Income Tax Appellate Tribunal - Delhi
Asahi India Glass Ltd., New Delhi vs Department Of Income Tax on 5 September, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'A' : NEW DELHI
BEFORE SHRI U.B.S.BEDI, JUDICIAL MEMBER AND
SHRI A.N.PAHUJA, ACCOUNTANT MEMBER
ITA no.5517/Del/2011
Assessment Year : 2003-04
Assistant Commissioner of Vs. M/s Asahi India Glass Limited,
Income Tax,Circle-2(1), 12, Basant Lok, Vasant Vihar,
Room no. 398D,CR Building,IP New Delhi.
Estate,New Delhi. [PAN : AADCA7706R].
(Appellant) (Respondent)
Revenue by : Shri A.K.Singh, DR.
Assessee by : None.
Date of hearing 12-06-2012
Date of pronouncement 12-06-2012
ORDER
A.N.PAHUJA : This appeal filed on 8th December, 2011 by the Revenue against an order dated 5th September, 2011 of learned CIT(A)-V, New Delhi, raises the following grounds:-
"1. The ld.CIT(A) has erred in holding that interest u/s 234B has not chargeable.
2. The ld.CIT(A) has, inter-alia, ignored like following judgments where it has been held that charging of interest u/s 234A, 234B & 234C is mandatory as the interest is compensatory in nature and that the authorities have no discretion in this regard.
(i) CIT Vs. Anjum N.H.Ghaswala 252 ITR 01 (SC).
(ii) M.R.Pattabhiram Vs. CIT 262 ITR 501 (Kar).
(iii) CIT Vs. Sant Ram Mangat Ram Jewellers 264 ITR 564 (SC).
2 ITA no.5517/Del/2011
3. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal."
2. At the outset, none appeared before us on behalf of the assessee nor submitted any request for adjournment. Considering the nature of the issue and the findings of the ld. CIT(A), the Bench proceeded to dispose of the appeal after hearing the ld. DR.
3. Facts, in brief as per relevant orders are that return declaring book profits of ``36,73,48,548/- in terms of provisions of section 115JB of the Income-tax Act, 1961 (hereinafter called as "the Act") filed on 28.11.2003, was selected for scrutiny with the service of a notice under Section 143(2) of the Act. Subsequently, the assessment was completed vide order dated 20th March, 2006 u/s 143(3) of the Act, determining book profits of ``38,25,08,186/-. Vide another order dated 29.12.2008 u/s 147/143(3) of the Act, book profits were again determined at `38,25,08,186/-. This order was rectified on 9th January, 2009 determining book profit of `36,42,63,501/-.Subsequently, the Assessing Officer[AO in short] reopened the assessment, after recording reasons in writing, and provisions for doubtful debts were added to the book profits vide order dated 29th November, 2010. Inter-alia, interest u/s 234B, 234C & 234D was charged in accordance with law.
4. On appeal, the assessee pleaded that no interest u/s 234B could be charged in view of the decision of ITAT in assessee's own case for AY 2004-05, wherein decision of Hon'ble Supreme Court in CIT Vs. Kwality Biscuits Ltd., 284 ITR 434 was relied upon. The assessee also relied upon the decision of ITAT Ahmedabad Bench in the case of Laxmi Narain Tulsidas Thakkar Vs. ACIT, and further argued that since provision for bad and doubtful debts had been made by the AO on account of amendment made by the Finance Act, 2009 with retrospective effect from 1st April, 2001, therefore, no interest should be charged u/s 234B of the Act, advance tax being not payable on the said disallowance of 3 ITA no.5517/Del/2011 provision. In the light of these submissions, the ld. CIT(A) without analyzing the facts of the case in the light of decisions cited before him, concluded as under:-
"5.2 After careful consideration of all the above three reasons, I am convinced that interest u/s 234B is not chargeable in this case and is directed to be deleted."
5. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A).The ld. DR merely supported the order of the AO.
6. We have heard the ld. DR and have gone through the facts of the case. As is apparent from the aforesaid facts, the ld.CIT(A), without analyzing the facts of the case, deleted levy of interest merely on the submissions of the assessee. We find that the ld. CIT(A) did not analyse the facts of the case in the light of decision of the Hon'ble Supreme Court in the case of JCIT Vs. Rolta India Ltd.,330 ITR 470, rendered on 7th January, 2011 holding that section 115JA/115JB is a self contained code and all the companies were liable for payment of advance tax u/s115JB and consequently, the provisions of section 234B and 234C of the Act were applicable in the event of default in the payment of advance tax. While holding so, their Lordships considered their earlier decision in the case of Kwality Biscuits Ltd. (supra) followed by the ld. CIT(A). The relevant observations of the Hon'ble Apex Court are as under:-
"7. In our view, Section 115J/115JA are special provisions. Section 207 envisages that tax shall be payable in advance during any financial year on current income in accordance with the scheme provided in Sections 208 to 219(both inclusive) in respect of the total income of the assessee that would be chargeable to tax for the assessment year immediately following that financial year. Section 215(5) of the Act defined what is "assessed tax", i.e., tax determined on the basis of regular assessment so far as such tax relates to income subject to advance tax. The evaluation of the current income and the determination of the assessed income had to be made in terms of the statutory scheme comprising Section115J/115JA of the Act. Hence, levying of interest was inescapable. The assessee was bound to pay advance tax under the said scheme of the Act. Section 115J/115JA of the Act were special provisions which 4 ITA no.5517/Del/2011 provided that where in the case of an assessee, the total income as computed under the Act in respect of any previous year relevant to the assessment year is less than 30% of the book profit, the total income of the assessee shall be deemed to be an amount equal to 30% of such book profit. The object is to tax zero-tax companies.
8. Section 115J was inserted by Finance Act, 1987 w.e.f.1.4.1988. This section was in force from 1.4.1988 to 31.3.1991. After 1.4.1991, Section 115JA was inserted by Finance Act of 1996 w.e.f. 1.4.1997. After insertion of Section 115JA, Section 115JB was inserted by Finance Act, 2000 w.e.f. 1.4.2001. It is clear from reading Sections 115JA and 115JB that the question whether a company which is liable to pay tax under either provision does not assume importance because specific provision(s) is made in the section saying that all other provisions of the Act shall apply to the MAT Company(Section 115JA(4) and Section 115JB(5)). Similarly, amendments have been made in the relevant Finance Acts providing for payment of advance tax under Sections 115JA and 115JB. So far as interest leviable under Section 234B is concerned, the section is clear that it applies to all companies. The pre-requisite condition for applicability of Section 234B is that assessee is liable to pay tax under Section 208 and the expression "assessed tax" is defined to mean the tax on the total income determined under Section 143(1) or under Section 143(3) as reduced by the amount of tax deducted or collected at source. Thus, there is no exclusion of Section115J/115JA in the levy of interest under Section 234B. The expression "assessed tax" is defined to mean the tax assessed on regular assessment which means the tax determined on the application of Section 115J/115JA in the regular assessment.
9. The question which remains to be considered is whether the assessee, which is a MAT Company, was not in a position to estimate its profits of the current year prior to the end of the financial year on 31st March. In this connection the assessee placed reliance on the judgment of the Karnataka High Court in the case of Kwality Biscuits Ltd. v. CIT reported in (2000) 243 ITR 519 and, according to the Karnataka High Court, the profit as computed under the Income Tax Act, 1961had to be prepared and thereafter the book profit as contemplated under Section 115J of the Act had to be determined and then, the liability of the assessee to pay tax under Section 115J of the Act arose, only of the total income as computed under the provisions of the Act was less than 30%of the book profit. According to the Karnataka High Court, this entire exercise of computing income or the book profits 5 ITA no.5517/Del/2011 of the company could be done only at the end of the financial year and hence the provisions of Sections 207, 208, 209 and 210(predecessors of Sections 234B and 234C) were not applicable until and unless the accounts stood audited and the balance sheet stood prepared, because till then even the assessee may not know whether the provisions of Section 115J would be applied or not. The Court, therefore, held that the liability would arise only after the profit is determined in accordance with the provisions of the Companies Act, 1956 and, therefore, interest under Sections 234B and 234C is not leviable in cases where Section 115J applied. This view of the Karnataka High Court in Kwality Biscuits Ltd. was not shared by the Gauhati High Court in Assam Bengal Carriers Ltd. v. CIT reported in(1999) 239 ITR 862 and Madhya Pradesh High Court in Itarsi Oil and Flours (P.) Limited v. CIT reported in (2001) 250 ITR 686 as also by the Bombay High Court in the case of CIT v. Kotak Mahindra Finance Ltd. reported in (2003) 130 TAXMAN730 which decided the issue in favour of the Department and against the assessee. It appears that none of the assesses challenged the decisions of the Gauhati High Court, Madhya Pradesh High Court as well as Bombay High Court in the Supreme Court. However, it may be noted that the judgment of the Karnataka High Court in Kwality Biscuits Ltd. Was confined to Section 115J of the Act. The Order of the Supreme Court dismissing the Special Leave Petition in limine filed by the Department against Kwality Biscuits Ltd. is reported in(2006) 284 ITR 434. Thus, the judgment of Karnataka High Court in Kwality Biscuits stood affirmed. However, the Karnataka High Court has thereafter in the case of Jindal Thermal Power Company Ltd.
v. Dy. CIT reported in (2006)154 TAXMAN 547 distinguished its own decision in case of Kwality Biscuits Ltd. (supra) and held that Section 115JB,with which we are concerned, is a self-contained code pertaining to MAT, which imposed liability for payment of advance tax on MAT companies and, therefore, where such companies defaulted in payment of advance tax in respect of tax payable under Section 115JB, it was liable to pay interest under Sections 234B and 234C of the Act. Thus, it can be concluded that interest under Sections 234B and 234C shall be payable on failure to pay advance tax in respect of tax payable under Section 115JA/115JB. For the foretasted reasons, Circular No. 13/2001 dated 9.11.2001 issued by CBDT reported in 252 ITR(St.)50 has no application. Moreover, in any event, para 2 of that Circular itself indicates that a large number of companies liable to be taxed under MAT provisions of Section 115JB were not making advance tax payments. In the said circular, it has been clarified that Section 115JB is a self-contained code and thus, all companies were liable for payment of advance tax under 6 ITA no.5517/Del/2011 Section 115JB and consequently provisions of Sections 234 Band 234C imposing interest on default in payment of advance tax were also applicable.
10. For the afore stated reasons CIT succeeds in the civil appeal arising out of S.L.P. (C) No. 25746 of 2009 (Jt. CIT v. Rolta India Ltd.) as also in the civil appeal arising out of S.L.P.(C) No. 18367 of 2010 (CIT-3 v. Export Credit Guarantee Corporation of India Ltd.). Consequently, Civil Appeal No. 459 of 2006 (Nahar Exports v. CIT) and Civil Appeal No. 7429 of2008 (Lakshmi Precision Screws Ltd. v. CIT) stand dismissed with no order as to costs."
7. As is apparent from the aforesaid observations in para 5.2 of the impugned order, the ld. CIT(A) did not analyse the facts of the case or issue before him in proper perspective nor considered the aforesaid decision of the Hon'ble Apex Court in Rolta India Ltd.(supra) .A mere glance at the impugned order reveals that the order passed by the ld. CIT(A) is cryptic and grossly violative of one of the facets of the rules of natural justice, namely, that every judicial/quasi-judicial body/authority must pass a reasoned order, which should reflect application of mind by the concerned authority to the issues/points raised before it. The application of mind to the material facts and the arguments should manifest itself in the order. Section 250(6) of the Act mandates that the order of the CIT(A) while disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reasons for the decision. The requirement of recording of reasons and communication thereof by the quasi-judicial authorities has been read as an integral part of the concept of fair procedure and is an important safeguard to ensure observance of the rule of law. It introduces clarity, checks the introduction of extraneous or irrelevant considerations and minimizes arbitrariness in the decision-making process. Hon'ble jurisdictional High Court in their decision in Vodafone Essar Ltd. Vs. DRP,196 Taxman423(Delhi) held that when a quasi judicial authority deals with a lis, it is obligatory on its part to ascribe cogent and 7 ITA no.5517/Del/2011 germane reasons as the same is the heart and soul of the matter and further, the same also facilitates appreciation when the order is called in question before the superior forum. W e may point out that a 'decision' does not merely mean the 'conclusion'. It embraces within its fold the reasons forming basis for the conclusion.[Mukhtiar Singh Vs. State of Punjab,(1995)1SCC 760(SC)].As already observed, the impugned order suffers from lack of reasoning and is not a speaking order on the issue before us. In view of the foregoing, especially when the ld. CIT(A) have not passed a speaking order nor examined the issue in the light of aforesaid observations of the Hon'ble Apex Court , we consider it fair and appropriate to vacate the findings of the learned CIT(A) and restore the issue to his file with the directions to readjudicate the issue after analyzing the facts of the case in the light of aforesaid observations of Hon'ble Apex Court in Rolta India Ltd.(supra) and of course after allowing sufficient opportunity to both the parties. Needless to say that while redeciding the appeal, the ld. CIT(A) shall pass a speaking order, keeping in mind, inter alia, the mandate of provisions of sec. 250(6) of the Act. With these directions, ground nos.1 & 2 in the appeal are disposed of.
8. No additional ground having been raised before us in terms of residuary ground no.3 in the appeal,accordingly, this ground is dismissed.
9. In the result, appeal is allowed, but for statistical purposes.
Order pronounced in open Court
Sd/- Sd/-
(U.B.S.BEDI) (A.N.PAHUJA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
VK.
Copy forwarded to: -
1. Appellant : Assistant Commissioner of
Income Tax,
Circle-2(1),
8 ITA no.5517/Del/2011
New Delhi.
2. Respondent : M/s Asahi India Glass Limited,
12, Basant Lok, Vasant Vihar,
New Delhi.
3. CIT concerned
4. CIT(A)-V,New Delhi
5. DR,'A' Bench ITAT
6. Guard File.
Assistant Registrar, ITAT