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2021 (9) TMI 476 - HC - Income TaxValidity of order of Income Tax Settlement Commission ITSC - deemed dividend under Section 2(22)(e) - Revenue contended that the ITSC erred in accepting the contention of the assessee for not including the advance amount received as liable to be taxed as deemed dividend - Levy of interest under Section 234A - HELD THAT - It will be too late for the Revenue to now contend that the ITSC could not have settled the cases in respect of the assessment year 2012-13 and especially when this was never the ground raised by the Revenue either in the report filed under Rule 9 of the said Rules or in the subsequent report filed to the reply given by the assessees. Though the word 'disclosed' gives a slightly distorted meaning, a clear picture emerges if we see paragraph 11.2 of the order passed by the ITSC, which deals with settlement of income. The total income arrived at by the ITSC which alone shall be considered as the income disclosed for the purposes of an application under Section 245C of the Act. The Revenue need not have any apprehension over the income, which was initially disclosed at the time of filing the application under Section 245C of the Act because the said income, which was offered at the first instance was not accepted by the Revenue and a report under Rule 9 of the said Rules was filed and based on that, the Revenue suggested four additions and thereafter, the case was proceeded and the matter was settled. Therefore, in our considered view, there may not be any necessity to remand the matter for a fresh consideration and the interest under Section 234B of the Act has to be charged on the income settled by the ITSC and in terms of the decision of the Hon'ble Supreme Court in the case of Brij Lal 2010 (10) TMI 8 - SUPREME COURT , the interest would be chargeable upto the date of order under Section 245D(1) of the Act and not upto the date of the order of the ITSC under Section 245D(4).
Issues:
Challenging common order of ITSC, Deemed dividend under Section 2(22)(e), Interest levy under Section 234A Analysis: The writ appeals were filed by the assessees against the common order passed by the ITSC, challenged by the Revenue through writ petitions. The primary challenge by the Revenue was on two grounds. Firstly, concerning deemed dividend under Section 2(22)(e) of the Income Tax Act, the Revenue contended that the ITSC erred in not taxing the advance amount received as deemed dividend. Secondly, the issue was about the levy of interest under Section 234A, where the Revenue argued that the Assessing Officer should have charged interest for delays in filing original returns as per the decision of the Supreme Court in the case of Brij Lal. The learned Single Judge upheld the ITSC's view but directed the Assessing Officer to recompute interest in line with the Supreme Court's decision. The Revenue partly succeeded as the orders for the assessment year 2012-13 were set aside. The High Court emphasized that a truncated challenge to ITSC's orders cannot be maintained, as the focus should be on the decision-making process, not the decision itself. The Court noted that the assessees did not offer any additional income for the assessment year 2012-13 during the settlement application. The Revenue raised concerns later, but the ITSC rightly considered the year of search, 2012-13, and directed the Assessing Officer to follow the Supreme Court's decision in the Brij Lal case. The ITSC's direction was duly followed by the Assessing Officer in 2015. Regarding the interest issue, the ITSC's order clarified that interest under Section 234B should be charged on the income settled by the ITSC, not on the income initially disclosed. The High Court concurred with this interpretation, stating that the interest should be levied up to the date of the order under Section 245D(1) of the Act, not the order under Section 245D(4). Consequently, the writ appeals were allowed, the common order in the writ petitions was set aside, and no costs were awarded. The connected CMPs were closed, providing clarity on the interest levy issue under Section 234B of the Act.
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