THE COMMISSIONER OF INCOME TAX vs. M/S KHETAN CHEMICALS LTD.

1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR DB Income Tax Appeal No.89/2006 The Commissioner of Income Tax, Alwar Vs. M/s. Khetan Chemicals Ltd. Date of Order :::: 10/05/2016 Hon'ble Mr. Justice M.N. Bhandari Hon'ble Mr. Justice J.K. Ranka Mrs. Parinitoo Jain, counsel for the appellant Mr. Anant Kasliwal, counsel for the respondent BY THE COURT (Per: Hon'ble J.K. Ranka, J.) 1. Instant appeal under Section 260A of the Income Tax Act, 1961 (for short, 'Act') is directed against the order dt.14/09/2005 passed by the Income Tax Appellate Tribunal, Jaipur Bench, Jaipur (for short, 'Tribunal'). It relates to the assessment year 1994-95. 2. Two substantial questions of law which have been raised by the Revenue read as under:- “(i) Whether the findings of the Tribunal are perverse in holding that the interest under Section 234A and 234B are not leviable, when such charging of interest is mandatory as per the statute ? (ii) Whether under the facts and circumstances of the case the Tribunal was justified in deleting the interest charged under Section 234A and 234B on the basis that no specific directions were given by the AO whereas such interest was determined in the notice of demand raised under Section 156 which formed the part of assessment order ?” 3. We have heard counsel for the parties finally at this stage with their consent. 4. The short controversy involved in the present appeal and on the question raised is that an assessment 2 order was passed by the Assessing Officer (for short, 'AO') on 26/03/2002 computing taxable income at Rs.45,64,267/-. The AO has observed in the concluding portion “Assessed. Issue necessary forms. Initiate penalty proceedings u/s. 271(1)(c) separately.” A demand notice being income tax computation form (ITNS 150) was also annexed to the assessment order by which the AO levied interest under Section 234A at Rs.94,480/- and interest under Section 234B at Rs.45,35,040/- . Apart from the additions made in the assessment order, the assessee also objected to levy of interest under Section 234A and 234B as aforesaid before the learned Commissioner of Income Tax (Appeals) (for short, 'CIT(A)'). The CIT(A) in so far as the interest is concerned, deleted the interest on the premise that in the assessment order there was no direction relating to charging of interest under Section 234A and 234B and placing reliance on the judgment of the Apex Court in the case of CIT Vs. Ranchi Club Ltd.: (2001) 247 ITR 209 and of this Court in the case of CIT Vs. Autolite Industries Ltd.: (2002) 256 ITR 303 (Raj.), deleted the interest. 5. The Revenue assailed the same before the Tribunal who in the light of the aforesaid judgments in the case of CIT Vs. Ranchi Club Ltd. (supra) and CIT Vs. Autolite Industries Ltd. (supra) dismissed the departmental 3 appeal. 6. Learned counsel for the Revenue contended that the AO had observed in the assessment order about issuing necessary forms which contained calculation of interest leviable on the assessee on account of the delayed filing of the return or/and non-payment of advance tax and once necessary form in the shape of the Income Tax Computation Form (ITNS 150), admittedly is accompanied with the assessment order being served on the assessee, the Tribunal erred in coming to the said conclusion. She contended that it is not necessary that there should be an order in the assessment order about charging of interest when admittedly the form (ITNS 150) contained the calculation and charge of interest and the same was in the nature of levy of interest though separately computed. In this regard, she relied upon the judgments rendered by the Apex Court Court in the case of Karanvir Singh Gossal Vs. Commissioner of Income-Tax and another: [2012] 349 ITR 692 (SC) where the Apex Court has held that levy of interest is mandatory and compensatory in nature. 7. On the contrary, learned counsel for the respondent-assessee vehemently contended that huge amount of interest has been levied which is unjust and there ought to have been a specific direction to charge 4 in the assessment order itself. Merely mentioning that issue necessary forms is not sufficient to confer a liability fastened on the assessee and there ought to have been a satisfaction of the AO to levy interest in the assessment order itself. Form ITNS-150 cannot be said to be an order by the AO. He contended that the Apex Court in the case of CIT Vs. Ranchi Club Ltd. (supra) and this Court in the case of CIT Vs. Autolite Industries Ltd. (supra), has also taken into consideration this very issue and contended that the order of the Tribunal is just and proper and is not required to be interfered with. 8. We have considered the arguments advanced by counsel for the parties and have perused the orders and the judgments cited. 9. In our view, Form ITNS-150 dt.26/03/2002 which accompanied the assessment order and had been duly served on the assessee alongwith the assessment order, clearly reveals that the same is duly signed by the AO after it was prepared and checked by two lower officials and apart from levy of tax payable, indicates “interest payable by/payable to the assessee under Section 234A at Rs.94,480/- Section 234B at Rs.45,35,040/- of the Act and the amount payable under the said provisions were clearly mentioned. Admittedly, this form ITNS-150 forms part of the assessment order and by this form alone, the assessee came to know about levy of interest 5 which was challenged by the assessee in appeal. It is not the case that the assessee was unaware of levy of interest through the accompanying form ITNS-150. In our view, the judgment of the Apex Court in the case of Kalyankumar Ray Vs. The Commissioner of Income Tax: AIR 1992 (SC) 159, is squarely applicable where similar controversy was raised in as much as in that case also the assessment order did not contain any direction and the Apex Court repealing the contention of the assessee observed as under:- ““The statute does not, however, require that both the computations (i.e. of the total income as well as of the sum payable) should be done on the same sheet of paper, the sheet that is superscribed assessment order”. It does not prescribe any form of the purpose. It will be appreciated that once the assessment of the total income is complete with indications of the deductions, rebates, reliefs and adjustments available to the assessee, the calculation of the net tax payable is a process which is mostly arithmetical but generally time consuming. If, therefore, the I.T.O. first draws up an order assessing the total income and indicating the adjustments to be made, directs the office to compute the tax payable on that basis and then approves of it, either immediately or some time later, no fault can be found with the process, though it is only when both the computation sheets are signed or initialled by the I.T.O. that the process described in S. 143(3) will be complete.” 10. From reading of the above, it is clear that form ITNS -150 as also the form for determination of the tax payable, when it is signed or initialed by the AO, it is an order in writing by the AO determining the tax payable 6 so also interest leviable. The Apex Court in the aforesaid judgment in the case of Kalyankumar Ray Vs. The Commissioner of Income Tax (supra) further observed as under:- “We are unable to see why this document, which is also in writing and which has received the imprimatur of the I.T.O., should not be treated as part of the assessment order in the wider sense in which the expression has to be understood in the context of S. 143(3). There is no dispute in the present case that the I.T.O. has signed the form I.T.N.S. 150. We, therefore, think that the statutory provision has been duly complied with and that the assessment order was not in any manner vitiated.” 11. In the case of Karanvir Singh Gossal Vs. Commissioner of Income-Tax and another (supra), the Apex Court had simply held that interest under Section 234B/234C is mandatory in nature and once it is mandatory, the AO need not specifically recite in the order of assessment. The Apex Court took into consideration the judgment relied upon by counsel for the respondent in the case of CIT Vs. Ranchi Club Ltd. (supra). 12. The Apex Court in the case of Commissioner of Income Tax Vs. Anjum M.H. Ghaswala and others: (2001) 252 ITR 1 examined the character of interest payable under the provisions of Section 234A, 234B and 234C and opined that interest for default in furnishing the return of income, default in payment of advance tax and 7 interest for deferment of advance tax is mandatory in nature. It would be appropriate to quote the observations made by the Apex Court which reads ad- infra:- “Nextly, the Commission has elaborately discussed the object of introduction of Chapter XIX-A in the Act, the history behind the introduction and schematic rationalisation of the provisions of Chapter XIX-A brought about through the Finance Act, 1987, to hold that in exercising its power under Chapter XIX-A it has almost an unbridled power to arrive at a settlement. This exercise of purposive interpretation by looking into the object and scheme of the Act and the legislative intendment would arise, in our opinion, if the language of the statute is either ambiguous or conflicting or gives a meaning leading to absurdity. We do not find any such problem in the provisions of the Act to which we have already referred. Sections 234A, 234B and 234C in clear terms impose a mandate to collect interest at the rates stipulated therein. The expression “shall” used in the said section cannot by any stretch of imagination be construed as “may”. There are sufficient indications in the scheme of the Act to show that the expression “shall” used in sections 234A, 234B and 234C is used by the Legislature deliberately and it has not left any scope for interpreting the said expression as “may”. This is clear from the fact that prior to the Amendment brought about by the Finance Act, 1987, the Legislature in the corresponding section pertaining to imposition of interest used the expression “may” thereby giving a discretion to the authorities concerned to either reduce or waive the interest. The change brought about by the Amending Act (Finance Act, 1987) is a clear indication of the fact that the intention of the Legislature was to make the collection of statutory interest mandatory.” 13. The Apex Court, while construing the said Section, 8 took into consideration the amendment made by the Finance Act, 1987 where the word “shall” was substituted by the word “may” in Section 234A, 234B and 234C of the Act and such a substitution clearly indicates that the intention of the legislature was to make the payment of interest mandatory in nature and not merely directory. 14. The Apex Court yet again, in the case of Commissioner of Income-tax, Delhi Vs. Bhagat Construction Co. (P) Ltd. [2015] 60 Taxman.com 334 (SC), wherein it was an admitted position that the assessment order passed by the Assistant Commissioner of Income Tax, New-Delhi did not contain any direction for the payment of interest and the Apex Court taking into consideration the judgment rendered in the case of Kalyankumar Ray Vs. The Commissioner of Income Tax (supra), observed as under:- “We are of the view that the facts of the present case are squarely covered by the decision contained in Kalyankumar Ray's case (supra) inasmuch as it is undisputed that Form I.T.N.S. 150 contained a calculation of interest payable on the tax assessed. This being the case, it is clear that as per the said judgment, this Form must be treated as part of the assessment order in the wider sense in which the expression has to be understood in the context of Section 143, which is referred to in Explanation 1 to Section 234B. This being the case, we set aside the judgment of the High Court and allow the appeal of the Revenue.” 15. The Apex Court in the aforesaid case, considered 9 the judgment relied upon by the Tribunal in the case of CIT Vs. Ranchi Club Ltd. (supra) and distinguishing the judgment of CIT Vs. Ranchi Club Ltd. (supra), it was observed as under:- “The Supreme Court judgment in the Ranchi