Income Tax Appellate Tribunal - Delhi
Lumax Industries Ltd. vs Dy. Commissioner Of Income Tax on 31 August, 2005
Equivalent citations: [2006]282ITR180(DELHI), (2006)99TTJ(DELHI)1125
ORDER
P.M. Jagtap, Accountant Member
1. This appeal by the assessee is directed against the order of learned CIT(A)-II, New Delhi dated 22/10/2001 and the solitary issue which arises for our consideration out of the same is whether the learned CIT(A) was justified in the facts and circumstances of the case to uphold the action of the Assessing Officer in charging interest Under Section 234B & 234C on the income computed Under Section 115JA on the basis of book profit while processing the return Under Section 143(1)(a).
2. The assessee in the present case is a limited company. A return of income for the year under consideration was filed by it showing a total income of Rs. 1,25,82,140/- being 30% of its book profit in accordance with the provisions of Section 115JA and a self assessment tax of Rs. 42,14,312/- was also paid on such income after claiming adjustment for TDS amounting to Rs. 1,89,437/-. The income so declared was accepted by the Assessing Officer while processing the return filed by the assessee Under Section 143(1)(a). However, considering that no advance tax was paid by the assessee company on the said income, the Assessing Officer levied interest of Rs. 6,11,074/- and Rs. 3,19,230/- Under Section 234B & 234C respectively in the intimation issued Under Section 143(1)(a). According to the assessee company, interest Under Section 234B and 234C was not chargeable when its income was computed on the basis of book profit Under Section (sic) and since it was of the view that the intimation issued by the Assessing of per Under Section 143(1)(a) had suffered a mistake apparent from record in charging such interest, application Under Section 154 was moved by it seeking rectification of the said mistake. In the proceedings Under Section 154 before the Assessing Officer, the levy of interest Under Section 234B and 234C was assailed on behalf of the assessee raising various contentions and it was urged that the mistake in charging interest Under Section 234B and 234C be rectified by modifying the intimation issued Under Section 143(1)(a). The Assessing Officer, however, found no merits in the contentions raised on behalf of the assessee company before him for the reasons given in the order passed Under Section 154. He, therefore, rejected the application filed by the assessee company Under Section 154 holding that the assessee company having clearly failed to pay the advance tax in respect of income computed Under Section 115JA on the basis of book profit, there was no mistake in charging the interest Under Section 234B and 234C in the intimation issued by him Under Section 143(1)(a).
3. Aggrieved by the order passed by the Assessing Officer rejecting its application filed Under Section 154, the assessee company preferred an appeal before the learned CIT(A) and it was mainly argued during the course of appellate proceedings before him on behalf of assessee that the issue relating to charging of interest Under Section 234B and 234C in a case where the income was computed Under Section 115JA on the basis of book profit being a debatable one, the same was outside the purview of adjustment permissible Under Section 143(1)(a). Reliance was placed on behalf of the assessee company on the decision of Hon'ble Karnataka High Court in the case of Quality Biscuits Ltd. v. CIT - 243 ITR 520 in support of the contention that the said issue was debatable. The submission made on behalf of the assessee company, however, did not find favour with the learned CIT(A). He held that interest Under Section 234B and 234C was charged by the Assessing Officer not by way of any prima-facie adjustment which power had since been deleted with effect from 1/6/99, but the same was charged as per the provisions of Section 143(1) as amended with effect from 1/6/99 whereby the Assessing Officer was empowered to issue demand notice if any tax or interest was found payable by the assessee. He, therefore, upheld the order passed by the Assessing Officer rejecting the application filed by the assessee Under Section 154. Aggrieved by the same, the assessee company is in appeal before the Tribunal.
4. The learned counsel for the assessee submitted before us that return filed by the assessee company for the year under consideration was processed by the Assessing Officer Under Section 143(1)(a) on 29/2/2000 whereas the provisions of Sub-section (1) of Section 143 were substituted by the Finance Act 1999 with effect from 1/6/99 whereby clause (a) of the said sub-section had been omitted. He contended that the question of any determination of liability towards interest Under Section 234B or 234C otherwise than as shown by the assessee in the return was beyond the scope and ambit of Sub-section (1) of Section 143 as substituted with effect from 1/6/99. In support of this contention, he relied on the decision of Hon'ble Rajasthan High Court in the case of CIT v. Smt. Premlata Jalani - 264 ITR 744 wherein it was held that the claim for enhanced interest Under Section 234C could not be made Under Section 143(1) as amended with effect from 1/6/99. His contention, therefore, was that there was a mistake on the part of the Assessing Officer in charging interest Under Section 234B and 234C in an intimation issued after 1/6/99 in view of the provisions of Section 143(1) as substituted with effect from 1/6/99 and the same being apparent from record, ought to have rectified by the Assessing Officer by accepting the application filed by the assessee Under Section 154. He also invited our attention to the CBDT circular explaining the amendment proposed in Section 143 reported in 240 ITR 3 (St.) and pointed out that the legislative intention as explained therein behind amending/substituting the provisions of Section 143(1) was to give quietus to the prima-facie adjustments permissible Under Section 143(1)(a) resulting in enhanced liability on debatable grounds and thereby leaving such questions to be determined only through participatory process provided by way of regular assessment. He contended that this circular was specifically referred to by the Hon'ble Rajasthan High Court in the case of Smt. Premlata Jalani (supra) and since the charging of interest by the Assessing Officer Under Section 234B and 234C, being a debatable issue, in an intimation issued Under Section 143(1) was contrary to the said CBDT Circular, which is binding on the revenue authorities, there was an apparent mistake in charging such interest which ought to have been rectified by the Assessing Officer Under Section 154. He, therefore, contended that the order passed by the Assessing Officer Under Section 154 declining to amend his intimation on the issue of levy of interest Under Section 234B and 234C as sought by the assessee company in (sic) was not in accordance with law and the learned CIT(A) was not justified in upholding the same.
5. The learned DR, on the other hand, submitted that advance tax in respect of total income assessed in the hands of the assessee company on the basis of book profit Under Section 115JA was admittedly not paid by the assessee company and it was, therefore, liable to pay interest Under Section 234B and 234C as held by Hon'ble Gauhati High Court in the case of Assam Bengal Carriers Limited v. CIT - 239 ITR 862, by Hon'ble M.P. High Court in the case of Itarsi Oils and Flours Pvt. Ltd. v. CIT -250 ITR 686 and by Hon'ble Bombay High Court in the case of CIT v. Kotak Mahindra (P) Ltd. He also submitted that the issue involved before the Hon'ble Rajasthan High Court in the case of Smt. Premlata Jalani (supra) was relating to the charging of interest Under Section 234C in respect of capital gain and since the said issue was found to be debatable by Hon'ble Rajasthan High Court in the facts and circumstances of that case, it was held to be beyond the scope of Sub-section (1) of Section 143 as amended/substituted with effect from 1/6/99. He contended that there is no such debate involved in the present case inasmuch as the issue of charging of interest Under Section 234B and 234C for the failure of the assessee to pay the advance tax in respect of income computed Under Section 115JA is not debatable. In support of this contention, he has relied on the decision of Delhi 'F' Bench of ITAT in the case of Insilco Ltd. v. JCIT - 85 TTJ 538 wherein it was held that provisions of payment of advance tax were fully applicable to the deemed income Under Section 115JA and the Assessing Officer, therefore, was fully justified in charging such interest in the intimation issued Under Section 143(1)(a). He also placed reliance on the decision of Hon'ble Punjab & Haryana High Court in the case of CIT v. Upper India Steel Mfg. & Engg. Co. Ltd. wherein charging of interest Under Section 234B and 234C by way of prima-facie adjustment Under Section 143(1)(a) was upheld by the Hon'ble Punjab & Haryana High Court observing that advance tax being payable on the income computed Under Section 115JA, provisions of Section 234B and 234C were attracted.
6. In the rejoinder, the learned counsel for the assessee submitted that the decision of Delhi Bench of ITAT in the case of Insilco Ltd. (supra) relied upon by the learned DR was rendered for assessment year 1998-99 to which the preamended provisions of Section 143(1)(a) were applicable whereas the assessment year involved in the present case being 1999-2000, the provisions of Section 143(1) as substituted with effect from 1/6/99 and interpreted by the Hon'ble Rajasthan High Court in the case of Smt. Premlata Jalani (supra) are applicable. He contended that the said decision, therefore, cannot help the Revenue in the present case involving assessment year 1999-2000 and the reliance of the learned DR on the said decision is clearly misplaced. As regards the decision of Hon'ble Punjab & Haryana High Court in the case of Upper India Steel Mfg. & Engg. Co. Ltd. (supra) relied upon by the learned DR, he pointed out that the assessment years involved in the said case were 1997-98 to 1999-2000 and although the provisions of Section 143(1) as substituted with effect from 1/6/99 were applicable to one of these years i.e. A.Y. 1999-2000, the Hon'ble Punjab & Haryana High Court decided the said case entirely on the basis of the provisions of Section 143(1)(a) without taking into consideration the provisions of Section 143(1) substituted with effect from 1/6/99 which were applicable to A.Y. 1999-2000. He, therefore, contended that the ratio of the said decision of Hon'ble Punjab & Haryana High Court cannot be applied to the present case involving A.Y. 1999-2000 and on the other hand, the decision of Hon'ble Rajasthan High Court in the case of Smt. Premlata Jalani being rendered after taking into consideration the provisions of Section 143(1) as substituted with effect from 1/6/99, deserves to be applied.
7. We have considered the rival submissions in the light of material available on record and the various judicial pronouncements cited by the learned representatives of both the sides. The position which is not in dispute is that in a case where the income is computed Under Section 115JA on the basis of book profit and the assessee company has failed to pay the advance tax in respect of such income, it is liable to pay interest Under Section 234B and 234C in view of the provisions of Sub-section (4) of section 115JA. Even as regards the debatability of this issue, Delhi 'F' Bench of ITAT in the case of Insilco Ltd. (supra) cited by the learned DR has held that the issue relating to charging of interest Under Section 234B while determining the income of the assessee Under Section 115JA on the basis of book profit is not a debatable issue and the Assessing Officer was right in making prima-facie adjustment in respect of such interest Under Section 143(1)(a). To the similar effect is the decision of Delhi 'E' Bench of ITAT in the case of Sam Distilleries. & Breweries Ltd. v. JCIT - (ITA No. 4047/Del/2000 (sic) 16/2/2004) to which one of us (Accountant Member) is a party (sic)that it was incumbent upon the assessee company to estimate its total income under the Income Tax Act or its book profit for the purpose of computation of its income Under Section 115JA and to pay advance tax of such income and having failed to do the same, interest Under Section 234B and 234C, which is automatic and mandatory, was rightly levied by the Assessing Officer in the intimation issued Under Section 143(1)(a).
8. The contention of the learned counsel for the assessee, however, is that the assessment year involved in the present case being 1999-2000, the provisions of Section 143(1) as substituted with effect from 1/6/99 are applicable and not the provisions of Section 143(1)(a) which stood omitted with effect from that date. In support of this contention, he has strongly relied on the decision of Hon'ble Rajasthan High Court in the case of Smt. Premlata Jalani (supra) wherein interest charged by the Assessing Officer Under Section 234C in the intimation issued Under Section 143(1) was held to be beyond his jurisdiction in view of the provisions of that Section as amended with effect from 1/6/99. In the said case before the Hon'ble Rajasthan High Court, the return of income was filed by the assessee on 30/10/2000 for A.Y. 2000-01. An intimation Under Section 143(1) was sent by the Assessing Officer on 9/11/2000 making variation in the calculation of interest as made by the assessee Under Section 234C. The Assessing Officer was of the opinion that since the assessee had failed to pay advance tax in respect of capital gains arising on whatever day during the previous year by 31st March 2000, she was liable to pay interest Under Section 234C for the entire period to the extent there was shortfall in payment of advance tax calculated as per the income returned by the assessee including capital gains from 15/9/99 when the first installment of advance tax became due. The assessee's stand was that capital gain having arisen to her only after 15/3/2000 when the date of payment of the last installment of advance tax had already expired, she was not liable to pay the advance tax on such capital gains till 15/3/2000. She, however, admitted that the advance tax was payable by her in respect of such capital gains by 31/3/2000 and having paid the same only in April 2000, she calculated interest payable in respect of such late payment of tax Under Section 234C for one month in her return and also deposited the same before filing of the return of income. Since the Assessing Officer had charged the interest Under Section 234C for the entire period starting from 15/9/1999 in the intimation issued Under Section 143(1), the assessee applied for rectification Under Section 154 which was rejected. The Commissioner (Appeals) upheld such rejection and when the matter reached to the Tribunal, the charging of interest Under Section 234C by the Assessing Officer for the period prior to the date of liability to tax arose was held to be unjustified. On appeal to the Hon'ble High Court, their Lordships held that the question of any determination as to the liability of interest on the tax otherwise than as per the claims made by the assessee was not within the scope of Sub-section (1) of section 143 as applicable to the assessment year 2000-01.
9. A careful reading of the aforesaid decision of Hon'ble Rajasthan High Court in the case of Smt. Premlata Jalani shows that the facts involved in the said case were entirely different from the facts involved in the present case. First of all, the issue relating to charging of interest Under Section 234C was found to be debatable in the peculiar facts involved in the said case inasmuch as the capital gain having arisen to the assessee in the relevant year, she was held to be liable to pay advance tax by the Assessing Officer right from the due date of first installment i.e. 15/9/99 whereas the stand of the assessee was that the said capital gain having arisen to her only after the due date of last installment of advance tax i.e. 15/3/2000, she was liable to pay the advance tax after 15/3/2000 but before 31/3/2000. Secondly, liability towards interest Under Section 234C was worked out by the assessee herself in the return filed in the said case and the question involved, therefore, was determination of the liability of interest on the tax otherwise than as per the claims made by the assessee which was found by Hon'ble Rajasthan High Court to be beyond the scope of provisions of Section 143(1) as substituted with effect from 1/6/99. In the present case, as already observed, there is no dispute or debate on the point that interest Under Section 234B and 234C was payable by the assessee having failed to pay advance tax in respect of income computed in accordance with the provisions of Section 115JA on the basis of book profit. Secondly, no interest Under Section 234B or 234C was worked out by the assessee company in its return of income in the present case and the question involved thus was not relating to the determination of any liability of interest on the tax otherwise than as per the claim made by the assessee as was involved in the case of Smt. Premlata Jalani (supra) before (sic) Rajasthan High Court.. The said case relied upon by the learned counsel for the assesse, therefore, is clearly distinguishable on facts and the decision rendered therein (sic) the Board circular (supra) referred to, in our opinion, cannot be of any help to the assessee in the present case.
10. On the other hand, the decision of Hon'ble Punjab & Haryana High Court in the case of Upper India Steel Mfg. & Engg. Co. Ltd. (supra) relied upon by the learned DR appears to have involved identical issue as well as similar facts inasmuch as income of the assessee in that case was determined in accordance with the provisions of Section 115JA on the basis of book profit and no advance tax was paid in respect of such income assessed in the hands of the assessee. In these facts and circumstances involved in that case, Hon'ble Punjab & Haryana High Court held that advance tax was payable by the assessee on the current income irrespective of whether the same was computed Under Section 115JA or under other provisions of the Act. It was also held that the provisions of Section 234B and 234C are mandatory and the levy thereunder is automatic the moment it is proved that the default in terms of payment of advance tax has been committed. It was also held that the levy of such interest is automatic without any notice to the assessee and as such, there is no scope for applying the provisions of equity or rules of natural justice. Hon'ble Punjab & Haryana High Court, therefore, upheld the prima-facie adjustment made by the Assessing Officer Under Section 143(1)(a) charging such interest payable by the assessee Under Section 234B and 234C.
11. Before us, the learned counsel for the assessee has submitted that the decision of Hon'ble Punjab & Haryana High Court in the case of Upper India Steel Mfg. & Engg. Co. Ltd. (supra) can not be applied in the present case in view of the provisions of Section 143(1) as substituted with effect from 1/6/99. He has contended that although the said provisions were applicable to one of the three years involved in the said case i.e. A.Y. 1999-2000, Hon'ble Punjab & Haryana High Court failed to consider the same having material effect on the issue under consideration. In this regard, it is observed that the provisions of Section 143(1)(a) as applicable upto A.Y. 1998-99 were reproduced by Hon'ble Punjab & Haryana High Court in its judgment delivered in the case of M/s Upper India Steel Mfg. & Engg. Co. Ltd. (supra) at page 389 of the report as under:-
143(1)(a). Where a return has been made under Section 139, or in response to a notice under Sub-section (1) of Section 142,-
(i) if any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of Sub-section (2), an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under Section 156 and all the provisions of this Act shall apply accordingly; and
(ii) if any refund is due on the basis of such return, it shall be granted to the assessee:
Provided that in computing the tax or interest payable by or refundable to the assessee, the following adjustments shall be made in the income or loss declared in the return, namely :
(i) any arithmetical errors in the return, accounts or documents accompanying it shall be rectified;
(ii) any loss carried forward, deduction, allowance or relief, which, on the basis of the information available in such return, accounts or documents, is prima facie admissible but which is not claimed in the return, shall be allowed;
(iii) any loss carried forward, deduction, allowance of relief claimed in the return, which, on the basis of the information available in such return, accounts or documents, is prima facie, inadmissible, shall be disallowed:
Provided further that an intimation shall be sent to the assessee whether or not any adjustment has been made under the first proviso and notwithstanding that no tax or interest is due from him:
Provided also that an intimation under this clause shall not be sent after the expiry of two years from the end of the assessment year in which the income was first assessable.
12. After reproducing the aforesaid provisions of Section 143(1)(a), the Hon'ble Punjab & Haryana High Court proceeded to record the following observations in its judgment:-
A. perusal of cl.-Y) shows that the A O, has to determine the tax or interest found due on the basis of the return after adjustment of prepaid tax or interest and send an 'intimation to the assessee specifying the amount payable by him Tax-and interest has to be computed as per the provisions of the Act. Clause (ii) provides for grant of refund if the assessee is found to be so entitled on the basis of the return. The first proviso describes the adjustments which the AO is required to make in the income or loss declared in the return. These adjustments clearly relate to the determination of quantum of income or loss. Levy of tax or interest does not amount to adjustment in the income or loss declared in the return. The Tribunal, in our opinion, has committed the basic mistake of treating the levy of interest under Sections 234B and 234C of the Act at par with the adjustments envisaged under this proviso. Thus, the tests applicable to examine the validity of adjustments permissible under Section 143(1)(a) of the Act have been wrongly applied by the Tribunal for quashing the levy of interest under Sections 234B and 234C of the Act. The Tribunal was required to resolve the issue solely on merits and could not have granted the relief on the ground that the issue was debatable."
13. As is evident from the aforesaid observations recorded by the Hon'ble Punjab & Haryana High Court, the issue relating to levy of interest Under Section 234B and 234C by way of prima-facie adjustment Under Section 143(1)(a) was considered and decided by their Lordships having regard to clause (i) of Section 143(1)(a). It is interesting to note here that even in Sub-section (1) of Section 143 as substituted with effect from 1/6/99, clause (i) continues to be there which is reproduced below:-
143(1) Where a return has been made under Section 139, or in response to a notice under Sub-section (1) of Section 142,-
(i) if any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid, any tax paid on self-assessment and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of Sub-section (2), an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under Section 156 and all the provisions of this Act shall apply accordingly; and
(ii)...
A perusal of clause (i) of section 143(1)(a) as applicable upto assessment year 1998-99 as well as clause (i) of Section 143(1) as substituted with effect from 1/6/99 clearly reveal that the provision contained therein are exactly identical and the Hon'ble Punjab & Haryana High Court having relied specifically on the said clause as contained in Section 143(1)(a), it will not be correct to say that non-consideration of the provisions of Section 143(1) as substituted with effect from 1/6/99 has made any material difference insofar as the ultimate decision rendered by it in the case of Upper India Steel Mfg. & Engg. Co. Ltd. (supra) is concerned. On the other hand, the facts involved in the said case as well as issue decided therein being similar to the issue involved in the present case, the ratio of the said decision, in our considered opinion, is directly applicable to the facts of the present case and respectfully following the same, we hold that charging of interest Under Section 234B and 234C by the Assessing Officer on account of assessee's failure to pay the advance tax in respect of income determined Under Section 115JA on the basis of book profit was within the scope of provisions of Section 143(1) as substituted with effect from 1/6/99 and the learned CIT(A) was fully justified in confirming the same. His impugned order is, therefore, upheld and this appeal filed by the assessee is dismissed.
14. In the result, the appeal of the assessee is dismissed.