TMI Blog2003 (1) TMI 285X X X X Extracts X X X X X X X X Extracts X X X X ..... vestment 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 ss. 234A and 234B in all these three years is concerned, the belief facts, which are common and as have been revealed from the records are that the assessee 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 Belgaum and was a regular assessee. However, returns for asst. yrs. 1994-95, 1995-96 and 1996-97 were not furnished as required under s. 139(1) or under s. 139(4) of the Act. The returns of income of all these three years were furnished on 31st March, 1999, in response to the notices under s. 148 of the Act issued on 11th Jan., 1999 and served upon the assessee on 18th Jan., 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 assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch). (2) Whether, in the absence of any specific order of the AO 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. vs. 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), was doubted before the Division Bench by the Revenue, the Double Bench had, in terms of judgment dt. 2nd July, 1996, Uday Mistanna Bhandar Complex vs. CIT (1997) 137 CTR (Pat) 376 : (1996) 222 ITR 44 (Pat), passed in CWJS 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. in favour of the assessee and against the Revenue, whereas the counsel appearing for the Revenue ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al 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 cl. (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 High Court is merged with that of the Supreme Court". 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. 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 ss. 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 Andh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee" in addition to making of an assessment. The learned Departmental Representative further submitted that it was under the old provisions of ss. 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 AO 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 ss. 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. vs. CIT (2) Decision of Patna High Court in (i) Uday Mistanna Bhandar Complex vs. CIT [CWJC No. 3287 of 1995 (R)] (ii) Tej Kumari Devi (CWJC Nos. 2732 and 2780 of 1995 (R)) (iii) Ranchi Club Ltd. (CWJC Nos. 3497, 3527, 3607, 3652 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 s. 142(1) 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 s. 147/148 in the course of scrutiny of the return 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 ss. 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 ss. 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 s. 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 234B r/w Expln. 4 is liable to be charged on the returned income or assessed income?" (a)(ii) 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 vs. CIT, 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 vs. Quality (1998) 146 CTR (Pat) 283 : (1997) 224 ITR 77 (Pat), where question of charging of interest under s. 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 s. 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of Supreme Court in case of J.K. Synthetics Ltd. vs. CTO 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 ss. 234A and 234B of the IT 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 ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r question still arises for consideration and the question is that "Can the Revenue recover from the assessee any interest under s. 234A or s. 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 ss. 234A and 234B of the Act being mandatory in nature, as has been held by the Hon ble Supreme Court in Ghaswala s case, 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 234A, 234B and 234C except to the extent of granting relief under the circulars issued by the Board under s. 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 ss. 234A, 234B and 234C of the Act while passing orders of settlement under s. 245D(4) of the Act. We have not decided any other issue that might arise in all 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), 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) has nowhere held that a levy under the mandatory provision can be recovered without 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of interest under ss. 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 asst. yr. 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 asst. yr. 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 AO 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 CIT(A) also confirmed the addition for want of evidence th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, submitted that even if the assessee s explanation, in the present case was found to be unsatisfactory the AO 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 vs. 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 vs. Smt. P.K. Noorjahan (1980) 15 CTR (Ker) 138 : (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 CIT(A). 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. Noorjahan as well as provision of s. 69 of the Act with almost care. 20. So far as the assessee s plea that under s. 69 of the Act the AO has been given a discretion in the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssible 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 s. 69 of the Act conforms only the discretion on ITO 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 expla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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