Income Tax Appellate Tribunal - Delhi
Joint Commissioner Of Income Tax, ... vs Mohan Exports India Ltd. on 12 May, 2006
Equivalent citations: [2006]101ITD478(DELHI), [2007]289ITR1(DELHI), (2006)105TTJ(DELHI)520
ORDER
S.C. Tiwari, Accountant Member
1. This appeal has been filed by the revenue on 30.3.2000 against the order of the learned CIT(Appeals)-II, New Delhi dated 17.12.1999 in the case of the assessee in relation to intimation under Section 143(1)(d) made by the Assessing Officer for assessment year 1997-98. In this appeal revenue has disputed the order of the learned CIT (Appeals) holding that the Assessing Officer was not justified in determining tax liability under the provisions of Section 115JA and in charging consequential interest under Sections 234A, 234B and 234C. According to the learned CIT (Appeals) the Assessing Officer has no powers to make such adjustments while making an order of intimation under Section 143(1)(a) of the Act.
2. During the course of hearing before us the learned DR pointed out that the relevant provisions of Section 143(1)(a) as applicable to assessment year 1997-98 are 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 or 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;
3. The learned DR argued that under the provisions as above quoted if any tax is found due on the basis of information available in the return of income, the Assessing Officer was entitled to determine the tax so payable and intimate the same to the assessee. There was no room for doubt that amounts payable under Section 115JA were tax payable by an assessee. In the instant case the Assessing Officer had not relied upon any extraneous information or particulars and done the working of tax due from the assessee under Section 115JA on the basis of documents annexed to the return of income only. The learned CIT (Appeals), therefore, erred in holding that the Assessing Officer had no such powers under Section 143(1)(a). Secondly the learned D.R. argued that as far as the provisions of Sections 234A, 234B and 234C are concerned, the same have been held mandatory by Hon'ble Supreme Court in the case of CIT v. Anjum M.H. Ghaswala and the subsequent judgments in CIT v. Hindustan Bulk Carriers [2003] 259 ITR 449 126 Taxman 321 (SC) and CIT v. Sant Ram Mangat Ram Jewellers .
4. The learned A.R. of the assessee referred to the decision of Income-tax Appellate Tribunal, Delhi Bench "A" New Delhi dated 29.4.2005 in the case of Travel Club (India)(P.) Ltd. [IT Appeal No. 213 (Delhi) of 2004]. He argued that in that decision the Tribunal had noted that in Form No. 1 for the return of income, there was no column for computing income under the provisions of Section 115JB. There was of course Schedule-I under the heading "Book Profits under Section 115JB" but the book profit computed in accordance with the above schedule was not required to be taken to Schedule F "Statement of Total Income". On that basis the Tribunal had held that it would be unjust to impose penalty under Section 271(1)(c) on an assessee for concealment of the particulars of income or for furnishing inaccurate particulars of income. The learned AR of the assessee argued that it, thus, followed that there was no liability on the assessee to declare tax payable under Section 115JA. That being so the Assessing Officer could not make any such adjustment and in the instant case the learned Assessing Officer has clearly exceeded his powers under Section 143(1)(a).
5. The learned AR of the assessee referred to the judgment of Hon'blc Delhi High Court in the case of Salwan Construction Co. v. Union of India Taxman 589. He argued that following the ratio of that judgment, we should hold that the provisions of Section 143(1)(a), as they exist today, should be applied to find out whether or not the adjustment of the kind made by the learned Assessing Officer is permissible.
6. The learned AR of the assessee argued that there were direct High Courts judgments that if an assessee did not work out tax liability under Section 115J, no tax under Section 115J could be charged by way of intimation under Section 143(1)(a). He relied in this respect on the following judgments:
• Mahalakshmi Glass Works v. Sunil Gupta, Asstt. CIT ;
• CIT v. Super Roller Flour Mills Ltd. ; and • Parikh Engg. & Body Building Co. Ltd. v. Union of India .
The learned Counsel read elaborately from the judgment of Hon'ble Supreme Court in the case of Karnataka Small Scale Industries Development Corporation Ltd. v. CIT [2002] 258 ITR 770 [2003] 126 Taxman 121.
He pointed out that Hon'ble Supreme Court laid down two stages for determination of tax payable under Section 115J. First stage was computation of total income on completion of assessment. Second stage was computation of 30 per cent of book profit. It was only when assessed total income fell short of 30 per cent of book profit that provisions of Section 115J could be applied. It, therefore, followed that there was no question of determination of any tax payable under Section 115JA in the intimation under Section 143(1)(a) without there being completion of order of assessment under Section 143(3). The learned AR also referred to the judgment of Hon'ble Punjab & Haryana High Court in the case of CIT v. S.S. Banga [2005] 279 ITR 107.
7. The learned D.R. in his rejoinder referred to paragraph 3 and paragraph 13 of the decision of the Tribunal in the case of Travel Club (India) Pvt. Ltd. (supra). He pointed out that contention of the assessee that income determined under Section 115 JB did not constitute the total income of the company was rejected by the Tribunal and it was held that whatever is deemed to be the total income of the assessee by virtue of Section 115JB is also total income within the meaning of Section 2(45), Section 5 and Section 139(1) of the Act and, therefore, the company was obliged in law to declare its book profit ascertained under Section 115JB as its total income and pay tax thereof. Again in paragraph 13 the Tribunal held that since the assessee had along with the return of income attached the profit and loss account and balance sheet from which the Assessing Officer could have computed the book profit under Section 115JB and demanded the tax in accordance therewith, the basic fact relating to the computation of book profit had been given with the return of income. There was, therefore, no assistance to the case of the assessee from the decision of Tribunal in the case of Travel Club (India) (P.) Ltd. (supra). In that decision only a lenient view was taken in relation to levy of penalty for concealment of income.
8. At the outset we are of the considered opinion that the act of the Assessing Officer to make an order under Section 115 JA while issuing an order of intimation under Section 143(1)(a) is an integral part of determination of tax found due on the basis of return of income itself. While doing so the Assessing Officer has made no adjustment at all even if in the return of income filed the assessee had omitted or failed to make computation of tax liability under the provisions of Section 115JA of the Act. Provisions of Section 143(1)(a) enjoin upon the Assessing Officer to determine the tax or interest payable by an assessee on the basis of return of income filed by the assessee himself and if after credit of any tax deducted at source and any advance-tax paid, any tax or interest is found due, to issue an intimation to the assessee specifying the sum so payable, or to grant if any refund is found due to the assessee after giving credit of tax deducted at source and advance-tax paid along with the intimation issued under Section 143(1)(a). However, provisions of Section 143(1)(a) permit the Assessing Officer to make certain adjustments to the income or loss declared in the return of income by the assessee, which are in the nature of prima facie adjustments as specified in the provisions of Section 143(1)(a) itself. Thus, provisions of Section 143(1)(a) have two operatives. Primary operative relates to determining of tax payable and credit of any tax deducted at source and any advance-tax paid by the assessee. The secondary operative is adjustments to the income or loss declared in the return in accordance with the provision. In our considered opinion, calculation of tax liability under Section 115JA is within the first part of operation of Section 143(1)(a) itself, i.e., to find out tax or interest or refund due on the basis of return of income filed by the assessee. It is integral part of the activity of determination of tax payable and not in the nature of an adjustment as such to the income or loss declared in the return of income. Thus, if on the basis of return of income filed by the assessee any tax liability is fastened upon the assessee by virtue of the provisions of Section 115JA, determination thereof in the intimation under Section 143(1)(a) is part of the basic implementation of the provision and it does not fall in the category of adjustments made by the Assessing Officer to the income or loss returned by an assessee. Hence the very debate whether it is in the nature of prima facie adjustment or not does not arise because such computation of tax payable under Section 115JA is made by way of process of implementation of the provisions of Section 143(1)(a) itself.
9. After consideration of the matter we find that there is scant assistance to the arguments of the assessee from the various authorities cited and relied upon by the learned AR of the assessee during the course of hearing before us. First of all, we may mention that the decision of the Income-tax Appellate Tribunal, Delhi Bench 'A' in the case of Travel Club (India)(P.) Ltd. (supra), on which much reliance was placed by the learned AR of the assessee, is in fact in favour of the revenue and against the assessee in relation to the question for consideration in this appeal before us. In the aforesaid decision the Hon'ble Tribunal have in paragraph 3 of their order observed as under:
3. The learned Counsel for the assessee first contended that the book profit does not constitute the total income of the company and, therefore, there was no obligation to disclose the book profit in the return of income as the total income and there can be no concealment if the assessee-company had not declared the book profit in its return. Section 115JB provides that notwithstanding anything contained in any other provision of the Act, where in the case of a company the income tax payable on the total income computed under the provisions of the Act is less than 7.5 per cent of its book profit, such book profit shall be deemed to be the total income of the company and the tax payable by the company on such total income shall be the amount of income-tax at the rate of 7.5 per cent. The Explanation below the Section defines "book profit" as the net profit shown in the profit and loss account prepared as per the provisions of the Companies Act, 1956 and increased or decreased by certain amounts mentioned therein, with which we are not concerned. Section 139(1) obliges every company to file a return of income on or before a particular date if its total income during the previous year exceeded the maximum amount not chargeable to income-tax. Section 2(45) defines "total income" to mean the total amount of income referred to in Section 5, computed in the manner laid down in the Act. Section 4 says that tax shall be charged at the rates prescribed in the relevant Finance Act in accordance with and subject to the provisions of the Act in respect of the total income of the previous year of every person. In the light of these provisions, we are unable to accept the contention of the learned Counsel for the assessee. Whatever is deemed to be the total income of the assessee by virtue of Section 115JB is also total income within the meaning of Section 2(45), Section 5 and Section 139(1) and, therefore, the company was obliged in law to declare its book profit ascertained under Section 115JB as its total income and pay tax thereon.
10. From the extract of the Tribunal order as given by us it is abundantly clear that there is no doubt that assessee's tax liability under Section 115JB can be brought to tax by way of an order of intimation under Section 143(1)(a) of the Act. The dispute before them related to the question as to whether in the case of an assessee, who had along with the return of income attached all the particulars needed for computation of the book profit under Section 115JB, but who had otherwise omitted to compute his tax liability under Section 115JB, it can be held that the assessee had concealed particulars of income or furnished inaccurate particulars of his income within the meaning of the provisions of Section 271 (1)(c) so as to attract penalty thereunder. In the present appeal we are concerned with the primary issue as to whether or not the Assessing Officer is empowered to compute tax liability under Section 115JA on the basis of return of income even if the assessee has failed or omitted to do so in the return of income. On this primary aspect there is no doubt expressed in the order of the Tribunal in the case of Travel Club (India)(P.) Ltd. (supra) and they have dealt with the secondary question as to whether the assessee having failed to compute tax liability under Section 115 JB in the return of income, can be visited by a penalty under Section 271(1)(c).
11. As to the reliance placed by the assessee on the judgment of Hon'ble Delhi High Court in the case of Salwan Construction Co. (supra), we find the same to be entirely misplaced. First, as we have stated earlier, the computation of tax liability under Section 115JA is part of the main provision of Section 143(1)(a) and it is not in the nature of "adjustment" specified under the provisions of Section 143(1)(a). There is no change in the legal position in this behalf and, therefore, there is no force in the argument of the learned A.R. of the assessee that provisions of Section 143(1)(a), as they existed at the time of intimation under Section 143(1)(a) or as they exist today during the course of proceedings before us, should be applied. The judgment of Hon'ble Delhi High Court in the case of Salwan Construction Co. (supra) relates to the prosecution provisions on failure to deduct tax at source. The position in relation to the tax liability provisions of Income-tax Act is fairly well-settled that if the amendment is of substantive nature so as to effect/affect tax payable by an assessee, the amended provision would apply prospectively. Where, however, a new provision relates to machinery provision or procedural provision of the Act, the amended provision would apply to all proceedings pending as on the date of amendment. In our opinion the provisions of Section 143(1)(a) directly affect the tax payable by an assessee and, therefore, any amendment in that provision has to be treated as substantive and applicable prospectively.
12. We may also mention that none of the three judgments, viz., Mahalakshmi Glass Works' case (supra), Parikh Engg. & Body Building Co. Ltd.'s case (supra) and Super Roller Flour Mills Ltd.'s case (supra) relate to the facts of the case before us. In none of the three aforesaid court judgments there was any dispute as to whether or not tax liability under Section 115JA can be computed in an order of intimation under Section 143 (1)(a). In all the three cases the assessee had themselves worked out tax payable on the basis of book profits. The Assessing Officer, however, made his own adjustments to the amount of book profit as worked out in the return of income and by way of order under Section 143(1)(a) the Assessing Officer demanded an higher amount of tax payable under Section 115J, than that determined by the assessees themselves. In none of those three cases there is any doubt that the Assessing Officer cannot compute tax liability under Section 115J on the basis of information available in the return of income where the assessee has not done that in the return of income.
13. During the course of hearing before us there was considerable debate as to whether or not the Assessing Officer was justified in charging interest under Sections 234A, 234B and 234C. We find that "the preponderance of judicial opinion is that an Assessing Officer can charge interest under Section 234B and 234C in relation to any shortfall in payment of tax payable under Section 115J by way of advance-tax. Reference in this respect is invited to the following judgments:
• CIT v. Holiday Travels P. Ltd. ;
• CIT v. Upper India Steel Mfg. & Engg. Co. Ltd. [2005] 279 ITR 123 141 Taxman 692 (Punj. & Har.);
• Karimtharuvi Tea Estates Ltd. v. Dy. CIT [2000] 113 Taxman 514 (Ker.);
• Assam Bengal Carriers Ltd. v. CIT ;
• Itarsi Oils & Flours (P) Ltd. v. CIT ; and • CIT v. Kotak Mahindra Finance Ltd. [2003] 265 ITR 119 130 Taxman 730 (Bom.).
It may be mentioned that in the case of Kerala High Court judgment cited above, levy of additional tax under Section 143(1A) in relation to interest under Section 234B too has been upheld by the Hon'ble Kerala High Court. In other words the issue is not treated to be one on which there may be more than one opinion.
14. In the result, we are of the view that the learned CIT (Appeals) is completely unjustified in holding that the Assessing Officer is not empowered to charge interest under Section 115JA while issuing an intimation under Section 143(1)(a). We, therefore, reverse the decision of the learned CIT (Appeals) and restore the order under Section 143(1)(a) and tax as demanded thereunder by the Assessing Officer.
15. In the result, this appeal filed by the revenue is allowed.