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2011 DIGILAW 981 (KAR)

Commissioner of Income Tax v. N. Sannamma

2011-10-07

ARAVIND KUMAR, MANJULA CHELLUR

body2011
JUDGMENT 1. These appeals are filed by the Revenue questioning the correctness and legality of the order dated 16.12.2000 passed by ITAT, Bangalore Bench B in ITA Nos. 1436 and 1676 /Bang/2005 relating to the assessment years 1995-96. 2. This Court by order dated 13.9.2007 admitted ITA 955/2006 to consider the following substantial questions of law: Re: IT A No.955/2006 1. Whether the Tribunal was correct in proceeding to take into consideration irrelevant facts as well as the legal position to hold that interest u/s.234A and 234B as worked out by the Assessing Officer and confirmed by the appellate Commissioner is not correct? 2. Whether the Tribunal failed to appreciate that when considering an application u/s.154 of the Act it was not open to the Tribunal to decide debatable issues? It is noticed from records that ITA 955/2006 was ordered to be clubbed along with IT A 949/2006 by order dated 8.11.2010 since it was a common order passed by Tribunal. 3. The assessees made a declaration before the Commissioner of Income Tax, Mysore under Voluntary Disclosure of Income Scheme, 1997 (hereinafter referred to 'VDIS' for brevity) offering undisclosed income. The said declaration was rejected as tax and interest was not paid as per section 67(2) of the Finance Act, 1997 within the stipulated period. Hence, a notice under 148 was issued and assessment was completed by separate orders dated 6.6.2002 and 9.7.2002. On determination of the tax payable interest was levied under sections 234A, 234B and 234C. Assessees filed application under section 154 of the Act seeking deletion of interest levied under sections 234A and 234B of the Act. Said application came to be rejected by the Assessing Officer by order dated 18.4.2005 and 11.07.2005. 4. Aggrieved by this order of rejection the assessees filed an appeal before CIT Appeals. After considering the contentions and grounds urged in the memorandum of appeals, the CIT (Appeals) by separate orders dismissed the appeals namely by order dated 24.8.2005 and 25.10.2005 respectively. Aggrieved by the said order, assessee filed further appeal to the Tribunal. The Tribunal allowed the appeals by a common order dated 16.12.2005. 5. We have heard the learned counsel Sri M.V. Seshachala for the revenue and learned counsel for the respondent assessees Smt. H. Vani. We have gone through the orders of the CIT(A) as well as the order of the Tribunal. 6. The Tribunal allowed the appeals by a common order dated 16.12.2005. 5. We have heard the learned counsel Sri M.V. Seshachala for the revenue and learned counsel for the respondent assessees Smt. H. Vani. We have gone through the orders of the CIT(A) as well as the order of the Tribunal. 6. It is the contention of the Revenue that Tribunal erred in holding that as per Explanation (3) to section 234A(i) of the Act, interest can be levied only from the date of filing the return pursuant to the notice issued u/s. 148 of the Act and not as per Section 139 of the Act. It is also contended that Tribunal committed an error in holding that assessee was liable to pay interest u/s.234B of the Act only if an intimation u/s. 143(1)(a)of the Act had been made and having failed to do so within the time prescribed, then levy of interest u/s. 234B of the Act was lengthened till the regular assessment. It is also contended that Tribunal erred in not considering that while adjudicating an application u/s. 154 of the Act. It was not open for the Tribunal to decide debat able issues. On these grounds, the learned counsel for the revenue would submit that substantial questions of law requires to be answered in favour of the revenue. 7. Per contra, learned counsel for the assessees would support the order passed by the Tribunal and contend that admittedly VDIS was made use of by the assessees and there was a delay of one day in payment of tax and interest within the stipulated period, and as such declaration was not accepted and the A.O based on the information available in such declaration a notice under 148 came to be issued to the assessees and thereafter, return of income came to be filed on 27.3.2002. It is contended that AO has levied interest under sections 234A and 234B and AO should have processed the return and issued intimation under sections 143(1)(a) and interest could be charged only under section 234A(3) or 234B(3) since there was no increase in the amount on which interest was payable as a result of order of reassessment u/s. 147 and no interest can be levied pursuant to such regular assessment. 8. 8. In order to appreciate the contentions raised by the learned advocates, it is necessary to extract some of the relevant provisions pressed into service namely the following: Section 139. Return of income. (1) Every person,- (a) being a company (a firm): or (b) being a person other than a company (or a firm), if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax. shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed: 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 interest at the rate of one per cent for every month or part of a month comprised in the period, commencing on the date immediately following the due 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 (I) 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 of,- (i) advance tax, if any, paid; (ii) any tax deducted or collected at source; (iii) any relief of tax allowed under section 90 on account of tax paid in a country outside India: (iv) any relief of tax allowed under section 90A on account of tax paid in a specified territory outside India referred to in that section; (v) any deduction, from the Indian income-tax payable, allowed under section 91, on account of tax paid in a country outside India; and (vi) any tax credit allowed to be set off in accordance with the provisions of section 115JAA. Explanation 1. Explanation 1. and 2 *** Explanation 3.- Where, in relation to an assessment year, an assessment is made for the first time under section 147 or section 153A, the assessment so made shall be regarded as a regular assessment for the purposes of this section. Explanation 4 *** (2) and (3) *** (a) and (b) *** (4) *** (i) in a case where the interest is increased, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly; (ii) in a case where the interest is reduced, the excess interest paid, if any, shall be refunded. (5) *** Section 234B. Interest for defaults in payment of advance tax,-(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 1st day of April next following such financial year (to the date of determination of total Income under sub-section (1) of section 143 (and where a regular assessment is made, to the date of such regular assessment, 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. (Explanation 1.-In this section, "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 under such regular assessment as reduced by the amount of,- (i) any 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; (ii) any relief of tax allowed under section 90 on account of tax paid in a country outside India. (iii) any relief of tax allowed under section 90A on account of tax paid in a specified territory outside India referred to in that section: (iv) any deduction, from the Indian income-tax payable, allowed under section 91, on account of tax paid in a country outside India; and (v) any tax credit, allowed to be set off in accordance with the provisions of section 115JAA.) Explanation 2.-Where, in relation to an assessment year, an assessment is made for the first time under section 147 (or section 153A), 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. (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. (3) Where, as a result of an order of reassessment, or recomputation under section 147 (or section 153A), the amount on which interest was payable under sub-section (1) is increased, 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 commencing on the day following (the date of determination of total income under sub-section (1) of section 143 (and where a regular assessment is made as is referred to in sub-section (1) following the date of such regular assessment)) and ending on the date of the reassessment, or recomputation under section 147 (or section 153A), on the amount by which the tax on the total income determined on the basis of the reassessment or recomputation exceeds the tax on the total income determined (under sub-section (1) of section 143 or ) on the basis of the regular assessment aforesaid. (4) Where, as a result of an order under section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount on which interest was payable under sub-section (1) or sub-section (3) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and- (i) in a case where the interest is increased, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly; (ii) in a case where the interest is reduced, the excess interest paid, if any, shall be refunded. (5) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989 and subsequent assessment years.) 9. The filing of the declaration under VDIS and also its rejection by the competent authority and consequential issue of notice by the jurisdictional AO u/s. 148 on the assessees and filing of return of income thereafter by the assessee are not in dispute. The jurisdictional Assessing officer on the basis of the return of income filed pursuant to notice issued u/s 148 has proceeded to complete the assessment and has raised a tax demand after considering the contentions raised by the assessees representatives and also on scrutiny of material furnished. The levy of interest under sections 234A and 234B when return of income is filed beyond due date is automatic. There cannot be any dispute on this legal position and accordingly it was levied. The issue relates to levy of interest in the absence of issue of intimation under section 143(1)(a)and levy of interest till the said date or till date of reassessment proceedings. 10. An application under section 154 came to be filed by the assessees wherein it was contended that levy of interest under sections 234A and 234B without considering proper effect of sub-section (3). 10. An application under section 154 came to be filed by the assessees wherein it was contended that levy of interest under sections 234A and 234B without considering proper effect of sub-section (3). A ret urn of income filed in response to a notice issued u/s. 148 is a return of income filed u/s. 139(1) and the assessee ought to have filed the return of income within the time stipulated and if such income is liable to tax, ought to have paid the tax, Admittedly, in the instant case, the assessees had not filed regular return of income and on rejection of VDIS declaration notice came to be issued u/s. 148 which was on account of failure of the assessees to file the return of income and this notice was issued to comply with the statutory provisions of filing the return of income. Even if the Assessing officer does not issue notice under section 148 within the time prescribed and subsequent issue of such notice as provided under the law would result in the assessees deemed to have defaulted. In other words, assessees is deemed to have defaulted in filing of return of income within time prescribed and, consequently, interest would be leviable from the due date of filing of the return. To clear any doubts in this regard, when Explanation (3) to section 234A as extracted hereinabove is read it would clearly go to show that interest was leviable from the date of filing of the return since the assessment made for the first time u/s. 147 has to be regarded as a regular assessment for the purposes of section 147, 11. In that view of the matter the appeal deserves to be allowed by answering the substantial questions of law in favour of the revenue and against the assessees.