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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 ..... omputed on book profits under section 115JB of the Act. 3. 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. 3.1 That the Ld. CIT (A) as well as Ld.A.0 have failed to appreciate the law applicable to the impugned assessment year that appellant was not required to pay any advance tax while computing the book profits under the MAT provisions and therefore the interest under section 234B and 234C cannot be charged. 4. The Ld. CIT(A) as well as the Ld. AO have failed to appreciate that the judgement of Hon'ble Supreme Court in Rolta India Ltd. (330 ITR 470) came in 2011 only and before that the judgement of Hon'ble Karnataka High Court in the case of Kwality Biscuits Ltd. (243 ITR 519) which was affirmed by the Supreme Court was holding the field according to which the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. (243 ITR 519) which was affirmed by the Supreme Court was holding the field according to which the assessee was not required to pay advance tax on book profits. 7. Without prejudice to the above, the Ld. AO has erred in referring to the intimation issued under section 143(1) of the Act which is in respect of the original return of income filed by the assessee in- spite of the fact that the assessee filed a revised return in February, 2010 which substituted the original return and against such revised return no intimation was issued in which interest was charged. 8. Without prejudice to the above the calculation of interest under section 234B & 234C made by learned A.O is grossly incorrect. 9. The order passed by Ld. CIT(A) as well as the Ld. A.O are not in accordance with the principles of natural justice." 4. In ITA No. 1575/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 directing the Department to compute the interest u/s 234B from April 2006 to the 31.03.2008 i.e. till payment of self-assessment tax not a regular assessment i.e. 31.12.2008. 2. The ld. CIT(A) has erred in law and on fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld have only operated under clause 3 and 4 of section 234B and charge interest only in respect of difference between the income assessed u/s 153 A and 143(3). Stating so the Ld. CIT(A) has ignored the fact that demands raised in subsequent proceeding under IT Act get merged with the demand raised to the current proceeding. Hence the interest charged on the assessee u/s 234B(1) of the IT Act, which was computed u/s 154 of the Act vide order date d 05.01.2021 would also be a part of the demand raised under this Section. Here it important to note that the assessee had deliberately not computed interest u/s 234B(1) and paid it, while paying the Self Assessment Tax as per the scheduled given below: Sl. No. Date Amount 1 11.12.2008 10197000 2 29.01.2009 30251100 3 27.02.2009 20394000 4 31.3.2009 110127600 5 04.07.2009 5665000 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee on returned income was higher than the tax on assessed income computed under normal provisions of the Act, income was assessed on returned book profits under section 115 JB of the Act and no interest under section 234B/234C of the Act was charged in the computation form attached along with the demand notice issued under section 156 of the Act. A search under section 132(1) of the Act was conducted on 30.10.2012, consequent to which the return of income under section 153A was filed by the assessee on 17.11.2014. Assessment under section 153A of the Act, consequent to search, was made on 29.03.2016 wherein yet 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us. 17. With regard to the arguments about charging of Section 234C, the revenue has relied on the case of Anium M.H. Ghaswala 252 ITR 1 (SC) wherein it was held that the charge of interest under section 234B and 234C is mandatory in nature. 18. Rebutting the argument of the revenue, the ld. AR Shri. Ajay argued that a decision is to be read vis-a-vis the facts of the case, and the ratio of the decision cannot be applied without considering its facts and the basis. It was argued the issue was whether the Settlement Commission has the power to reduce or waive interest under section 234A, 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 pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay consist of confirming, reducing, enhancing or annulling the assessment. If the AAC has not been called upon or has not actually dealt with any part of the assessment order made by the ITO, there is no question of that part of the order merging or being superseded by the order of the AAC. 22. With regard to the limitation of the rectification, the ld. AR relied on the judgment of Hon'ble High Court of Calcutta in the case of CIT vs. Shaw Wallace & Co. Ltd. (73 Taxman 469) wherein it was held that so long as the original order of assessment remains unaffected and does not merge with 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest of Rs. 1,11,06,607/- u/s 234C of the IT Act by the CIT (A). The case was argued in detail before the Hon'ble H-Bench on 14.09.2022. Further the case is again listed for clarification on 14.10.2022 and for assistance of the Hon'ble Bench, the following written submissions are filed. Submissions on charging of interest u/s 234B & 234C of the IT Act. In its defence, the assessee has taken the following main grounds. (1) The department has not charged the interest u/s 234B and 234C earlier i.e. u/s 143(l)and regular assessment u/s 143(3) 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the IT Act. Not only this, in the income tax computation form at page no. 129 & 130 of the paper book, interest under section 234B was duly charged and by typographical error section 234C was inadvertently mentioned as 234A. However, even though the interest was charged in the income tax computation form but it was wrongly calculated, but it is clear that the interest was duly charged both in the body of the assessment order as well as IT computation form. Thus, the assessee's contentions that interest was charged for 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order demanding interest in the assessment or rectification orders?" This question has been answered by the High Court in para 17 and it is held by the Himachal Pradesh High Court after following certain judgments rendered by the Uttarakhand and Allahabad High Court that payment of interest under Section 234A, 234B and 234C is a mandatory, the assessing authority while passing the original assessment order or while reassessment or rectification order has to pass orders on payment of interest. It is held that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner in which income-tax payable is to be computed. Sub-section (2) provides for computation of 'book profit'. Sub-section (5) specifies that save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee, being a company mentioned in that section. In other words, except for substitution of tax payable under the provision and the manner of computation of book profits, all the provisions of the tax including the provision relating to charge, 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 cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax Act only in case of companies paying taxes u/s 115JB of the Income Tax Act, 1961. Thus, the decision in this case squarely covers the instant case also. (Para 12 & Para 13 of the decision.) Further, the similar issue was decided by the Hon'ble High Court of Gujarat in the case of AIMS Oxygen Ltd. vs. Addl. Commissioner of Income Tax in 55 taxmann.com 269 (2015). In that case, the Hon'ble High Court held that interest u/s 234B can be charged when income 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 115J. As already observed, the levy is automatic without any notice to the assessee. The Tribunal has cancelled the levy by placing reliance on its earlier order decided on the basis of the judgment of the Karnataka High Court in the case of Kwality Biscuits Ltd. (supra). The Karnataka High Court while accepting the claim of the assessee has observed as under (at page 526): "........The liability of the assessee for payment of tax under section 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and held that companies paying taxes under MAT u/s 115 JB are liable to pay advance tax and in case of default, also liable for interest u/s 234B and 234C of IT Act, 1961. Also, the assessee's contention that the decision of Hon'ble Supreme Court in the case of Rolta India Ltd. cannot be applied retrospectively was answered by the same decision of the Hon'ble Supreme Court, which stated that all companies which were liable for 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee are wrong and misleading and clearly rebutted both during the argument stage as well as by the above submission, accordingly the assessee appeal may be allowed." 24. Similar arguments have been put forth by the Represented by Ms. R. Raja Rajeshwari, Ld.Sr. DR representing for the A.Y.2006-07 in I TA No. 1575/Del/2 021. She argued eloquently and submitted her arguments in writing. 25. The submission of the ld. 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 payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest u/s 234C of the Act of Rs. 36,07,589. 1.7. 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment, on an amount equal 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,- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 raise thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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 order u/s 143(1). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 to him on the basis of such assessment. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B [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. 35. The pertinent facts relevant to the adjudication of the issue are as under: Date of filing of return for A.Y. 2008-09 - 30.09.2008 Date of intimation u/s 143(1) - 26.08.2009 Date of issue of notice u/s 143(2) - 19.08.2009 Interest charged u/s 234B - Rs. 00 Interest charged u/s 234C - Rs. 1,12,84,102/- Date of rectification u/s 154/143(1) - 04.11.2009 Interest charged u/s 234B - Rs. 3,27,36,372/- Interest charges u/s 234C - Rs. 1,12,84,102/- Date of filing of revised return - 26.02.2010 Date of assessment u/s 143(3) - 11.05.2010 Mentions "charge interest as per law" Demand raised - Nil Tax calculation u/s 143(3) Interest u/s 234B - Nil Interest u/s 234C - No column Date of order u/s 153A - 29.03.2016 Mentions "charge interest u/s 234A/234B/234C Interest ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w. However, the same cannot be accepted in view of the jurisprudence laid down by the Hon'ble Apex Court. 37. We find that the Hon'ble Supreme Court in the case of CIT Vs. Gujarat Electricity Board 129 taxman 65 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). The Hon'ble High Court held that where regular assessment proceedings have been commenced u/s 143(2), the processing of the return u/s 143(1) was not required. Even, after considering the submission of the ld. DR with regard to refund and collection of tax, we would like to bring it on record that the Hon'ble Gujarat High Court, the order of which has been contested by the revenue before the 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. The Hon'ble High Court held ..... X X X X Extracts X X X X X X X X Extracts X X X X
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