Income Tax Appellate Tribunal - Chandigarh
Mount Shivalik Breweries Ltd. vs Deputy Commissioner Of Income-Tax on 31 August, 1994
Equivalent citations: [1994]51ITD292(CHD)
ORDER
J. Kathuria, Accountant Member
1. These two appeals - one by the assessee and the other by the Revenue - pertain to assessment year 1980-81 and are disposed of by a combined order for the sake of convenience.
2. We shall first take up the assessee's appeal (I.T.A.No. 754/Chd/1989). The assessee-company is engaged in the business of manufacture and sale of liquor and Beer. The assessee filed its return of income for assessment year 1980-81 on 8-8-1980 declaring total income of Rs. 18,29,770. In fact, the income from business for assessment year 1980-81 was of the order of Rs. 37,00,766 and after adjusting deficiency under Section 80J, deduction under sections 80W and 80G, total income was returned at Rs. 18,29,770. Assessment was completed on 28-2-1983 by the Assessing Officer on total income of Rs. 38,32,810 and the tax liability was determined at Rs. 22,66,148. The Assessing Officer charged interest under Section 215 at Rs. 4,24,573 which was later on reduced under Rule 40 of the Income-tax Rules, 1962 to Rs. 2,08,406.
3. The assessee filed an application under Section 154 stating therein that it was under no obligation to file an estimate of advance-tax and as such there was no justification for charging interest under Section 215. The Assessing Officer was of the opinion that the estimate of advance-tax at Form No. 29 filed by the assessee on 12-6-1979 on total income of Rs. 19,20,000 and a revised estimate of advance-tax filed on 14-12-1979 on total income of Rs. 13,95,000 were not mere scraps of paper and as such could not be ignored. He further held that whether an estimate of advance-tax filed despite the assessee's obligation to file it, can be acted upon for purposes of levying interest under Section 215 was a debatable issue. Relying on the Supreme Court judgment in the case of T.S. Balararn v. Volkart Bros. [1971] 82 ITR 50, he rejected the assessee's application under Section 154.
4. The assessee preferred an appeal before the learned CIT(A) who appreciated the hardship caused to the assessee but observed that such hardship was of the assessee's own seeking because it had filed an estimate of advance-tax when it was under no obligation to file such estimate. He further observed that the judgment of the Bombay High Court in the case of Patel Aluminium (P.) Ltd. v. Miss KM. Tawadia [1987] 165 ITR 99 did not apply to the facts of the assessee's case because in that case, the petitioner had not filed a statement nor did it pay advance-tax for the relevant assessment year. The learned CIT(A) further noted that the assessee filed application under Section 154 only when its appeal before the Tribunal was rejected vide order dated 20-7-1987 and the rectification application was filed only to retrieve the situation. The learned CIT(A) was of the opinion that after the rejection of the claim of the assessee by the Tribunal, provisions of Section 154 were not applicable. He accordingly dismissed the assessee's appeal.
5. Shri K.K. Mehra. the learned Counsel for the assessee, submitted that the assessee had declared loss of Rs. 21,82,664 for assessment year 1975-76 and loss of Rs. 23,11,491 for assessment year 1976-77. It was pointed out that, before 31-3-1979, assessments for assessment years 1975-76 and 1976-77 stood completed at loss figures. It was also pointed out that assessment for assessment year 1977-78 was made only on 26-3-1980 which was after the close of the accounting period of the assessee for assessment year 1980-81. It was also pointed out that for assessment years 1977-78, 1978-79 and 1979-80, the assessee filed returns showing nil income and the Assessing Officer also assessed income at nil figures. It was therefore, submitted that there was no obligation on the part of the assessee to either file a statement of advance-tax for assessment year 1980-81 or an estimate of advance-tax. It was vehemently argued that simply because the assessee under a mistaken notion had filed estimates of advance-tax and paid a sum of Rs. 8,25,000 also towards advance-tax, it should not be penalised by charging interest under Section 215. It was submitted that if the assessee had not filed these estimates, it would not have been saddled with the levy of interest under Section 215. Reliance was placed on the Bombay High Court decision in the case of Patel Aluminium (P.) Ltd, (supra) for the proposition that since it was not obliged in law to file an estimate of advance-tax, it was not liable to pay interest under Section 215 of the Art. Relying on the Tribunal's decision in S.P. Jaiswal Estates (P.) Ltd. v. ITO [1992] 41 ITD 342 (Cal.), it was submitted that when the assessee was not obliged by law to file a statement or estimate of advance-tax under Section 209A, it could not be made liable for any interest under Section 215 because the statement and estimate of advance-tax filed by the assessee-company were invalid and non est in law. Reliance was also placed on the Tribunal's decision in the case of Anil Kumar v. IAC [1986] 15 ITD 695 (Asr.) for the proposition that when the assessee was not required to file estimate of advance tax payable, interest under Section 215 was not leviable. Reliance was also placed on the Tribunal's decision in the case of ITO v. Paramount Premises (P.) Ltd. [1985] 21 TTJ (Bom.) 572 for the proposition that as the assessee was not liable to pay any advance-tax, Section 215 was not attracted. The learned Counsel for the assessee also relied on the Tribunal's decision in the case of Heatex Products (P.) Lid. v. Fourth ITO [1986] 24 TTJ (Bom.) 65 for the proposition that interest under Section 217 was not chargeable if the assessee did not file advance-tax estimate because it could neither foresee the retrospective amendment of Section 80J brought about on 25-8-1990 nor the judgment of the Supreme Court in Lohia Machines Ltd. v. Union of India [1985] 152 ITR 308 which changed the law. It was also submitted that in the instant case if the addition made by the Assessing Officer on account of the retrospective amendment of law and the Supreme Court decision cited (supra) was not taken into consideration, the result would be a marginal difference between the income assessed and the income on which estimate should have been filed.
6. It was also submitted that the Appellate Tribunal vide order dated 16-6-1994 in ITA No. 537/Chd./1989 in the assessee's own case had since upheld the deletion of penalty of Rs. 1,08,723 levied under Section 273(2)(a) of the Act.
7. Relying on the Punjab and Haryana High Court decision in the case of Indian Woollen Textile Mills (P.) Ltd. v. CIT [1978] 111 ITR 205, it was submitted that where a statutory provision was completely lost sight of, the matter could be treated as an error apparent on record and rectified accordingly. It was argued that In the instant case also the Assessing Officer had completely lost sight of the true import of the provisions contained in sections 215, 209 & 209A and had wrongly charged interest under Section 215. The learned Counsel for the assessee also relied on the Calcutta High Court decision in ITO v. Raleigh Investment Co. Ltd. [1976] 102 ITR 616 in which it was held that where the section was possible of one construction only and the Assessing, Office misread the section, then rectification could be made. It was submitted that Section 215 read with Section 209A was capable of only one construction that in case the assessee was not obliged to file the estimate of advance-tax and erroneously filed it, it should not be held liable to pay interest.
8. The learned D.R. strongly relied on the orders of the Revenue authorities and submitted that the matter was highly debatable and there was no mistake apparent from record.
9. We have carefully considered the submissions of both the parties as also the facts on record. It is no doubt a case of hardship but income-tax law and equity do not always go hand in hand with each other. In our considered view whether an estimate filed by an assessee when it was not obliged to file the same is non est and Invalid, is a debatable proposition. As rightly pointed out by the Revenue authorities, the estimate of advance-tax filed by the assessee cannot be treated as a scrap of paper. Some sanctity does attach to such documents. We, therefore, hold that, despite the decisions of the authorities in favour of the assessee, on merits, that when it is not obliged to file the estimate of advance-tax but erroneously files it, it should not be held liable to pay interest under Section 215, we had held that another view is conceivable and possible. Once two views are possible, the matter goes out of the ambit of Section 154 because it no longer remains a patent and obvious mistake.
10. The facts in the case of India. Woollen Taxtile Mills (P.) Ltd. (supra) are also distinguishable from the facts of the instant case. In that case, the facts were that in the course of surtax assessment, the Income-tax Officer treated "surplus taxation reserve" and "dividend reserve" as reserves. Subsequently, he became alive to the existence of the Explanation to Rule 1 of the Second Schedule of the Companies (Profits) Surtax Act, 1964. He immediately revised the assessment after giving a due notice to the assessee and his action was upheld by the first appellate authority and the Tribunal. The High Court held that when a statutory provision is completely lost sight of, the matter can be treated as an error apparent on record. As regards the matter being debatable, the High Court observed that from a perusal of the orders of the Income-tax Officer, the Appellate Assistant Commissioner and the Appellate Tribunal, it was found that no such question had been raised and that the assumption throughout was that the "taxation reserve", "dividend reserve" and "surplus" fell within the mischief of the Explanation. It was on these facts that the matter was decided against the assessee. In the present proceedings, the Assessing Officer has made the question of debatability as the sheet-anchor of his order and dismissed the assessee's application.
11. The decision in the case of Raleigh Investment Co. Ltd. (supra) is also distinguishable on facts. In that case, the High Court interpreted the provisions of Section 85A and held that the learned single Judge was in error in thinking that two views of the section were possible and that in view of the language used in Section 85A, it was not possible to say that the section was capable of two constructions. From these facts, it is clear that where only one interpretation is possible, the mistake becomes apparent from record but where two constructions are possible, then it becomes a debatable issue and the matter is taken outside the pale of Section 154. We have already held above that two views are possible as to whether if the assessee voluntarily and without any legal obligation, files an estimate of advance-tax, such estimate is non est or invalid and that it is debatable question. We also find that the matter of charging of interest had travelled upto the Tribunal and the Tribunal vide order dated 20-7-1987 held that the assessee was only entitled to consequential relief as a result of the order of the CIT(A) and the Tribunal. When the matter on merits in this very case has been decided against the assessee, there was no question of there being a mistake apparent from record.
12. In view of the above discussion, we do not find any merit in the assessee's appeal which is hereby dismissed.
13. Now we come to the Revenue's appeal (I.T.A. No. 1439/Chd./1992). As mentioned above, original asst. for assessment year 1980-81 in the case of the assessee was made on 28-2-1983 on total income of Rs. 38,32,810. The Assessing Officer charged interest under Section 215 to the tune of Rs. 4,24,573 which was later on reduced to Rs. 2,08,406 under Rule 40 of the Income-tax Rules, 1962. The assessee preferred an appeal against the charging of interest and the ground of appeal raised before that authority was as follows:
6.6. Interest under Section 215 of the Income-tax Act, 1961 has incorrectly been charged at Rs. 4,24,573 as against the correct amount of Rs. 4,12,732 which on the facts and in the circumstances of the case would have been waived in view of the provisions contained in Rule 40 of the Income-tax Rules, 1962.
14. The CIT(A) looking into the facts and circumstances of the case, set aside the matter to the file of the IAC(A) "with the direction to calculate the interest under Section 215 according to law and also allow consequential relief.
15. The assessee preferred an appeal against that order before the Appellate Tribunal and the Tribunal disposed of the matter vide order dated 20-7-1987. In para 18 of the order, the Tribunal observed that it was clear that the assessee challenged the interest charged under Section 215 on two counts (i) there was mistake in calculating interest i.e., it should have been at Rs. 4,12,732 as against Rs. 4,24,573 and (ii) the interest should have been waived in view of the provisions contained in Rule 40 of the Income-tax Rules, 1962. The Tribunal observed that waiver presupposes the liability to interest. It was, in fact, found by the Tribunal that the Assessing Officer had reduced the interest charged under Section 215 to the extent of Rs. 2,16,167. The Tribunal noted that a new plea was being put up for the first time pleading that the assessee had denied its liability to be assessed to interest under Section 215. It was also observed that the assessee had not spelt out as to how the liability was denied. The Tribunal rejected this ground following the Supreme Court decision in the case of Central Provinces Manganese Ore Co. Ltd. v. CIT [1986] 160 ITR 961. The Tribunal clearly and categorically held that the assessee was only entitled to consequential relief as a result of the orders of the CIT(A) and the Tribunal which was automatic. It was, therefore, held that there was no justification to interfere with, the order of the learned CIT(A) on this account.
16. As pointed out above, the learned CIT(A) had set aside the matter of interest under Section 215 for calculation as per law and for allowing consequential relief. The Assessing Officer passed an order on 16-4-1990 giving effect to that direct and again held that the assessee had rightly been charged interest of Rs. 2,16,367. The learned CIT(A) vide order dated 25-5-1992 held that since the assessee had no obligation to file an estimate of advance-tax or to pay advance-tax, it was not liable to be charged interest under Section 215. It is against this order that the Revenue has come in appeal before us.
17. The learned D.R. submitted that once the matter had been set aside by the learned CIT(A) and the Tribunal and only consequential relief was to be allowed apart from calculating the interest correctly chargeable under the law, there was no question of going behind or beyond the observations or directions of the higher authorities and then holding that the assessee was not liable to interest under Section 215.
18. Shri Mehra, on the other hand, made valiant efforts to support the impugned order. It was submitted that the impugned order was a reasoned order and was supported by various judgments of the Tribunal. The learned Counsel for the assessee also relied on the Supreme Court judgment in the case of Chamundi Mopeds Ltd. JT 1992 (3) S.C. 98. Our attention was drawn to the distinction made by the Supreme Court regarding the stay orders and orders which were quashed and remanded. It was submitted that where an order has been stayed, it only means that order which has been stayed would not be operative from the date of the passing of the stay order and it does not mean that the said order has been wiped out from existence. But if an order passed by the appellate authority is quashed and the matter is remanded, the result would be that the appeal which has been disposed by the said order of the appellate authority would be restored and it could be said to be pending before the appellate authority after the quashing of the order of the appellate authority. It was, therefore, submitted that once the matter was set aside by the learned CIT(A) and his order was confirmed by the Tribunal, then the matter was open and had to be decided afresh by the Assessing Officer on merits.
19. We have carefully considered the rival submissions. The argument of Shri Mehra though attractive at first blush is not really so when considered properly. We have already given the back ground against which the matter regarding charging of interest was set aside by the learned CIT(A). At the cost of repetition we may reiterate that the matter was not wholly set aside by the learned CIT(A). It was set aside for a limited purpose of calculating the interest as per law and for allowing consequential relief. The Tribunal in very categorical and clear terms explained the position and held that the assessee was entitled only to consequential relief as a result of the orders of the CIT(A) and the Tribunal. Against this background, we fall to understand as to how the matter could be said to have been thrown open and to be considered afresh by the Assessing Officer/appellate authority. In our considered opinion, the matter had to be gone into and processed in the light of the observations of the learned CIT(A) and the Tribunal and it had a very limited ambit. The question on merits about the leviability or otherwise of interest could not be gone into. The learned CIT(A), in our opinion, has committed a basic mistake in travelling beyond the scope in which the matter lay and not deciding the issue on merits deleting the interest. Since the question was one of calculation of interest as per law and of allowing consequential relief only, the learned first appellate authority, in our opinion, could not travel beyond those parameters and come to the conclusion that in this case interest was not leviable at all. It was not the chargeability of interest but its calculation which was the subject-matter of setting aside the issue. Once this fundamental aspect is grasped, the situation becomes absolutely clear.
20. Since no mistake in calculation of interest of Rs. 2,16,367 has been pointed out nor has it been brought to our notice that the Assessing Officer has not given consequential relief, no further relief is due to the assessee. Respectfully following the Tribunal's decision dated 20-7-1987 in the assessee's own case for this very assessment year and for the reasons mentioned above, we reverse the order of the first appellate authority and restore that of the Assessing Officer and hold that interest of Rs. 2,16,367 has been correctly charged by the Assessing Officer under Section 215 of the Act.
21. In the result, the Revenue's appeal is allowed.