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TMI Blog2023 (7) TMI 1074X X X X Extracts X X X X X X X X Extracts X X X X ..... The provision of section as amended by the subsequent Finance Act 2017 merely mentions that the processing of return shall not be necessary where a notice has been issued u/s 143(2) which was mainly brought in the Income Tax Act to stop the granting of refunds in the case of assessee's, whose return has been taken for scrutiny u/s 143(2). We find that the Hon ble Supreme Court in the case of CIT Vs. Gujarat Electricity Board [ 2002 (10) TMI 5 - SUPREME COURT] held that where summary procedure u/s 143(1) has been adopted, a regular assessment can be made u/s 143(3) after issuing of notice u/s 143(2) but the converse is not correct. The provisions u/s 143(1D) provides that notwithstanding anything contained in sub-section (1), the processing of a return shall not be necessary, where a notice has been issued to the assessee under sub-section (2). Hon ble Apex Court held that Section 143(1) enacts a summary procedure for quick collection of tax and quick refunds and it was meant for seeking any rectification u/s 154. Thus, we find the order of the rectification u/s 154 passed by the revenue authorities on 09.12.2020 rectifying the order of the earlier decade is barred by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout prejudice to the aforesaid, the order dated 23.11.2020 passed by the Id. AO under section 154/254/143(3) and confirmed by the Id. CIT(A) charging interest under section 234B and 234C is barred by limitation. 3. In ITA No. 1452/Del/2021, following grounds have been raised by the assessee: 1. That on the facts and circumstances of the case, the order dated 18.08.2021 passed by the Learned Commissioner of Income-tax (Appeal) (hereinafter referred to as Ld. CIT (A) ) is bad in law and on facts. 2. That the ld. CIT (A) as well as Ld. Assessing Officer erred in confirming/ charging interest under section 234B and 234C on the Book profit as calculated for the purpose of MAT provisions without appreciate the law applicable to the impugned assessment year at that time. That appellant was not required to pay any advance tax while computing the Book profit under the MAT provisions and therefore the interest under section 234B and 234C cannot be charged. 3. The order passed by the ld. Assessing Officer ( hereinafter referred to as Id. AO ) charging interest under section 234B and 234C of the Income Tax Act, 1961 ( hereinafter referred to as the Act ) amounting to R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions continued in the (2) of Section 234B r.w.s. 140A and the explanation thereon which justify the action of the AO. 5. In ITA No. 1578/Del/2021, following grounds have been raised by the Revenue: 1 The Ld. CIT(A) has erred in law and on facts of the case in deleting the interest of Rs. 6,30,94,800/- charged on the assessee u/s 234B of the IT Act. 2. The Ld CIT(A) has erred in law and on facts of the case in considering the income of the assessee u/s 115JB of the IT Act as Rs. 185,11,16,416/- instead of 198,74,47,666/- despite the fact that the assessee in its original return and revised return filed on dated 30.09.2008 and 26.02.2010 respectively declared its income u/s 115JB as Rs. 198,74,47,666/-. The assessee in pursuance to the notice u/s 153A of the IT Act again filed return of income on 17.11.2014 declaring income Nil under normal provision and income u/s 115JB at Rs. 185,11,16,416/-. The AO in order u/s 153 A dated 29.03.2016 assessed income of the assessee at Rs. 153,18,19,400/- after making addition of Rs. 24,25,43,674/-. Since the tax under normal provision was higher than that of the income u/s 115JB, the income of the assessee under the sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 31.08.2009 19317220 7 31.08.2009 6496734 8 31.08.2009 17484161 Total 219932815 The assessee paid entire tax in form of Self Assessment Tax after 01.04.2008 which was supposed to pay within the FY under consideration as advance tax. 4. While deleting the interest charged u/s 234B of the Act the Ld. CIT(A) ignored the fact that the assessee did not pay any interest u/s 234B and 234C of the IT Act, which was the statutory obligation of the assessee and was supposed to be paid during the financial year under consideration or at the time of filing the return of income or after processing of the case u/s 143(1) of the Act. The assessee deliberately did not discharge this statutory obligation and did not pay the interest even on later dates. 5. The Ld. CIT(A) has erred in law and on the facts stating the action of the AO of passing order u/s 154 beyond the jurisdiction despite the fact that the AO had passed order u/s 154 of the Act o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... again additions were made to the total income computed under normal provisions of the Act and no interest under section 234C was charged in the computation or demanded from the assessee. 11. Since, the tax on book profits paid by the assessee on returned income was higher than the tax on income assessed under section 153A under normal provisions of the Act, a rectification order was passed on 16.01.2017 in respect of the computation made vide order under section 153A of the Act dated 29.03.2016. In the said rectification, the income was computed as per the book profits and yet again no interest under section 234B/234C was charged. 12. An appeal had been filed against the order dated 29.03.2016 passed under section 153A of the Act, in respect of all the additions made under the normal provisions of the Act on account of share capital, brokerage, salary paid in cash, unaccounted investments in purchases and scrap. 13. The Id. CIT (A) passed his order dated 31.03.2017 deleting additions and granting part relief to the assessee. 14. On 06.07.2017, the Assessing Officer gave effect to the order of the Id. CIT (A) wherein he gave relief in respect of the additions deleted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 234B and 234C of the Act since the Settlement Commission held inter-alia that settlement essentially is an interplay of compromise and settlement and the Settlement Commission has powers which are coterminous that of the CBDT and in order to give purposive interpretation, they have the power to waive interest in suitable cases. The ld. AR argued that the Hon ble Supreme Court held that there is no such power vested with the Settlement Commission since sub section 4 of section 234A and 234B specifically states that charge of interest is to be increased or decreased consequent to the order passed by the Settlement Commission and further held that the section says that interest shall be charged and shall has to be interpreted to mean must and not may . 19. The ld. AR further argued that the involved in rectification was not related to appeal filed by the assessee before the Id. CIT(A) or decision/findings given by him in his order. The impugned rectification order seeking to rectify the issue which was out of context and purview of the appellate order in the appeal effect order is not permissible. It was argued that the additions under challenge before the ld. CIT(A) were in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellate order, the limitation for rectification will run from the date of original order and not from the date when the ITO has given effect to the order of the appellate authority. The short question for determination was whether the mistake, if any, occurred in the original order dated 30.05.1973 or in the order dated 18.07.1975 which was passed by the ITO in giving effect to the order of the appellate authority. If the mistake was in the original order, then the order of rectification was on the face of it barred by limitation. If, however, the mistake was in the subsequent order, that is to say, order giving effect to the appellate order, in that event it was not barred by limitation. The Hon ble further elaborated that if the mistake rectified under section 154, had occurred in the original assessment order which continued in the order passed for giving effect to the appellate orders. As that portion of the order in which the mistake occurred was not carried in appeal, the question of its merger with the appellate order did not arise. In view of this, the period of limitation for passing order under section 154 would be reckoned from the date of passing the original ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and u/s 153A and the department cannot charge interest u/s 234B and 234C for the first time through rectification of an appeal effect order. (2) As per the law applicable at the time of impugned assessment year i.e. AY 2008-09(FY 2007-08), interest u/s 234B and 234C was not applicable on the companies paying taxes under MAT on book profits. (3) The assessee is covered by the decision of Hon'ble Karnataka High Court in the case of Kwality Biscuits Ltd. 243 ITR 519 (30.11.1999) and the decision of M/s Rolta India Ltd. of Supreme Court in 230 ITR 470 came in 2011 only, accordingly the assessee was not covered by the decision. (4) Further, the assessee has also mentioned that it is covered by the judgment of Bombay High Court in the case of M/s Mangalore Refinery and Petrochemicals Ltd. ITA No.875 and 2017. All the contentions raised by the assessee have been duly rebutted during the course of the hearing and some of the contention raised by the assessee are incorrect and misleading accordingly the following submissions are made to make the issue more clear and for the assistance of the Hon'ble Bench. ISSUE No. 1) The department has not charged the inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first time in order u/s 154 which was the rectification of appeal effect order is clearly incorrect and misleading because it is clearly evident from the above discussion and documents that interest was charged at each and every stage of assessment proceedings i.e. u/s 143(1), 143(3) and even after search assessment u/s 153A r.w.s 143(3). In fact the assessee is wrongly and incorrectly alleging the department of charging interest u/s 234B 234C for the first time in rectification order passed u/s 154/250/153A dated 05.01.2021, however it is the assessee who has not contested the charging of interest at all three stages i.e. u/s 143(1), in regular assessment u/s 143(3) and 153 r.w.s. 143(3), when the interest was clearly charged at all three stages in the body of the assessment order . Further, the assessee case is clearly covered by decision of Hon'ble Madhya Pradesh High Court in the case Ramesh Prasad Dhahayat vs. CIT 45 taxmann.com 446 wherein the Hon'ble High Court has clearly held that if in the assessment order, it is indicated that interest is to be paid in accordance with law without mentioning any particular provision, the benefit has to be given to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even if in the order it is indicated that interest be paid in accordance with law, without specifying any particular provision, the benefit has to be given to the Revenue and since payment of interest is mandatory, the interest can be recovered. It is held that if the Assessment order is silent about payment of interest and nothing in this regard is indicated, the Revenue cannot claim interest under Section 234A, 234B and 234C. If the case in hand is evaluated in the backdrop of the aforesaid judgment, it is clear that in the assessment order it is clearly held that interest be charged as per rules. That being so, the requirement of law as laid down in the aforesaid judgment having been made, we find no error. Thus, in view of the above, the assessee's contention being incorrect and wrong has to be dismissed, especially in view of the above noted decision of the Hon'ble High Court. Moreover charging of interest u/s 234B and 234C of the I.T. Act has already attained finality in the case of the assessee, as the assessee has not challenged the charging of interest u/s 234B 234C of the I.T. Act before CIT(A) neither when the assessee challenged the order passed ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rge, definitions, recoveries, payment, assessment, etc., would apply in respect of the provisions of this section. The scheme of the Income-tax Act also needs to be referred to. Section 4 of the Act charges to tax the income at any rate or rates which may be prescribed by the Finance Act every year and section 207 deals with liability for payment of advance tax and section 209 deals with its computation based on the rates in force for the financial year, as are contained in the Finance Act and the first proviso to section 2(8) of the Finance Act, 2001 provides that the tax payable by way of advance tax in respect of income chargeable under section 115JB as introduced by Finance Act, 2000 and consequently the provisions of sections 234B and 234C for interest on defaults in payment of advance tax and deferment of advance tax would also be applicable where facts of the case warrant. 3. Further the note to Finance Bill 2002 made the issue more clear and provided that companies paying taxes under MAT provisions are liable to pay advance tax and in case of failure in payment, interest u/s 234B 234C are to be mandatorily paid. 4. The issue was also examined by Hon'ble Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome of assessee is modified u/s 154 even if no interest has been charged at the time of framing of regular assessment. (Para 5.1 of the Hon'ble High Court decision). ISSUE No. 3 The assessee is covered by the decision of Hon'ble Karnataka High Court in the case of Kwality Biscuits Ltd. 243 ITR 519 (30.11.1999) and the decision of M/s Rolta India Ltd. of Supreme Court in 230 ITR 470 came in 2011 only accordingly the assessee was not covered by the decision. The contention of the assessee that it is covered by the decision of Hon'ble High Court in the case of Kwality Biscuits Ltd. 243 ITR 519 (30.11.99) is incorrect, wrong, totally not justified and clearly misleading because of the following reasons: 1. The decision of Kwality Biscuits ltd. was confined to section 115 J of the I.T Act whereas the assessee case is covered by section 115 JB of the Income Tax Act (This fact was also mentioned by Hon'ble SC in Rolta India ltd. case Para 9). 2. The decision of Kwality Biscuits Ltd. was given by Hon'ble Karnataka High Court on 30-11-199, however even the provisions of the section 115 JB (which covers assessee's case) came with effect from 01.04. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 115J arises if the total income as computed under the provisions of the Act is less than 30 per cent of its book profits. This exercise for determining the total income in accordance with the provisions of the Act and that of book profit can be only after the end of the relevant assessment year. It is only the deemed income for which the provisions of section 115J have been incorporated. When a deeming fiction is brought under the statute it is to be carried to its logical conclusion but without creating further deeming fiction so as to include other provisions of the Act which are not specifically made applicable. Since the entire exercise of computing the income or that of book profit could be only at the end of the financial year, the provisions of sections 207, 208, 209 or 210 cannot be made applicable, until and unless the accounts are audited and the balance-sheet is prepared even the assessee may not know whether the provision of section 115J would be applicable or not. The liability would be after the book profits are determined in accordance with the Companies Act. The words for the purposes of this section' in the Explanation to section 115J(1A) are relevant and cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of Advance Tax were also liable to pay interest u/s 234B 234C on default. The issue of date of application of the laws was also covered by the Hon'ble Supreme Court in the case of CIT vs. Saurashtra Kutch Stock Exchange Ltd. (2008) 305 ITR 227, which clarified about the application of the various laws (Para 42 of the Hon'ble Supreme Court Order). 42. In our judgment, it is also well-settled that a judicial decision acts retrospectively. According to Blackstonian theory, it is not the function of the Court to pronounce a 'new rule' but to maintain and expound the 'old one'. In other words, judges do not make law, they only discover or find the correct law. The law has always been the same. If a subsequent decision alters the earlier one, it (the later decision) does not make new law. It only discovers the correct principle of law which has to be applied retrospectively. To put it differently, even where an earlier decision of the Court operated for quite sometimes, the decision rendered later on would have retrospective effect clarifying the legal position which was earlier not correctly understood . Further, the similar issue c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR is as under: 1. Brief Facts: 1.1. Return of income was e-filed by the assessee company on 30.11.2006 declaring income at Nil . T hereafter, the revised return at Nil Income was filed on 31.03.2008. The assessee declared income of Rs. 86,20,27,361 u/s 115JB of the Income-tax Act, 1961. The assessee paid self-assessment tax of Rs. 7,14,37,417 at the time of filing of return and had TDS credit of Rs. 11,92,185. 1.2. The case was selected under CASS and assessment order u/s 143(3) of the Act was passed on 31.12.2008 after following making additions/disallowances: S. No. Particulars Amount 1 Disallowance of expenditure claimed u/s 43B 1,76,21,571 2 Payment regarded funded interest related to A.Y 1997- 98 allowed 2,00,00,000 3 Disallowance of payment of FBT 34,44,878 4 Disallowance of payment of WT 14,345 5 Disallowance of prior peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Against the above order 154/254/143(3) dated 23.11.2020, the assessee preferred an appeal before the CIT(A). The learned CIT(A) by his order dated 18.08.2021 held that the assessee was liable to pay interest u/s 234B and 234C on failure to pay advance tax in respect of tax payable under section 115JB by relying on the decision of Hon ble Supreme Court in the case of M/s Rolta India Ltd 330 ITR 470.(para no.8- page no. 18). While deciding so, the learned CIT(A) held that since the returned income (MAT income) was accepted under section 143(3) without any variation, clause(2) of 234B is squarely applicable and the terminal date for charge of interest under section 234B is the date of payment of self-assessment tax which is 31.03.2008. (Para no. 9.4, Page No.22). Accordingly, the CIT(A) deleted the additional levy of interest u/s 234B of Rs. 20,24,811. 2. Appeals before the Hon ble ITAT by the Department as well as by the Assessee: 2.1. Against the above referred order of learned CIT(A), the assessee has preferred an appeal before the Hon ble ITAT in ITA No.1451/Del/2021 mainly on the contention as under: (a) The assessee was not required to pay advance tax on MAT Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l to the assessed tax or, as the case may be, on the amount by which the advance tax paid as aforesaid falls short of the assessed tax. . (2) Where, before the date of determination of total income under sub-section (1) of section 143 or completion of a regular assessment, tax is paid by the assessee under section 140A or otherwise, (i) interest shall be calculated in accordance with the foregoing provisions of this section up to the date on which the tax is so paid, and reduced by the interest, if any, paid under section 140A towards the interest chargeable under this section; (ii) thereafter, interest shall be calculated at the rate aforesaid on the amount by which the tax so paid together with the advance tax paid falls short of the assessed tax. 2.2.2. Further, the relevant portion of Explanation to section 140A of the Act is produced as under: Self-assessment. 140A. (1) Where any tax is payable on the basis of any return required to be furnished under section 115WD or section 115WH or section 139 or section 142 or section 148 or section 153A or, as the case may be, section 158BC, after taking into account, (i) the amount of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per Form No.36, the tax effect is Rs. 16,60,206 which is below the monetary limit specified by the CBDT. However, the appeal has been filed in the case as this case involves Revenue Audit Objection which falls under the exceptional clause provided under the CBDT s Circular No. 3/2018 dated 11.07.2018. A copy of the Revenue Audit Objection is enclosed for kind perusal. 26. The ld. CIT DR further argued on 14.10.2022 that the case was fixed for clarification and at the stage of clarification the assessee cannot raise any new ground which it has not taken in the grounds of appeal and in the earlier proceedings. The issuance of intimation u/s 143(1) on charging of interest u/s 234B and 234C in the said intimation has been argued in detail by him and on 14.09.2022 when the arguments concluded and assessee did not take this ground on 14.09.2022 when the substantive arguments took place. From the perusal of the grounds of appeal filed by the assessee, it is seen that the assessee never took this ground i.e. after the issuance of notice u/s 143(2) intimation u/s 143(1) becomes irrelevant and accordingly after the completion of trial and the detailed arguments the assessee cannot r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quent amendment u/s 143(2) sub section 2 brought about by Finance Act 2012 and by Finance Act 2017 there was no bar of processing the return after the issuance of the notice u/s 143(2). The provision of section as amended by the subsequent Finance Act 2017 merely mentions that the processing of return shall not be necessary where a notice has been issued u/s 143(2) which was mainly brought in the Income Tax Act to stop the granting of refunds in the case of assessee's, whose return has been taken for scrutiny u/s 143(2). In other words, even the subsequent amendment u/s 143(2) was inserted only for protection of the interest of the revenue so as to stop the department from issuing refund in cases where demand is anticipated after scrutiny. Thus the assessee contention that after issuing of notice u/s 143(2), the intimation u/s 143(1) becomes an irrelevant and invalid is clearly not borne out of provisions of section 143 and accordingly the assessee contention is not tenable as per law. 29. Recalling the provisions of the Income Tax Act, the ld. DR submitted that as the order u/s 143(1) get subsumed in order u/s 143(3) accordingly there is no sanctity of demand raised in orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied on Section 234B and also the grievance at ground no. 5 in ITA No. 1578/Del/2021 wherein the ld. CIT(A) held that the order u/s 154 is beyond jurisdiction and deleted interest u/s 234B. 33. We find that the root cause of the matter was the audit objection raised at a later stage on the issue of non-levy of interest. The said audit objection is as under: ORDER DATE SCRUTINY, DATED 31 -Dec-2008 INTERNAL AUDIT P ARTY No OBSERVATION REL ATES TO 234C, 234 B Observation Non levy of interest Section 234C of the Income Tax Act, 1961, provides that, where in any financial year, the company who is liable to pay advance tax u/s 208, has failed to pay such tax or where the installments of -advance tax paid by such assessee is less than the percentage fixed for specified months, then the company shall be liable to pay simple interest at the rate of one percent for three months on the amount of shortfall. Further Section 143(3) of the Income Tax Act 1961 provides that in a scrutiny assessment, the Assessing Officer is required to make a correct assessment of the total income or los s of the assessee and determine the correct sum payable by him or refundable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Balance Tax 71437417 Interest u/s 234B for 24 months (up to March 2008) 1714498 0(A) Self Asstt. Tax paid on 31.01.2007 of Rs 11220 00 1122000 Self Asstt. Tax pai d On 31.03,2008 of Rs 70315417 70315417 Total self asstt. tax paid 71437417 Tax and Interest to be adjusted (71437417 + 3607589 + 1714498 0) 9218 998 6 Balance tax 20752569 Interest for 09 months (December 08) 1867731(B) Total interest u/s 234B [A +B] 19012711 Total non -levy of interest (23 4C and 23 4B) 22620300 34. The audit objection has been accepted and an order u/s 154 has been passed by the revenue. The main grievance of the assessee is that the interest u/s 234C has been charged for the first time on 05.01.2021 by rectifying u/s 154 the appeal effect order dated 06.07.2017. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 234C has not been charged while issuing the intimation and the demand raised as per the record was Nil. The date of order u/s 154 was 16.01.2017 pertaining to the Assessment Order passed u/s 153A and date of rectification order u/s 154 r.w.s. 254/143(3) was dated 09.12.2020 which tried to modify the order of 2009. With the filing of the revised return and issue of notice u/s 143(2), the revenue looses the right of processing the return u/s 143(1). We reiterate that the ld. DR vehemently argued that at the time of impugned AY i.e. 2008-09 there was no bar u/s 143 of the IT Act which prohibited summery assessment u/s 143(1) after the issuance of notice u/s 143(2). Even after the subsequent amendment u/s 143(2) sub section 2 brought about by Finance Act 2012 and by Finance Act 2017 there was no bar of processing the return after the issuance of the notice u/s 143(2). The provision of section as amended by the subsequent Finance Act 2017 merely mentions that the processing of return shall not be necessary where a notice has been issued u/s 143(2) which was mainly brought in the Income Tax Act to stop the granting of refunds in the case of assessee's, whose return has been take ..... X X X X Extracts X X X X X X X X Extracts X X X X
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