AJAY JAISINGHANI ,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE -5(2), MUMBAI

3. Brief facts of the case are that the assessee is an individual and had filed his return of income dated 23.12.2020, declaring total income at Rs. 100,59,09,135/- and the same was processed u/s. 143(1) of the Act, where the ld. AO/CPC vide an intimation dated 23.03.2021 accepted the returned income filed by the assessee but had levied interest u/s. 234A of the Act.

4. The assessee was in appeal before the first appellate authority, challenging the intimation passed by the ld. AO/CPC and also on the ground that the ld. AO has not considered the additional legal claim filed by the assessee dated 17.07.2021 post the intimation order u/s. 143(1) of the Act and had further failed to adjudicate the same on the merits.

(A.Y. 2020-21) Ajay Jaisinghani 5. The ld. CIT(A) vide order dated 06.12.2024, dismissed the appeal filed by the assessee on the ground that the ld. AO/CPC has accepted the returned income filed by the assessee, thereby making no adjustments and the subsequent legal claim filed by the assessee, modifying/revising the claim made in the return of income was filed subsequent to the passing of the intimation order u/s. 143(1) of the Act. That being so, the ld. CIT(A) held that the assessee can file the appeal before the first appellate authority u/s. 246A of the Act, only when he is aggrieved by the order passed by the ld. AO, in which case, the assessee has failed to substantiate the fact that he was aggrieved by the order by way of any documentary evidences. The ld. CIT(A) relied on the order of the coordinate bench in the case of Huber Group India Pvt. Ltd. (formerly known as Micro Inks Pvt. Ltd.) vs. ACIT, Vapi, dated 15.06.2022, in which case, the appeal of the assessee was dismissed as there were no subject matter which was appealable neither from the draft assessment order nor was a subject matter of objections before the Hon'ble DRP. The ld. CIT(A) also dismissed the grounds challenging the levy of interest u/s. 234A of the Act, by holding that the same is mandatory and is a consequence of the income assessed.

6. The assessee is in appeal before us, challenging the impugned order of the ld. CIT(A).

(A.Y. 2020-21) Ajay Jaisinghani 12. Subsequent to the intimation u/s. 143(1) of the Act, the assessee filed an additional legal claim before the ld. AO dated 30.07.2021, by relying on the decision of the Hon'ble Apex Court in the case of B. C. Srinivasa Shetty [(1981) 128 ITR 294] which held that capital gains are not liable to tax in case of OFS for the following reasons: • “As per Explanation to section 55(2)(ac) of the Act, to compute the FMV, the shares should be listed on a recognized stock exchange on the date of transfer. However, in case of OFS, the shares have been transferred to an escrow account well before the listing date and it is one day prior to the listing date that the shares are transferred to the account of the purchaser. The shares are listed onto the stock exchanges after the date of transfer. • Cost for the purpose of capital gains in the present case is the FMV which cannot be computed. • The current transaction specifically falls under section 55(2)(ac) of the Act and hence, recourse of any other provision of section 55 of the Act for determination of cost of acquisition cannot be sought as section 55(2)(ac) of the Act is more specific to the facts of the case and since no other provision can be applied and no computation mechanism is available, the cost of the shares cannot be computed and the computation mechanism fails.”

filed by the assessee, for the reason that there was no subject matter of appeal as per the order of CPC/AO in the intimation passed u/s. 143(1) of the Act and the assessee ought to have filed appeal u/s. 246A of the Act but since there was no grievance against the order u/s. 143(1) of the Act, the same was dismissed by the first appellate authority by relying on the decision of the coordinate bench in the case of Huber Group India Pvt. Ltd. (supra), when the appeal of the assessee was dismissed on the ground that there was no subject matter emanating from the orders of the lower authorities directly or indirectly, thereby rejecting the additional ground raised by the assessee.

15. The assessee is in appeal before us, challenging the order of ld. CIT(A) in not admitting the additional claim pertaining to the non-taxability of capital gain along with other grounds on the merits of the issue.

16. The ld. AR had relied on a catena of decisions of the Hon'ble Supreme Court as well as Hon'ble Bombay High Court and further contended that the ld. CIT(A) ought to have decided the additional legal claim raised by the assessee as having co-terminus powers as that of the ld. AO. Upon perusal of the decision relied upon by the ld. AR, it is observed that all the decisions are on the fact that there was either an assessment proceeding or an appellate proceeding pending adjudication and only in such case an additional claim depending upon the facts of the case could be admitted, but in the (A.Y. 2020-21) Ajay Jaisinghani present case in hand, the revenue contends that there is no subject matter of appeal neither before the ld. CIT(A) nor before us as the assessee’s returned income has been accepted by the CPC/AO in the 143(1) proceeding and pertinently, the assessee’s case was also not picked up for scrutiny assessment u/s. 143(3) of the Act. On perusal of section 246A of the Act, which enumerates a list of orders which are appealable before the Commissioner (Appeals), it has categorically stated that any assessee who is aggrieved by any of the following orders, may appeal to the Commissioner (Appeals) against the specified orders which are mentioned from clauses (a) to (r) which also includes the intimation under sub section (1) of Section 143 of the Act. Further, in order to make an additional claim the recourse to the assessee is to file a revised return u/s. 139(5) of the Act within the specified time or to raise a claim before the ld. CIT(A) in an appeal against a valid grievance challenging an addition or disallowance or error in the original order or by way of rectification application u/s 154 of the Act, if applicable, or a revision u/s. 264 of the Act before the Commissioner.

17. In a celebrated case law of the Hon'ble Supreme Court in the case of Commissioner of Income-Tax, Calcutta vs Rai Bahadur Hardutroy Motilal Chamaria, [1967] 66 ITR 443 SC, though the issue was with regard to the power of enhancement of the appellate authority the proposition that was laid down was that the Commissioner (Appeals) cannot go beyond what was there in the return of income or the assessment order of ld. AO and is restricted to find out new sources of income which has not being the subject matter of the (A.Y. 2020-21) Ajay Jaisinghani consideration by the ld. AO. Further, it was held that there cannot be any ‘incidental’ or ‘collateral’ examination of any matter which is not in the assessment order or in the return of income and that the Commissioner (Appeals) has no jurisdiction to consider any issue which was not part of the assessment proceedings.

18. In the present case in hand, it is observed that the assessee has raised the ground challenging the interest levied u/s. 234A of the Act in the intimation passed u/s. 143(1) of the Act, for which the assessee is said to have filed a rectification application on 30.09.2021 for re-computing the interest calculated as per intimation issued u/s. 143(1) of the Act. The assessee aggrieved by the fact that the rectification application was not given effect filed an appeal before the ld. CIT(A) challenging the quantum of interest levied by the CPC. Now, the moot question here is whether the interest levied u/s. 234A of the Act is an appealable order u/s. 246A of the Act before the Commissioner (Appeals). For this, we would like to place our reliance on the decision of the Punjab and Haryana High Court in the case of PCIT, Faridabad vs. Shri Krishan Gopal (HUF), in of 2015, Order dated 15.09.2015, where one of the issue was whether the Commissioner (Appeals) has jurisdiction u/s. 246 to entertain and decide an appeal against the order u/s. 234A, 234B and 234C of the Act. The Hon'ble High Court by relying on the decision of the Hon’ble Apex Court in the case of Central Provinces Manganese Ore Co. Ltd. v. CIT (1986) 160 ITR 961, held that the levy of interest is part of the process of assessment and could be challenged in an appeal, provided the assessee disputes the chargeability of interest on the ground that he was (A.Y. 2020-21) Ajay Jaisinghani not liable to the levy of interest at all and further, it held that where the assessee claims waiver or reduction of interest levied then the same could not be challenged in appeal u/s. 246 of the Act except by way of invoking revisional jurisdiction of the Commissioner. It was reiterated that the levy of interest becomes part of the process of assessment which is appealable only when the assessee limits to the ground that it was not liable for levy of interest at all. The relevant extract of the said order of the Hon'ble High Court is cited herein under for ease of reference: 6. In this appeal, two issues arise for consideration of this Court, namely, (i) Whether the CIT(A) was well within his jurisdiction to entertain the first appeal under Section 246 of the Act against the chargeability of interest by the Assessing Officer under Sections 234A, 234B and 234C of the Act; and (ii) Whether the CIT(A) and the Tribunal were justified in deleting the interest under Sections 234A and 234C of the Act and in restricting the interest charged under Section 234B of the Act.

7. Adverting to issue No. (i), it may be noticed that the question regarding maintainability of appeal under Section 246 of the Act against order charging interest passed by the Assessing Officer under the Act was considered by the Apex Court in Central Provinces Manganese Ore Co. Ltd. v. CIT (1986) 160 ITR 961. It was observed that the levy of interest is the part of the process of assessment. Although Sections 143 and 144 of the Act do not specifically provide for the levy of interest but it is nevertheless a part of the process of assessing the tax liability of the assessee. The Supreme Court held that since levy of interest is a part of the process of assessment, it could be challenged in appeal provided the assessee disputes the chargeability of interest on the ground that he is not liable to the levy of interest at all. It was clarified that where the assessee claims waiver or reduction of the interest levied, that could not be agitated in appeal under Section 246 of the Act but more appropriately by resorting to revisional jurisdiction of the Commissioner. It was further observed that before the revisional jurisdiction of the Commissioner can be invoked for waiver or reduction, the assessee is required to demonstrate before the Assessing Officer that there is a case for waiving or reducing the levy of interest.

8. Applying the aforesaid authoritative principles of law enunciated by the Apex Court, the appeal filed by the assessee laying challenge to the very levy of interest under Sections 234A, 234B and 234C of the Act before the CIT(A) was clearly maintainable.

9. Similar contention raised by the revenue before the Tribunal against maintainability of appeal before the CIT(A), against levy of interest under Sections 234A, 234B and 234C of the Act, was repelled with the following observations: - “12. We have occasion to go through the decision of Hon'ble Supreme Court in the case of Central Province Manganese Ore Co. Ltd. vs. CIT (1986) 160 ITR 961 (SC) on an identical issue. The issue raised before the Hon'ble Supreme Court was as to whether orders levying interest under sub- section (8) of section 139 and under sec. 215 are appealable under sec. 246 of the Act. Hon'ble Supreme Court after detailed discussion has been pleased to hold that the levy of interest is part of the process of assessment. Although Sections 143 and 144 do not specifically provide for the levy of interest and the levy is, in fact, attributable to sec. 139(8) or section 215, it is nevertheless a part of the process of assessing the tax liability of the assessee. It was held that, in as much as, the levy of (A.Y. 2020-21) Ajay Jaisinghani interest is the part of the process of assessment, it is open to an assessee to dispute levy in appeal provided he limits himself to the ground that he is not liable to the levy at all. The fact of that case before the Hon'ble Supreme Court is akin to the fact of the present case as in the present case as well the assessee in their first appeals had limited themselves to the grievance of non-leviable of interest under Sections 234A, 234B and 234C of the Act at all. The contention of the assessee was that the charging of interest under Sections 234A, 234B and 234C was not proper and justified in view of the facts and circumstances of the case as only 20% of the sales consideration was received prior to the end of the relevant financial year and balance 80% was received in the next financial year. Without prejudice to this ground, the assessee during the course of first appellate proceedings also raised an additional ground that the assessee company could be fastened with the levy of interest to the extent of 20% only, i.e. the amount received by the assessee in the relevant financial year. Obviously, it was an alternative ground. The main contention as discussed above of the assessee remained that it was not liable to the levy of interest under Sec. 234A, 234B and 234C of the Act. Thus, respectfully following the ratio laid down by the Hon'ble Supreme Court in the above cited case, we hold that the first appeal against the levy of the disputed interest under Sec.234A, 234B and 234C was very much maintainable under sec. 246 of the Act. Hon'ble Supreme Court has been also pleased to observe that clause (c) of sec. 246 provides an appeal against an order where the assessee denies his liability to be assessed under the Act or against any assessment order under sub-section (3) of sections 143 or 144, where the assessee objects to the amount of income assessed or to the amount of tax determined or to the amount of loss computed or to the status under which he is assessed. Inasmuch as, the levy of interest is part of the process of assessment, it is open to an assessee to dispute the levy in appeal provided he limits himself to the ground that he is not liable to the levy of interest at all. The issue is thus decided in favour of the assessee. In result, ground No.2 involving the issue is rejected.”

raised by the assessee by way of additional claim can be admitted and adjudicated. We find no discussion in the ld. CIT(A)’s order on this issue which has larger impact on the admissibility of the additional claim raised by the assessee.

20. On this observation, we find that the action of the ld. CIT(A) in not passing a speaking order on this issue is not justifiable. We therefore are of the considered opinion that all these issues are to be remanded back to the file of the ld. CIT(A) with the direction to decide the admissibility of the ground challenging the levy of interest u/s. 234A of the Act and if the same is admissible in accordance with law then whether the assessee’s (A.Y. 2020-21) Ajay Jaisinghani additional claim raised before the ld. AO could be adjudicated which the assessee could possibly not raise before the ld. AO as per the Hon'ble Supreme Court decision in the case of Goetze (India) Ltd. (supra). We direct the ld. CIT(A) to re-examine this issue in the light of the relevant case laws and to pass a speaking order after giving sufficient opportunity of hearing to the assessee and decide the issue on the merits and in accordance with law. We have not given our thoughtful consideration on any of the issues on merits. Therefore, the grounds of appeal filed by the assessee is allowed for statistical purpose.