2004 (3) TMI 325 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the return filed on 31-12-1991.
2. Withdrawal of exemption under section 47(v) and applicability of section 47A.
3. Levy of interest under section 234A.
4. Levy of interest under section 234B.

Detailed Analysis:

1. Validity of the Return Filed on 31-12-1991:
The primary issue was whether the return filed by the assessee on 31-12-1991, signed by the Secretary instead of the Managing Director or a Director, was valid. The Assessing Officer (AO) deemed it invalid and only recognized the return filed on 15-10-1992. The assessee argued that the defect was curable under sections 139(9) and 292B, which the AO and CIT(A) rejected. However, the ITAT found that the defect was curable and directed the AO to treat the return filed on 31-12-1991 as valid once the defect was rectified on 15-10-1992. This decision was supported by judicial precedents favoring the assessee.

2. Withdrawal of Exemption under Section 47(v) and Applicability of Section 47A:
The AO withdrew the exemption under section 47(v) due to the desubsidiarisation of the assessee company, which reduced the holding company's shares from 100% to 43%. The CIT(A) held that the AO should first allow the exemption under section 47(v) and then withdraw it under section 155(7B). The ITAT found this approach illogical, noting that the AO was justified in applying section 47A directly in the assessment order under section 143(3) due to the known facts. The ITAT reversed the CIT(A)'s direction and upheld the AO's approach.

3. Levy of Interest under Section 234A:
The AO levied interest under section 234A for late filing of the return. The CIT(A) upheld this, but the ITAT directed that interest under section 234A should be computed with reference to the date of filing the return on 31-12-1991, treating the initial return as valid after rectification.

4. Levy of Interest under Section 234B:
The AO levied interest under section 234B due to the shortfall in advance tax payment, which the assessee contested, arguing that it had paid the correct tax based on its "current income" and could not have anticipated the withdrawal of exemption under section 47(v). The CIT(A) upheld the levy of interest, and the ITAT agreed, citing the mandatory nature of section 234B as established by the Supreme Court in Anjum M.H. Ghaswala's case. The ITAT emphasized that the interest under section 234B is compensatory, not penal, and must be levied regardless of the circumstances leading to the shortfall.

Conclusion:
The ITAT allowed the Revenue's appeal, confirming the AO's actions regarding the withdrawal of exemption and levy of interest under section 234B. The assessee's appeal was partly allowed concerning the validity of the return filed on 31-12-1991 and the computation of interest under section 234A. The assessee's appeal against the order under section 155(7B) was dismissed.