LATE SHRI HARSHAD S.MEHTA,MUMBAI vs. ASST CIT CEN CIR 4(1), MUMBAI

आदेश / O R D E R

PER RAVISH SOOD, JUDICIAL MEMBER:

1. The Ld. Commissioner of Income-Tax (Appeals) has erred in law and in facts in confirming the levy of interest u/s. 234A, 234B and 234C of the Act.

2. The Ld. Commissioner of Income-Tax (Appeals) has erred in law and in facts in not appreciating that the income assessed in the hands of the appellant were subjected to the provisions of TDS and hence on the said amount of tax, no interest can be computed u/s 234B and 234C of the Act.

3. The Appellant craves leave of Your Honour to add to, alter, amend and/or delete all or any of the foregoing grounds of appeal.”

2. Briefly stated, the assessee is a person notified under the Special Court (Trial of Offences relating to transactions in securities) Act, 1992. It was observed by the A.O that no „return of income‟ for the year under consideration viz. A.Y. 2012-13 was filed by the assessee before the „due date‟, as provided under Sec. 139 of the Act. Notice under Sec. 148, dated 08.11.2013 was issued to the assessee. The assessee, vide a letter dated 09.02.2015 submitted a copy of the „return of income‟ in response to the aforesaid notice. Subsequently, the A.O framed the assessment under Sec. 143(3) r.w.s. 147 of the Act at Rs. 5,34,00,910/-. On the basis of the assessed income, the A.O raised an additional demand of Rs. 2,75,72,437/- viz. Tax : Rs. 1,63,48,441/-; and Interest under Sec. 234A : Rs. 47,41,048/-, 234B : Rs. 58,85,439/- and 234C : Rs. 5,97,509/-.

ITA NO(s). 1844/Mum/2017 & 1845/Mum/2017 3 Late Shri. Harshad S. Mehta through L/H Smt. Jyoti H. Mehta Vs. ACIT, Central Circle-4(1), Mumbai and Harshad S .Mehta through L/H Smt. Jyoti H. Mehta Vs. DCIT, Central Circle-4(1), Mumbai.

3. Aggrieved, the assessee assailed the validity of the assumption of jurisdiction by the A.O for reopening the case under Sec. 147 of the Act, as well as challenged the levy of interest under Sec. 234A, 234B and 234C of the Act. The CIT(A) not finding favour with the contentions advanced by the assessee as regards the validity of the assessment, thus, rejected the same. Further, the CIT(A) was of the view that levy of interest under Sec. 234A, 234B and 234C was mandatory and no exception was carved out under the statute in respect of chargeability of the same in the case of a notified person. Thus, not finding any infirmity as regards the levy of interest by the A.O, the CIT(A) upheld the same. Still further, the CIT(A) also not being persuaded to subscribe to the contention of the assessee that for computing the interest under Sec. 234A, 234B and 234C, necessary credit of the TDS on interest income was to be allowed, thus, rejected the same.

ITA NO(s). 1844/Mum/2017 & 1845/Mum/2017 4 Late Shri. Harshad S. Mehta through L/H Smt. Jyoti H. Mehta Vs. ACIT, Central Circle-4(1), Mumbai and Harshad S .Mehta through L/H Smt. Jyoti H. Mehta Vs. DCIT, Central Circle-4(1), Mumbai. contra, the Learned Departmental Representative (for short „D.R‟) relied on the orders of the lower authorities.

“6. The next Ground relates to charging of interest under section 234A, 234B and 234C of the Act. On this issue it was a common ground between the parties that the said issue has been decided in the case of the assessee itself for assessment year 2002-03(supra), wherein the following discussion is relevant:- “10. Grounds 3 & 4 deal with levy of interest u/s 234A, 234B and 234C. During the course of hearing, the Ld. Counsel stated at the very outset that this issue is covered by the decision of the Tribunal given in case of group company of the assessee, biz. M/s Growmore Exports Ltd vs DCIT (ITA No.4358/Mum/2013) dated 08-02-2016 and therefore this order should be followed. The Ld. Special Counsel did not point out any distinction in facts or legal position.

ITA NO(s). 1844/Mum/2017 & 1845/Mum/2017 5 Late Shri. Harshad S. Mehta through L/H Smt. Jyoti H. Mehta Vs. ACIT, Central Circle-4(1), Mumbai and Harshad S .Mehta through L/H Smt. Jyoti H. Mehta Vs. DCIT, Central Circle-4(1), Mumbai. liability is to be calculated after taking into account tax deducted at source. The Ld. Counsel for the assessee company relied upon decisions of the Tribunal in the case of DCIT v. Smt Rasila S. Mehta in vide orders dated 21. 10.201.5, Divine Holding Pvt. Ltd. v. ACIT in ITA no. 560/Mum/20 1.3 dated 21.10.2015 and Aatur Holdings Private Limited vs. DCIT in ITA no. 846, 1032 & 147/ Mum/ 20 1 0 dated 23-09-2015, whereby Tribunal has restored the issue to the file of the learned assessing officer who would levy the interest as per provisions of Section 234 after reducing the amount of tax deductible at source and decide as per the provision of law. The Tribunal’s decision in ITA no. 846,1032,2147/Mum/ 2010 dated 23.09.. 2015 is reproduced below:- “6. Last ground of appeal for all the three assessment years pertain, to levy of interest u/s 234A, 234B and 234C of the Act. Before us, the representative of both the sides agreed that identical issue was decided in the cases of Topaz Holdings Pvt. Limited ( ITA/21461/Mum/2013, A. Y. 2002-03 dt. 78.06.2014) and Eminent Holdings Pvt. Ltd. (ITA/2139/Mum/2013 A.Y.2002-03, dated 18.06.2014) that the Tribunal had upheld the levy of interest in principal, that it had set aside the issue for calculating the interest to the file of the AO) with direction that the tax deducted at source should be reduced while calculating the interest. We find that the issue was discussed in the case of Eminent Holdings Pvt. Ltd. (supra) as under:

5. Next ground of appeal is about levy of interest u/s. 234 of the Act. Before us, AR stated that the assessee was a notified entity, that the provisions of s. 234A, 234B and 234C of the Act were deemed to have complied with, that the assets were already in attachment of the Custodian appointed under the provisions of the Special Courts Act, that the Tribunal in the case of the appellant and several other entities had held the view in favour of the appellant that the Hon’ble Bombay High Court in the case of Divine Holdings Pvt. Ltd. and Cascade Holdings Pvt. Ltd, had held that the provisions of sections 234A, 234B and 234C of the Act were mandatory and were applicable to the notified entities also that the assessee was in the process of ITA NO(s). 1844/Mum/2017 & 1845/Mum/2017 6 Late Shri. Harshad S. Mehta through L/H Smt. Jyoti H. Mehta Vs. ACIT, Central Circle-4(1), Mumbai and Harshad S .Mehta through L/H Smt. Jyoti H. Mehta Vs. DCIT, Central Circle-4(1), Mumbai. filing an appeal against the said order before the Hon’ble Supreme Court , that the income earned in the year under consideration was subjected to the provisions of 9 TDS, that the chargeability of section 234A, 234B and 234C of the Act should be after considering the amount of tax deductible at source on the income assessed. The appellant relies in this regard on the following decisions. He relied upon the cases of Motorola Inc. vs DCIT (95 LTD 269(Del)( SB). Sedco Pores Drilling Co. Ltd. (264 ITR 320), NGC Network Asia LLC (313 ITR 187). Summit Bhatacharya (300 ITR (AT) 347 (Bom)(SB), Vijay Gopal Jindal (ITA No. 4333/Del/2009) & Emillo Ruiz Berdejo (320 ITR 190(Bom). DR relied upon the cases of Divine Holdings Pvt. Ltd. 3.1 We have heard the rival submissions and perused the material before us. We find that in the case of Divine Holdings Put. Ltd..Hon’ble Bombay High Court has held that provisions of Section 234A, 234B and 234C were applicable to the notified person also. Therefore, upholding the order of the FAA to that extent, we hold that- provisions of Section 234 of the Act are applicable. As far as calculation part is concerned, we find merits in the submission made by the assessee. Therefore, we are restoring back the issue to the file of the AO for fresh adjudication who would decide the issue after considering the amount taxed deductible at source on the income assessed and after affording a reasonable opportunity of hearing to the assessee. Ground no. 5 is allowed in part in favour of the assessee. Respectfully following the above order we restore back the issue to the file of the AO who would levy the interest as per the provisions of section 234 of the Act and give credit for the TDS amounts. Ground no, 6 for all the three A. Y s Stands partly allowed.” The Ld. Counsel for the assessee company submitted that the Tribunal has in the assessee company's own case has adjudicated the issue in ITA no. 52031/Mum/2013 for assessment year 2003-04, vide orders dated 18.12.2014 as under: 9. Ground No.5 relates to charging of interest u/s 234A and 234B of the Act. In connection with the ITA NO(s). 1844/Mum/2017 & 1845/Mum/2017 7 Late Shri. Harshad S. Mehta through L/H Smt. Jyoti H. Mehta Vs. ACIT, Central Circle-4(1), Mumbai and Harshad S .Mehta through L/H Smt. Jyoti H. Mehta Vs. DCIT, Central Circle-4(1), Mumbai. charge of interest u/s 234B of the Act, Ld. Counsel for the assessee submitted that the assessee being a 'notified person there is no charge of interest. it is his further submissions that the receipts- of the assessee are subjected to TDS. On the contrary, Special Counsel for the Revenue flied various decisions of the Tribunal in support of charge of interest. The judgment of the jurisdictional High Court in the case of CIT vs. Divine Holding Pot, Ltd. was relied on by the Spl. Counsel for the Revenue. During the rebuttal time, Ld. Counsel submitted that this issue should also revisit the file of the AO for removal of certain inaccuracies in calculating the interest. We order accordingly. Thus, ground no. 6 is allowed for statistical purposes. 10. in the result, assesses's appeal is partly allowed for statistical purposes.' Ld. Special counsel of the Revenue submitted that the leviability of interest u/s 234A 234B and 234C of the Act is mandatory. He Relied upon decision of the Hon'ble jurisdictional High Court in the ease of Divine Holdings Private Limited in of 2010, whereby Hon’ble Bombay High Court has held that in case of notified parties under the Special Court Act interest u/s 234A, 234B and 234C of the Act has to be levied, and contended that the interest u/s 234 is mandatory. After hearing both the parties and carefully considering the material on records including relied upon case, Respectfully following the above order's of the Tribunal we restore the issue back to the file of learned, assessing officer who would levy interest as per provisions of Section 234 of the Act and give credit for the TDS amount. We order accordingly.” Both the parties jointly stated that aforesaid order is applicable on the facts of the case before us. Therefore, following the order, we send this issue back to the file of the AO with the same directions as have been given in the aforesaid order. The AO is directed to follow the order and decide the same afresh after giving adequate opportunity of hearing to the assessee. The assessee shall also be free to raise all legal and factual issues in this regard. This ground may be treated as allowed for statistical purposes.”

ITA NO(s). 1844/Mum/2017 & 1845/Mum/2017 8 Late Shri. Harshad S. Mehta through L/H Smt. Jyoti H. Mehta Vs. ACIT, Central Circle-4(1), Mumbai and Harshad S .Mehta through L/H Smt. Jyoti H. Mehta Vs. DCIT, Central Circle-4(1), Mumbai.

6.1 Following the aforesaid decision, it has to be held that so far as the chargeability of interest under section 234A, 234B and 234C, the same is hereby affirmed in principle. So however, in so far as quantification of interest chargeable is concerned, the issue is restored back to the file of Assessing Officer to decide the amount of tax deductible at source on the income assessed. In fact, the Assessing Officer is directed to follow the directions of the Tribunal dated 07/02/2017(supra) in the case of the assessee for assessment year 2002-03 and decide the issue accordingly. Thus, on this aspect assessee partly succeeds.”

ITA No. 1845/Mum/2017 A.Y. 2013-14

ITA NO(s). 1844/Mum/2017 & 1845/Mum/2017 9 Late Shri. Harshad S. Mehta through L/H Smt. Jyoti H. Mehta Vs. ACIT, Central Circle-4(1), Mumbai and Harshad S .Mehta through L/H Smt. Jyoti H. Mehta Vs. DCIT, Central Circle-4(1), Mumbai.

1. The Ld. Commissioner of Income-Tax (Appeals) has erred in law and in facts in confirming the levy of interest u/s. 234A, 234B and 234C of the Act.

9. Briefly stated, it was observed by the A.O that the assessee had failed to file his „return of income‟ for the year under consideration viz. A.Y. 2013-14. Subsequently, assessment was framed by the A.O under Sec. 144 of the Act at Rs. 5,73,43,720/-. On the basis of the assessed income, the A.O raised an additional demand of Rs. 2,87,72,339/- viz. Tax: Rs.1,75,44,109/-;and Interest under Sec. 234A : Rs. 52,63,233/- and Sec. 234B : Rs. 59,64,997/-.

10. Aggrieved, the assessee challenging the levy of interest under Sec. 234A, 234B and 234C of the Act, carried the matter in appeal before the CIT(A). The CIT(A) being of the view that as the levy of interest under Sec. 234A, 234B and 234C was mandatory, and no exception was carved out in the statute as regards the chargeability of the same in the case of a notified person, thus, did not find any infirmity in the levy of such interest by the A.O and upheld the same. Still further, the CIT(A) also not being persuaded to subscribe to the contention of the assessee, that for computing the interest under Sec. 234A, 234B and 234C necessary credit in respect of the TDS on interest income was to be allowed, rejected the same.

11. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. We find that as the issue

ITA NO(s). 1844/Mum/2017 & 1845/Mum/2017 10 Late Shri. Harshad S. Mehta through L/H Smt. Jyoti H. Mehta Vs. ACIT, Central Circle-4(1), Mumbai and Harshad S .Mehta through L/H Smt. Jyoti H. Mehta Vs. DCIT, Central Circle-4(1), Mumbai. involved in the present appeal remains the same, as was there before us in the appeal of the assessee for the immediately preceding year i.e. A.Y. 2012-13, which has been adjudicated by us hereinabove, thus, our order passed while disposing off the appeal of the assessee in A.Y. 2012-13 shall apply mutatis mutandis for disposing off the present appeal of the assessee for A.Y. 2013-14 viz. ITA No. 1845/Mum/2017. The Ground of appeal No. 1 is dismissed as not pressed. The Ground of appeal No. 2 is in the same terms allowed for statistical purposes. The Ground of Appeal No. 3 being general is dismissed.