Income Tax Appellate Tribunal - Jaipur
Assistant Commissioner Of Income Tax vs Dr. Mohan Lal Swarnakar [Alongwith ... on 29 November, 2004
Equivalent citations: (2005)95TTJ(JP)969
ORDER
Levy of interest under section 220(2) Held: As the AO had charged interest under section 220(2) without passing a separate order and same had arisen from the order passed under section 158BC, same is appealable under section 246.
Income Tax Act, 1961 s.246 Income Tax Act, 1961 s.220(2) Income Tax Act, 1961 s.158BC ORDER Satish Chandra, J.M.
1. All the three appeals have been filed by the Department against different orders of the learned CIT(A), dt. 10th May, 2004, 7th May, 2004 and 30th April, 2004, respectively, for the block period 1st April, 1995 to 13th Dec, 2001. The assessees have also filed the cross-objections.
2. It may be mentioned that the tax effect in this appeal is less than Rs. 1 lac and consequently as directed by CBDT in the Instruction No. 1979 (F. No. 279/126/98-ITJ), dt. 27th March, 2000, and further explained by the Instruction No. 1985, dt. 29th June, .2000 (F.No. 279/126/98-ITJ), no second appeal is to be filed if the tax effect is less than Rs. 1 lakh. The exceptions are, however, made only in four cases and these are :
(1) Where the Revenue audit objection in the case has been accepted by the Department (2) Where Board's order, notification, instruction or circular is the subject-matter of an adverse order.
(3) Where prosecution proceedings are contemplated against the assessee, and (4) Where the constitutional validity of the provisions of the Act are under challenge.
3. No such exception has been pointed out in this case. Therefore, the Revenue should have refrained from filing second appeal in view of the aforesaid CBDT circular and consequently the time of the Tribunal, of its own (Revenue's) officers, as well as of the assessee would have been saved and utilized on some substantive matters. It would be apt to quote the observations of Delhi High Court in the case of CIT v. ITAT (1988) 232 ITR 207 (Del) at page No. 216 as below :
"The CBDT instructions are binding on the Department. If the case at hand is covered by a policy laid down by the CBDT in that case no fault can be found with the order of the Tribunal refusing to state the case and there is no reason why the High Court should interfere with such discretion of the Tribunal as has been exercised consistently with the uniform policy laid down by the CBDT which binds all the subordinate authorities of the IT Department. The High Court would not ordinarily encourage breach of policy decisions and the Departmental instructions which have a public purpose behind them. Valuable time of High Courts and highly placed Tribunals is not to be wasted on petty matters."
4. However, by keeping in mind the ratio laid down by the jurisdictional High Court in the case of CIT v. Rajasthan Patrika Ltd. (2002) 258 ITR 300 (Raj), we examined the issue on merits also.
5. In all the three appeals the ground No. 2 is related to charging of interest (sic-surcharge) under Section 113.
6. After hearing rival submissions and on perusal of material available on record, it appears that a search was conducted and concluded on 17th Jan., 2002, in all the cases. But Section 113 was amended w.e.f. 1st June, 2002, which has no retrospective effect. So the provisions of said section are not applicable in the instant cases as per CBDT Circular No. 8/2002, dt. 27th Aug., 2002. Similar views were expressed in the following cases :
(i) Om Prakash Sharma v. Dy. CIT (2004) 83 TTJ (Jp) 246
(ii) Mrs. Aruna M. Katara v. Dy. CIT (2004) 82 TTJ (Pune) 363 In the light of above discussion, we are of the view that surcharge in the instant cases are not leviable. Therefore, we find no reason to interfere with the order of the CIT(A). Thus, ground No. 2 in all the appeals are dismissed.
IT(SS)A No. 45/Jp/2004 (Dr. Mohan Lal Swarnakar)
7. Ground No. 1 is related to disallowance of Rs. 2,09,936 made under Section 40A(3) of the IT Act.
8. After hearing rival submissions, it appears that on the basis of the documents found during the course of search, a few papers were found and seized pertaining to expenditure exceeding Rs. 20,000. As per the details given by the AO in his order at para 12 p. 6. The total of such expenditure was Rs. 10,14,680. Therefore, the AO has disallowed 20 per cent of the said expenditure which comes to Rs. 2,02,936 but without having any discussion. The CIT(A) after having discussion, has deleted the said addition. From the record, it appears that CIT(A) has followed the ratio laid down in the following cases where it was observed that :
(1) "while computing the undisclosed income in a block assessment, disallowance under Section 40A(3) of the IT Act can not be made." [Western India Bakers (P) Ltd. v. Dy. CIT (2004) 84 TTJ (Mumbai) 223 : (2003) 87 ITD 607 (Mumbai)] (2) "disallowances such as disallowances under Section 40A(3) of the IT Act do not fall within the ambit of Chapter XIV-B of the IT Act." [Parakh Foods Ltd. v. Dy. CIT (1998) 64 ITD 396 (Pune)]
9. By following the Tribunal's order, supra, we find no infirmity with the order of the CIT(A). Therefore, we approve the order of the CIT(A) along with the reasons mentioned therein in this regard.
10. Regarding the second leg of ground No. 1, it appears that there is no discussion in the CIT(A)'s order. In other words, it is not emerging from the order of the CIT(A). However, on merit, it may be mentioned that amount which is taxable as undisclosed income in the block assessment should fall within the scope and ambit of definition expressly given in Chapter XIV-B and the amount which is not involved by the said definition cannot be subjected to tax in the block assessment even though declared as such by the assessee in the return of income for block period. In other words, determination of undisclosed income is independent to the return filed by the assessee as per the ratio laid down by the Tribunal in the case of Dy. CIT v. Sanmukhdas Wadhwani (2003) 80 TTJ (Nag) 648 : (2003) 85 ITD 734 (Nag). Similar views were expressed in the following cases :
(i) CIT v. Bharat General Reinsurance Co. Ltd. (1971) 81 ITR 303 (Del)
(ii) Narayanan v. Gopal AIR 1960 SC 235
11. In the light of above discussion and by considering the totality of facts and circumstances of the case, we find no merit in the grievance taken by the Department. In other words, ground No. 1 is dismissed.
IT(SS)A No. 46/Jp/2004 [M/s Vikas Health Services India (P) Ltd.]
12. The remaining ground No. 1 is related to the relief of Rs. 2,02,989 on account of set off.
13. The AO discussed this issue in his order at para 13 where the stock of medicines worth Rs. 9,99,450 was found during the course of search. The AO observed the value of the closing stock in the books as on 13th Dec, 2001 was Rs. 7,89,461. Hence, the excess stock of Rs. 2,09,989 was added as the unexplained investment by the AO. The AO also observed that the ad hoc disclosure of Rs. 1,26,373 made in block assessment covered this addition. Hence, same is not considered as addition separately. However, the AO has again added a sum of Rs. 2,09,989.
14. The CIT(A) in first appeal after discussing a number of case laws, deleted the said addition by giving the set off against unaccounted profit from unaccounted sales of Rs. 20,00,637 for asst. yr. 2001-02.
15. By considering the totality of facts and circumstances of the case, it also appears that the assessee has surrendered a sum of Rs. 28,00,000. The impugned addition is covered under the profit on account of unaccounted sales. In other words, the CIT(A) has given just set off which appears reasonable in the facts and circumstances of the case. When it is so, then we find no reason to interfere with the order of the CIT(A), which is hereby upheld along with the reasons mentioned therein. Thus, this ground is dismissed. For the similar reason, ground No. 2 of the cross-objection is also dismissed.
IT(SS)A No. 47/Jp/2004 (Ram Ratan Soni):
16. Ground No. 1 in this appeal is related to relief of Rs. 1,07,687.
17. The facts and circumstances are identical as were discussed in the previous appeal, supra. In the facts and circumstances of the case, the set off given by the CIT(A) appears reasonable. So this ground has no merit. Thus ground No. 1 of the Departmental appeal and ground No. 2 of the cross-objection are dismissed.
18. In all the three cross-objections, ground No. 1 is related to charging of interest under Section 220(2) read with Section 140A of the IT Act.
19. The learned Authorised Representative submitted that this interest is not chargeable as notice under Section 156 was never issued. He further submitted that the AO has not passed a separate order. He has just mentioned in the assessment order "charge interest under Section 220(2) read with Section 140A of IT Act, 1961" without any discussion. The learned Authorised Representative submitted that a separate order is required for charging the interest under Section 220(2), if the assessee is defaulter of notice under Section 156. He submitted that the CIT(A) has wrongly confirmed the charging of interest by mentioning that issue of notice under Section 156 is not mandatory. So he made a request that the interest should not be charged in the instant case.
20. On the other hand, the learned Departmental Representative relied on the orders of the lower authorities, who has submitted that the notice under Section 156 is not mandatory for charging of interest under Section 220(2). He further submitted that the order is not appealable as per Section 246 of the IT Act.
21. We heard both the parties and gone through the material available on record. We do not agree with the learned Departmental Representative that this issue is not appealable as per Section 246 which requires a separate order to be passed. In the instant case, no separate order has been passed and the issue arising from the order passed under Section 158BC is appealable.
22. Section 220(2) runs as under :
"If the amount specified in any notice of demand under Section 156 is not paid within the period limited under Sub-section (1), the assessee shall be liable to pay simple interest at one and one-fourth per cent for every month or part of a month comprised in the period commencing from the day immediately following the end of the period mentioned in Sub-section (1) and ending with the day on which the amount is paid."
Accordingly, the notice under Section 156 is the precondition and second condition is that there must be default of this notice. In the instant case neither notice has been issued nor there is any default by the assessee of notice under Section 156. Therefore, we set aside both the orders of the lower authorities and direct not to charge interest in the present appeals. However, the AO will be at liberty to pass the separate orders under Section 220(2) read with Section 140A on merits, if need be. With these observations, we allow this ground in favour of the assessee in all the three appeals under consideration.
23. In the result, all the three appeals filed by the Department are dismissed and all three cross-objections filed by the assessees are partly allowed as stated above and announced in the open Court.