Income Tax Appellate Tribunal - Amritsar
Janak Raj Chauhan & Ors. vs Asstt. Cit on 29 November, 2001
Equivalent citations: (2002)75TTJ(ASR)260
ORDER
H.L. Karwa, J.M. These two appeals by the assessee involving common point of dispute against the consolidated order of the Commissioner (Appeals), Jalandhar, dated 10-3-2000, were heard together and are being disposed of by this common order for the sake of convenience.
2. For the assessment year 1987-88, the assessing officer charged interest amounting to Rs. 4,11,250 under section 139(8) and Rs. 3,56,680 under section 215/217 of the Income Tax Act, 1961. Similarly, the assessing officer has charged interest under section 139(8) and 215/217 of the Act amounting to Rs. 94,496 and Rs. 80,652, respectively. The main contention of the assessee in these appeals was that they were not at all liable to pay interest under sub-section 139(8) and 215/217 of the Act.
3. The relevant facts appearing from the records are that Janak Raj Chauhan, Jagdish Raj Chauhan and Smt. Sohagwanti, residents of Tagore Nagar, Jalandhar, were carrying out the venture of purchase/sale of agricultural land at village Masudabad, New Delhi, during the financial years 1986-87 and 1987-88, relevant to the assessment years under consideration. It is claimed that each of them had equal share in the said venture. The Income Tax Department conducted a search under section 132 of the Act at the assessees residential/business premises on 31-7-1992, during the course of which certain incriminating documents, papers, maps, conveyance deeds showing large scale transaction in immovable property, development of residential colonies, etc., were found. The seized documents revealed that an agreement was entered into for purchasing of 8-1/2 acres of land at village Masudabad Najafgarh Road, New Delhi, between the owner of the land on one hand as vendor and Janak Raj Chauhan, Jagdish Raj Chauhan and Smt, Sohagwanti on the other hand, as vendees. This land was developed into plots during the accounting periods, relevant to the assessment years 1987-88, 1988-89 and 1989-90. It is apparent that Janak Raj Chauhan filed his return of income for the assessment years 1987-88 and 1988-89 on 17-12-1993, in response to the notices issued under sections 147/148 of the Act. Similarly, Jagdish Raj Chauhan filed his returns of income in response to the notice under section 148 on 27-1-1993, for the assessment years 1987-88 and 1988-89. The assessing officer noted that Janak Raj Chauhan and his brother moved applications before the Settlement Commission in their individual cases. The applications filed before the Settlement Commission were rejected. Subsequently, Jagdish Raj Chauhan, Janak Raj Chauhan for himself and as a legal heir of Smt. Sohagwanti moved applications on 5-8-1996, to the Income Tax Officer, Ward 1(4), Jalandhar, for the assessment years 1987-88, 1988-89 and 1989-90, wherein it was stated that the members of Association of Person having 1/3rd share each purchased the agricultural land measuring 71/2 acres in village Masudabad, Najafgarh Road, New Delhi, and the land was sold in the form of plots from June, 1986, to December, 1988. It was further stated in the said application that the members of the Association of Person declared the income in the petition before the Settlement Commission, which was not admitted and now the Honble Supreme Court as recently held in the case of ITO v. Ch. Atchaiah (1996) 218 ITR 239 (SC) that in the new Act, the assessing officer has an option to assess the income either in the hands of the Association of Person or in the hands of the individual member, as it was available under the old Act and the assessing officer has to tax only the right person. Jagdish Raj Chauhan declared the income from the sale of plots of Delhi land in the three years as under :
Asst. yrs.
Income 1987-88 5,67,963 1988-89 1,69,003 1989-90 23,877 The assessing officer assessed the income of Association of Person and 1/3rd share of Jagdish Raj Chauhan was determined. Accordingly, the assessees 1/3rd share was worked out at Rs. 73,756 and Rs. 2,26,920 for the assessment years 1987-88 and 1988-89, respectively. The assessing officer further noted that the assessee had accounted for only 7-1/2 acres of land when the purchase was made of 81/2 acres of land. Applying the average selling rate of the one-acre of land he inferred that the assessee has suppressed the income of Rs. 4,41,020 by not showing the sale of one acre of land. He, divided this amount in the same proportion as the sales were shown in the three years and then from that amount, he worked out 1/3rd share of Jagdish Raj Chauhan. In other words, he made further addition on the share from the declared profit of the Association of Person.
4. The assessing officer had added 1/3rd share plus 1/3rd share of Smt. Sohagwanti in the hands of Janak Raj Chauhan. The additions in this respect for the three assessment years in respect of the profits of the said Association of Person were made by the assessing officer as under :
Asst. yrs.
Shares or profits in respect of Janak Raj Chauhan Smt. Sohagwanti Total 1987-88 2,95,548 2,95,548 5,91,096 1988-89 3,72,680 3,72,680 7,45,360 1989-90 33,072 33,072 66,144 4.1. For the assessment years under consideration, the assessing officer framed the assessments under section 143(3) in the status of individual. While framing the assessments, the assessing officer also charged interest under sections 139(8) and 215/217 of the Act.
5. When the matter was taken to the Commissioner (Appeals) in appeal, by Jagdsih Raj Chauhan (Indl.), the learned Commissioner (Appeals) following the ratio laid down by the Honble Supreme Court in the case of ITO v. Ch. Atchaiah (supra) accepted this contention of the assessee that income was earned by the Association of Person and, therefore, the assessment has to be made in the hands of the Association of Person alone. Accordingly, he directed the assessing officer to initiate the proceedings for the assessment of the Association of Person for the assessment years under consideration. The additions made by the assessing officer were deleted.
5.1. Similarly, while deciding the appeals of Janak Raj Chauhan (Indl.) for the assessment years under consideration, the learned Commissioner (Appeals) issued the same directions to the assessing officer and deleted the additions made by the assessing officer.
6. The assessing officer initiated the assessment proceedings in view of the judgment of the Honble Supreme Court in the case of ITO v. Ch. Atchaiah (supra) as well as in view of the directions of the learned Commissioner (Appeals) given in the appellate orders dated 27-6-1997, in the case of Jagdish Raj Chauhan (Indl.) for the assessment years 1987-88 to 1989-90 and order dated 20-8-1997, passed in the case of Janak Raj Chauhan (Indl.) for the assessment years 1985-86 to 1989-90. The assessing officer issued notice under section 148 to the Association of Person to file return, which was received on 26-12-1997. In response to the said notice, the return was filed on 27-1-1998, i.e., within 31 days in the status of Association of Person. The assessing officer processed the returns under section 143(1)(a) (status was taken as Association of Person) of the Act, and in the intimation sent to the assessee raised a demand of Rs. 4,11,250 being interest charged under section 139(8) and Rs. 3,56,681 being the interest charged under sections 215/217 of the Act for the assessment year 1987-88. Similarly, for the assessment year 1988-89, the assessing officer raised a demand of Rs. 94,496 on account of interest charged under section 139(8) and Rs. 86,652 on account of interest charged under sections 215/217 of the Act.
7. Aggrieved by the orders of the assessing officer for both the years under consideration, the assessee preferred appeals before the Commissioner (Appeals). One of the grounds taken before the Commissioner (Appeals) was that the assessing officer was not justified in charging interests under sections 139(8) and 215/217 of the Act.
7.1. The learned Commissioner (Appeals) discussed this issue vide paras 3 and 4 of his order. For the detailed reasons given in the consolidated order dated 10-3-2000, for the assessment years 1987-88 and 1988-89, the learned Commissioner (Appeals) held that the assessing officer was justified in charging interest under sections 139(8) and 215/217 of the Act.
8. Aggrieved by the consolidated order of the Commissioner (Appeals), the assessee is in appeal before the Tribunal.
9. Before us, Ravish Sood, advocate, the learned counsel for the assessee, submitted that till the recent years, the assessing officer had the discretion to assess any income, either in the hands of the Association of Person or in the hands of the members of the said Association of Person. The said discretion was duly vested with the assessing officer as per Circular No. 75/19/191/162-ITJ, dated 24-8-1966 by the Central Board of Direct Taxes. Accordingly, it was submitted that in view of the said circular the assessing officer, who had exercised option by framing the assessment in the hands of the individual members, was precluded from the proceedings and thereupon framing assessment in the hands of the Association of Person. Ravish Sood, advocate, the learned counsel for the assessee, also referred to the decision of the Honble Supreme Court in the case of ITO v. Ch. Atchaiah (supra) and submitted that the Honble Supreme Court reversing its earlier judgment in the case of State of Uttar Pradesh v. Raza Buland Sugar Co. Ltd. (1979) 118 ITR 50 (SC) held that the assessing officer was under an obligation to tax the right person and the right person alone, and therein if the income belonged to an Association of Person the same has to be taxed in the hands of the Association of Person alone, and the assessing officer therefore, had no option to 1 assess the same either in the hands of the Association of Person. Or in the hands of the members. The aforesaid decision was delivered by the Honble Supreme Court on 11-12-1995. It was also brought to our notice that when the members of the Association of Person came to know about the aforementioned proposition of law, they voluntarily filed an application on 5-8-1996, to the assessing officer and requested him that in view of the judgment of the Hon'ble Supreme Court in the case of Ch. Attchaiah (supra), the income from the "Venture" of sale of agricultural land at village Masudabad, New Delhi, which was assessed by the assessing officer in the hands of the individual members was to be assessed in the hands of the Association of Person and consequently, requested the assessing officer that the notice under section 148 be issued to the Association of Person in order to enable it to file the return. It was also submitted by the learned counsel for the assessee that at the relevant time, the appeals filed against the order of the assessing officer in the individual cases were fixed for hearing before the Commissioner (Appeals), Jalandhar. The learned Commissioner (Appeals) vide his order dated 27-6-1997, and 20-6-1997, in the cases of Janak Raj Chauhan and Jagdish Raj Chauhan deleted the additions made by the assessing officer pertaining to their shares from the aforesaid venture of purchase/sale of agricultural land in village Masudabad, New Delhi, and directed the assessing officer that income from the aforesaid venture may be assessed in the hands of the Association of Person alone. It is stated that in pursuance of the directions of the Commissioner (Appeals), Jalandhar, and in view of the letter, dated 5-8-1996, filed by the assessee and also in view of the judgment of the Honble Supreme Court, the assessing officer issued notice under section 148 to the Association of Person. However, the notices under section 148 were issued only on 24-12-1997, i.e., after a lapse of about 1-114 years after making of the request by the Association of Person. It was also brought to our notice that the assessee filed the return in response to the notices issued under section 148 of the Act and the income returned was accepted by the assessing officer. However, the assessing officer was not justified in charging the interest under sections 139(8) and 215/217 of the Income Tax Act on the Association of Person, submitted the learned counsel for the assessee. In view of the above, it was contended that no interest was chargeable in the instant case.
9.1. Ravish Sood, advocate, the learned counsel for the assessee, also submitted that the assessing officer has not afforded an opportunity to the assessee-Association of Person before charging interest under sections 139(8) and 215/217 of the Act. The assessee has shown that it was prevented by sufficient cause from filing the return in time and at the same time, the assessee was prevented by sufficient cause from filing of estimating of advance-tax/depositing of advance tax. In fact, the assessing officer should have given an opportunity of being heard to the assessee-Association of Person, submitted the learned counsel for the assessee.
In support of the above contentions, reliance was placed on the decision of the Honble Karnataka High Court in the case of S. Govindaraju v. CIT (1982) 138 ITR 495 (Karn) and of the Honble Andhra Pradesh High Court in the case of Ambica Chemical Products v. ITO (1991) 191 ITR 382 (AP). In view of the above, it was submitted that interest under sections 139(8) and 215/217 of the Act was not leviable on the assessee-Association of Person. Alternatively, it was contended that the assessing officer was not justified in levying interest under sections 139(8) and 215/217 of the Act without affording any opportunity to the assessee of being heard in the matter.
9.2. S.C. Pahwa, the learned Departmental Representative strongly supported the orders of the authorities below. He further submitted that the assessee has filed the return in the status of Association of Person, which was late and, therefore, the assessing officer was justified in levying the interest under section 139(8) of the Act. Similarly, the interest under section 215/217 of the Act has rightly been levied by the assessing officer, submitted the learned Departmental Representative.
9.3. We have carefully considered the rival submissions and have also gone through the orders of the authorities below. The decisions relied upon by the learned representatives of both the parties were duly considered. In the instant case, the learned Commissioner (Appeals) was not justified in stating that no appeal is maintainable against the levy of interest in isolation. In the case of Central Provinces Manganese Ore Co. Ltd. v. CIT (1986) 160 ITR 961 (SC) the Honble Supreme Court held (headnotes) as under :
"The levy of interest is part of the process of assessment. Although sections 143 and 144 do not specifically provide for the levy of interest and the levy is, in fact, attributable to section 139(8) or section 215, it is nevertheless a part of the process of assessing the tax liability of the assessee. Inasmuch as the levy of interest is a part of the process of assessment, it is open to an assessee to dispute the levy in appeal provided he limits himself to the ground that he is not liable to the levy at all."
(Emphasis, italicised in print, supplied, by us) In the instant case, the assessing officer has not afforded an opportunity of being heard to the assessee before charging of interest under sections 139(8) and 215/217 of the Act. As it is apparent from the facts of the present case that only intimation under section 143(1)(a) of the Act was sent to the assessee. In the instant case, from the very beginning, the assessee was denying the liability to pay the interest. It was the case of the assessee before the appellate authority below that it was not liable to the levy of interest under section 139(8) and 215/217 of the Act. In view of the decision of the Honble Supreme Court, referred to above, the appeal was maintainable before the Commissioner (Appeals) and, therefore, the findings given by the Commissioner (Appeals) contrary to the settled position of law, is not tenable. Accordingly, we hold that in the facts and the circumstances of the present case, the appeal was maintainable before the Commissioner (Appeals). The assessee has never admitted at any stage that it was liable for the charging of interest under section 139(8) and 215/217 of the Act.
9.4. From the above contentions of the assessee, it is clear that as per Central Board of Direct Taxes Circular No.75/19/191/162-ITJ, dated 24-8-1966, the assessing officer has the discretion to assess any income either in the hands of the Association of Person or in the hands of the members of the Association of Person. It is true that Boards circulars are binding on the revenue authorities. It is an admitted fact that the assessments in the case of individuals were also made under section 143(3) of the Act, and against the orders of the assessing officer, the assessees filed appeals before the Commissioner (Appeals), Jalandhar. It is clear that the Commissioner (Appeals), Jalandhar disposed of the appeals on 20-6-1997, and 27-6-1997. The learned Commissioner (Appeals) directed the assessing officer to assess the income arising out of the purchase/sale of agricultural land at village Masudabad, New Delhi, in the hands of the Association of Person alone. It seems that the learned Commissioner (Appeals) has decided the appeals keeping in view the judgment of the Honble Supreme Court in the case of Ch. Atchaiah (supra). An application was moved by the individual members on 5-8-1996, to the assessing officer, who was having jurisdiction in their cases and requested him that in view of the judgment of the Honble Supreme Court the income from the venture of sale of agricultural land of village Masudabad, New Delhi, may be assessed in the hands of the Association of Person independent of individual members. In view of the decision of the Honble Supreme Court in the case of Ch. Atchaiah (supra), the assessing officer issued notice under section 148 to the assessee. In the case of Ch. Attchaiah (supra) the Honble Supreme Court has held that if it is the income of the Association of Person in law, the Association of Person alone has to be taxed, the members of Association of Person cannot be taxed individually in respect of the income of the Association of Person. It was also observed by the Honble Supreme Court that consideration of the interests of the revenue has no place in this scheme. It is noticed that in response to notice issued under section 148, the assessee-Association of Person filed its return on 27-1-1998.
9.5. Thus, from the above legal discussion, it is clear that the assessee (Association of Person) was prevented by sufficient cause from filing the returns of income well within time. As we have already noted that the decision in the case of Ch. Atchaiah (supra) was delivered on 11-12-1995, by the Honble Supreme Court and it was held that it was obligatory for the Association of Person to file its return of income. Before the said decision, the position of law was quite different. It is worth mentioning that notice under section, 148 was issued by the assessing officer to the assessee-Association of Person on 24-12-1997, requiring it to file the returns and in response to that, the assessee immediately filed the returns. Even the assessee had made a request to the assessing officer vide its letter dated 5-8-1996, to issue notice under section 148 of the Act.
9.6. Considering the above facts, it cannot be said that the assessee had deliberately delayed the filing of the returns.
9.7. In the case of CIT v. Anupinder Singh & Ors (2000) 243 ITR 686 (P&H) the Honble Punjab and Haryana High Court has held that "The Tribunal was right in holding that assessees were not liable to pay interest under sections 139(8) and 217 of the Act. The assessees voluntarily filed returns after the order of the High Court granting interest on the enhanced compensation and paid tax on that income. They could not anticipate enhancement of compensation and grant of interest thereon prior to the order of the High Court." Accordingly, it was held by the Honble High Court that the Tribunal was justified in stating that the assessee was not liable to pay interest under sections 139(8) and 217 of the Act. In the instant case also, at the time when the assessing officer has assessed the share income in the hands of the members, he himself had as per law as it was then, precluded himself from proceeding against the Association of Person. However, no one could have anticipated that the Honble Supreme Court would deliver a judgment as on 11-12-1995, which would make it obligatory on the part of the assessing officer to assess the income in the hands of the Association of Person, despite the fact that the said income had already been assessed in the hands of the individual members. In our view, there is merit in this contention of the learned counsel for the assessee that the Association of Person cannot be made liable for chargeability of interest under sections 139(8) and 215/217 of the Act on the ground that it has failed to anticipate the said subsequent judgment of the Honble Supreme Court. Accordingly, the order of the Commissioner (Appeals) is against the law and is liable to be reversed.
9.8. In the case of Bharat Conductors (P) Ltd. v. CIT (1999) 238 ITR 89 (Karn), wherein it has been held that "If for any reason the law is amended retrospectively creating liability of tax then, it would be sufficient cause for not charging interest under section 139(8) of the Income Tax Act, 1961. "It was also held by the Honble Karnataka High Court that "Interest under section 217 of the Act on the same reasoning was also to be waived in respect of the income derived by the assessee on sale of import entitlement which was made taxable because of retrospective amendment by the Finance Act, 1990. "
9.9. In view of the above, it is clear that no interest under sections 139(8) and 215/217 of the Act can be levied in the facts and the circumstances of the present case.
9.10. Alternatively, it was submitted before us by the learned counsel for the assessee that no opportunity has been afforded to the assessee to show sufficient cause for delay in filing the return, filing of estimate of advance tax/depositing of advance-tax. In the case of Ambica Chemical Products v. ITO (supra), the Honble Andhra Pradesh High Court has held that "under rule 40 and 117AA of the Income Tax Rules, 1962, the Income Tax Officer is vested with discretion to waive or reduce interest levied under sections 215, 217 and 139 of the Income Tax Act, 1961, under certain circumstances. By implication these require that an opportunity must be given to the assessee to show cause why interest should not be levied or to satisfy the Income Tax Officer that there is a case for waiver or reduction of interest. Where no such opportunity was given to the assessee, the orders levying interest are liable to be quashed." It is relevant to point out that SLP filed by the department against the aforesaid judgment of the Honble Andhra Pradesh High Court has been rejected by the Honble Supreme Court in the case of ITO v. Ambica Chemicals Products (SLP (Civil) Nos. 1881-1884 of 1986 : (1991) 187 ITR (St) 162). In the instant case also, no proper opportunity of being heard was given to the assessee before charging interest under sections 139(8) and 215/217 of the Act.
9.11. The net result of the above discussion is that the assessee was not at all liable for interest under sections 139(8) and 215/217 of the Income Tax Act, 1961. Accordingly, we cancel the interest levied by the assessing officer for both the years under consideration under sections 139(8) and 215/217 of the Income Tax Act, 1961. In other words, we reverse the findings of the Commissioner (Appeals) on this issue and common ground Nos. 3 and 4 of both the appeals are allowed.
10. Common ground No.2 read as under :
"That the Commissioner (Appeals) has erred in not dropping proceedings under section 147 and the notice issued under section 148 dated 24-12-1997, because;
(i) The initiation of proceedings and issuance of notice under section 148 being without jurisdiction is ab initio void.
(ii) The notices has been issued without getting the sanction from the proper authority as envisaged under section 151 which may be evident from the notice itself where word additional has been written before the Deputy Commissioner by the Income Tax Officer in his own hand and the Commissioner (Appeals) has erred in not appreciating that it is not a mere technicality where section 292B is applicable but it involves a question of jurisdiction.
10.1. Since we have allowed the appeals of the assessee on merits and, therefore, we do not think it proper to decide this common ground of appeals by which a legal issue has been raised. Therefore, no findings are given on this issue.
11. In the result, both the appeals are allowed partly.