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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 6TH DAY OF OCTOBER 2020
PRESENT
THE HON’BLE MR. JUSTICE ALOK ARADHE
AND
THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD
I.T.A. NO.254 OF 2014 BETWEEN:
M/S. MAHESH INVESTMENTS A-1, MESEUM TERRACE NO.29, MUSEUM ROAD BANGALORE-560001. ... APPELLANT (BY SRI. ASHOK A. KULKARNI, ADV.,)
AND:
THE ASST. COMMISSIONER OF INCOME-TAX CIRCLE-1(1), BANGALORE. ... RESPONDENT (BY SRI. K.V. ARAVIND, ADV.) - - -
THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 07.02.2014 PASSED IN ITA NO.1339/BANG/2012, ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 31.07.2012 AND ASSESSMENT ORDER DATED 25.11.2010, FOR THE ASSESSMENT YEAR 1992-93, PRAYING THAT THIS HON’BLE COURT MAY BE PLEASED TO: (I) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN. (II) ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BANGALORE ORDER DATED 7.2.2014 IN ITA NO.1339/BANG/2012, ORDER OF THE COMMISSIONER OF INCOME
TAX (APPEALS) DATED 31.7.2012 AND ASSESSMENT ORDER DATED 25.11.2010.
THIS ITA COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING:
JUDGMENT
This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been preferred by the assessee. The subject matter of the appeal pertains to the Assessment year 1992-93. The appeal was admitted by a bench of this Court vide order dated 28.10.2014 on the following substantial question of law:
Whether on the facts and in the circumstances of the case in the impugned order of assessment consequent upon set aside by the order of the High Court interest u/s 234 A, B & C can be levied as if such an order is a regular assessment which alone attracts such levy of interest.
Facts leading to filing of the appeal briefly stated are that assessee on 13.09.1994 filed its return
of income as a registered firm for the Assessment Year 1992-93. The Assessing Officer, by an order dated 30.03.1995, inter alia held that the assessee is not carrying on any business activity and treated it as an Association of Persons and completed the assessment. The Assessing Officer quantified the interest under Section 234A, B and C at Rs.2,04,170/-, Rs.3,89,250/- and Rs.250/- respectively, that is an aggregate sum of Rs.5,95,923/-. The assessee filed an appeal before the Commissioner of Income Tax (Appeals), inter alia, contending that it is a registered partnership firm and has constructed the buildings which has been let out to various persons and the rent received from the building is apportioned in terms of profit and loss shown in the partnership deed. The Commissioner of Income Tax (Appeals), by an order dated 23.02.1996, inter alia held that the status of the assessee is that of a firm and allowed the appeal preferred by the assessee. The revenue thereupon filed an appeal before this Court.
The appeal preferred by the assessee was admitted on the following substantial question of law: “When the respondent – assessee is not carrying on any business activities, whether the authorities were justified in holding that the respondent – assessee is a firm and not an Association of Persons?”
The aforesaid appeal was disposed of by judgment dated 14.11.2007 on the following terms: 7. In the circumstances, without answering the question of law framed in this appeal, we are required to set aside all the orders and remand the matter to the Assessing Officer for fresh consideration.
Accordingly, this appeal is allowed and the matter is remanded to the Assessing Officer. It is open for the respondent- assessee to produce necessary documents to prove its case and thereafter the Assessing Officer shall pass appropriate order.
Thereafter, the Assessing Officer by an order dated 25.11.2010, maintained its earlier order which
was set aside by a Bench of this Court. The assessee preferred an appeal. The Commissioner of Income Tax (Appeals), by an order dated 31.07.2012, determined the status of the assessee from Association of Persons to a firm, but upheld the levy of interest. The Tribunal, by an order dated 07.02.2014, inter alia held that original order of assessment which has been effaced, is restored with all its characteristics of a regular assessment for the purpose of levy of interest under Section 234A, B and C of the Act. In the result, the appeal preferred by the assessee was dismissed. In the aforesaid factual background, the assessee has approached this Court.
Learned counsel for the assessee, while inviting our attention to explanation-3 to Section 234A(1) of the Act, submitted that the aforesaid provision applies only to regular assessment. It is also submitted that from perusal of explanation-3, it is evident that where an
assessment is made for the first time under Section 147 or under Section 153A, the assessment so made shall be regarded as regular assessment for the purposes of this Section. It is also submitted that in view of sub-Section (4) of Section 234A of the Act, where income is varied in appeal / revision, the interest has to be varied accordingly. Our attention has also been invited to Section 2(40) of the Act which defines the expression ‘regular assessment’ and it has been submitted that the order passed by the Tribunal is in contravention of the law laid down by the Supreme Court in ‘MODI INDUSTRIES LTD. AND OTHERS Vs. COMMISSIONER OF INCOME-TAX AND ANOTHER’ 216 ITR 759 SC. It is also urged that the decision relied on by the Tribunal in 259 ITR 258 in the case of ‘DR. MRS. RENUKA DATLA AND OTHERS Vs. COMMISSIONER OF INCOME-TAX AND ANOTHER’ has no application to the fact situation of the case. Learned counsel has also referred to the decision of this
Court in ‘CHARLES D’SOUZA Vs. COMMISSIONER OF INCOME-TAX, KARNATAKA-II’ 147 ITR 694.
On the other hand, learned counsel for the revenue has submitted that even though in a proceeding for remand, the original order of assessment gets effaced, and a fresh order of assessment is passed, the same is passed under Section 143(3) of the Act and in view of the decision of the Supreme Court in MODI INDUSTRIES, supra, the expression ‘regular assessment’ has to be deemed to have been completed on the date when first order of assessment has been passed and not when the modified order of assessment has been passed. It is further submitted that the Tribunal has rightly held that interest is chargeable upto the date of first assessment order passed by the Assessing Officer and the view taken by the Tribunal is just and proper and relief has rightly been granted to the assessee. In support of his submissions, he has
placed reliance on the decision of the Supreme Court in ‘COMMISSIONER OF INCOME-TAX Vs. ANJUM M.H.GHASWALA’ 252 ITR 1(SC).
We have considered the submissions made by the learned counsel for the parties and have perused the record. Before proceeding further, it is apposite to take note of the relevant extract of the provisions of the Act namely Sections 2(8), 2(40), explanation-3 to Section 234A(1) of the Act: Section 2(8) " assessment" includes reassessment
Section 2(40) "regular assessment" means the assessment made under sub- section (3) of] section 143 or section 144.
234A (1) Where the return of income for any assessment year under sub-section (1) or sub-section (4) of section 139, or in response to a notice under sub- section (1) of section 142, is furnished after the due date, or is not furnished, the assessee shall be liable to pay simple interest at the rate of one per cent for every
month or part of a month comprised in the period commencing on the date immediately following the due date, and,—
Explanation 3—Where, in relation to an assessment year, an assessment is made for the first time under section 147 or section 153A, the assessment so made shall be regarded as a regular assessment for the purposes of this section.
From perusal of the aforesaid provisions, it is axiomatic that the expression ‘assessment’ has a wide connotation and includes reassessment as well. The interest under Section 34A(1) of the Act is levied under the circumstances mentioned therein namely where the return of income has not been furnished under sub- Sections (1) and (4) of Section 139 or in response to the notice under sub-Section (1) of Section 142 and / or is not furnished after due date. In the aforesaid circumstances, the assessee is liable to pay simple interest at the prescribed rate for every month. It is also not in dispute that if an order of assessment get
effaced, it ceases to exist and a fresh order of assessment has to be passed. The Supreme Court in the case of MODI INDUSTRIES, supra, has held that the expression ‘regular assessment’ has to be deemed to have been completed on the date when first order of assessment has been passed and not when modified order of assessment has been passed, as the assessee cannot be penalized for lapse of time between the first assessment order and modified assessment order without there being any fault on his part. Therefore, the interest under Section 234A can be levied upto the date of first assessment order only.
It is also pertinent to mention here that ‘assessment’ as defined under Section 2(28) of the Act has a comprehensive meaning and includes all steps and proceedings taken for determination of tax payable and for imposing liability on the assessee. It includes reassessment as well. Therefore, even after the matter
is remitted, an order of assessment is passed, the same is referable to Section 143 or Section 144. Explanation- 3 only protects the assessee from levy of interest and confines the same when the original order of assessment is passed and not when the modified order of assessment is passed.
In view of preceding analysis, the substantial question of law is answered against the assessee and in favour of the revenue. In the result, we do not find any merit in this appeal. The same fails and is hereby dismissed.
Sd/- JUDGE
Sd/- JUDGE ss