COMMISSIONER OF INCOMET TAX vs. M/S NAHAR SPINNIG MILLS

ITA/8/2004HC Punjab & HaryanaPHHC01051602200406 July 2011Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE AJAY KUMAR MITTAL26 pages
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What were the facts?

The assessee, M/s Nahar Spinning Mills Ltd., filed its return for assessment year 1989-90, which was processed under Section 143(1)(a). Subsequently, a notice under Section 148 was issued, leading to an assessment under Section 143(3)/147. Interest under Section 234B was charged. The CIT(A) partly allowed the appeal, deleting the interest. The Tribunal upheld this. The department revised the assessment under Section 263, leading to a revised assessment order under Section 143(3) with enhanced income and increased interest under Section 234B. The CIT(A) again held that interest under Section 234B was not chargeable as the revised assessment was not a regular assessment. The Tribunal dismissed the department's appeal. The revenue appealed to the High Court against the Tribunal's order dated 3.6.2003.

What did the High Court hold?

The High Court found substantial force in the submissions of the revenue. It noted that the initial return was processed under Section 143(1)(a), and a subsequent assessment was framed under Section 143(3)/147. The Court addressed the issue of whether the assessment under Section 143(3)/147 was a regular assessment. The Court observed that Section 115JA and 115JB are self-contained codes and that other provisions of the Act, including those for advance tax and interest, apply to companies liable under these sections. The Court rejected the assessee's reliance on the Karnataka High Court's decision in Kwality Biscuits Ltd. v. CIT, noting that other High Courts had taken a contrary view, and that the Supreme Court's dismissal of the appeal in Kwality Biscuits Ltd. was in limine. Furthermore, the Court pointed out that subsequent decisions, including by the Karnataka High Court itself in Jindal Thermal Power Company Ltd. v. Dy. CIT, distinguished Kwality Biscuits Ltd. and held that interest under Sections 234B and 234C is leviable on failure to pay advance tax under Section 115JB. The Court also noted that CBDT Circular No. 13/2001 did not apply. The alternative contention of the assessee was rejected in light of the Supreme Court's decision in Rolta India Ltd. The question of law was answered in favour of the revenue. The appeal was allowed.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the interpretation of Section 234B(4) made by the ITAT is sustainable in law, given that the order passed under Section 147 r.w. 143(3) was a regular assessment in view of Explanation 2 to Section 234B, as opposed to a mere processing under Section 143(1)(a)? Assessee's contentions: - The assessment order revised under Section 263 was not a regular assessment, and therefore, Section 234B(1) was not applicable, nor consequently Section 234B(4). - Reliance was placed on the High Court's judgment in Darshan Lal Gulati v. Commissioner of Income-tax, Jalandhar [2008] 173 TAXMAN 268. - Alternatively, as income was assessed on book profits under Section 115J, the judgment of Karnataka High Court in Commissioner of Income-Tax v. Kwality Biscuits Ltd. [2000] 243 ITR 519 (affirmed by SC) was applicable, making interest under Section 234B not exigible. Revenue's contentions: - The assessee was liable to pay interest under Section 234B for failure to pay advance tax on assessed income. - Explanation 2 to Section 234B supports the view that the assessment under Section 143(3)/147 was the first assessment, not just a processing under Section 143(1)(a). - The orders of CIT(A) and Tribunal deleting interest were contrary to the decisions in Commissioner of Income Tax v. K. Govindan and sons (Ker) [1999] 238 ITR 1005 (affirmed by SC) and Abdul Majid v. Commissioner of Income Tax [2006] 281 ITR 366 (All). - Interest under Section 234B was correctly charged in the assessment order passed under Section 143(3)/147 and could be enhanced subsequently. - Reliance was placed on Joint Commissioner of Income-Tax v. Rolta India Ltd. [2011] 330 ITR 470 (SC) and judgments of the High Court in M/s Amtek Auto Limited v. The Commissioner of Income Tax, Gurgaon and The Commissioner of Income Tax v. M/s Steel Strips Leasing Ltd.

Which sections of the Income-tax Act were involved?

Section 234B,Section 147,Section 143(3),Section 115J,Section 143(1)(a),Section 148,Section 263,Section 80-I,Section 234B(4),Section 234B(1),Section 208,Section 115JA,Section 115JB,Section 207,Section 209,Section 210,Section 234C,Section 254(2),Section 115J(4),Section 115JB(5),Section 260A

AI-generated summary — verify with the full judgment below

-1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of Decision: 6.7.2011 Commissioner of Income Tax ....Appellant. Versus M/s Nahar Spinning Mills Ltd. ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL, ACTING CHIEF JUSTICE. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Denesh Goyal, Standing Counsel, for the appellant. Mr. Sanjay Bansal, Senior Advocate with Mr. Robin Jarial, Advocate, for the respondent. AJAY KUMAR MITTAL, J.

1.

This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 3.6.2003 passed by the Income Tax Appellate Tribunal, Chandigarh, Bench “A”, Chandigarh (hereinafter referred to as “the Tribunal”) in ITA No. 1078/Chandi/97, relating to the assessment year 1989-90. The appeal was admitted on 11.7.2006 to consider the following substantial question of law:- “Whether, on the facts and in the circumstances of the case, the interpretation of Section 234B(4) made -2- by the ITAT is sustainable in law as the same being based on misinterpretation of law as well as facts of the case in as much as order passe

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