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TMI Blog2023 (8) TMI 1026X X X X Extracts X X X X X X X X Extracts X X X X ..... s, Tribunal has rightly directed the A.O. to delete partially out of the total addition made u/s. 69 on account unexplained investment. We have no hesitation in holding that question decided against the revenue and in favour of the Assessee. Interest u/s 234B - to be charged on the returned income OR assessed income? - HELD THAT:- Recently the Hon ble Apex Court in its judgment passed in the case of Shree Choudhary Transport Co. [ 2020 (8) TMI 23 - SUPREME COURT] has held that in Income Tax matters the law to be applied is that which is enforce in the assessment year in question unless stated otherwise by express intendment or by necessary implication. Bare perusal of Section 234B of the Act it is crystal clear that the interest has to be charged 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. The term assessed tax has been defined in Explanation-1 of Section 234B (1). As per said Explanation-1 assessed tax means the tax on the total income determined under sub-Section (1) of Section 143 and where a regular assessment is made, the tax on the total income determined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Against which the Assessee carried the matter before the CIT(A). In the appellate proceeding, the CIT(A) upheld the action of A.O and dismissed the appeal of the Assessee. Being aggrieved by the order of CIT(A), the Assessee preferred an appeal before the ITAT, SMC Bench Ranchi and the said appeal was allowed vide impugned order dated 22.05.2019 and the AO was directed to delete Rs. 5,40,000/- out of the total addition made under Section 69 of the Act. The learned Tribunal has further directed the AO to delete the addition and charge the interest u/s. 234B of the Act on returned income instead of assessed income. 3. The instant appeal was admitted on 03.08.2022 with following questions of law:- (i) Whether on the facts in the circumstances of the case and in law, the Hon ble ITAT is justified in deleting the addition made by the A.O on the ground that the income of the past years cannot be taxed as an investment in purchase of shares during the year under consideration? (ii) Whether on the facts in the circumstances of the case and in law, the Hon ble ITAT is justified in interpreting the provisions of section 234B(1) read with explanation 1 and 234B(3) of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the instant appeal was admitted on 03.08.2022 on aforementioned questions of law, this Court felt it necessary to ask from the officials of the Revenue as to whether they want to press the questions of law with regard to charging of interest. Thereafter, during course of proceeding the learned PCIT-Ranchi (Appellant herein), appeared before us and informed us that Mr. Rahul Lamba, who was erstwhile advocate on record in this case, but later on changed due to change in panel, has again been instructed by the Commissioner of Income Tax (PCIT) vide letter dated 05.07.2023 to put forth argument in support of contention for the question of law Nos. 2, 3 4 as the issue was having far-reaching effect. 6. Mr. Rahul Lamba learned counsel made following submissions in support of question Nos. 2, 3 and 4. (i) The learned ITAT was not justified in interpreting the provisions of Section 234B (1) read with explanation 1 and 234B (3) of the IT Act, 1961 while directing to calculate interest under Section 234 B on returned income instead of assessed income. (ii) Learned ITAT should have taken into consideration that there was an amendment made in Section 234B and 234C pursuan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned judgment. 8. Having heard learned counsel for the rival parties and after going through the grounds taken by the respective counsels; at the outset it is necessary to decide the question of maintainability with regard filing of appeal being below the monetary limit. In this regard reference may be made to the circular No. 23/2019 dated 06.09.2019 (Annexure-1 to the supplementary affidavit dated 18.01.2023 filed by the Appellant). For brevity, relevant portion is extract hereinbelow: - Subject; -Exception to monetary limits for filing appeals specified in any Circular issued under Section 268A of the Income-tax Act, 1961-reg Reference is invited to the Circulars issued from time to time by Central Board of Direct Taxes (the Board) under section 268A of the Income-tax Act, 1961 (the Act), for laying down monetary limits and other conditions for filing of departmental appeals before Income Tax Appellate Tribunal (ITAT), High Courts and SLPs/appeals before Supreme Court. 2. Several references have been received by the Board that in large number of cases where organised tax-evasion scam is noticed through bogus Long-Term Capital Gain (LTCG)/Short Term C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 5,05,265/- only instead of Rs. 10,45,265/- being the income of the Assessee and not the entire sale receipts, which included Rs. 5,40,000/- being the investment made by the Assessee in purchase of shares, as the investment was duly shown in balance sheet of the Assessee in previous year and was made out of past earning savings. The copy of balance sheet as on 31.03.2014 is also on record which was placed before the learned Tribunal. On perusal of the same, it reveals that Rs. 3,60,000/- and Rs. 1,80,000/- totaling to Rs. 5,40,000/- have been shown in the balance sheet in the name of Kailash Auto on purchase of 20000 and 10000 shares respectively for the assessment year 2014-2015, which is the investments of previous year and cannot be taxed in the subsequent year. Therefore, in our opinion, the A.O. could have added only income earned during Assessment Year 2015-16 and cannot tax the investment made in purchase of shares being income of past years, as there were no findings given by the A.O. that the purchase transactions were bogus transactions. Thus, looking the entirety, learned Tribunal has rightly directed the A.O. to delete Rs. 5,40,000/- out of the total additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Hon ble Supreme Court. The Hon ble Supreme Court vide its judgment, dated 01.08.2000, passed in the case of Commissioner of Income Tax Ors. v. Ranchi Club Ltd reported in (2013) 15 SCC 545 dismissed the said appeal preferred by the Income Tax Department vide the following order: 1. We have heard the learned counsel for the appellant. We find no merit in the appeals. 2. The civil appeals are dismissed. No order as to costs. (v) Subsequently, the Full Bench of the Hon ble Patna High Court vide its judgment, dated 22.09.2000 , passed in the matter of Smt. Tej Kumari v. Commissioner of Income Tax reported in 2000 SCC Online Pat 860 adjudicated the issue whether interest under Section 234A and Section 234B read with Explanation 4 is liable to be charged on the returned income or assessed income. The Hon ble Full Bench in the said judgment made the following finding: 18. Explanation 4 to Section 234A of the Act fully clarifies the position by explaining the tax on the total income as determined under sub-section (1) of Section 143 or on regular assessment shall be deemed to be the tax on total income as declared in the return for the purpose of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date, and,- (a) where the return is furnished after the due date, ending on the date of furnishing of the return; or (b) where no return has been furnished, ending on the date of completion of the assessment under section 144, on the amount of the tax on the total income as determined under sub-section (1) of section 143 or on regular assessment as reduced by the advance tax, if any, paid and any tax deducted or collected at source. Explanation 1. In this section, due date means the date specified in sub-section (1) of section 139 as applicable in the case of the assessee. Explanation 2. In this sub-section, tax on the total income as determined under sub-section (1) of section 143 shall not include the additional income-tax, if any, payable under section 143. Explanation 3. Where, in relation to an assessment year, an assessment is made for the first time under section 147, the assessment so made shall be regarded as a regular assessment for the purposes of this section. Explanation 4In this sub-section, tax on the total income as determined under sub-section (1) of section 143 or on regular assessment shall, for the purposes of computin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A (1) with retrospective effect from 1.4.1989. Similarly, the Finance Act, 2001 also amended Section 234B of the Income Tax Act, 1961 by deleting earlier Explanation 1 to Section 234B (1) and by substituting a new Explanation with effect from 1.4.1989. (ix) Since the aforesaid amendments brought in Section 234A and 234B, subsequent to the Finance Act, 2001, the interest, both under Sections 234A 234B, were required to be charged on the income as determined by the assessment done by an Assessing Officer and not on the income disclosed in the return filed by an Assessee. Fundamentally, the interest now under the said provision was to be charged on the assessed income and not on returned income. (x) The extract of the relevant portion of Section 234A of the Income Tax Act subsequent to the amendment brought by the Finance Act, 2001 is reproduced herein below or ready reference: Section 234A. (1) Where the return of income for any assessment year under sub-section (1) or sub-section (4) of section 139, or in response to a notice under sub-section (1} of section 142, is furnished after the due date, or is not furnished, the assessee shall be liable to pay simple i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment as reduced by the amount of tax deducted or collected at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income.] Explanation 2. Where, in relation to an assessment year, an assessment is made for the first time under section 147, the assessment so made shall be regarded as a regular assessment for the purposes of this section. Explanation 3. In Explanation 1 and in sub-section (3) tax on the total income determined under sub-section (1) of section 143 shall not include the additional income-tax, if any, payable under section 143. (xii) From bare perusal of the above provision of Sections 234A 234B, which were adjudicated upon by the Full Bench of the Hon ble Patna High Court in the matter of Smt. Tej Kumari v. Commissioner of Income Tax, were materially changed by way of the Finance Act, 2001 and now the said amended provision of Sections 234A 234B categorically provided that the interest has to be charged under the said provisions on the assessed income and not on the returned income. (xiii) The vires of the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on was the subject-matter of challenge before this court in Raj Kumar Singul's cuse, [2002] 255 ITR 561 where the vision each while upholding the validity of the said provision, interpreted it as under (page 562): A comparison of the two provisions shows that under the original provision interest was leviable on the income as declared in the return filed by the assessee. By the amended provision, the interest is leviable on the income as determined by the assessing authority minus the income on which the tax has been paid or deducted. The amendment is only calculated to clarify the ambiguity that was felt in the original provision. It is not arbitrary or unreasonable. 10. Now, referring to the case law cited by the learned counsel for the assessee, it would be sufficient to notice that the apex court in J.K. Synthetics Ltd.'s case, [1994] 94 STC 422 : (1994) 4 SCC 276 : AIR 1994 SC 2393 , was interpreting the provisions of the sales tax law and, therefore, the same does not advance the case of the assessee. Equally, the judgments of the apex court in Ranchi Club Ltd.'s case, [2001] 247 ITR 209 and that of the Patna High Court in Ranchi Club Ltd.'s c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harged as per rule. Interest can be levied under Sections 234 A and 234 B of the Act. It is submitted that in view of the Judgment of Full Bench of Ranchi Bench of Patna High Court delivered in the case of Smt. Tej Kumari Vrs. Commissioner of Income-tax reported in [2001] 114 Taxman 404 (PAT.) (FB), the interest cannot be levied over the assessed income and it can be levied only on the income declared in the return. The revenue preferred S.L.P. before Hon'ble Supreme Court against the said judgment of the Full Bench of Patna High Court, which was dismissed by the Hon'ble Supreme Court on merits vide order dated 01.08.2000 by saying that there is no merit in the appeal. 24. Learned counsel for the revenue could not dispute this legal position. Therefore, so far as question of law involved in this appeal that whether the interest could have been levied against the assessed income of the assessee under Sections 234 A and 234 B is concerned, in view of the Full Bench judgment of Ranchi Bench of Patna High Court delivered in the case of Smt. Tej Kumari, the revenue can levy the interest only on the total income declared in the returns and not on the income assessed and de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the provisions of Section 234B and 234C: with regard to interest under Section 234B, the calculation is to be made not on the returned income but on the tax as may be finally assessed and determined by the assessment whereas under Section 234C, what is to be determined is tax due on the returned income for the purpose of calculation of the shortfall in the advance tax paid. 14. Now the law is no more res integra regarding applicability of any provision of law. Recently the Hon ble Apex Court in its judgment passed in the case of Shree Choudhary Transport Co. v. Income Tax Officer reported in 2020 SCC Online SC 610 has held that in Income Tax matters the law to be applied is that which is enforce in the assessment year in question unless stated otherwise by express intendment or by necessary implication. The relevant part of the said judgment is reproduced herein below for ready reference: 71. It needs hardly any detailed discussion that in income tax matters, the law to be applied is that in force in the assessment year in question, unless stated otherwise by express intendment or by necessary implication. 15. Admittedly, in the instant case the assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section. A bare perusal of Section 234A shows that the interest has to be charged on the amount of the tax on the total income as determined under sub-section (1) of section 143, and where a regular assessment is made, on the amount of the tax on the total income determined under regular assessment, as reduced by the amount provided in section 234A(1) of the Act. Therefore, it is crystal clear that interest has to be charged on the assessed income and not on the returned income. The provision of Section 234B as applicable for the A.Y. 2015-16 is also reproduced herein below for ready reference: 234B. (1) Subject to the other provisions of this section, where, in any financial year, an assessee who is liable to pay advance tax under section 208 has failed to pay such tax or, where the advance tax paid by such assessee under the provisions of section 210 is less than ninety per cent of the assessed tax, the assessee shall be liable to pay simple interest at the rate of one per cent for every month or part of a month comprised in the period from the Ist day of April next following such financial year to the date of determination of total income under sub-section (1) of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B has to be charged on the assessed income and not on the returned income of an Assessee. 17. At this stage, it is also pertinent to mention here that the judgment of the coordinate Division Bench of this Court rendered in the case of Ajay Parkash Verma (supra) is not binding in other cases in relation to the issue of chargeability of interest under Section 234A 234B for the reason that in the said judgment the amendment brought by way of the Finance Act, 2001 in Sections 234A 234B were not considered when the period involved in the case of Ajay Prakash Verma was AY 2003-04. 18. The Hon ble Apex Court dealt with the doctrine of per incuriuam in the matter of State of M.P. v. Narmada Bachao Andolen reported in (2011) 7 SCC 639 and held as under : 65. Incuria literally means carelessness . In practice per incuriam is taken to mean per ignoratium. The courts have developed this principle in relaxation of the rule of stare decisis. Thus, the quotable in law is avoided and ignored if it is rendered in ignorance of a statute or other binding authority. 66. While dealing with the observations made by a seven- Judge Bench in India Cement Ltd. v. State of T.N. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ater stage, the mistake inadvertently committed by this Court earlier, should be perpetuated. 69. The courts are not to perpetuate an illegality, rather it is the duty of the courts to rectify mistakes. While dealing with a similar issue, this Court in Hotel Balaji v. State of A.P. [1993 Supp (4) SCC 536 : AIR 1993 SC 1048] observed as under: (SCC p. 551, para 12) 12. ... 2. ... To perpetuate an error is no heroism. To rectify it is the compulsion of judicial conscience. In this we derive comfort and strength from the wise and inspiring words of Justice Bronson in Pierce v. Delameter [1 NY 3 (1847)], AMY at p. 18: a Judge ought to be wise enough to know that he is fallible and therefore ever ready to learn: great and honest enough to discard all mere pride of option and follow truth wherever it may lead: and courageous enoug to acknowledge 1s errors. JEd.: As observed in Distributors (Baroda) (P) Ltd. v. Union of India, (1986) 1 SCC 43, p. 46, para 2.] (See also Nirmal Jeet Kaur v., State of M.P. [(2004) 7 SCC 558 : 2004 SCC (Cri) 1989] and Mayuram Subramanian Srinivasan v. CBI [(2006) 5 SCC 752 : (2006) 3 SCC (Cri) 83: AIR 2006 SC 2449] .) 70. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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