowed.