TMI Blog2008 (12) TMI 293X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT (2001) 170 CTR (MP) 158 : (2001) 250 ITR 686 (MP). (3) Because under the facts and circumstances of the case the interest charged under ss. 234B and 234C by order under s. 154 is wrong, illegal and deserves to be deleted." 3. The relevant facts of the case are that the returns for the years under consideration i.e., 1998-99 and 1999-2000 were processed under s. 143(1). It is an admitted fact that at the time of processing of return, interest under ss. 234B and 234C amounting to Rs. 2,55,032 and Rs. 35,757 respectively was not charged for asst. yr. 1998-99. Similarly, for asst. yr. 1999-2000 under these circumstances, interest amounting to Rs. 3,47,515 and Rs. 1,53,758 respectively was not charged by the AO. However, acting under s. 154 of the Act, after notice to the assessee in view of the judgment of the jurisdictional High Court in the case of Itarsi Oils Flours (P) Ltd. vs. CIT (2001) 170 CTR (MP) 158 : (2001) 250 ITR 686 (MP), the AO levied interest under ss. 234B and 234C for the years under consideration. The AO referred in the s. 154 proceedings that in terms of the judgment of the jurisdictional High Court in the case of Itarsi Oils Flours (F) Ltd. it has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf not been approved by the Hon'ble Supreme Court by virtue of the fact that the contrary view of the Karnataka High Court in the case of Kwality Biscuits Ltd. vs. CIT (2000) 159 CTR (Kar) 316 : (2000) 243 ITR 519 (Kar) had been affirmed by the apex Court wherein the Departmental appeals were dismissed by the apex Court in the judgment in (2006) 205 CTR (SC) 122 : (2006) 284 ITR 434 (SC) in the case of CIT vs. Kwality Biscuits Ltd. As such reliance had been placed upon the said judgment so as to argue that the rectification carried was not in accordance with law as the very basis of the rectification i.e., the judgment of the jurisdictional High Court relied upon in fact is no longer a good law. 11. It was submitted that the Bench had required clarification on the aspect that the judgment of the apex Court relied upon by the assessee i.e., CIT vs. Kwality Biscuits Ltd. cited supra was in the context of s. 115J whereas as per the order under s. 154 the assessee's case was to be considered in the context of s. 115JA. Responding to this it was submitted by the learned Authorised Representative that in such an eventuality the very basis of the order under s. 154 is taken away. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Engg. Co.) (1993) 115 CTR (All) 29 : (1993) 203 ITR 1 (All) so as to argue that the question whether estimate had been filed or not before 14th March was not free from doubt. As such failure to levy interest under s. 217(1A) has been held by the Hon'ble High Court as not being a case of mistake apparent from record and thus interest was held to be not chargeable in rectification proceedings. Thus relying upon the above orders it was submitted that the assessee would want to contend that the provisions are pari materia as such he has contended that firstly if the provisions of ss. 115J and 115JA are considered to be pari materia even then the argument would be that the judgment relied upon by the AO Itarsi Oils Flours (P) Ltd. of the jurisdictional High Court is no longer the law by virtue of CIT vs. Kwality Biscuits Ltd. Accordingly on the basis of this argument alone it was submitted that the appeal of the assessee deserves to be allowed since the settled legal position is that rectification operates in a very narrow compass and once the very basis taken into consideration by the AO does not stand in the eyes of law by virtue of the judgment of the apex Court the rectificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able and have seen that admittedly the assessee is governed by s. 115JA of the Act. As such, admittedly the AO has passed the rectification order following the judgment of the jurisdictional High Court in the case of Itarsi Oils . Flours (P) Ltd. which it is seen is in the context of s. 115J. Thus admittedly a judgment not relevant to the assessee has been applied as such the rectification upheld by the CIT(A) cannot be upheld by us as the very basis suffers from a grave error. The fact on record also is that the judgment of the apex Court in the case of Kwality Biscuits Ltd. has resulted in a situation where the jurisdictional High Court decision is no longer a good law; the rectification carried out by the AO as such does not have any legs to stand on. 20. We have also examined the issue from another angle in the light of the arguments advanced before us, i.e., whether the provisions of ss. 115JA and 115J are pari materia or not. The said issue has not been addressed by the Department in their arguments and reliance is placed on the impugned order. It is pertinent to mention again that the assessee has initially sought to canvass that the same pari materia on the basis of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts of the present case it is seen that a judgment not applicable to the assessee has been applied more so the said judgment even in the context of s. 115J is no longer the law of the land by virtue of the judgment of the apex Court in the case of Kwality Biscuits Ltd. As such, examining the issue from all aspects we find ourselves unable to agree with the conclusion of the CIT(A). 21. We are of the considered view that in the face of tile peculiar facts and circumstances of the case wherein rectification has been made solely on account of the judgment of the jurisdictional High Court in the case of Itarsi Oils Flours (P) Ltd. cited supra the rectification order under s. 154 for both the years deserves to be quashed. Ordered accordingly. We are also fortified in our view in the peculiar facts and circumstances of the case by the principle laid down in the judgments in the cases of CIT vs. Arihant Industries Ltd. and CIT vs. Punjab National Bank which laid down the proposition that rectification of intimation cannot be made after the issuance of notice under s. 143(2) as such during the pendency of the proceedings under s. 143(3) of the Act. As such, the assessee deserves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the years under consideration, the AO is shown to have issued a notice under s. 154 of the Act on 24th March, 2004 to rectify the mistake for not charging mandatory interest under ss. 234B and 234C of the Act for assessee's failure to pay advance tax and deferment of advance tax arising on account of the tax liability determined under s. 115JA of the Act as also the jurisdictional High Court in the case of Itarsi Oils Flours (P) Ltd. vs. CIT has held that even under MAT provisions advance tax liability comes and if tax is not paid, interest is chargeable under ss. 234B and 234C of the Act. In response to the show-cause notices, the assessee has submitted before the AO that non-charging of interest under ss. 234B and 234C is not a mistake apparent from the record to be rectified later on and thus, has requested to drop the proceedings for both the years. The submissions made by the assessee were not accepted for the following reasons: (a) Charging of interest under ss. 234B and 234C is mandatory. (b) Jurisdictional High Court in the case of Itarsi Oils Flours (P) Lid. vs. CIT has held that MAT provisions are subject to advance tax and tax if not paid in advance, interest u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest under ss. 234B and 234C of the Act on income computed under s. 115JA of the Act is debatable. Reference was made to the judgment rendered by Bangalore Bench of Tribunal in the case of Bullion Investments Financial Services (P) Ltd. vs. Dy. CIT and also of Allahabad High Court in the case of CIT vs. M.S.J. (Engg. Co.). The provisions of ss. 115J and 115JA are pari materia same. The Jodhpur Bench of Tribunal in the case of Dy. CIT vs. Hindustan Zinc Ltd. vide para 26 of its order has taken a view that in the absence of any specific provision in the Act for payment of advance tax in case where income is deemed under s. 115J or s. 115JA, the taxpayer is not liable to pay any advance tax at all. SMC Bench of Tribunal at Lucknow in Ganpati Industries Ltd. vs. Jt. CIT has upheld the decision of learned CIT(A) that in a case where income had been returned as per provisions of s. 115JA, no interest under s. 234B or 234C can be levied by taking the reasoning that there is a divergence of opinion on applicability of provisions of s. 115J of the Act. Reliance has also been placed on the judgment of Cochin Bench of Tribunal in the case of Escapade Resorts (P) Ltd. vs. Asstt. CIT w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed therein. The relevant passage is reproduced as under: "The Commission has elaborately discussed the object of introduction of Chapter XIX-A in the Act, the history behind the introduction and schematic rationalization of the provisions of Chapter XIX-A brought about through Finance Act, 1987, to hold that in exercising its power under Chapter XIX-A it has almost an unbridled power to arrive at a settlement. This exercise of purposive interpretation by looking into the object and scheme of the Act and legislative intendment would arise, in our opinion, if the language of the statute is either ambiguous or conflicting or gives a meaning leading to absurdity. We do not find any such problem in the provisions of the Act to which we have already referred to. Secs. 234A, 234B and 234C in clear terms impose a mandate to collect interest at the rates stipulated therein. The expression 'shall' used in the said section cannot by any stretch of imagination be construed as 'may'. There are sufficient indications in the scheme of the Act to show that the expression 'shall' used in ss. 234A, 234B and 234C is used by the legislature deliberately and it has not left any scope for interpreting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also reproduced as under: "We have carefully considered the rival submissions. It is correct that in CIT vs. Ranchi Club Ltd. (2000) 164 CTR (SC) 200 : (2001) 247 ITR 209 (SC), the Hon'ble Supreme Court have upheld the judgment of Hon'ble Patna High Court in Ranchi Club Ltd. vs. CIT (1996) 131 CTR (Pat) 368 : (1996) 217 ITR 72 (Pat) to the effect that interest under s. 234B cannot be charged without there being a speaking order of the AO. At the same lime, in CIT vs. Anjum M.H. Ghaswala Ors. (2001) 171 CTR (SC) 1 : (2001) 252 ITR 1 (SC), the Hon'ble Supreme Court have held that the expression 'shall' used in ss. 234A, 234B and 234C cannot be construed as 'may' because there is a clear indication that the expression has been used by the legislature deliberately. On this basis, the Hon'ble Supreme Court have held that levy of interest under the provisions of ss. 234A, 234B and 234C is mandatory unless the same is waived or reduced by Chief CIT or Director General of IT acting under CBDT Circular No. 400/234/95-IT(B), dt. 23rd May, 1996. The power of relaxation in the aforesaid circular issued by CBDT under s. 119(2)(a) cannot be exercised by any other authority in any other man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tification by putting assessee to notice was that while processing return under s. 143(1) of the Act, mandatory interest under ss. 234B and 234C has not been charged and once it has been found from the face of record itself that the AO had committed a mistake in not charging interest which was mandatory to do so, no further inquiry into scope of his powers and action taken is considered necessary and his action to rectify the mistake has to be held justified which under the peculiar facts and position of law I uphold. 17. The judgment in the case of CIT vs. M.S.J. (Engg. Co.) relied by the appellant's counsel was a case where the Tribunal has held that interest under s. 217(1A) could not be charged by taking recourse to s. 154. Rule 40 of IT Rules conferred discretion on the ITO to reduce or waive the interest chargeable under s. 217(1A) and as such, the ITO would be deemed to have waived the interest chargeable in the regular assessment. The Hon'ble High Court, however, did not find this approach to be sound and correct. It has interpreted the expression "at any time before the date" occurring in sub-s. (3A) of s. 212 in the relevant year and came to the conclusion that the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of ss. 207 to 219 of the Act would not be applicable to the income deemed under s. 115JA of the Act. Subjecting the income deemed under s. 115J of the Act to the provisions of ss. 207 to 219 of the Act, as was considered in the case of Kwality Biscuits Ltd., however, was plausible and arguable and were different when compared to the provisions of s. 115JA of the Act. There existed no such provision in s. 115J of the Act which can be said to have made all other provisions of the Act applicable but the legislature in its wisdom has inserted sub-s. (4) under s. 115JA of the Act. In s. 115J deeming fiction found was required to be carried to logical conclusion but without creating further deeming fiction so as to include other provisions of the Act. The provisions contained under sub-s. (4) of the s. 115JA do not create further fiction and the same are clear and unambiguous insofar as all other provisions of the Act shall also apply to an assessee being a company. Such unambiguous provisions of the Act have to be understood to have one meaning only and they declare the intention of legislature. The Courts, therefore, are bound to give effect to the unambiguous provisions of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can only be determined after the close of the books of account at the end of the year. I am, therefore, persuaded to follow the view entertained by Hon'ble Punjab Haryana High Court in the case of CIT vs. Upper India Steel Mfg. Engg. Co. Ltd. (2004) 192 CTR (P H) 385 : (2005) 279 ITR 123 (P H), which is the solitary judgment directly on the point under consideration. The Hon'ble Punjab Haryana High Court in an appeal filed by the Revenue against the order passed by the Tribunal, Chandigarh, holding that the interest under ss. 234B and 234C of the Act cannot be charged in a case where income is computed as per provisions of s. 115JA of the Act, answered the issue in favour of the Revenue and expressed its satisfaction that the Tribunal was not right in holding that the assessee was not liable to pay interest under ss. 234B and 234C of the Act. The findings of the Tribunal thus, stood reversed. 22. The assessee's counsel Shri Pankaj Gargh has sought to rely on judgments rendered by various Benches of the Tribunal including Single Member cases taking a view that no interest under s. 234B or 234C can be levied where the income is deemed under s. 115JA. These judgments, however, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound recorded. Before us also, no material has been laid nor there is any reference on record of such facts within the meaning of sub-r. (6) of r. 18. of ITAT Rules. I, therefore, find it difficult to accept and admit the fact that a notice under s. 143(2) of the Act pursuant to first return filed under s. 139 of the Act, had been issued for making a regular assessment under s. 143(3) of the Act. In the absence of any material on record, it has to be held that after issuance of intimation under s. 143(1) of the Act for both the years under appeal, no notice under s. 143(2) of the Act has been issued for making a regular assessment under s. 143(3) of the Act nor can be accepted that the proceedings under s. 154 of the Act have been initiated after issuance of such notice under s. 143(2) of the Act to allow any benefit of the two judgments rendered by Hon'ble Punjab Haryana High Court in the case of CIT vs. Arihant Industries Ltd. and by Delhi High Court in the case of CIT vs. Punjab National Bank. Merely because the assessee had raised a plea before the learned CIT(A) without bringing any material on record to that effect and the learned CIT(A) having not accepted the same, as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e which he discovers from the face of record. Under the peculiar facts of this case and having regard to its entire conspectus, I do not find any merit in the grounds in appeal raised by the assessee for both the years under appeal and, therefore, reject the same. 27. In the result, both the appeals are dismissed. G.E. VEERABHADRAPPA, VICE PRESIDENT (AS THIRD MEMBER): 31st Dec., 2008 In these cases the JM passed her own order and the AM passed his order. For making the reference as to the points of differences, there was serious difference between the Members and they ventured to write different notes and the files show that they did not ultimately give their points of difference. The Hon'ble President, Tribunal, nominated me as Third Member to resolve differences emerging from the judicial orders of both the Members under s. 255(4) of the Act. I, therefore, ignore the notes that were exchanged between the Members to arrive at the point of difference and after going through the judicial orders directly resolve the differences after finding the same. 2. These appeals of the assessee arise out of a consolidated order dt. 9th May, 2005 of the CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position. 2. Because under the facts and circumstances of the case, interest under ss. 234B and 234C cannot be charged by passing order under s. 154 of the IT Act. The AO has wrongly and illegally relied on the judgment of Madhya Pradesh High Court in Itarsi Oils Flours (P) Ltd. vs. CIT (2001) 170 CTR (MP) 158 : (2001) 250 ITR 686 (MP). 3. Because under the facts and circumstances of the case the interest charged under ss. 234B and 234C by order under s. 154 is wrong, illegal and deserves to be deleted." 5. According to learned JM, the decision of the Madhya Pradesh High Court in Itarsi Oils Flours (P) Ltd., is no longer good law in view of the decision of the apex Court in the case of CIT vs. Kwality Biscuits Ltd. (2006) 205 CTR (SC) 122 : (2006) 284 ITR 434 (SC). She accepted the plea of the assessee by virtue of the decision of the Hon'ble Supreme Court. The contrary view taken by the Karnataka High Court in the case of Kwality Biscuits Ltd. vs. CIT (2000) 159 CTR (Kar) 316 : (2000) 243 ITR 519 (Kar) has been affirmed by the apex Court and the very basis of rectification i.e. the judgment of the jurisdictional High Court, relied upon, in fact, according to her, was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the assessee are already extracted earlier and clearly the difference between the Members is in the disposal of those grounds of appeal raised by the assessee. I shall take one by one. 9. Whether the AO could be said to have a valid jurisdiction to initiate action and rectify the order under s. 154 of the Act by relying upon the judgment of the Madhya Pradesh High Court in the case of Itarsi Oils Flours (P) Ltd. The Madhya Pradesh High Court in the case of Itarsi Oils Flours (P) Ltd. it must be appreciated, was not concerned with the provisions of s. 115JA of the Act. They were only concerned with computation of income under s. 115J of the Act and there was a shortfall in the payment of advance tax. Question arose whether interest under ss. 234B and 234C can be validly levied. The High Court answered the issue in favour of the Revenue by affirming the order of the Tribunal. The Hon'ble Madhya Pradesh High Court was of the view that whenever the assessee is liable to pay advance tax under s. 208 of the Act, even though the income in question is a book profit determined under s. 115J, he has to pay the tax and he has to pay the interest. This decision was rendered on 31s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question. The Madhya Pradesh High Court in that case was concerned with levy of interest under s. 214 of the Act. The question of payment of interest on excess advance tax paid was subject mater of judicial controversy and on one hand the Gujarat High Court in the case of Chandrakant Damodardas vs. ITO (1980) 16 CTR (Guj) 1 : (1980) 123 ITR 748 (Guj) and on the other hand the Andhra Pradesh High Court in the case of Kangundi Industrial Works (P) Ltd. vs. ITO (1980) 14 CTR (AP) 328 : (1980) 121 ITR 339 (AP) and Kerala High Court in the case of A. Sethumadhavan vs. CIT (1980) 16 CTR (Ker) 376 : (1980) 122 ITR 587 (Ker) have taken contrary views. When the Madhya Pradesh High Court, in the case cited supra, has held that when there can conceivably be two opinions on a particular issue, s. 154 will not be attracted and that whether an issue was debatable or not would depend on its intrinsic character and not what a particular High Court held at a particular time. Even assuming that the Gujarat High Court has taken a view in favour of the assessee in interpreting the language of s. 214, it did not mean that the issue had become non-controversial or free from debate. Therefore, since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has confirmed the view of the Karnataka High Court has impliedly approved both the grounds on which Karnataka High Court has cancelled the levy of interest under ss. 234B and 234C of the Act when there was computation of book profit under s. 115J of the Act. It can be possibly argued that under s. 115JA there are provisions whereby other provisions of the Act are specifically made applicable and therefore the levy of interest under ss. 234B and 234C could possibly be justified. But the main line of argument that the book profit can be determined only at the end of the financial year and therefore payment of advance tax cannot be made till such book profits are determined, still survives for a debate and discussion, correctness of which can be established only by a long drawn process of reasoning. Whether mistake in such a situation committed by the AO could be one which could be treated as apparent and obvious, in the facts explained and in the situation and position of law as explained above, it is very difficult to say that the AO is justified in acting under s. 154 of the Act. Therefore, on this preliminary ground I agree with the view expressed by the JM in vacating the order ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
