Income Tax Appellate Tribunal - Bangalore
Islamic Academy Of Education (R), ... vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
BANGALORE BENCH 'A'
BEFORE SHRI N.L. KALRA, A.M.AND SHRI GEORGE GEORGE K, J.M.
ITA No.568(BNG)/09
(Assessment Year : 2004-05)
The Assistant Commissioner of Income Vs. M/s. Islamic Academy of
Tax, Central Circle, Mangalore. Education, Nityanandanagar,
Mangnalroe.
Appellant. Respondent.
ITA No. 631(BANG)/09
(Assessment Year 2004-05)
(By Assessee)
Revenue By : Smt. Jacinta Zimik Vashai.
Assessee By : Shri Dinesh.
O R D E R
PER BENCH :
The revenue as well as the assessee have filed appeals against the order of learned Commissioner of Income Tax (Appeals)-VI, Bangalore Dt.23.3.2009.
2. The Assessing Officer completed assessment vide order dt.24.12.2007 in which the Assessing Officer determined the income of the assessee at Rs.61,16,710. On the assessed income, the Assessing Officer determined the tax and interest payable at Rs.28,37,532. There were pre paid taxes to the extent of Rs.1,03,04,669. Hence a sum of Rs.74,67,137 was determined as excess refundable by the Assessing Officer. On such amount which is refundable, the Assessing Officer allowed interest under section 244A to the extent of Rs.6,34,707. The Assessing Officer issued a notice under section 154 on 5.1.2009 vide which the Assessing Officer propose to withdraw the interest under section 244A allowed on self-assessment tax which is included in the pre paid tax of Rs.1,03,04,669. In response to the notice issued by the Assessing
-2- ITA Nos.568 & 631(BNG)/09 Officer, the assessee vide letter dt.20.1.2009 submitted that interest was already granted and therefore the same cannot be withdrawn by passing an order under section 154 of the Income Tax Act, 1961 because the issue of not allowing interest in self assessment tax is debatable. It was further submitted that there are various case laws in which it has been held that the power under section 154 cannot be invoked on an issue which is debatable. The contention of the assessee was not acceptable by the Assessing Officer. According to the Assessing Officer interest under section 244A was regularly allowed on the payment of self assessment tax. The withdrawal of interest under section 244A is nothing but rectifying a mistake apparent on record and thus mistake is not a debatable issue. The learned Assessing Officer referred to section 244A in which it has been mentioned that interest is payable on advance tax or TDS etc. Nothing is mentioned in section 244A that interest under section 244A can be given on self assessment tax.
3. The assessee filed an appeal before the learned CIT(A). It was submitted that the issue on which the Assessing Officer has done rectification is a debatable issue and therefore the Assessing Officer should not have passed order under section 154 on the debatable issue. The learned A.R. relied on the following decisions before the learned CIT(A) in which it has been held that rectification under section 154 cannot be done on a debatable issue.
i) T.S. Balaram, ITO Vs. Volkart Brothers (82 ITR 50) (SC)
ii) CIT Vs. Keshri Metal (P) Ltd. (237 ITR 165) (SC).
iii) CIT Vs. Hero Cycles (228 ITR 463) (SC)
iv) CIT Vs. South Indian Bank Ltd. (249 ITR 304) (SC)
v) Satishchandra & Co. Vs. CIT (234 ITR 70) (Kar)
vi) ACIT Vs. B.C. Parthasarathy (101 TTJ 448) (Bangalore Tribunal)
-3- ITA Nos.568 & 631(BNG)/09
vii) CIT Vs. Satyanarayanan Bhalotia (14 Taxman 34) (Cal)
viii) CIT Vs. Lakshmi Prasad Lahkar (220 ITR 100) (Gau)
ix) CIT Vs. M M T C Ltd. (246 ITR 725) (Del)
x) Additional CIT Vs. Grindwell Norton Ltd. (102 TTJ 265) (Mum) The learned CIT(A) mentioned that the Assessing Officer has pointed that interest on self assessment tax is not payable under section 244A and therefore the mistake made in the assessment order is a mistake of law.
4. The learned CIT(A) after considering the submissions of the assessee and the contentions of the Assessing Officer has mentioned in the order held as under :
"Above interpretation of law is appreciated. But the Hon'ble jurisdictional High Court holds a different view on this issue. It has favoured purposive interpretation of the provisions of section 24A(1)(b) of Income Tax Act over the literal interpretation. This interpretation has come in the wake of controversy as to the explanation to section 244A(1)(b) which provides that date of payment of tax or penalty means the date on and from which the amount of tax or penalty specified in the notice of demand issued under section 156 is paid in excess of such demand. Thus, a controversy has arisen that whether the self assessment adjusted is in pursuance of a notice of demand or not ? The Karnataka High Court in CIT Vs. NGEF Ltd. (244 ITR 665) (Kar) held that when an assessment is completed, the self assessment tax already paid under section 140A gets adjusted against the assessment tax and thus partakes of the character of assessed tax. Therefore, the self assessment tax paid by the assessee should also be taken into account for the purpose of allowing interest under section 244A(1) of Income Tax Act. This decision is binding. Respectfully following the same, I direct the A.O. to adjust the self assessment tax against the demand raised and compute the interest under section 244A(1) of Income Tax Act and if it results in refund issue the refund."
5. We have heard both the parties. It is noted that search under section 132 was conducted on 21.9.2005 at office premises of the assessee and also at residential premises of its Chairman Sri Y. Abdulla Kunhi. During the course of search proceedings at the residential premises of Sri Y. Abdulla Kunhi, a sum of Rs.76,39,525 was found
-4- ITA Nos.568 & 631(BNG)/09 and out of which a sum of Rs.74 lakhs was seized. The Assessing Officer issued notice under section 153A of the Income Tax Act, 1961 and in response to that notice, the assessee filed a return of income on 27.2.2006 vide which income of Rs.2,51,41,336 was disclosed. As per the return the assessee was liable to pay self assessment tax of Rs.1,02,63,449. The assessee did not pay the self assessment tax due as per the returned income. The assessee filed a letter dt.27.2.2006 vide which he asked that seized cash should be adjusted against the self assessment tax of Rs.1,02,63,449. The order under section 154 dt.3.2.2009 does not indicate as to when the cash seized was adjusted against the self assessment tax on account of letter of assessee dt.27.2.2006. As per para 3 of the assessment order dt.24.12.2007, the Assessing Officer has mentioned that the assessee filed return of income on 27.2.2006 and in that return the assessee disclosed additional income of Rs.6,33,05,350. This additional income included unaccounted donations to the extent of Rs.1,58,05,350, unexplained creditors for building to the extent of Rs.3.5 crores and unexplained expenditure of Rs.1.25 crores. Such additional income was disclosed as per the statement recorded under section 132(4). The assessee filed a revised return on 27.2.2007 vide which an income of Rs.2,25,33,625 was declared. The reason for filing revised return was for the purpose of claiming depreciation which was not claimed in the original return. The assessee filed another revised return on 28.3.2007 vide which an income of Rs.4,20,43,975 was disclosed and the assessee also claimed exemption under section 11 of the Income Tax Act, 1961. The Assessing Officer in the computation of income vide order dt.24.12.2007 considered the excess over
-5- ITA Nos.568 & 631(BNG)/09 expenditure and included the additional income to the extent of Rs.5,02,29,802. Such additional income was clarified in para 6.1.6 of the assessment order and the additional income consisted of unexplained expenditure and unexplained creditors for building.
6. In the assessment order, the Assessing Officer has not treated the cash seized as undisclosed income. Section 132B of the Income Tax Act, 1961 deals with the application of seized cash or requisitioned asset. As per proviso to section 132B(1)(i), it is mentioned that the assessee can make an application for the release of assets within 30 days from the end of the month in which the asset is seized provided the assessee can specify the Assessing Officer that asset as seized is explained. In case such asset is explained then the seized asset is to be released after adjusting the existing liability. Section 132B (1)(i) is reproduced for ready reference :
132B(1)(i) -- " the amount of any existing liability under this Act, the Wealth Tax Act, 1957 (27 of 1957), the Expenditure Tax Act, 1987 (35 of 1987), the Gift Tax Act, 1958 (18 of 1958) and the Interest Tax Act, 1974 (45 of 1974), and the amount of the liability determined on completion of the assessment (under section 153A and the assessment of the year relevant to the previous year in which search is initiated or requisition is made, or the amount of liability determined on completion of the assessment under Chapter XIV-B for the block period, as the case may be) (including any penalty levied or interest payable in connection with such assessment) and in respect of which such person is in default or is deemed to be in default, may be recovered out of such assets."
As per the above provision, the seized cash could have been utilized for satisfying the existing liability or should have been utilized against the liability determined on the completion of assessment under section 153A. Sub-section 4 of section 132B mentions that the cash which has not been adjusted as per section 132B(1)(i), then the balance is to be released to the assessee and the assessee has to get interest under section
-6- ITA Nos.568 & 631(BNG)/09 132B(4) and interest is for the period from the date immediately following the expiry of the period of 120 days from the date on which the last of the authorization for search under section 132 is executed to the date of completion of assessment. The provisions of the Act clearly mentions that the seized cash should have been adjusted against the existing liability or should have been adjusted. Under section 140A(1), the assessee was required to pay tax of Rs.1,02,63,449 on the income declared in the return and the assessee made a request that seized cash may be adjusted against the tax payable as per the return filed and the department accordingly adjusted the cash against the tax which was payable on the basis of return. Section 140A(3) specifies that the assessee is to be deemed to be an assessee in default if the assessee fails to pay the whole or any part of the tax in accordance with the provisions of sub-section (1) of section 140A. Thus the tax which is payable as per the return is to be paid under section 140A(1) and if the assessee is not paying such tax along with the return then the assessee is to be deemed in default as per section 140A(3). Thus an existing liability stood against the assessee in view of the return filed vide which the tax was payable to the extent of Rs.1,02,63,449. Thus the amount which has been paid is not a self assessment tax under section 140A but it is seized cash which has been adjusted against the existing liability. Moreover the A.O. was required to process the return of income filed under section 143(1) and was required to issue intimation on the basis of the income returned. No such details have been furnished to show that the Assessing Officer processed the earlier return vide which the assessee was payable to pay tax to the extent of Rs.1,02,63,449. The Assessing Officer has basically passed order under
-7- ITA Nos.568 & 631(BNG)/09 section 154 on the ground that seized cash has been paid as self assessment tax. The facts on record does not show that the assessee has paid self assessment tax under section 140A(1). The amount was realized from the seized cash for adjustment of existing liability. In case the return was processed then the intimation was to be treated as a demand notice under section 156 and on that basis the seized cash should have been adjusted against the liability.
7. Moreover it is settled law that the order under section 154 cannot be made on the debatable issue of facts and law. The Assessing Officer can have jurisdiction under section 154 in case the mistake is clear, distinct and apparent from record. Such factual aspect is not available in the record to show that the Assessing Officer could have withdrew the interest under section 244A by holding that the seized cash was adjusted against self assessment tax under section 140A(1). We, therefore, feel that the Assessing Officer was not justified in withdrawing the interest under section 244A because the issue was debatable. It is true that the learned CIT(A) has directed the Assessing Officer to adjust the self assessment tax and pay the interest under section 244A(1) of the Income Tax Act, 1961. Our finding is that the Assessing Officer was not justified in withdrawing the interest under section 244A(1) because the seized cash was adjusted against the existing liability and interest under section 244A was liable from the date on which the amount was adjusted against the existing liability to the date when the amount was refunded. We therefore dismiss the appeal of the revenue and we uphold the appeal of the assessee that the Assessing Officer was not justified in passing order under section 154 of the Income Tax Act, 1961.
-8- ITA Nos.568 & 631(BNG)/09
8. In the result the appeal of revenue is dismissed and that of the assessee is allowed.
Pronounced in the open court on 29.01.2010.
Sd/- Sd/-
(GEORGE GEORGE K) (N.L. KALRA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Bangalore,
Dt.29.01.2010.
Copy to :
1. The Assessee.
2. The Assessing Officer.
3. CIT(Appeals)
4. CIT
5. Departmental Representative, ITAT, Bangalore.
6. Guard File, ITAT, Bangalore.
7. Guard File, ITAT, New Delhi.
* Gpr
By Order
Assistant Registrar