THE DCIT, COCHIN vs. M/S APPOLLO TYRES LTD, COCHIN

Per George George K, JM

This appeal at the instance of the Revenue is directed against the CIT(A)’s order dated 30.12.2017. The order of the CIT(A) arises out of the order passed u/s 143 r.w.s. 263 of the Income-tax Act dated 12.10.2010. The relevant assessment is 1993-1994.

“1. The order of the learned CIT(Appeals) opposed to the legal tenet laid down for charging interest

ITA No.53/Coch/2017. 2 M/s.Appollo Tyres Limited. u/s.234B(4) of the Act and opposed to the facts and circumstances of the case.

ITA No.53/Coch/2017. 3 M/s.Appollo Tyres Limited. 3. Briefly stated the facts of the case are as follow:-

3.1 The assessee is a company engaged in the manufacture and sale of automobile tools. For the relevant assessment year, the CIT(A) has passed an order u/s 263 (order dated 08.03.2010). The Assessing Officer gave effect to the CIT’s order passed u/s 263 of the Act vide order dated 12.10.2010. While giving effect to the order of the CIT, the Assessing Officer levied interest u/s 234B of the Act amounting to Rs.1,45,61,506. The Assessing Officer had levied interest u/s 234B of the Act from 01.04.1990 to 30.03.2000 i.e. up to the date of reassessment u/s 147 of the I.T.Act.

ITA No.53/Coch/2017. 4 M/s.Appollo Tyres Limited.

“f) It is clear that on the facts of the instant case that there has been an assessment u/s 147 only subsequent to a regular assessment u/s 143(3) of the Act, and such reassessment followed by various Appellate orders and the consequential orders of the AO giving effect to such Appellate orders have only reduced the assessed income from the amount assessed in the regular assessment u/s 143(3). Therefore, the applicable interest is to be calculated u/s 234B(1) r.w.s 234B(4) of the Act and not u/s 234B(3) of the Act. Section 234B(4) of the Act reads as under:

"Where, as a result of an order u/s 154 or section 155 or section 250 or section 155 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 AO 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."

g) It is clear from the above that u/s 234B(4), interest payable u/s 234B(1) shall be increased or reduced but it has not specified the period for which it will be levied, since the period already stands specified in Section 234B(1). Hence the period of charging interest u/s 234B would be as specified under section 234B(1) i.e. the 1st day of April next

ITA No.53/Coch/2017. 5 M/s.Appollo Tyres Limited. following financial year to the date of the regular assessment order passed u/s 143(3).

h) The decision of the Income Tax Appellate Tribunal (ITA T), Delhi Bench in the case of Freightship Consultants (P) Ltd. vs. ITO (supra) wherein relying on the case laws in the case of Modi Industries Ltd. vs. eIT (1995) 216 ITR 759(SC) and CIT vs. Anjum MH. Ghaswala (2001) 252 ITR 1 (SC) following was held: "It is mandatory for the AO to charge interest under s.234B of the Act and after the decision of ITAT, he is duty bound to increase or reduce the same as per the order of the Tribunal which he has charged while passing the assessment order and upto the date of the assessment order and not up to the date of the order passed by him in consequence of the order passed by the Tribunal." These decisions were cited by the Hon'ble Gujarat High Court in its decision dated 01.12.2015 in the case of the Pr. Commissioner Of Income-tax versus Applitech Solutions Ltd. [Tax Appeal No. 887 of 2015], which has been cited by the Appellant and is held to be squarely applicable on the facts of the instant case.

i) Going even further, the position that there is no fundamental difference between an assessment u/s 143(3) and u/s 147 in deciding the date until which the applicability of Section 234B could be reckoned has been held by various Hon'ble Courts including the Hon'ble Punjab and Haryana High Court in the case of Smt. Kamla Vati v. Commissioner of Income Tax (Centra/), Patiala. (1978) 111 ITR 248, the Hon'ble Madras High Court in the case of K.Gopalaswami Mudaliar v. Fifih Addl.ITO (1963) 49 ITR 322 (Mad), the Hon'ble Delhi High Court in the case of National Agricultural Cooperative Marketing Federation of India(1982) Tax LR 417 (Del) and the Hon'ble Kerala High Court in the case of Lally Jacob vs. IT0(1992) 197 ITR 439 (Ker.) all of which have been further sanctified by the judgment of the

ITA No.53/Coch/2017. 6 M/s.Appollo Tyres Limited. Hon'ble Supreme Court in the case of M/s K. Govirulan and Sons vs. Commissioner of Income Tax, Cochin [AIR 200 I SC 254]. However, all of these will become favourable to Revenue only when there is an increase in the income assessed and taxes emanded from regular assessment to reassessment. j) In the case of South Indian Bank Ltd. vs. CIT [2002P 325 ITR 517 (Ker), the Hon'ble Kerala High Court decided on a case where interest u/s 234B(3) was held to be chargeable until the date of the second reassessment order passed u/s 147 when such interest was not charged u/s 234B(1) in the original assessment order passed u/s 143( I) of the Act as well as in a first reassessment order passed u/s 147. In its decision date 12.02.2009 the Hon'ble Court held, inter alia, that: "It is clear beyond doubt from the above provisions that interest payable under section 234B(1) could be levied even in a reassessment completed under section 147 on excess short-fall of advance tax, consequent to increase in demand of tax pursuant to revision of assessment under sect inn 147

………..

In fact interest under section 234B(3) is on the differential amount of short-fall of advance tax with reference to the advance tax found to have been paid in the original assessment. In this case, when the revised loss return was accepted, in original assessment there was no liability for any advance tax and, so much so no interest was found payable under section 234B(1). Therefore the differential amount on which interest could be demanded under section 234B(3) is actually on the total short-fall in advance tax payable with reference to the revised assessment completed under sect ion 147 of the Act."

ITA No.53/Coch/2017. 7 M/s.Appollo Tyres Limited. k) The above case is not congruent on facts with the instant case of the Appellant where: a) there is an original assessment order passed u/s 143(3); and b) there has been a reduction in the amount of income assessed and taxes payable following the subsequent reassessment u/s 147 and the "giving effect to" orders to the Appellate orders. The case is however applicable on the matter inasmuch as that following such reassessment u/s 147 and the "giving effect to" orders, there is no excess short fall in the advance tax paid on the date of the original assessment.

l) In view of the all the above, the Appellant's position that in this case interest u/s 234B should be charged for the period 1.4.1993 to 20.3.1996 i.e the date of the regular assessment u/s 143(3) is held to be justified. The position of the AO in the impugned order that interest u/s 234B(3) of the Act is to be charged for the period of 0 1.04.1996 to 20.03.2000 (viz. 48 months) on an amount of Rs.98,49,240/- being the addition on account of the deduction claimed u/s 80HHC of the Act that was made and assessed vide order 20.03.2000, is hindered by the visible fact that the taxable income of the Appellant has reduced from Rs. 21,55,66,620/- assessed in the Order passed u/s 143(3) dated 22.03.1996 to Rs.14,70,65,440/- in the Order passed u/s 143(3) r.w.s. 147 dated 20.03.2000. However, this fact may be, for clarity's sake, in view of the large number of orders passed and the antiquity of the case, once again be verified by the AO. If and only if there is an increase in taxable income from assessment to reassessment can there be any levy of interest u/s 234B of the Act. Such action may be taken by the A.O. if the facts so demand. Consequently, subject to the verifications directed to be carried out by the Assessing Officer as above, Ground Numbered 2 is allowed.”

ITA No.53/Coch/2017. 8 M/s.Appollo Tyres Limited. 5. Aggrieved by the order of the CIT(A), the Revenue has filed the present appeal before the Tribunal. The learned Departmental Representative relied on the grounds raised in the memorandum of appeal. The learned AR, on the other hand, reiterated the submissions made before the Income-tax Authorities.

Sl. Particulars Date Assessed Tax No. Income Liability 1. Return of Income filed 30 Dec 1993 4,03,00,000 2,08,55,250 on 30/12/1993 u/s 139(1) 2. Revised Return of Income 29 Mar 1995 3,72,30,440 filed on 29/03/1995 3. Assessment order passed 22 Mar 1996 21,55,66,620 11,15,55,726 by AO u/s 143(3) dated 22/03/1996

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ITA No.53/Coch/2017. 10 M/s.Appollo Tyres Limited. 6.1 The CIT(A) held that section 234B(3) is attracted only if the income assessed as per order u/s 143(3) of the Act is increased by order u/s 147 of the Act [refer page 5 para (f) of the CIT(A)’s order]. The CIT(A) further held that if the income assessed u/s 143(3) is reduced as per the order u/s 147, the interest u/s 234B can be levied only as per the provisions of section 234B(4) of the Act. The CIT(A) further held that since section 234B(4) does not speak about the terminus point of levy of interest, the period mentioned u/s 234B(1) alone can be reckoned. The observation of the CIT(A) that there has been a reduction of assessed income as per the reassessment order u/s 147 dated 20.03.2000 vis-à-vis order u/s 143(3) dated 22.03.1996 is not correct. No doubt, the assessment order passed u/s 143(3) of the Act dated 22.03.1996 had assessed the total income at Rs.21,55,66,620, however, the same was reduced while giving effect to the CIT(A)’s order to Rs.12,95,52,690 (order giving effect to CIT(A)’s order dated 25.09.1996). The amount assessed subsequent to the order of the CIT(A), viz., a figure of Rs.12,95,52,690 is to be substituted for the figure of Rs.21,55,66,620 being the original assessed figure u/s 143(3) of the Act, since the appellate proceedings is only a continuation of the assessment proceedings. When the assessed income has been substituted with a figure of Rs.12,95,52,690, the assessment completed u/s 147 was at an income of Rs.14,70,65,440 (higher figure). Therefore, there is an increase in the assessed income by virtue of reassessment order passed u/s 147 of the Act. In this context section 234B(3) will have application.

ITA No.53/Coch/2017. 11 M/s.Appollo Tyres Limited. 6.2 Moreover, section 234B(3) specifically states about order of reassessment or re-computation u/s 147 of the Income-tax Act and states that interest u/s 234B had to be computed upto the date of reassessment / re-computation, whereas section 234B(4) is concerning levy of interest while giving effect of appellate order, rectification order, revisionary orders etc., The section 234B(4) states that if there is any increase or decrease in the income, correspondingly interest shall be increased or reduced accordingly. In the instant case, since reassessment u/s 147 of the Act was completed and in the reassessment the assessed income being higher, the interest is to be calculated as per section 234B(3) of the Income-tax Act, instead of section 234B(4) of the Income-tax Act.

6.3 The judgment of the Hon’ble Gujarat High Court relied on by the learned Counsel for the assessee in the case of Principal Commissioner of Income-tax-1 v. Applitech Solutions Ltd. [(2016) 55 taxmann.com 124 (Gujarat)] is distinguishable on the facts. The Hon’ble High Court was considering a case where the interest was levied u/s 234B of the Act while giving effect to the order of the Tribunal. As mentioned earlier while giving effect to the appellate order, the section 234B(4) will have application and not section 234B(3) of the Act.

6.4 The Assessing Officer had levied interest u/s 234B from 1st April 1993 upto the date of reassessment u/s 147 of the Act. According to the learned AR, this calculation of interest is patently wrong, because section 234B(3) states about levy of

ITA No.53/Coch/2017. 12 M/s.Appollo Tyres Limited. interest from the date of determination of total income u/s 143(1) of the Act up to the date of reassessment or re- computation u/s 147 of the Act. The learned AR relied on the order of the Tribunal in the case of MBG Commodities (P) Ltd. v. DCIT [(2017) 77 taxmann.com 353] in raising the above contention.

6.5 The A.O., how he had computed interest u/s 234B of the Act is not very discernable and the period for which the same has been levied is also not mentioned in the order dated 12.10.2010. We are of the view, in the interest of justice and equity, the interest u/s 234B needs to be recalculated afresh. Therefore, we restore this appeal to the files of the A.O. to recalculate interest. The A.O. shall afford a reasonable opportunity of hearing to the assessee. The Assessing Officer shall also take note of the dictum laid down by the order of the Tribunal in the case of MBG Commodities (P.) Ltd. v. DCIT [(2017) 77 taxmann.com 353 (Hyderabad – Tribunal)] while calculating the interest u/s 234B of the Act, afresh. It is ordered accordingly.

Sd/- Sd/- (Manjunatha G.) (George George K.) JUDICIAL MEMBER ACCOUNTANT MEMBER Cochin ; Dated : 04th January, 2018. Devdas*

ITA No.53/Coch/2017. 13 M/s.Appollo Tyres Limited. Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT, Kochi. 4. CIT(A)-I, Kochi. 5. DR, ITAT, Cochin 6. Guard file. By order (Asstt. Registrar) ITAT, Cochin