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Income Tax Appellate Tribunal, DELHI BENCH ‘C’ : NEW DELHI
Before: SHRI B.P. JAIN & SHRI KULDIP SINGH
PER KULDIP SINGH, JUDICIAL MEMBER :
Since common question of law and facts is involved in all the aforesaid appeals filed by the assessee against a single order dated 15.07.2014 passed by the ld. CIT (A), the same are being disposed off by way of consolidated order to avoid repetition of discussion.
Appellant, Shri Gautam R. Chadha (hereinafter referred to as ‘the assessee’), by filing the present appeal sought to set aside the impugned order dated 15.07.2014 passed by the Commissioner of Income-tax (Appeals)-XXVI, New Delhi, for the Assessment Years 2003-04, 2005-06 & 2007-08 on the grounds inter alia that :-
“1. That the authorities below erred in facts & in law in charging interest u/s 234B of the Income Tax Act 1961 (amounting to Rs.2,47,926/-), 234D (amounting to Rs.,633 & 4,50,260) & 220(2)(amounting to Rs.57,118) total amounting to Rs.9,23,557/-. Neither the order u/s 154/260A/143(3) dt. 23.12.2013 authorized the charge of such an interest nor was a charge as per law. At any rate, without prejudice, the calculation of under various sections is neither according to the law nor correctly computed as per the spirit of the law and is also unjust, arbitrary, illegal and at any rate very excessive.
The withdrawal of interest u/s 244 amounting to Rs.1,66,620 is not only illegal but also nor authorized order u/s 154/260A/143(3) dt.
23.12.2013. The adjustment of refund already issued amounting to Rs.19,42,040 & Rs.10,48,862 ought not to have considered in computing the additional demand payable by the appellant.”
ITA NO.5449/DEL/2014 (AY 2003-04)
“1. That the authorities below erred in facts & in law in charging interest u/s 220(2) of the Income Tax Act 1961 and no opportunity of being heard was given before rejecting the Appellants petition. Various facts and circumstances which ought to have been considered were either not considered or were not given the due consideration and decision was based upon surmises, conjectures and guesswork. At any rate without prejudice, the charge of interest U/s 220(2) of the Act is illegal, unjust, arbitrary and unduly exorbitant.”
ITA NO.5450/DEL/2014 (AY 2005-06)
“1. That the authorities below erred fact and law in not allowing relief of charging interest amounting to Rs.19,63,109/- u/s 234B & 234D of the Income Tax Act 1961. The entire calculation of tax and interest payable as computed by the AO is arbitrary, illegal, unjust and without prejudice excessive.”
ITA NO.5453/DEL/2014 (AY 2007-08)
“1. That the authorities below erred in fact and in law in not allowing relief on account of charging interest amount to Rs.34,40,848/- u/s 234B & 234D of the Income Tax Act 1961. The entire calculation of tax and interest payable as computed by the AO is arbitrary, illegal, unjust and without prejudice excessive.”
ITA NO.5455/DEL/2014 (AY 2007-08)
“1. That the authorities below erred in facts & in law in charging interest u/s 220(2) of the Income Tax Act 1961 and no opportunity of being heard was given before rejecting the Appellants petition. Various facts and circumstances which ought to have been considered were either not considered or were not given the due consideration and decision was based upon surmises, conjectures and guesswork. At any rate without prejudice, the charge of interest U/s 220(2) of the Act is illegal, unjust, arbitrary and unduly exorbitant.”
Briefly stated the facts necessary for adjudication of the controversy at hand are recorded for AY 2003-04, for the sake of brevity because in all other appeals there is only difference of amount involved. Assessee by filing an application under section 154 of the Income-tax Act, 1961 (for short ‘the Act’) sought to incorporate the directions issued by Hon’ble High Court while passing order u/s 260A/143(3) of the Act to the effect that, “25% of the booking advances received should be treated as income of the assessee assuming that there are no cancellations. However, the assessee shall be entitled to 10% credit on account of travel agents commission after ascertaining actual outgoing in this regard.” Assessee claimed that while giving 10% credit on account of travel agent commission in the appeal effect order, the AO has taken 10% of 25% of booking advances received, whereas as per the direction of the Hon’ble Court, 10% credit had to be given after ascertaining actual outgoing in this regard.
AO on the basis of verification of record computed the income as under :-
“Income accrued to the assessee @ 25% and credit 10% on advance booking after ascertain the actual outgoing is determined as under :-
25% of advance booking Rs.36,19,218/- (25% of Rs.1,44,76,873/-) Less : commission payable/paid to travel agents @ 10% Rs.14,47,687 (10% of Rs.1,44,76,873/-) Income accrued to assessee Rs.21,71,531/-
In view of the above facts, the assessed income of assessee is computed as under :- I. Assessed Income as per order of the CIT (A) :
Assessed Income u/s 143(3) Rs.2,48,09,680/- Less : (i) relief on a/c of advances received (75% of 14476873 + 10% of 25% of 14476873) Rs.1,12,19,575/- (ii) Relief on a/c of payment u/s 40A(2)(b) Rs.4,32,000/- (iii) relief on a/c of expenses related to Interzign Solution P Ltd. Rs.42,100/- (iv) relief on a/c of telephone expenses Rs.30,741/- (v) relief on a/c of car expenses & car depreciation Rs.68,289/- Assessed income Rs.1,30,16,975/-
II. Assessed income as per order of the ITAT
Assessed Income as per order of the CIT (A) Rs.1,30,16,975/- Less : (i) relief on a/c of advances received Rs.32,57,298/- (relief of RS.1,12,19,575 out of total addition of RS.1,44,76,873/- on this issue has already been allowed in pursuance to the order of the CIT (A). Accordingly, the balance of RS.32,57,298/- is being allowed here.)
(ii) Relief on a/c of loss of shares Rs.17,41,940/- Assessed income Rs.80,17,737/- III. Assessed Income as per order of the Hon’ble High Court of Delhi. Assessed income as per order of the ITAT Rs.80,17,737/- Add : addition on a/c of advances received Rs.21,71,531/- Net Assessed Income Rs.1,01,89,268/- 6. Accordingly, the assessed income is determined at Rs.1,01,89,268/-. Issue demand notice, ITNS & necessary forms and allow credit of taxes paid.”
5. Assessee carried the matter by way of filing appeals before the ld. CIT (A) who has dismissed the appeals. Feeling aggrieved, the assessee has come up before the Tribunal by way of challenging the impugned order passed by ld. CIT (A) by filing aforesaid appeals.
We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
Undisputedly, appeal effect has been given by the AO by computing the income of the assessee qua Assessment Years 2003- 04, 2005-06 & 2007-08 when assessment completed by the AO has been upheld by the Hon’ble High Court. It is also not in dispute that the AO has passed the appeal effect order u/s 260A/ 143 (3) of the Act after the assessment order passed by the AO has been finally upheld by the Hon’ble High Court.
In the light of the aforesaid facts and circumstances of the case, the first question arises for determination in all the aforesaid appeals is :-
“as to whether AO was not authorized to charge interest u/s 234B, 234D and 222 while passing order u/s 154/260A/143(3) of the Act and without prejudice the interest has not been computed as per spirit of law?”
Ld. CIT (A) has determined this issue primarily by invoking the “doctrine of merger” by following the judgment cited as CIT vs. Tony Elect. Ltd. – 185 Taxman 12. It is settled principle of law that once the appeal filed against the completed assessment is decided by the appellate authority, the assessment order merges into the order passed by appellate authority. Since there is no dispute that when the AO has passed original assessment order in all the aforesaid cases, he has categorically ordered to charge the interest as per law and in accordance with ITNS 150 and he has specifically enclosed computation of tax and interest as per ITNS 150 along with assessment order.
So, in the given circumstances, we are of the considered view that when there was specific order passed by the AO for charging the interest under the Act and the said order merges into the appeal order, there is no illegality or perversity in the findings returned by ld. CIT (A). The ld. AR for the assessee though raised ground in the alternative that without prejudice the calculation under various sections is neither correct nor as per spirit of law, but has failed to point out as to how and under what circumstances, the calculation of the interest made by the AO is not in accordance with law.
The ld. AR for the assessee contended that since the Special Leave Petition filed by the assessee has been admitted by Hon’ble Supreme Court, this issue cannot be decided. However, when the ld. AR for the assessee is confronted with the fact that only interest has been calculated on the quantum of income on the basis of facts which have not been disputed in quantum proceedings rather question of law has been challenged the ld. AR has failed to reply otherwise. Even otherwise, in case the assessee gets any favourable order from the Hon’ble Apex Court, the interest charged shall be refunded in accordance with law and the appeals cannot be kept pending.
So far as second contention raised by the ld. AR for the assessee in AY 2003-04 that the withdrawal of interest u/s 244 of the Act amounting to Rs.1,66,620/- is not only illegal but also not authorized under the order passed u/s 144/260A/143(3), against the refund already issued, is concerned, when certain amount is found to be due against the assessee the same can be adjusted against the refund due to the assessee by issuing a demand notice as provided u/s 244A(1). In the instant case, the refund has been adjusted against the interest levied on the assessee as per assessment order and again, we are of the considered view that there is no illegality or perversity in the impugned order passed by the ld. CIT (A).
In view of what has been discussed above, ld. CIT (A) has passed a comprehensive order by appreciating the law and facts and we find no illegality or perversity in the impugned order, hence all the aforesaid appeals filed by the assessee are hereby dismissed. Order pronounced in open court on this 18th day of September, 2017.