2014 (1) TMI 1355 - AT - Income Tax

Original assessment set aside No findings for commencement of business matter already restored for fresh consideration - Held that - The CIT (A) had grossly erred in coming to a conclusion that the only issue of charging of interest u/s 234B of the Act survives for adjudication - If that were to be so, the earlier Bench would have given a specific direction to the AO to address only issue of charging of interest u/s 234B of the Act as ascribed by the CIT (A) - when the assessee had sought to raise an additional ground in its cross objection, there was no trace of any objection from the then learned DR for admitting such an additional ground by the Bench - Thus, it is explicit that after having duly considered the rival submissions and also the facts of the issue, the earlier Bench thought it fit to accede to the request of both the parties. The CIT (A) was also incorrect in observing that the ITAT did not examine the issue on merits at all, but, only advised to re-look by the AO - When both the parties have pleaded for restoration of the issue(s) to the AO for fresh adjudication, naturally, the earlier Bench was left with no other alternative, but, to accede to their requests - when the DR agreed that the issues raised by both the assessee and the Revenue be restored to the Assessing Officer for fresh adjudication and the Tribunal order having attained finality, the Tribunal s direction cannot be circumvented The authorities below have not properly understood the directions of the earlier Bench in a better perception for which it was intended to the issue remitted back to the AO for fresh adjudication. Levy of Interest u/s 234B(3) of the Act Held that - The omission of the officer to levy interest u/s 234 B(3) in the reassessment completed u/s 147 which could have been rectified u/s 154 did not desist the officer from levying interest under the very same provision, when the reassessment was revised a second time u/s 147 - The levy of interest u/s 234B was valid - in the present case when the original assessment was concluded on a total income of Rs.65.76 lakhs, interest u/s 234B of the Act was charged at Rs.17.28 lakhs and finally when the re-assessment was concluded u/s 143(3) r.w.s. 254(1) of the Act on a reduced income of Rs.61.79 lakhs, the interest chargeable u/s 234B of the Act cannot be higher than what has been levied in the original assessment Decided partly in favour of Assessee.

Summary

Issues Involved:
1. Failure of CIT (A) to appreciate Tribunal's direction for fresh adjudication.
2. Direction to capitalize pre-commencement business expenditure.
3. Levy of interest under section 234B of the Income Tax Act.

Detailed Analysis:

1. Tribunal's Direction for Fresh Adjudication:
The assessee contended that the CIT (A) failed to appreciate that the Tribunal had set-aside the original assessment order for fresh adjudication. The Tribunal had directed the AO to reconsider the issues afresh, including the commencement of business. The CIT (A) erroneously concluded that only the issue of charging interest under section 234B survived for adjudication. The Tribunal clarified that both parties had agreed to set aside the entire matter for fresh adjudication, not just the issue of interest under section 234B. The CIT (A) was not justified in limiting the scope of the Tribunal's remand.

2. Capitalization of Pre-commencement Business Expenditure:
The assessee argued that the CIT (A) should have directed the AO to capitalize the pre-commencement business expenditure and apply the provisions of sections 35AB and 35D of the Act. However, no specific arguments were put forth by the assessee's representative during the hearing before the Tribunal. Therefore, this ground was not adjudicated by the Tribunal in the current proceedings.

3. Levy of Interest under Section 234B:
The assessee contended that the CIT (A) erred in upholding the levy of interest under section 234B until the date of the present assessment, arguing that it should be pegged to the date of the first regular assessment on 31.3.1995 or, alternatively, up to 25.3.1999. The AO had calculated interest up to 25.3.1999 but charged interest up to 19.7.2007 in the computation, which was deemed arbitrary and incorrect. The Tribunal analyzed the provisions of section 234B and concluded that the interest should be charged up to 25.3.1999, as initially determined. The AO was directed to correct the interest calculation accordingly.

Conclusion:
The Tribunal found that the CIT (A) and AO had not properly understood the directions of the earlier Bench. The matter was restored to the AO for fresh adjudication on all issues raised by the assessee, including the additional ground of commencement of business. The AO was directed to charge interest under section 234B up to the date of the original assessment on 31.3.1995. The appeal was partly allowed for statistical purposes.