Income Tax Appellate Tribunal - Panji
S.A. Waisingh Laxmansnvgh Rajfut vs Ito on 23 January, 2003
Equivalent citations: (2004)86TTJ(PANJI)901
ORDER
I.S. Verma, J.M. All these appeals, being of the same"assessee, are disposed of, for the sake of convenience, by this consolidated order.
2. The objections raised by the assessee in these appeals relate to the following issues
(i) Common objection for all the three assessment years is against the charging of interest under sections 234A and 234B of the Income Tax Act, 1961, (hereinafter referred to as "the Act") while calculating the tax payable by the assessee in the body of the assessment order but without there being any direction or order in any of the assessment order with regard to charging of such interest.
(ii) The second objection for assessment year 1994-95 is against the addition of Rs. 50,000 made by considering the investment in purchase of jeep as unexplained, by invoking the provision of section 69 of the Act.
(iii) The common second objection, for assessment year 1995-96 and assessment year 1996-97, is against the addition of Rs. 1,110,000 in each year made by invoking the provisions of section 69 of the Act by considering the investment in construction of house by the assessee as unexplained.
3. I have heard the parties.
4. So far as the issue relating to charging of interest under sections 234A and 234B in all these three years is concerned, tlye-belief facts, which are common and as have been revealed from the records are that the cAssessee was carrying on the, business of trading in cloth under the name and style of M/s Bhawani Cloth Stores, at Mugalkhod village, Taluka Raibag, District Belgaurn and was a regular assessee. However, returns for assessment years 1994-95, 1995-96 and 1996-97 were not furnished as required under section 139(1) or under section 139(4) of the Act. The returns of income of all these three years were furnished on 31-3-1999, in response to the notices under section 148 of the Act issued on 11-1-1999 and served upon the assessee on 18-1-1999 declaring the income as detailed below Asst. yr.
Business income Income from other sources Total 1994-95 Rs. 23,082 Rs. 15,000 Rs. 38,082 1995-96 Rs. 26,027 Rs. 18,000 Rs. 44,027 1996-97 Rs. 24,092 Rs. 21,000 Rs. 45,096 The assessments for all the three assessment years were completed under section 143(3) read with section 147 of the Act on total income as detailed below :
Asst. yr.
Business income Income from other sources Total Addition under section 69 Total Agricultural Income 1994-95 23,082 15,000 38,082 50,000 88,082 15,000 1995-96 26,027 18,000 44,027 1,10,000 1,54,027 15,000 1996-97 24,092 21,000 45,096 1,10,000 1,56,092 20,000 While computing the tax payable by the assessee in the body of assessment order for 1994-95 itself the assessing officer included interest under sections 234A and 234B of the Act by observing as under :
Add :
interest under section 234A 21,626 Add :
interest under section 234B 29,981"
Interest in the body of assessment orders for assessment years 1995-96 and 1996-97 has also been added in the computation tax payable by the assessee by similar observations/caption as in assessment year 1994-95 reproduced above, with the difference in quantum of interest only.
5.1. The counsel for the assessee submitted that the interest under sections 234A and 234B in all the three assessment years having being demanded from the assessee by way of demand notices without there being a specific order for charging interest under these sections for any of assessment orders are illegal and bad in law and for this purpose placed strong reliance on the decisions in following cases :
(i) Ranchi Club Ltd. v. CIT (2000) 164 CTR (SC) 200: (2001) 247 ITR 209 (SC)
(ii) Smt. Tej Kumari & Ors. v. CIT (2000) 164 CTR (Pat)(FB) 201 : (2001) 247 ITR 210 (Pat)(FB).
5.2 Referring to the decision of Patna-Ranchi Bench, (Full Bench) in case of Smt. Tej Kumari & Ors. (supra) the counsel submitted that since the decision of Hon'ble Supreme Court in case of Ranchi Club Ltd. (supra) was a short decision dismissing civil appeals, there were some doubt in various quarters of the legal fraternity with respect to the interpretation, scope and that binding precedent and therefore, the Hon'ble Full Bench got itself seized of the following two questions for its reply "Question No. (1). Whether interest under sections 234A and 234B read with Expln. 4 is liable to be charged on the returned income or assessed income." (Referred by the Division Bench).
(2) Whether, in the absence of any specific order of the assessing officer to charge the interest could the interest be charged and recovered from the assessee ?"
The counsel further submitted that since the correctness of decision in case of Ranchi Club Ltd. v. CIT (1996) 131 CTR (Pat) 368. (1996) 217 ITR 72 (Pat), which was the subject-matter of civil appeal at the instance of revenue before Hon'ble Supreme Court (2000) 164 CTR (SC) 200 : (2001) 247 ITR 209 (SC) (supra), was doubted before the dDivision Bench by the revenue, the Double Bench had, in terms of judgment dated 2-7-1996, Uday Mistanna Bhandar & Complex v. CIT (1997) 137 CTR (Pat) 376: (1996) 222 ITR 44 (Pat), passed in MAiJS Nos. 3287, 2732 and 2780 of 1995 (had referred the aforesaid question No. 1 for consideration of the Full Bench. Question No. 2 was framed by the Hon'ble Full Bench itself.
5.3 The learned counsel further submitted that before the Hon'ble Full Bench of Patna the counsel for the assessee had submitted that both the questions stood settled by the decision of Hon'ble Supreme Court in case of Ranchi Club Ltd. (supra) in favour of the assessee and against the revenue, whereas the counsel appearing for the revenue had submitted that since the Hon'ble Supreme Court had dismissed the revenue's appeal in limine it cannot amount to affirming the law laid down by Division Bench of Patna High Court in case of Ranchi Club Ltd. case (supra). The revenue's counsel have further submitted that summary rejection of the civil appeal without any specific order merely meant that the Supreme Court was not inclined to interfere with the order of High Court and nothing more than that and, therefore, it was contended that the Full Bench should decide the correctness of the view taken by the Division Bench in case of Ranchi Club Ltd. (supra). The learned counsel, in view of aforesaid facts and circumstances submitted that the Full Bench went to consider the interpretation/scope/binding precedent of the decision of Hon'ble Supreme Court where the order of dismissal of a civil appeal was passed by the Supreme Court and where a special leave petition summarily dismissed and after relying on the decision of Hon'ble Supreme Court in case of VM. Salgaocar and Bros. 0 Ltd. vs: CIT (2000) 160 CTR (SC) 225: (2000) 243 ITR 383 (SC), held that when a special leave petition is summarily dismissed under Art. 136 of the Constitution, such dismissal does not lay down any law so that it shall be deemed that the Supreme Court has simply held that it is a not fit case where special leave petition should be granted but this principle will not apply in a case where a civil appeal is dismissed by Supreme Court holding that appeal has to merit because, when once a civil appeal is dismissed after hearing of parties by the Supreme Court holding that the appeal has no merit then such order becomes one which attracts, Art. 141 of the Constitution, which provide that the law declared by the Supreme Court shall be binding on all the court within the territory of India. The following observations of the Hon'ble Supreme Court at p. 392 in case of V.M. Salgaocar (supra) were relied by the counsel before me.
"Different considerations apply when a special leave petition under Art. 136 of the Constitution is simply dismissed by saying "dismissed", and an appeal provided under Art. 133 is dismissed also with the words "the appeal is dismissed". In the former case it has been laid down by this court that when a special leave petition is dismissed this court does not comment on the correctness or otherwise of the order from which leave to appeal is sought. But what the court means is that it does not consider it to be a fit case for exercise of its jurisdiction under Art. 136 of the Constitution. That certainly could not be so when an appeal is dismissed though by a non-speaking order. Here the doctrine of merger applies. In that case, the Supreme Court upholds the decision of the High Court or of the Tribunal from which the appeal is provided under clause (3) of Art. 133. This doctrine of merger does not apply in the case of dismissal of a special leave petition under Art. 136. When an appeal is dismissed the order of the Th,gh court is merged with that of the Supreme Court". (emphasis, italicized in print, by me).
5.4 The learned counsel, therefore, submitted that so far as binding nature of decision of Hon'ble Supreme Court in the case of Ranchi Club Ltd. (supra) is concerned it has the binding effect as that of a law laid down by the Hon'ble Supreme Court and consequently charging of interest under sections 234A and 234B of the Act without there being a specific order in any of three assessment order is illegal and bad in law.
5.5 The learned counsel further tried to explain the term "order" by referring to the decision of High Court of Andhra Pradesh in State of Andhra v. Ballam Konda Venkata Subbkahi AIR 1957 AP 462, 463 and submitted that unless there is an indication by way of some expression of opinion which is to be carried out or enforced it cannot be said that there is an order. According to him it is the, conclusion of a body upon any motion which is termed as "order". Referring to the present cases the counsel* submitted that simply by adding the quantum in the amount of tax payable by the assessee do not amount to order and, therefore, charging of interest is illegal.
5.6 The counsel further relied on decision of Tribunal, Delhi Bench (SMQ in case of Chetandas Laxmandas v. Income Tax Officer (2002) 122 Taxman 263 (Digest) in support of his submission with respect to scope of decision of Hon'ble Supreme Court (2000) 164 CTR (SC) 200 : (2001) 247 ITR 209 (SC) (supra) and of Full Bench of Patna High Court (2000) 164 CTR (Pat)(FB) 201 : (2001) 247 ITR 210 (Pat)(FB) (supra).
6. The learned departmental Representative on the other hand, in addition to supporting order of the Commissioner (Appeals) both on the point of additions and charging of interest under sections 234A and 234B, submitted that as a result of substitution of fresh Expln. 1 to S. 234B with retrospective effect from 1-4-1989, by the Finance Act, 1995 by which "assessed tax" for the purpose of section 234B of the Act has been defined to mean tax on the total income determined under section 143(1) or on regular assessments as reduced by the amount of tax deducted or collected at source on any income which is subject to such deduction or collection and which is taken into account in computing such total income the decision of Hon'ble Supreme Court in case of Ranchi Club Ltd. (supra), is no more a good law. The learned departmental Representative further submitted that interest chargeable under sections 234A and 234B are mandatory in nature and, therefore, there is no necessity of passing a specific order by the assessing officer before charging the interest. The learned departmental Representative supported this plea by further submitting that had there been such requirement the legislature could have provided such requirement in the section itself. According to him where the legislature had intended to provide any condition of a specific order it had provided the same and to justify the same referred to the provisions of section 143(3) of the Act, in the context of the requirement of the determination of "the sum payable by the assessee" in addition to making of an assessment. The learned departmental Representative further submitted that it was under the old provisions of sections 215 and 216 of the Act, the assessing order had been given authority to waive the interest, it was mandatory for him to pass a specific order for charging the interest. In other words, had there been not specific order for charging interest under those sections it could be claimed that the assessing officer had waived the same. According to him it was to avoid this confusion that the necessity of passing a specific order was upheld, but this is not a case for charging interest under sections 234A and 234B of the Act. He, therefore, submitted that the decision of Hon'ble Supreme Court is not applicable to the present case.
7. I have considered the rival submissions, facts and circumstances of the case, provision of law on the issue and various decisions such as :
(1) Decision of Patna High Court in Ranchi Club Ltd. v. CIT (supra) (2) Decision of Patna High Court in
(i) Uday Mistanna Bhandar & Complex v. CIT (CWJC No. 3287 of 1995 (R)J
(ii) Tel Kumaii Devi (CWJC Nos. 2732 and 2780 of 1995 (R))
(iii) Ranchi Club Ltd. (CWJC Nos. 3497, 3527, 3607, 3652 and 3682 of 1994 (R)) (3) CIT & Ors. v. Ranchi Club Ltd. (SC) (supra). Decision of Patna High Court in case of Ranchi Club Ltd. v. CIT (Pat) (supra) and Decision of Patna High Court in case of Ranchi Club Ltd. v. CIT (CWJC No. 3494, 3527, 3609, 3562 and 3782 of 1995 (R)-(1997) 137 CTR (Pat) 376 : (1996) 222 ITR 44 (Pat).
I am of the opinion that to decide the issue it is necessary to bring out the issues involved and proposition of law held in aforesaid decisions of Hon'ble Patna High Court as well as of Hon'ble Supreme Court and therefore, I proceed to discuss the decisions as under :
7.1 (i) Decision of Hon'ble Patna High Court-Ranchi Bench, in case of Ranchi Club Ltd. v. CIT (supra) Facts of this case as have been revealed from the decision work from there was no mention about levy of interest in the assessment order. The demand notice also did not mention as to however in the demand notice under section 156 of the Act, a sum of Rs. 78,322 was mentioned as the interest payable on tax due, i.e., Rs. 69,434.
On these facts it was challenged by the assessee that whether the levy of interest on the tax assets to the best of judgment under section 139 of the Act after the assessee had filed the return under section 139 of the Act was legally sustainable.
The Hon'ble High Court after considering the various provisions of Act such as sections 142M, 143(3), 144 and 234A and the decision of Hon'ble Supreme Court in J.K. Synthetics Ltd. v. CTO (1994) 119 CTR (SC) 222 : 94 STC 420 (SC) at p. 78 read as under
"The object of section 234A is to create additional liability to pay interest for a default in furnishing the return of income, the object is not to penalize the assesses who has already ffled the return under section 139 for not producing account or documents and so on under clause (ii) or (iii) of section 142(1). In my considerate opinion, therefore, the necessary conditions as required under section 234A are hot made doubt in the instant case and, therefore, the levy of interest is not justified". (emphasis, italicised in print, by me).
While considering the assessee's plea that though an appeal be preferred against the assessment order but what has been challenged in the appeal is the inclusion of the amount of entrance fee and the computation of taxable income, and not levy of interest which is not applicable and that being the position, the petitioner has had no option but to approach the court under Arts. 226 and 227 of the Constitution. The Hon'ble Court, after observing that if the assessment order is set aside or modified and it is held the -amount "entrance fee" is not includible within the taxable income the levy of interest would automatically go, but what will be the position if the order is not interfered with. The levy of interest would obviously stand. This writ petition cannot, therefore, may dismiss merely because an appeal and assessment order has been preferred have been pending as held as under :
"Now the question is whether interest on the amount of tax found payable on the assessed income can be levied at this stage.
From the facts mentioned hereinabove it is clear that there was no default in filing the return and payment of self-assessed/advance-tax. The notice under section 1420) which is said to have been not complied with leading to the levy of interest, was sent after considering the show-cause filed by the petitioner pursuant to notice under section 147/148 in the course of scrutiny of thereturn under s. 143(1)(a). In the aforesaid show-cause, the petitioner had taken a specific plea as to non-includibility of the amount of "entrance fee". As a matter of fact, in the written statement filed along with return itself a firm stand had been taken in that regard. Thus, it cannot be said to be a case of suppression or concealment of income. Of course, the plea has not been accepted by the assessing authority. But this is the subject-matter of appeal. It is difficult in my view, on these facts to hold that the petitioner committed default within the meaning of section 234A or 234B of the Act so as to make it liable to pay the interest.
From Expln. 4 appended to section 234A, quoted above, it is clear that interest is leviable on the tax on the total income "as declared in the return" and not on the total income as determined." (emphasis, italicized in print, by me).
7.2 (ii) Decision of Hon'ble Patna High Court Ranchi Bench, in case of
(i) Uday Mistanna Bhandar & Complex (CWJC No. 3287 of 1995(R))
(ii) Tei Kumari Deid (CWJC Nos. 2732 and 2780 of 1995 (R))
(iii) Ranchi Club Ltd. (CWJC Nos. 3494, 3527, 3609, 3562 and 3782 of 1995 (R) (supra)
(a) The facts in case No. (i) were as under Operative part of assessment order read "Assessed under section 143(3)/251 on total income of Rs. 86,060 charge interest, if any. Issue and challan".
As per notice of demand under section 156 of the Act, interest was charged under sections 234A and 234B.
Assessment order and demand notice were challenged.
(b) The facts in case No. (ii) (CWJC No. 2732) were as under:
In assessment order specific order was made to charge interest under sections 234A, 234B and 234C.
Commissioner (Appeals) dismissed the assessee's appeal against the charging of interest by holding that order for charging interest under sections 234A and 23B is not an appealable order.
The facts in case No. (ii) (CWJC No. 2780) were as under
There was a specific order to charge interest under sections 234A, 234B and 234C. Commissioner (Appeals) allowed partial relief in appeal against assessment which resulted in reduction of quantum of interest.
(c) The facts in case No. (iii) were as under : In CWJC Nos. 3494, 3527, and 3609 the operative portion of the order reads as under :
"Assessed under section 143(3) of the Income Tax Act, 1961, on total income of (as determined in each case). Issue demand notice, challan and copy of order and charge interest, if any."
In the demand notices interest had been charged under sections 234A, 234B and 234C In CWJC No. 3562 the operative portion of the order read as under
"Penalty proceeding under section 271(1)(c) is initiated, charge interest as per rules. Assessed under section t43(3). Issue demand notice, etc., tax as per ITNS 150 enclosed".
In CWJC No. 3782 the assessment order was not filed, however, as per computation form filed by the assessee there was a mention of the amount of interest charged under sections 234A, 234B and 234C.
At the time of hearing before the High Court the learned counsel for the assessee had submitted that the common issue involved in the writ petitions were :
"(i) Whether interest under sections 234A and 234B was liable to be charged on the tax payable on the returned income or the assessed income ?
(ii) Whether interest was chargeable under these sections only on the tax payable on such returned income which the assessee bona fide and in good faith believed to be the income liable to tax ?
(iii) Whether interest could be levied merely though a notice of demand under section 156 of the Act where there was no specific order in the assessment order that interest was leviable and for charging that interest ?
(iv) Whether mere insertion of the words in the assessment order "charge interest, if any" or "charge interest as per rules" was sufficient for charging interest through the notice of demand ?
(v) Whether appeal lay against the order for charging interest under sections 234A and 234B of the Act ?
(d) In view of above facts, the Hon'ble High Court set aside the notices of demand claiming interest under any of the sections 234A, 234B and 234C and consequently decided the issue at serial No. (iii) and serial No. (iv) in favour of the assessee (p. 50 para D). The common issue listed at serial No. (v) was also decided in favour of the assessee and against the revenue. (page No. 51 para E to G)
(e) The issue listed at serial Nos. (i) and (ii), which was again common i.e., whether interest under sections 234A and 234B was liable to be charged on the tax payable on the returned income or assessed income, were not decided rather, accepting the revenue's plea that the decision of Patna High Court in Ranchi Club Ltd. v. CIT (supra) needs reconsideration, referred the matter to a larger Bench, in the form of following question "whether interest under sections 234A and 234B read with Expln. 4 is liable to be charged on the returned income or assessed income". The revenue went in appeal against the aforesaid decision before the Hon'ble Supreme Court and the same was decided by Supreme Court on 1-8-2000, as per decision in Ranchi Club Ltd. v. CIT (supra).
(f) This decision of the Hon'ble Supreme Court is in revenue's appeals against (i) The decision of High Court of Patna in Ranchi Club Ltd. v. CIT (supra); and
(ii) decision of Patna High Court in CWJC Nos. 3494, 3527, 3609, 3562 and 3782 of 1995 (R) relating to Ranchi Club Ltd. reported as Uday Mistanna Bhandar & Complex v. CIT (supra) and were decided by Hon'ble Supreme Court as per decision dated 1-8-2000, and the judgment given read as under :
"We have heard the learned -counsel for the appellant. We find no merits in the appeal.
The civil appeals are dismissed. No order as to costs."
The Head notes of the ITR read as under : -
7.3 (iii) Decision of Patna High Court (Ranchi Bench) (Fun Bench) in Smt. Tei Kumarf & Ors. v. CIT (supra)
(a)(i) Consequent upon the reference by the Division Bench of Patna High CouITR anchi Bench, while deciding writ petitions No. CWJC 3287 of 1996 (R) by Uday Mistanna Bhandar & Complex and writ petition No. CWJC Nos. 2732 and 2780 of 1995 by Smt. Tej Kumari Devi, having been made, after having accepted the revenue's plea that decision of Patna High Court in case of Ranchi Club Ltd. v. CIT (supra), need reconciliation, the Full Bench was seized of the following question.
"Whether interest under sections 234A and 234B read with Exp1n. 4 is liable to be charged on the returned income or assessed income "?
(a)(h) At the time of hearing before the Full bench the counsel for the assessee relied on the decision of the Patna High Court- in Uday Mistanna Bhandar & Complex v. CIT (supra), in support of his contention that without any specific order to that effect in the assessment order, the revenue cannot demand interest but, since by that time another Division Bench, of Patna High Court while disposing writ petitions No. CWJC 2296, 1495, 1507 and 2144 of 1996 (R) CIT v. Quality (1998) 146 CTR (Pat) 283: (1997) 224 ITR 77 (Pat), where question of charging of interest under section 139(8) was involved, had held that mere not mentioning of the specific provisions under which interest is charged does not go to the root of the matter and does not make the order bad, the counsel for the revenue had relied on this decision for the proposition that chargeability of the interest flows from the statute inasmuch as section 139(8) of the Act creates a mandate to the effect that the assessee would be liable to pay interest without any adjudication by the assessing authorities.
(a)(iii). In view of above conflicting views the Hon'ble Full Bench thought it fit to formulate a second question as below "Whether in the absence of any specific order of the assessing authorities interest could be charged and recovered from the assessee
(a)(iv). When the Special Bench was on way to hear the reference, the revenue's appeal before the Hon'ble Supreme Court (Civil appeal No. 1030 of 1996) against the decision of Patna High Court in case of Ranchi Club Ltd. (supra) was dismissed and the judgment of Hon'ble Supreme Court (supra) reads as under "We have heard the learned counsel for the appellant. We find no merits in the appeal.
The civil appeals are dismissed. No order as to costs."
(a)(0. "In view of decision of Hon'ble Supreme Court (supra) the counsel for the assessee submitted that there is no need to go any further iii the matter because the issue has been settled by the Supreme Court (in favour of the assessee, against the revenue), but, the counsel appearing for the revenue did 11ot agree with the submission made by the counsel for the petitioner and submitted that since the revenue's civil appeal preferred against the decision of Patna High Court in case of Ranchi Club Ltd. (1996) 131 CTR (Pat) 368 : (1996) 217 ITR 72 (Pat), before the Supreme Court had been dismissed in limine, it does not amount to affirming the law laid down by the Double Bench.in case of Ranchi Club Ltd (1996) 217 ITR 72 (Pat). According to the counsel for the revenue rejection of the appeal without any specific order merely mean the Supreme Court was not mchned to interfere with the order of the High Court nothing not or that. The Revenue's counsel therefore, contended that the Full Bench should decide correctness of the view taken by the Double Bench in case of Ranchi Club Ltd. (supra)" (emphasis, italicized in print, by me).
(a)(vi). In view of aforesaid objection of the counsel for the revenue, the Hon'ble Full Bench first took up the issue with regard to the binding effect of the order of dismiss of civil appeal, by the Supreme Court (2001) 247 ITR 209 (supra) and for that purpose discussed the decision in case of Ranchi Club Ltd. (supra), decision of Supreme Court (2000) 164 CTR (SC) 200 : (2001) 247 ITR 209 (supra) in case of Ranchi Club Ltd., decision of Supreme Court in case of V.M. Salgaocar & Bros. (P) Ltd. v. CIT (supra), provisions of sections 143, 144, 234A, 234B, Expln. 4 to section 234A, departmental Circular No. 549 dated 31-10-1989 ((1990) 82 CTR (St) (1990) 182 ITR (St) 11, and decision of Supreme Court in case of J.K. Synthetics Ltd. v. CTO (supra) and held as under:
(a) When a special leave petition is summarily dismissed under Art. 136 of the Constitution such dismissal would not lay down any law rather it would be deemed that the Supreme Court had simply held that it was not a fit case where special leave could be granted. That same principle would not apply in the case where a civil appeal was dismissed by the Supreme Court holding that the appeal had no merits. Once the civil appeal was dismissed after hearing the parties that the appeal had no merits then such matter becomes one which attract Art. 141 of the Constitution which provides that the law declared by the Supreme Court would be binding on all the Courts within the territory of Supreme Court." ?
(b). "Interest under sections 234A and 234B of the Income Tax Act, 1961, is leviable on the tax on total income as declared in the return and not on the income as assessed and determined by the assessing authorities.
(c) "In the absence of any specific order of the assessing authorities interest could not be charged and recovered from the assessee".
8.1 After having considered the rival submission, facts and circumstances of the case and the aforesaid various decisions. I am of the opinion that it is now settled law that prior to omission of Expln. 4 to section 234A, substitution of Expln. 1 to S. 234B by a new explanation with retrospective effect from 1-4-1989, interest under sections 234A and 234B of the Act could be charged on the tax on the total income as declared on the return and not on the income assessed, however in view of the retrospective amendments this proposition of law no more holds good and, therefore, I am inclined to agree with the counsel for the assessee that these retrospective amendments in section 234A and section 234B of the Act have the effect of overcoming the decision of Hon'ble Supreme Court in case of Ranchi Club Ltd. (supra) with respect to the question as to whether interest under sections 234A and 234B is leviable on the tax on returned income or on the tax on the assessed income. The submission of the learned departmental Representative that these amendments have the effect to nullify the effect of decision of Hon'ble Supreme Court (2000) 164 CTR (SC) 200 : (2001) 247 TTR 209 (supra) completely, therefore, fails.
8.2 I am further of the opinion that the question as to whether interest under section 234A and section 234B can be charged and recovered from the assessee without there being a specific order of the assessing officer in the assessment order stand settled by the decision of Hon'ble Supreme Court in case of Ranchi Club Ltd. (supra) and decision of Full Bench of Patna High Court in case of Smt. Tej Kumari & Ors. (supra).
In other words it is now settled law that interest under sections 234A and 234B, even after retrospective amendments in sections 234A and 234B, cannot be charged and recovered from the assessee if there is no specific order of the assessing officer for charging of such specific interest in the assessment order.
9. So far as submissions of the learned departmental Representative that levy of interest under sections 234A and 234B being mandatory as has been by the Hon'ble Supreme Court in case CIT v. Anjurn M.H. Ghaswala & Ors. (2001) 171 CTR (SC) 1 : (2001) 252 ITR 1 (SC) and that after this decision of the Hon'ble Supreme Court the decision in case of Ranchi Club Ltd. (supra) no more holds good is concerned, I am of the opinion that, as discussed below, such is not the case and if such proposition is accepted then, in my opinion, before deciding the issue raised by the learned departmental Representative, another question still arises for consideration and the question is that "Can the revenue recover from the assessee any interest under section 234A or section 234B of the Act without there being a specific order for charging such interest in the assessment order, on the ground that the levy of interest contemplated under sections .034A and 234B of the Act being mandatory in nature, as has been held by the Hon'ble Supreme Court in Ghaswala's case (supra), there is no necessity of passing specific order by the revenue authorities either in the assessment order (if levied at the time of assessment) or in any other order (if levied during the time of passing of order)?"
10. To decide the aforesaid question it is necessary to consider the effect of a substantive or mandatory provisions as well as the procedural provisions.
11.1 In judicial parlance substantive laws determine the rights and liabilities of the parties concerned and when these rights are sought to be exercised, substantial rights get crystallised as on the date when "a proceeding" to enforce these rights is initiated, and it is so, because, any subsequent alternation in such rights is not to effect the parties concerned, unless it is expressly or impliedly so prescribed. Same is the position of mandatory provisions.
Procedural rights, on the other hand, do not get crystallised in this manner, rather crystallises on the completion of the manner in which such rights or obligation are to be enforced or realised and if there is change in procedure, it is the changed procedure which will apply.
11.2 In the case of levy of interest under sections 234A and 234B, I am of the opinion, that the provisions for levy of interest under these sections, being mandatory (2001) 119 Taxman 352 (SC) .- (2001) 252 ITR 1 (SC), the revenue has got a right to get the interest, in case of default under any of these sections, and the assessee has the liability to pay , biit the revenue's right to get the interest or to charge/levy the interest will materialise/crystallise only on initiation of the proceedings to enforce this right, which can be initiation of the proceeding for exercising this right, which, in turn, will be only on passing of some order for the levy of the interest, whereas the procedural part, which relates to the recovery of the levy, will crystallise after issuing of a D.N, under section 156 of the Act 162 STC Siemens India Ltd. v. State of Maharashtra 40, 45, 53 (B) 11.3 In view of above discussion, I am of the opinion that levy of mandatory nature also can't be recovered without there being a proper and speaking order for charging such levy. My answer to question posed in para No. 9 above, therefore, is "No".
12.1(a) Coming to the decision of Supreme Court in case first of all, of Ghaswala (supra), after having carefully gone through the decision, I am of the opinion that the issue before the Hon'ble court as well as the proposition of law held by it relates to the powers of the settlement Commission. The specific issue before the Hon'ble court was "whether the Settlement Commission (for short-"the Commission") constituted under 8. 245B of the Income Tax Act, 1961 (hereinafter referred to as "Act") has jurisdiction to reduce or waive the interest chargeable under sections 234A, 234B and 234C of the Act, while passing orders of settlement under S. 245DA of the Act ?" and the Courts answer to this issue has been given in the following terms".
"For the reasons stated above, we hold that the Commission in exercise of its power under section 245D(4) and (6) does not have the power to reduce or waive interest statutorily payable under sections 234A, 234B and 234C except to the extent of granting relief under the circulars issued by the Board under section 119 of Act. "
12.1(b) The Hon'ble Court, after having held as above, has gone further to specifically hold as under at p. 16 "In conclusion, we must note that we have taken up for consideration civil appeals Nos. 4126 to 4150 of 2000 and have decided the issue pertaining to the power of the Commission to waive or reduce the interest chargeable under sections 234A, 234B and 234C of the Act while passing orders -of settlement under section 246D(4) of the Act. We have not decided any other issue that might arise in an the appeals/petitions".
12.2(c) Secondly, from the detailed study of the aforesaid decision of Hon'ble Supreme Court (2001) 252 ITR 1 (SC) (supra), the concept of mandatory/ substantive provisions of law and the provisions of procedural provisions, I am of the opinion that the Hon'ble Supreme Court in 252 ITR 1 (SC)(supra) has nowhere held that a levy under the mandatory provision can be recovered with I out passing an order for such levy and consequently, I am of the opinion that for any mandatory levy to be recovered from the subjects, there has to be a proper order for charging such levy.
13. In view of above facts and circumstances and the discussion I am of the opinion that the decision of Hon'ble Supreme Court in case of Ghaswala (supra), has neither overruled nor changed the provisions of law held by the apex court in case of Ranchi Club Ltd. (supra) and, therefore, the proposition of law that "Interest under sections 234A and 234B can't be charged without passing a specific order by the assessing officer in the assessment order", still holds good.
14. Having held as above, the next question for consideration, in the present appeals, is as to whether narration in the assessment order such "as add : interest under section 234A-(amount)", and again "add : interest under section 23413(amount)" can be said to be specific orders for charging interest under sections 234A and 234B of the Act ?
14.1 After having gone through the procedure involved in passing an assessment order I am of the opinion that the operative part of the assessment has got three parts, namely :
(i) Assessment and computation of-taxable income.
(ii) Determination of tax payable on assessed income.
(iii) This part of the assessment order is for the purpose of passing of the specific order for taking action under any other provisions of the Act. For example, initiation of penalty proceeding under section 271(1)(b), or under section 271(1)(c) or under section 273 or any other penalty imposable under Chap. XXI of the Act or for initiating any proceeding under Chap. XXII of the Act or for charging interest under section 234A or 234B of the Act.
14.2 For there being a specific order with respect to any matter relating to third part of the assessment order, I am of the opinion that the narration must go to show that it has come out of a judicial mind and after due application of mind because the term "order" means the outcome of a mind having authority to direct for taking of certain action but after due consideration of judicial mind. I am, therefore, of the opinion that unless and until there is a judicious direction in express term anything else will not amount to "a specific order".
15. Keeping in view the aforesaid principle I am of the opinion that the narration in the assessment orders for all the three years under appeal (reproduced in para 14 of this order) cannot, by any stretch of imagination, be said to be specific order to charge under sections 234A or 234B of the Act. Consequently, I am of the opinion that the demand created against the assessee on account of interest under sections 234A and 234B of the Act, for all the three assessment years is illegal and bad in law and, therefore, the same is cancelled.
ITA No. 83 for assessment year 1994-95
16. The second objection raised by the assessee in this appeal is again the addition of Rs. 50,000 by considering the investment in purchase of jeep as assessee's unexplained investment.
17.1 The facts relating to the issue are that during the previous year relevant to assessment year 1994-95 the assessee had purchased a jeep for consideration of Rs. 50,000 and when asked to explain the source, the assessee explained that the jeep was purchased out of money provided by his brother Shri Vijay Singh L. Rajput who'was carrying on separate business of stone blasting for tubewells. It was further submitted that the vehicle was mainly used by his brother for his business. The assessing officer did not accept the explanation on the plea that "there is no proof/evidence to show that the jeep had been purchased out of money provided by his brother", and therefore, considered the investment of Rs. 50,000 as unexplained and added the same.
On appeal by the assessee, the Commissioner (Appeals) also confirmed the addition for want of evidence that amount was given by assessee's brother.
ITA Mos. 84 & 85 for assessment years 1995-96 and 1996-97 17.2 The facts, which are common for these two appeals are that the assessee had constructed a house during the financial year 1994-D5 and 1995-96 for an admitted cost Rs. 1,80,000 on a plot purchased in 1995 for Rs. 45,000. In the balance sheet as on 31-3-1996, the assessee had shown the cost of plot only. The cost of construction was not shown in any of the years. When asked to explain the source, the assessee explained that the cost of construction was met out of money received from his father who, as HUF was having income from agriculture at Sambalpur, district Pali, Rajasthan, but since the assessee had not furnished any evidence in support of the explanation, the assessing officer rejected the assessee's explanation and after estimating the cost of construction of the house at Rs. 2,20,000 added Rs. 1,10,000 in each one of the assessment years as assessee's undisclosed income. On appeal by the assessee, the Commissioner (Appeals) confirmed the order of the assessing officer for want of any evidence in support of assessee's explanation that the construction was out of money received from father. The assessee's plea that income from other sources and agriculture should be considered as having been used for investment in relevant assets was also rejected on the ground of assessee's having not shown any withdrawal for household expenses, this amount should be sufficient only to meet the household expenses and there could not be any surplus for investment in construction.
Another fact, common for all the three years, is that the assessee has not declared any income from agriculture, however, the assessing officer estimated income from agriculture at Rs. 15,000 for assessment year 1994-95 Rs. 16,000 for assessment year 1995-96 and Rs. 20,000 for assessment year 1996-97.
18. In view of above facts the counsel for the assessee first of all submitted under the provisions of section 69 of the Act are not mandatory for assessing officer to consider the investment as that of the assessee even if assessee's explanation regarding the source of income is fo~nd to be unsatisfactory. Accordingly to the learned counsel the word "may" in section 69 are of great significance which. go to show that the assessing officer has discretion in the matter of treating the source of investment which has not been satisfactorily explained by the assessee, as income of the assessee. He, therefore, submitted that even if the assessee's explanation,. in the present case was found to be unsatisfactory the assessing officer should have used his discretion in favour of the assessee by not considering the investment as assessee's income and in support of the same he relied on the'decision of Supreme Court in CIT v. Smt. P.K. Noorjahan (1999) 155 CTR (SC) 509: (1999) 237 ITR 570 (SC), where the Hon'ble Supreme Court affirmed the order of the Kerala High Court in CIT v. Smt. P.K. Nocrjahan (1980) 15 CTR (Ker) 13B.- (1980) 123 ITR 3 (Ker). On merits the learned counsel submitted that the assessee was having agriculture land measuring seven acres and, therefore, income from agriculture and from other sources should be considered as having been invested in the concerned assets.
The learned departmental Representative, on the other hand, supported, the order of the Commissioner (Appeals).
19. I have considered the rival submissions, facts and circumstances of the case and the decision of the Hon'ble Supreme Court in case of Smt. P.K. Noollahan (supra) as well as provision of section 69 of the Act with almost care.
20. So far as the assessee's plea that under section 69 of the Act the assessing officer has been given a discretion in the matter of treating the source of investment, which has not been satisfactorily explained by the assessee, as the income of the assessee, because of the use of wofd "may", I am of the opinion there is no dispute with respect to thf proposition, however, the matter is to be seen with regard to the facts of each case that the assessing officer should exercise jurisdiction for not considering unexplained investment as assessee's income.
In my opinion the assessing officer can use his discretion available under section 69 of the Act only when it is found as a matter bf fact that the person concerned (in whose name the investment has been made) is in no way in a position to earn any income for example, if the person concerned is a little child or of unsound mind or is illiterate housewife or such a age and living under such environment where there cannot be a possibility for earning any income, it is only in such, cases where the discretion be used for not considering the investment as assessee's income. On the other hand, if the person concerned, on the existing facts and circumstances, can be said to be in a position to earn income or is actually doing some business, then the discretion cannot be exercised in favQur of the assessee, by not considering the unexplained investment as assessee's income, because, if the discretion is used in favour of the assessee, in such cases also then the provisions of section 69 are rendered redundant. In that situation no unexplained investment can be considered as assessee's income, I am unable to subscribe to such interpretation on the provisions of section 69 of Act, The discretion has to be exercised on the facts and circumstances of every case independently from the facts and circumstances of the other case.
21. So far as present case is concerned, the admitted facts a re that the assessee is adult, of sound mind, carrying on the business as well as agricultural activities and earning income from more than one source. Under these facts it is quite impossible to exercise the decretion vested with the assessing officer by virtue of provision of section 69 of the Act in assessee's favour by not considering the unexplained investment as assessee's income.
22. So far as decision relied upon by the assessee is concerned, I am of the opinion in that case it was found by the Tribunal that the assessee is a Muslim lady of 20 or 21 years, who had no other source of income and that if was impossible for the assessee to have earned the amount invested in the property. In view of these facts it was held that,the amounts should necessarily be amounts given to her by somebody else, and that by no stretch of imagination could the assessee be credited with having earned this income in the course of assessment years, or could even be in a position to earn it, for a decade and more.
It was, in view of aforesaid findings of facts by the Tribunal, that the Hon'ble High Court as well as Hon'ble apex court upheld the findings as well as reasoning of the Tribunal that section 69 of the Act conforms only the discretion on Income Tax Officer to deal with investment as the income of the assessee, and that it did not make it mandatory on his part not to deal with the investment as income of the assessee as soon as latter's explanation is rejected.
In view of above discussion, I am of the opinion that the decision relied upon by the assessee being distinguishable on facts is not applicable to the present case.
23. Coming to the merits of the additions, I am of the opinion that the assessee having failed to furnish any evidence till the stage of hearing of appeal by the Tribunal, in support of his explanation that the amount used for the purchase of jeep in assessment year 1994-95 and the amount used for the construction of house for assessment years 1995-96 and 1996-97 came from his brother and father, respectively, no fault can be found with the order of the Commissioner (Appeals) and, therefore, the same are confirmed.
24. So far as assessee's claim that income from other sources and income from agriculture should be considered as having been invested in the concerned asset. I am of the opinion that assessee's this plea is also liable to be rejected because, as observed by the Commissioner (Appeals) and not disputed by the assessee before the Tribunal, the assessee having not shown any withdrawal in his books of account for household expenses, it was natural that income from other sources and agriculture must have been used from that purpose and since the total income from both these sources was only Rs. 30,000 for assessment year 1994-96, Rs. 33,000 for assessment year 1995-96 and Rs. 49,000 for assessment year 1996-97, the same may have been sufficient to meet the household expenses only and there could not be possibility of any saving from such meagre income. Consequently no benefit of agriculture income or income from other sources can be allowed, however, so far as estimate of cost of construction of the house is concerned, I am of the opinion that in absence of any evidence on the contrary the assessing officer should not have enhanced the same from Rs. 1,80,000 to Rs. 2,20,000. The cost of construction shown by the assessee is accepted and addition on the account of undisclosed income are confirmed at Rs. 50,000 in assessment year 1994-95, Rs. 90,000 in assessment year 1995-96 and Rs. 95,000 in assessment year 1996-97.
25. Another ground taken by the assessee for assessment year 1994-95 is against the estimation of assessed agricultural income at Rs. 15,000. According to the assessee the income from agriculture has been estimated at a new figure, because the assessee's land measuring 6.5 acres was fully irrigated.
26. After hearing the parties I am of the opinion that the assessee having not declared any income from agriculture in his return and also having not produced any documentary evidence for sale of agriculture produce during the period relevant to assessment year 1994-95 before any of the authorities, the assessee has no right to agitate the estimate right by the assessing officer. In case the assessee was having more income he should have produced the same but, for the reasons best known to him, has not produced any evidence in this regard.
27. In view of above discussion this ground of appeal is rejected.
28. The ground No. 1 which is common and reads as "The order of the Commissioner (Appeals) is opposed to law and facts of the case" is of general nature and was not argued by the counsel for the assessee. Consequently the same is rejected as such.
29. Jn the result assessee's all the three appeals are partly allowed.