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On appeal being taken, the Commissioner of Income Tax allowed the appeal and deleted the aforesaid levy of interest as imposed by the assessing officer. On appeal being preferred by the Department, the learned Tribunal by the impugned judgment and order has restored the order of the assessing officer and set aside the order of the Commissioner of Income Tax (Appeals).

Mr. J.P. Khaitan, Learned Senior Advocate, appearing in support of the appeal contends that actually this issue has now been settled by the Supreme Court by necessary implications. The Karnataka High Court has dealt with almost identical issue in relation to the fictional income in the case of Kwality Biscuits Limited Vs. Commissioner of Income Tax, reported in 243 ITR Page 519. This matter was taken to Supreme Court. The Supreme Court admitted the appeal which on hearing dismissed the appeals by one line judgment. As such, he says that doctrine of merger in this case will apply. Therefore, the ratio decided by the Karnataka High Court in Kwality Biscuits Case is now holding principle and is applicable in this case. He has drawn our attention to the judgment of Bombay High Court, post Supreme Court decision as above. Before the Bombay High Court case related to Section 115JA, while accepting the judgment of Karnataka High Court in Kwality Biscuits case it was held that the provisions of Sections 234B and 234C is not attracted in case of deemed income under Section 115JA. Before the Kerala High Court following the said decision of the Karnataka High Court, it was held dealing with the case that provision under Sections 115J, 114, 234B and 234C are not attracted. Gujarat High Court has taken a similar view dealing with the case involving Section 115J. However, he is fair enough to say that Madras High Court has taken contra view. It has not followed the Karnataka view which was affirmed by the Supreme Court. He, therefore, submits that in view of the acceptance of the Karnataka High Court judgment by the Supreme Court the principle laid down therein has to be followed in this case also though it has not dealt with the case falling under Section 114JA but when the Bombay High Court has accepted the decision, he urges this Court that similar view may be taken as has been taken by Bombay High Court.

Mr. Shome, Learned Senior Advocate with Mr. Chowdhury, Advocate appearing for the Department submits on the other hand that one-line order of the Supreme Court judgment cannot be said to be a binding precedent under Article 141 of the Constitution and as such the Madras High Court has taken contrary view. He submits that this Supreme Court judgment as well as Karnataka judgment in Kwality Biscuits case were in respect of the provisions of Section 115J and he says that there are distinguishable feature in Section 115JA from 115J. Hence, the said Supreme Court one-line order even applying the principle of merger should not be followed and this Court can take a view independent of Karnataka High Court following the Madras High Court. He has also drawn our attention to Section 114JA, sub-section (4), whereby and whereunder the provisions of other part of the Act is made applicable by making a subsequent amendment. Hence, the liability of payment of advance tax is automatically attracted, sequally the payment of interest in case of defaulted or deferment of payment of interest as contemplated in Sections 234B and 234C automatically applicable.

Though this judgment was rendered in connection with Section 115J but by applying the principle of para materia the ratio can be applied in this case also. However, the Bombay High Court in the case of Snowcem India Limited Vs. Deputy Commissioner of Income Tax, reported in 313 ITR Page 170 dealing with the case under Section 115JA has held taking note of the Karnataka High Court judgment as well as Supreme Court judgment as follows:-

"...in Kwality Biscuits Ltd. v. CIT[2000]243 ITR 519 has been affirmed by the Supreme Court by dismissing the appeals, in our opinion, the law binding on us would be the judgment in CIT v. Kwality Biscuits Ltd. [2006] 284 ITR

434."

In that case following the said decision, the Bombay High Court held as follows:-

"In the instant case, we are concerned with Section 115JA under Chapter XII-B. The terminology used in Section 115JA is same or similar as contained in Section 115J."

In this case it has also been held that Sections 234B and 234C were not attracted. The Madras High Court judgment in our view has not exposed the correct position of law while taking note of the judgment of Supreme Court dismissing the appeal against the judgment of Karnataka High Court in Kwality Biscuits case (supra). With respect the Division Bench of Madras High Court observed that the one-line dismissal order of the Supreme Court is not the binding precedent and, therefore, the Division Bench differed with the decision of the Karnataka High Court in Kwality Biscuits case.