Income Tax Appellate Tribunal - Delhi
Freightship Consultants (P) Ltd. vs Ito on 25 May, 2007
Equivalent citations: [2008]110ITD377(DELHI), [2008]300ITR96(DELHI)
ORDER
D.R. Singh, Judicial Member
1. These two appeals filed by the assessee against the consolidated order of the Commissioner (Appeals), New Delhi, involving exactly identical grounds and issues, passed in Appeal Nos. 134 & 135/05-06/ Commissioner (Appeals)-XIV/Delhi, dated 2-12-2005 were heard together and are being disposed of through this single order for the sake of convenience.
2.The identical grounds of appeal taken by the assessee in both its appeals are as under :
On the facts and in the circumstances of the case and in law the learned Commissioner (Appeals) was not justified in confirming the order passed by the assessing officer under Section 154/254 of the Act because :
(i) there was no mistake apparent from record in the order passed under Section 254/143(3) of the Act;
(ii) interest under Section 234B could not be charged under Section 154 of the Act since there was no directions by the assessing officer in the original order for charging the interest;
(iii) the order against which the rectification order was passed had merged with the order of the Hon'ble ITAT and therefore the assessing officer had no jurisdiction to take recourse to rectification proceedings.
3. Briefly stated, the facts relating to the issue involved in these grounds of appeals are that the original assessments under Section 143(3) of the Income Tax Act, 1961 were completed in these cases. While making the assessments, the assessing officer did not allow the claim of the assessee for deduction under Section 80-O of the Act as the same was claimed by the assessee on the basis of gross amount of convertible foreign exchange received by the assessee.
4. On appeal, the Commissioner (Appeals) allowed the relief to the assessee in toto. However, in 2nd appeal before the Tribunal filed by the revenue, the ITAT directed the assessing officer to allow deduction under Section 80-O of the Act on net income to be computed as per directions of the Tribunal issued in assessment year 1996-97. As per the directions of the ITAT, the Assessing pOfficer determined the income of the assessee for assessment years 1996-97 and 1997-98 at Rs. 7,40,660 and Rs. 14,81,970 respectively. He issued demand notice and charged interest under Section 234B up to the date of assessment order and the same was also paid by the assessee.
5. Later on, the assessee moved an application under Section 154 of the Act pointing out that interest under Section 220(2) has wrongly been charged as it should be charged from the date of the order passed under Section 254/143(3) of the Act, i.e., after 30-11-2004. While examining the claim of the assessee, the assessing officer noticed that in Form No. ITNS-150 sent to the assessee with the order under Section 254/143(3) dated 30-11-2004, interest under Section 234B was charged up to the date of original assessment order, i.e., up to 31-3-2000 whereas it should have been charged up to the date of reassessment framed vide order under Section 254/143(3) of the Act, i.e., 30-11-2004.
6. Further, according to the assessing officer, since it was a mistake apparent from records, notice under Section 154 was issued by him to the assessee requiring it to explain as to why interest under Section 234B should not be charged up to the date of reassessment made vide order under Section 254/143(3) dated 30-11-2004.
7. In response thereto, the assessee filed a reply dated 2-5-2005 wherein the assessee contended that interest under Section 234B of the Act was not chargeable in this case because short payment of advance tax was mainly because of bona fide dispute regarding the allowability/applicability/ interpretation of Section 80-O, ie., whether deduction under Section 80-O is to be allowed on the gross basis or net basis and hence charging of interest under Section 234B was not justified. In support of his contention, the assessee also relied upon the ratio of judgment in the case of CIT v. Sedco Forex International Drilling Co. Ltd. (2003) 264 ITR 3201 (Uttaranchal).
8. The learned assessing officer after considering the reply of the assessee and distinguishing the facts of Sedco Forex International Drilling Co. Ltd's case (supra) with the facts of the instant case of the assessee, rejected the contentions of the assessee and came to the conclusion that by not charging correct interest under Section 234B of the Act vide ITNS-150 the assessing officer committed a mistake apparent from record and hence it required rectification and accordingly he rectified the mistake and charged interest under Section 234B of the Act up to the date of the order of ITAT.
9. Aggrieved with the order of the assessing officer, the assessee filed an appeal before the Commissioner (Appeals) and reiterated the submissions made before the assessing officer. The Commissioner (Appeals) after considering the submissions of the assessee and analyzing the provisions of Section 234B and after taking into consideration the decision of the Apex Court in the case of CIT v. Anjum M.H. Ghaswala (2001) 252 ITR 12, held that levying of interest under ** Section 234B upon the assessee was mandatory and the same has been rightly charged by the assessing officer by passing an order under Section 154/254 of the Act because after the order passed by the ITAT there was no debate on the point of charging interest under Section 234B of the Act.
10. Before us, the learned AR for the assessee in support of his grounds of appeals raised before us firstly contended that in this case the Assessing Officer has wrongly charged interest up to the date of order, i.e., 30-11-2004 passed by the ITAT because the same if at all is required to be charged that should have been up to the date of regular assessment made by the assessing officer. Secondly, he contended that in the instant case no notice under Section 154 of the Act was given to the assessee and hence order passed by the assessing officer under Section 254 read with Section 154 of the Act was invalid and thirdly, learned AR for the assessee contended that since the allowability of assessee's claim of deduction under Section 80-O, i.e., whether it is to be allowed on gross basis or net basis was in itself debatable so no interest under Section 234B could have been charged from the assessee after the order passed by the ITAT because the assessee could not have visualized that his claim under Section 80-O would be only allowed on net basis and not on gross basis by the ITAT. Further according to the assessee since it has declared its q income as M7 neither any advance tax was required to be paid by the assessee and consequently no interest under Section 234B was chargeable and so the assessing officer was not competent to pass an order under Section 154 of the Income Tax Act, 1961 and the same has been wrongly upheld by the Commissioner (Appeals). In support thereof he has relied upon the following case laws :
Motorola Inc. v. Dy. CIT (2005) 95 ITD 269' (Delhi) (SB) (Mag.) Sedco Forex International Drilling Co. Ltd. 's case (supra) CIT v. Reading & Bates Exploration Co. (2005) 278 ITR 472 (Uttaranchal) Sri Renukeswara Rice Mills v. ITO (2005) 93 ITD 263 (Bang.) Addl. CIT v. Isthmian India Maritime (P) Ltd. (1978) 113 ITR 570 (Mad.) CIT v. Asian Cables Corpn. Ltd. (No. 1) (2003) 262 ITR 5353 (Bom.).
11.On the other hand, learned DR for the revenue countering the arguments of learned AR for the assessee submitted that after the decision of the ITAT since there was increase in the liability on account of allowance of deduction under Section 80-O on net basis against interest on gross basis as claimed by the assessee, so, as per provisions of Section 234Bof the Act read with Explanation 4, the assessing officer has rightly charged the interest under Section 234B of the Act up to the date of decision by the ITAT. He further contended that since there was no debate on this point after the decision of the ITAT, hence, the assessing officer has rightly issued a notice under Section 154 of the Act and corrected his mistake which he earlier committed at the time of issuing ITNS-150.
12. We have considered the rival contentions of both the parties, perused the records and carefully gone through the orders of the tax authorities below as well as the case laws relied upon by the learned AR for the assessee.
13. In order to appreciate the proposition, whether the assessing officer by passing an order under Section 154/254 can validly charge interest under Section 234B of Income Tax Act in consequence of the order passed g by the ITAT, we have looked into the relevant provision of Section 234B of the Act which are reproduced as under :
234B. Interest for defaults in payment of advance tax.(1) Subject to theother provisions of this section, where, in any financial year, an assesseewho is liable to pay advance tax under Section 208 has failed to pay suchtax or, where the advance tax paid by such assessee under the provisionsof Section 210 is less than ninety per cent of the assessed tax, the assesseeshall be liable to pay simple interest at the rate of one per cent for everymonth or part of a month comprised in the period from the 1st day of April next following such financial year to the date of determination of total income under Sub-section (1) of Section 143 (and where a regular assessment is made, to the date of such regular assessment, on an amount) equal to the assessed tax or, as the case may be, on the amount by which the advance tax paid as aforesaid falls short of the assessed tax.
Explanation 1. In this section, 'assessed tax' means the tax on the total_income determined under Sub-section (1) of Section 143 or on regular assessment as reduced by the amount of tax deducted or collected at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income.
Explanation 2. Where, in relation to an assessment year, an assessmentis made for the first time under Section 147 or Section 153 A, the assessmentso made shall be regarded as a regular assessment for purposes of thissection.
(4) Where, as a result of an order under Section 154 or Section 155 orsection 250 or Section 254 or Section 260 or Section 262 or Section 263 orsection 264 or an order of the Settlement Commission under Sub-section (4) of Section 245D, the amount on which interest was payable under subsection (1) or Sub-section (3) has been increased or reduced, as the casePmay be, the interest shall be increased or reduced accordingly, and
(i) in a case where the interest is increased, the assessing officer shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable and such notice of demand shall be deemed to be a notice under Section 156 and the provisions of this Act shall apply accordingly.
(ii) in a case where the interest is reduced, the excess interest paid, if any, shall be refunded.
14. From a plain reading of the relevant provisions of Section 234B it is clear that if the advance tax paid by the assessee is less than 90 per cent of the assessed tax, the assessee is liable to pay interest under Section 23 4B of the Act at the prescribed rates on the assessed tax or as the case may be on the amount of which the advance tax paid falls short of assessed tax. In Explanation 1, it has also been defined what is assessed tax. As per this Explanation, the assessed tax means the tax on the total income determined under Sub-section (1) of Section 143 or on regular assessment as reduced by the amount of tax deducted or collected at source in accor-dance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income. From the above provisions noted and discussed above, it is clear that for determining the liability under Section 234B of the Act, the assessed tax is to be taken into consideration for working out the liability as noted above. It is also provided in this section itself, how the interest under Section 23 4B of the Act is required to be q calculated.
15. Whereas Section 234B(4) specifically deals with a situation where the assessment made under Section 143(1), 143(3)or 144 is altered/modified/ revised by an order of rectification, appeal, revision or reference or even by an order of settlement passed under Section 245 D(4) of the Act. Interest under Section 234B shall be increased or reduced accordingly.
16. The Apex Court in the case of Anjum M.H. Ghaswala (supra) has held D that levying of interest under Sections 234A, 234B and 234C of the Act is mandatory in nature which means that after the decision of the Apex Court: in the case of Anjum M.H. Ghaswala (supra), the assessing officer in view of the clear provisions of Section 234B was duty bound to work out the interest under Section 234B on account of the order passed by the learned ITAT.
17. Now, the other important point which needs to be considered is the Eterminus dated up to which the interest under Section 234B of the Act is required to be charged by the assessing officer and payable by the assessee. The Sub-section (4) to Section 234B simply provides that if the amount on which interest is payable under Sub-section (1) is increased or reduced on account of any of the afore-specified orders, the interest shall be increased or reduced accordingly. Obviously, the statutory mandate only provides for the quantification of the amount of interest without whispering about the terminus date up to which the interest should be F payable.
18. First, we were able to lay our hands on the two contrary decisions of Bombay High Court and Gujarat High Court on this proposition because during the course of arguments no assistance was rendered to the Bench by the authorized representatives of both the parties for resolving this controversy.
19. The Bombay High Court in CIT v. Carona Sahu Co. Ltd " (FB) ruled that the expression "regular assessment" is to be understood as the first or original assessment made by the assessing officer under Section 143(3) or Section 144 and it does not refer to a fresh assessment or modification of the assessment to give effect to the decision of the appellate or revisional authority. Contrary to this view, the Gujarat High Court in Bardolia Textile Mills Ltd v. ITO (1985) 151 ITR 3892 (FB) laid down that "regular assessment" cannot be confined to the first original assessment but also includes an assessment made pursuant to the direction of the appellate or revisional authority.
20. Now from these two contrary decisions of the Full Benches of two different High Court's it was apparent that a good deal of confusion and controversy hovered over the implication and effect of Sub-section (4) to Section 23 4B, especially in the matter of ascertaining the terminal point up to which interest is payable for default in the payment of advance tax till P the decision of the Apex Court in the case of Modi Industries Ltd v. CIT , relevant page 790E-H. Because in the case of Modi Industries Ltd (supra), the Apex Court has set this controversy at rest by making following relevant observations in their order :
'Assessment' has been given an inclusive meaning in Sub-section (8) of Section 2. It includes reassessment. 'Regular assessment' has been defined in Section 2(40) to mean the assessment made under Section 143 or 144. In the context of Sections 140A, 141 and 141A 'regular assessment' could only mean the original assessment made under Section 143 or 144. Having regard to the scheme of the Act and use of the phrase 'regular assessment' in various sections of the Act, in Section 214 'regular assessment' has been used in no other sense than the first order of assessment passed under Section 143 or 144. If any consequential order has to be passed by the Income Tax Officer to give effect to an order passed by the higher authority that consequential order cannot be treated as 'regular assessment' nor can the date of the consequential order be treated as the date of the regular assessment." (p. 707) The Apex Court in this case has also approved the Full Bench decision of Bombay High Court in the case of Carona Sahu Co. Ltd. (supra) and disapproved the Full Bench decision of Gujarat High Court in the case of Bardolia Textile Mills Ltd. (supra). Hence, from these two decisions rendered by Apex Court in the cases of Anjum MH. Ghaswala (supra) and Modi Industries Ltd (supra), it is mandatory for the assessing officer to charge interest under Section 234B of the Act and after the decision of *" ITAT, he is duty bound to increase or reduce the same as per the order of the ITAT which he has charged while passing the assessment order and up to the date of the assessment order and not up to the date of the order passed by him in consequence of the order passed by the ITAT.
21. In the instant case, we find that while issuing ITNS-150 on the receipt of order of ITAT the assessing officer charged the interest up to the date of assessment order passed by the assessing officer but later on while examining the application moved by the assessee under Section 154 of the Act, he was of the opinion that as per the provisions of Section 234B he was required to charge interest up to the date of passing of the order by him in pursuance of the order of ITAT. Hence, by issuing a notice under Section 154 of the Act and after considering the reply of the assessee he corrected the mistake committed while issuing ITNS 150 wherein he B charged interest under Section 234B up to the date of the assessment order earlier passed by him.
22. On examining the facts of the instant case, we are of the opinion that charging of interest under Section 234B is not debatable as after the order passed by ITAT determining the deduction under Section 80-O on netbasis the assessing officer worked out the interest under Section 234Band charged the same up to the date of the assessment order and vide ITNS 150 created a demand and issued notice to the assessee for payment of interest under Section 234B and the same was also paid by the assessee. It further means that up to the creation of demand of interest under Section 234B by the assessing officer and the payment of the same by the assessee in response to ITNS 150 the assessee was not aggrieved and so there was no question of there being any dispute in the mind of the assessee with respect to charging of interest under Section 234B of the Act after the order of the ITAT on account of the issue of deduction claimed by the assessee under Section 80-O on gross basis and allowed by the ITAT on net basis.
23. It further means that for the first time the issue regarding the debatability of deduction under Section 80-O and charging of interest under Section 234B of Income Tax Act, 1961 was only raised by the assessee when the assessing officer issued a notice under Section 154simply for charging of interest under Section 234B up to the date of the passing of the order by him in pursuance of the order passed by the Tribunal instead of wrong working of the same in ITNS 150 up to date ofthe assessment order. Whereas, the only so-called debate raised by the assessee could be said to be whether interest under Section 234B is to be charged up to the date of the order of assessment or up to the date of the passing of the order by him in pursuance of the order by ITAT. Hence, we find that the argument raised for the first time by the assessee, i.e., since the claim of deduction under Section 80-O was debatable the interest p under Section 234B could not be levied against the assessee under Section 234B, is not relevant and is meaningless keeping in view the above discussed facts and circumstances because from a bare reading of provisions of Section 234B, as well as the decision of Apex Court in the cases of Anjum MM Ghaswala (supra) and Modi Industries Ltd. (supra), as reproduced hereinabove, it is evident that the assessing officer is duty bound to charge the interest under Section 234B of the Act as per the order of TTAT UP to the date pf the order of assessment passed by the Assessing Officer and not up to the date of the order passed by the assessing officer and after the date of the order of passed by the ITAT. Hence, now it cannot be said that in the instant case the charging of interest under Section 234B was debatable irrespective of the deduction claimed by the assessee under Section 80-O of the Act. Accordingly all the arguments put forth by the assessee regarding the debatable issue raised before us have no merits and are rejected.
24. In the instant case, the assessee has not been able to establish before us that it is not liable to pay any interest under Section 234B of the Act after the order passed by the ITAT and, hence the other argument of the learned AR for the assessee that it has not received any notice issued by the assessing officer under Section 154 of the Act has no merits because in the instant case the assessee has sent a reply to the notice issued under Section 154 of the Act and the assessing officer after considering the reply of the assessee has passed the impugned order under Section 254/154 of the Act and accordingly this plea of the assessee being devoid of any merit is hereby rejected.
25.Though, we have already considered the plea of the assessee regarding non-chargeability of interest under Section 234E of the Act because according to the assessee, in this case the deduction claimed by the assessee under Section 80-O of the Act was a debatable issue and so no order under Section 154 of the Act could be passed by the Assessing Officer. This plea has already been rejected by us in the light of our discussions made hereinabove in this order. However, still we consider it appropriate to discuss the case law relied upon by the learned AR for the assessee and the same is discussed as under.
26. On considering the decisions of Madras High Court and Bombay High Court in the cases of Isthmian India Maritime (P.) Ltd. (supra) and Asian Cables Corpn. Ltd (No. I) (supra) we find that these cases are of no assistance to the assessee for advancing the proposition that charging of interest under Section 234B was debatable because the charging of interest under Section 234B was not an issue under consideration before their Lordships in the cases (supra) but in those cases their Lordships were simply required to consider the issue of deduction claimed under Section 80-O and while deciding that issue their Lordships held that the deduction was to be allowed on gross income and not the net income for the purposes of calculating deduction under Section 80-O whereas, the simple issue under consideration before us is that in the instant case when the Tribunal has decided that the deduction under Section 80-O is to be allowed to the assessee on net income whether the assessing officer can vary the interest under Section 234B as per the order passed by the Tribunal and whether in a case the assessing officer comes to the conclusions that he committed a mistake in charging interest under Section 234B while issuing ITNS 150, he can rectify the same by passing an order under Section 154 of the Act.
27. Similarly, the other case law relied upon by Learned AR for the assessee in the case of Sri Renukeshwara Rice Mills (supra) decided by ITAT Bangalore Bench wherein the Tribunal held that the tax payable on the returned income being less than Rs. 5,000, the assessee was not under obligation to pay advance tax under Section 208 because it could not have foreseen the disallowance under Section 40A(3) interest under Section 234B was not chargeable, was distinguishable on facts and hence is of no help to the assessee.
28. We further find that the other two decisions of Uttaranchal High Court in the case of Sedco Forex International Drilling Co. Ltd. (supra), and the case of Reading & Bates Exploration Co. (supra) relied upon by the learned AR, their Lordships held that levying of interest under Section 234B was not justified when there were conflicting decisions of the Tribunal viz.-a-viz, taxability of off-period salary due to non-resident assessee at the relevant time and the employer company failed to deduct tax at source for which the assessee could not be faulted since it does not determine the proposition under consideration before us in the instant case of the assessee. These two cases (supra) too are of no assistance to the assessee. For the reasons stated above we have come to a conclusion that the decisions (supra) relied upon by the Learned AR for the assessee are, since, not directly on the issue under consideration before the Tribunal, therefore, are of no assistance to the assessee being distinguishable on facts.
29. Now, we shall be deciding on merits as to whether after the decision of ITAT, the assessing officer was justified in charging the interest under Section 234B of the Act up to the date of assessment order or up to the date of order passed by the assessing officer in consequence of the order passed by the ITAT by passing an order under Section 254/154 of the Act. In the instant case, the assessing officer has charged interest under Section 234B of the Act up to the date of the order passed by him in consequence of the order of IT AT by passing an order under Section 254/ 154 of the Act. This is certainly against the decision of the Apex Court in the case of Modi Industries Ltd. (supra) as well as Full Bench decision of Bombay High Court in the case of Carona Sahu Co. Ltd. (supra) (approved by the Apex Court) and, hence, the order passed by the assessing officer under Section 254/154 of the Act charging interest under Section 234B of the Act up to the date of the order passed by him in consequence of the order of the ITAT is against the provisions of Law and, hence, the same cannot be upheld and consequently the same has been wrongly been p upheld by the Commissioner (Appeals) and, accordingly, the order of the Commissioner (Appeals) in this regard is set-aside to this extent. In the light of above findings the grounds of appeal taken by the assessee stands disposed of accordingly.
30. In the result, the instant appeals filed by the assessee are partly allowed. In terms of our order passed hereinabove.