TMI Blog2016 (11) TMI 1011X X X X Extracts X X X X X X X X Extracts X X X X ..... pt in those cases, for which, provision has been made under Section 234(C) of the Act. Section 234C of the Act is applicable to cases, where there is shortfall in the making of payment, by the assessee, on the returned income, whether it be on account of underestimate or failure to estimate the amount of capital income or the income of the nature referred to in sub-clause (ix) of clause (24) of Section 2 of the Act; except in the case of income from any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from any gambling or betting of any form or nature whatsoever. - Tax Case (Appeal) No. 234 of 2016 - - - Dated:- 4-8-2016 - S. Manikumar And D. Krishna Kumar, JJ. For the Appellant : Mr. N. Vijayaraghavan, Senior Counsel for M/s.Subbraya Aiyar Padmanabhan For the Respondent : Mrs. Hema Muralikrishan JUDGMENT ( Judgement of this Court was made by S. Manikumar, J. ) Instant Tax Case Appeal is filed, challenging the order in ITA.No.1377/Mds/2010, dated 06.11.2015, passed by the Income Tax Appellate Tribunal, A Bench, Chennai. 2. Short facts leading to the appeal are as follows: For the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les Tax Department. The judgment of the Hon'ble Supreme Court was rendered on 21.09.2006, by which time, 1st and 2nd installments of advance tax were already paid by the assessee and that the appellant had no knowledge of this income, while arriving at the first two advance tax installments, payable. The Commissioner of Income-Tax (Appeals), in his order in ITA.No.52/09-10, dated 28.07.2010, held that levy of interest, under Section 234C is mandatory. 5. Aggrieved by the order of the Commissioner of Income-Tax (Appeals), dated 28.07.2010, the assessee preferred an appeal to the Income Tax Appellate Tribunal, which also held that levy of interest under Section 234C as mandatory. As against the abovesaid order of the Tribunal, instant Tax Case Appeal is filed on the following substantial question of law, Whether the Tribunal was right in law, in holding that the levy of interest under Section 234C of the Act is mandatory without appreciating that the deferment in payment of advance tax was beyond the control of the assessee 6. Mr.N.Vijayaraghavan, learned counsel for the appellant submitted that Sections 234B and 234C operate on different fields. Interest u/s 234B is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is a substantial question of law, involved in this appeal. 11. Placing reliance on a decision of the Hon'ble Supreme Court in Central Provinces Manganese Ore Co. Ltd., v. Commissioner of Income-Tax reported in 1986 (160) ITR 961, learned counsel for the appellant further submitted that in the context Section 139(8) and 215, similar to Section 234A /234B of the Income Tax Act, 1961, the Hon'ble Supreme Court held that even though there is a provision for waiver, under Rule 117A and Rule 40 of the IT Rules, still, if the assessee objects to the very levy or its computation, an appeal would lie. Thus, according to the learned counsel for the appellant, right of appeal against levy of interest, cannot be taken away by the circular of CBDT, on the grounds that the Commissioner can consider waiver of interest. 12. Inviting the attention of this Court to a decision in Shriram Chits (Bangalore) Ltd., v. Joint Commissioner of Income-Tax reported in 2010 (325) ITR 219, learned counsel for the appellant submitted that in the above reported judgment, while considering the retrospective effect of an amended provision, a Hon'ble Division Bench of the Karnataka High Court h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her games of any sort or from gambling or betting of any form or nature whatsoever. She therefore submitted that in all other cases, interest for deferment for payment of advance tax is mandatory. According to her, there is no substantial question of law involved in this appeal and for the reasons stated, prayed for dismissal of the appeal. 16. By way of reply, Mr.N.Vijayaraghavan, learned counsel for the appellant submitted that the decision of the Hon'ble Supreme Court in the case of CIT Vs Bhagat Construction Co Pvt Limited [235 Taxman 0135], relied on by the revenue has been rendered on a completely different issue in respect of charging interest u/s.234B of the Act. The issue on appeal in the present case, according to him, is whether interest u/s.234C can be levied, when the order of assessment did not contain any direction for payment of interest under Section 234B of the Act. While deciding this issue, according to him, the Hon'ble Supreme Court held that Sec.234B is leviable inasmuch as Form ITNS 150, contained calculation of interest, payable on tax assessed and this Form, is a part of the assessment order, and therefore, interest under Sec.234B is leviable. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s involved in the case, in which it is rendered and, while applying the decision to a later case, courts must carefully try to ascertain the true principle laid down by the decision and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by the court, to support their reasoning. He also submitted that the Hon'ble Apex Court has cautioned that it is not proper to regard a word, clause or sentence occurring in the judgment of the Hon'ble Supreme Court, divorced from its context as containing a full exposition of the law on a question, when the question did not even fall to be answered in that judgment. Thus the decision of the Hon'ble Supreme Court cited is not authority for deciding the issue in appeal before us, as it deals with another section under different circumstance and the question raised in this appeal was considered by the Hon'ble Apex Court, in that decision. Heard the learned counsel for the parties and perused the materials available on record. 20. Section 234(C) of the Income Tax, deals with Interest for deferment of advance tax and the same is reproduced hereunder: Where in an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then, the assessee shall be liable to pay simple interest at the rate of one per cent on the amount of the shortfall from the tax due on the returned income : Provided that nothing contained in this sub-section shall apply to any shortfall in the payment of the tax due on the returned income where such shortfall is on account of under-estimate or failure to estimate (a) the amount of capital gains; or (b) income of the nature referred to in sub-clause (ix) of clause (24) of section 2, and the assessee has paid the whole of the amount of tax payable in respect of income referred to in clause (a) or clause (b), as the case may be, had such income been a part of the total income, as part of the remaining instalments of advance tax which are due or where no such instalments are due, by the 31st day of March of the financial year: Provided further that nothing contained in this sub-section shall apply to any shortfall in the payment of the tax due on the returned income where such shortfall is on account of increase in the rate of surcharge under section 2 of the Finance Act, 2000 (10 of 2000), as amended by the Taxation Laws (Amendment) Act, 2000 (1 of 2001) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 143(1) of the Income-Tax Act and completed under Section 143(3), determining the total income of ₹ 17,31,76,488/-. The case of the assessee was that it was under the impression that payments made under Voluntary Retirement Scheme are allowable deductions. A new provision under Section 35DDA was introduced, for the first time, in the Finance Act, 2001, with effect from 1st April, 2001. The Assessee has failed to pay the advance tax. Hence, the Assessing Officer levied interest, under Sections 234B and 234C of the Income-Tax Act and completed the assessment. Appeal filed before the Commissioner of Income-Tax (Appeals), was dismissed. Income-Tax Appellate Tribunal allowed the assessee's appeal and hence, the Revenue preferred a Tax Case Appeal, in this Court. At the time, when deduction was made, there were two binding decisions of this Court, viz., CIT v. George Oakes Ltd., [(1992) 197 ITR 288 (Mad.)] and CIT v. Simpson Company Ltd., [(1998) 230 ITR 794 (Mad.)]. Thus, he deducted expenditure incurred, by way of payments made for Voluntary Retirement Scheme. Sections 207 and 208 of the Income-Tax Act, pressed into service are extracted hereunder: 207. Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture. In fact in almost identical circumstances in the 3rd Member decision by the Delhi Bench in the case of Haryana Warehousing Corporation v. DCIT (75 ITD 155) it was held that in such situations the legal dictum LEX NON COGIT AD IMPOSSIBILIA would be attracted. The simple meaning of this dictum is that law cannot compel you to do the impossible . In the case before us also, the assessee could not have visualize till the last instalment of advance tax i.e. 15.03.2001 that he would not be entitled to deduct VRS payments. Therefore, the assessee could not have done anything other than to estimate the liability to pay advance tax on the basis of existing provisions. We are of the considered opinion that in such situation, it cannot be said that the assessee was liable to pay advance tax. Once we come to the conclusion that the assessee was not liable to pay advance tax, there is no question of charging tax under Section 234B and 234C. In similar circumstances in the case of Priyanka Overseas Ltd. v. DCIT, where the assessee had treated the receipt of cash assistance as capital receipts, which was subsequently amended to be business receipt by the Finance Act, 1990, it was held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;s case that the appellant has committed a default in payment of advance tax; when it actually paid it, the appellant cannot be held liable to pay interest under s.234B. Insofar as the observations in the order of the Tribunal, that the appellant should have anticipated the events that took place in March, 1992 are concerned, in our opinion, they have no substance. In our opinion, it is rightly submitted that it was not possible for the appellant to anticipate the events that were to take place in the next financial year and pay advance tax on the basis of those anticipated events. 24. In Central Provinces Manganese Ore Co. Ltd., v. Commissioner of Income-Tax reported in 1986 (160) ITR 961, the court at Paragraph 7, held that, 7. Now the question is whether orders levying interest under sub-s. (8) of s. 139 and under s. 215 are appealable under s. 246 of the Income-tax Act. Cl. (c) of s. 246 provides an appeal against an order where the assessee denies his liability to be assessed under the Act or against any assessment order under sub-s. (3) of s. 143 or s. 144 , where the assessee objects to the amount of income assessed or to the amount of tax determined or to the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that levy of penal interest under sections 1 39 and 215 is part of assessment. When such penal interest is levied the assessee is assessed , meaning thereby, he is subjected to the procedure for ascertaining and imposing liability on him. If the assessee denies his liability to be assessed under the Act, he has a right of appeal to the Appellate Assistant Commissioner against the order of assessment. Where penal interest is levied under section 215 by the order or assessment, the assessee may altogether deny his liability to pay such interest on the ground that he was not liable to pay advance tax at all or that the amount of advance tax determined by the Income-tax Officer as payable ought to be reduced. In either case he denies his liability, wholly or partially, to be assessed. Similarly, where interest is levied under section 139 of the Act, the assessee may deny his liability to pay such interest on the ground that the return was not belated or that the penal provision was not attracted at all to his case. In such a case also he denies his liability to be assessed to interest. 8. The decision was noted with approval by the Gujarat High Court in Bhikhoobhai N. Shah v. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in such a case the High Court was plainly right. As the assessee has made no application to the Income- tax Officer for reduction or waiver of the interest under sub- s. (8) of s. 139 or under s. 215 no question arises of the relevant authority having denied improperly a reduction or waiver of the interest and that being so, no revision petition can be maintained in that regard by the assessee before the Commissioner of Income-tax. 9. In the result we affirm the orders of the Commissioner of Income-tax rejecting the revision petitions but on grounds different from those adopted by the Commissioner. We leave it open to the assessee to apply to the Income-tax Officer for waiver or reduction of interest under sub-s. (8) of s. 139 and under s. 215 of the Income Tax Act. If the assessee does so within six weeks from today, the Income-tax Officer will dispose of the applications on the merits expeditiously. Subject to the aforesaid observations the appeals are dismissed. In the circumstances there is no order as to costs. 25. In Commissioner of Income-Tax, Delhi v. Bhagat Construction Co. (P) Ltd., reported in 2015 (60) TAXMANN 334 (SC), the Hon'ble Supreme Court cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if proper amount of advance tax, is not paid. 27. In CIT v. Anjum Mohd. Hussain Ghaswala reported in (2001) 252 ITR 1, considering the facts and circumstances of the case, the High Court held that the assessee is not supposed to pay interest, on the payment of tax, which may be assessed in regular assessment under Section 143(3) or best judgment under Section 144, as he is not supposed to know or anticipate his return of income. The High Court further held that interest is payable, in future only, after the dues are finally determined. When the matter was taken on appeal, on the above facts and circumstances of the case, the Hon'ble Supreme Court observed as under:- Sections 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 sections 234A, 234B and 234C is used by the Legislature deliberately and it has not left any scope for interpreting the said expression as may . This is clear from the fact that prior to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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