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Income Tax Appellate Tribunal, “H”, BENCH MUMBAI
Before: HON’BLE SHRI R.C.SHARMA, AM & HON’BLE SHRI SANDEEP GOSAIN, JM
Assessee by Shri Ketan Ved, A.R Revenue by Shri V. Justin, D.R 27/07/2018 Date of Hearing Date of Pronouncement 15/10/2018 आदेश / O R D E R PER SANDEEP GOSAIN (JUDICIAL MEMBER): This appeal filed by the assessee against the order of CIT(A)-20, Mumbai dated 02.01.2017 for A.Y.2003-04 which in itself arises from the order passed by the A.O under Sec. 143(3) of the Income Tax Act, 1961 (for short „Act‟) dated 25.06.2015.
Grounds of appeal: Ground No. 1 to 4: are inter connected and inter related and relates to challenging the order of Ld. CIT(A) in confirming the action of AO in levy of interest of Rs. 3,20,31,105/- under Sec. 220(2) of the Income-tax Act, 1961 [“Act”], therefore we thought it fit of the same to this common order.
P a g e | Hazira Cryogenic Engineering & Construction Management Pvt. Ltd. Vs. ACIT, Circle-12(2)(2) 3 Ld. AR appearing on behalf of the assessee reiterated the same arguments as were raised by him before Ld. CIT(A), which are at para no. 6.2 of the order of Ld. CIT(A). It was submitted the assessee is an Indian company, incorporated on 31 December 2002 and engaged in the business of project management contractor services for the port and LNG terminal to be set up in Hazira, Gujarat. It was also submitted that the present appeal is against the order dated 02.01.17 passed by the Assessing Officer [“AO”] giving effect to the order dated 12 December 2006 passed by the Commissioner of Income-tax (Appeals) [“CIT(A)”] for the assessment year 2002-03. The entire chronology of events leading to the erroneous levy of interest under section 220(2) for the year under consideration has been given by the assessee which is given hereunder for ready reference:
Sr. No. Details of Assessm Date of Remarks event/order ent year order passed 1 Return of income AY 27 October The appellant claimed a filed 2003-04 2003 refund of taxes of Rs.4,71,04,498/- 2. Intimation issued AY 31 May Refund granted of under Sec. 143(1) 2003-04 2004 Rs.3,17,67,188/- including interest under Sec. 244A of Rs. 21,70,059/- 3. Order passed AY 21 March The appellant was under Sec. 143(3) 2003-04 2006 allowed a deduction of professional fees of Rs. 10,33,35,934/- disallowed in the earlier assessment year viz. AY P a g e | Hazira Cryogenic Engineering & Construction Management Pvt. Ltd. Vs. ACIT, Circle-12(2)(2) 2002-03. Total refund determined of Rs. 5,87,16,315/-. Additional refund receivable by the appellant of Rs.2,91,19,186/- [ over and above amount of refund granted under Sec. 143(1) of the Act] was adjusted against the demand determined for AY 2002-03.
4. Order of the AY 12 The CIT(A) allowed the CIT(A) 2002-03 December appellant a deduction of 2006 professional fees of Rs.10,33,35,934/- in AY 2002-03.
Rectification order AY 5 July 2007 There was no change in under Sec. 154 2003-04 the tax payable/refundable as assessed in the Order issued under Sec. 143(3).
6. Order giving AY 25 June The AO has withdrawn effect to the order 2003-04 2015 the deduction of of the CIT(A) for professional fees of AY 2002-03 Rs.10,33,35,934/- granted to the Appellant in 143(3) Order for AY 2003-04. The A.O has raised a demand vide notice of P a g e | 4 AY. 2003-04 Hazira Cryogenic Engineering & Construction Management Pvt. Ltd. Vs. ACIT, Circle-12(2)(2) demand dated 25 June 2015 of Rs.6,11,50,291/- [tax payable of Rs.2,91,19,186/- plus interest under Sec. 220(2) of Rs.3,20,31,105/-]. This demand was discharged by way of adjustment of refund due for AY 2002- 03. It was submitted that the assessee had filed this appeal against the order dated 25 June, 2015 passed by AO giving effect to the order of the CIT(A) dated 12 December 2006 for AY 2002-03, wherein an interest under Sec. 220(2) of Rs.3,20,31,105/- has been levied erroneously. It was also submitted the Assessing Officer vide his impugned order was of the view that interest under Sec. 220(2) of the Act, is leviable on the appellant for the year under consideration (i.e AY 2003-04) on an alleged demand of Rs.2,91,19,186/- which was outstanding in the case of the assessee from 21st March 2006 to 25th June 2015 i.e the date of passing the impugned order.
On the other hand, Ld. DR relied upon the orders passed by the revenue authorities.
5 We have heard the counsels for both the parties and we have also perused the material placed on record, judgment cited by the parties as well as orders passed by the revenue authorities. We find from the record that at no point of time, there had been any tax which had been P a g e | Hazira Cryogenic Engineering & Construction Management Pvt. Ltd. Vs. ACIT, Circle-12(2)(2) outstanding in the case of the assessee for the year under consideration i.e AY 2003-04. This is evident from the following table: Date Event Amount of Page No. of the refund (in paper book. Rs.) 27 October Return of income 4,71,04,498 1-3 2003 filed 31 May Intimation issued 3,17,67,188 4-6 2004 under Sec. 143(1) 21 March Order passed under 5,87,16,315 7-11 2006 Sec. 143(3) 5 July 2007 Rectification order 5,87,16,315 12-14 under Sec. 154 25 June Order giving effect to NA- 2015 the order of the Impugned CIT(A) for AY 2002- order 03.
Before we decide the merits of the contentions raised by the assessee, it is necessary to first appreciate the provision of section 220 of the I.T. Act and the same is reproduced below :-
“220(1) Any amount, otherwise than by way of advance tax, specified as payable in a notice of demand under section 156 shall be paid within thirty days of the service of the notice at the place and to the person mentioned in the notice Provided that, where the Assessing Officer has any reason to believe that it will be detrimental to revenue if the full period of thirty days aforesaid is allowed, he may, with the previous approval of the Joint Commissioner, direct that the sum specified in the notice of demand shall be paid within such period being a period less than the period of thirty days aforesaid, as may be specified by him in the notice of demand.
P a g e | Hazira Cryogenic Engineering & Construction Management Pvt. Ltd. Vs. ACIT, Circle-12(2)(2) (1A) Where any notice of demand has been served upon an assessee and any appeal or other proceeding, as the case may be, is filed or initiated in respect of the amount specified in the said notice of demand, then, such demand shall be deemed to be valid till the disposal of the appeal by the last appellate authority or disposal of the proceedings, as the case may be, and any such notice of demand shall have the effect as specified in section 3 of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964 (11 of 1964). (2) If the amount specified in any notice of demand under section 156 is not paid within the period limited under sub-section (1), the assessee shall be liable to pay simple interest at one per cent for every month or part of a month comprised in the period commencing from the day immediately following the end of the period mentioned in sub-section (1) and ending with the day on which the amount is paid. Provided that, 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 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount on which interest was payable under this section had been reduced, the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded. [Provided further that where as a result of an order under sections specified in the first proviso, the amount on which interest was payable under this section had been reduced and subsequently as a result of an order under said sections or section 263, the amount on which interest was payable under this section is increased, the assessee shall be liable to pay interest under sub-section (2) from the day immediately following the end of the period mentioned in the first notice of demand, referred to in sub-section (1) and ending with the day on which the amount is paid:]”
After having gone through the provisions of section 220(1) of the I.T. Act, we find that each of the aforesaid sub- sections to section 220 are explained herein below:
P a g e | Hazira Cryogenic Engineering & Construction Management Pvt. Ltd. Vs. ACIT, Circle-12(2)(2) Sub-section 1 specifies that any amount specified in the Notice of Demand issued under section 156 of the Act will be paid within a period of 30 days of service thereof. The first proviso thereto lays down an exception, in terms of which, an assessing officer can grant a period of lesser than 30 days, after obtaining necessary approvals. Sub-section 1A specifies that where a Notice of Demand is served on an assessee alongwith an Order, and such Order is subject matter of appeal / revision, etc., then such Notice of Demand will be valid till the disposal of the appeal. Meaning thereby that any internal relief granted to the tax payer may not be considered in case ultimately the issue is decided against the tax payer. Sub-section 2 specifies that where an amount of demand arising in terms of a Notice of Demand under section 156 is unpaid within the specified time, then such assessee is liable to pay interest ©l% per month, on such outstanding demand.
It is evident from the aforesaid, in order to levy interest under section 220(2) of the Act it is necessary that a. demand is raised; b. for which a Notice of Demand is issued by the Assessing Officer; and c. which demand is outstanding; 9. Thus Applying the aforesaid, to the facts of the instant case, the position which emerges is that no demand whatsoever was outstanding for the year under consideration i.e. AY 2003- P a g e | Hazira Cryogenic Engineering & Construction Management Pvt. Ltd. Vs. ACIT, Circle-12(2)(2) 2004 till 25 June 2015 i.e. the date on which the notice of demand dated 25 June 2015 issued in pursuance to the order giving effect to the Order of the CIT(A) for AY 2002-2003, was passed in the case of the Appellant. Accordingly, no interest under section 220(2) was leviable. 10. In this regard, reliance can be placed on the following decisions, wherein it has been held that interest under section 220(2) of the Act can be levied only where there is an outstanding demand in terms of the Notice of demand issued under section 156 of the Act: i) Vikrant Tyres Ltd. v/s. First Income-tax Officer [2001] 247 ITR 821 (SC); ii) Schloemann Siemag v/s. DCIT [2001] 250 ITR 97 (AP); iii) Muchhala N.V. v/s. ACIT [ITA Nos. 2591 and 2592/Mum/2012]
Further, with respect to the AO's observation [confirmed by the CIT(A)] that the refund of Rs. 2,91,19,186/-issued to the Assessee on 21.03.2006 will take character of excess amount refunded on regular assessment u/s 143(3) of the Act, and hence, it will fall within the ambit of the provisions of section 143(4)(b) of the Act (Paragraph 6.2 of the order dated 25 P a g e | Hazira Cryogenic Engineering & Construction Management Pvt. Ltd. Vs. ACIT, Circle-12(2)(2) June 2015).
We have also considered the submissions of the parties wherein Ld. AR submitted that as per the provisions of section 143(4)(b) of the I.T. Act 1961, no refund was due on regular assessment or if amount refunded u/s 143(1) exceeds the amount of refundable on regular assessment, the amount refunded will be deemed to be the amount of tax payable.
The provisions of section 143(4) of the Income-tax Act, 1961 are reproduced herein for ready reference: “(4) Where a regular assessment under sub-section (3) of this section or section 144 is made,—
(a) any tax or interest paid by the assessee under sub- section (1) shall be deemed to have been paid towards such regular assessment;
(b) if no refund is due on regular assessment or the amount refunded under sub-section (1) exceeds the amount refundable on regular assessment, the whole or the excess amount so refunded shall be deemed to be tax payable by the assessee and the provisions of this Act shall apply accordingly.”
P a g e | Hazira Cryogenic Engineering & Construction Management Pvt. Ltd. Vs. ACIT, Circle-12(2)(2) 14. In the instant case, the refund of Rs. 3,17,67,188/ - granted to the Appellant pursuant to the intimation under section 143(1) of the Act has been correctly computed. The amount of refund as per Order under section 143(3) was increased to Rs. 5,87,16,315/-. Hence the question of refund in terms of regular assessment being less than the amount refundable under section 143(1) does not arise.
As per the records, even after giving effect to the CIT(A)'s order dated 12 December 2006, there will be no reduction in the refund granted under 143(1) intimation. Hence, the provisions of section 143(4)(b) are not applicable in the instant case as the excess refund has been granted as per order under section 143(3) and such a scenario is not explicitly covered by the aforesaid provisions. Ld. AR also invited our attention to the order of Ld. CIT(A) order dated 02.01.17 in para 6.4, where he has observed that the demand raised by the AO vide order dated 21 March 2006 passed under section 143(3) has been fully paid by the Appellant including interest under section 220(2) of the Act. It was evident from above that there was refund due and issued to the Appellant in the order passed under section 143(3) and no demand was payable by the Assessee.
P a g e | Hazira Cryogenic Engineering & Construction Management Pvt. Ltd. Vs. ACIT, Circle-12(2)(2) 16. Further, the CIT(A),while passing the order had relied on the decision of the Income Tax Appellate Tribunal [ITAT] (Bangalore) in the case of Sri. M. Ramnath Shenoy, Mysore vs Department of Income-tax.
We have considered the above judgment, however the facts of the present case are different from the facts in the case of Sri. M. Ramnath Shenoy. In case of Sri. M. Ramnath Shenoy, demand was raised by way of order passed under section 143(3) of the Act along with interest under section 220(2) of the Act. Thereafter, an order under section 143(3) read with section 148 was passed whereby the demand was enhanced. It may be appreciated that in the present case, there was no demand payable by the Appellant till 25 June 2015 (date of notice of demand issued pursuant to the order giving effect to the CIT(A) order) and hence the said ruling is not applicable to the present facts.
In light of the above, we are of the view that no demand was existing on the Appellant till the Notice of Demand dated 25 June 2015 issued along with the order giving effect to the CIT(A)'s order for AY 2002-03. In other words, the demand can only be said to arisen in view of the demand notice dated 25 June 2015. This demand was paid by way of adjustment of refund P a g e | Hazira Cryogenic Engineering & Construction Management Pvt. Ltd. Vs. ACIT, Circle-12(2)(2) issued for AY 2002-03. Accordingly, in absence of any demand, the question of default of payment and consequential levy of interest under section 220(2) of the Act for the period March 2006 to June 2015 does not arise. Further, the provisions of section 143(4)(b) are also not applicable in the instant case, as elaborated hereinabove.
In view of our above findings, we are of the considered view that the impugned levy of interest of Rs. 3,20,31,105/- under section 220(2), is clearly incorrect, erroneous and thus needs to be deleted.” Resultantly these ground raised by the assessee are allowed.
Ground no. 5 & 6 are general in nature, thus needs no specific adjudication.
In the net result, the appeal filed by the assessee stand allowed with no order as to cost. Order pronounced in the open court on 15th October, 2018 (R. C. Sharma) (Sandeep Gosain) लेखासदस्य / Accountant Member न्याययकसदस्य / Judicial Member म ुंबई Mumbai;यदनाुंकDated : 15.10.2018 Sr.PS. Dhananjay P a g e | Hazira Cryogenic Engineering & Construction Management Pvt. Ltd. Vs. ACIT, Circle-12(2)(2)