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Facts
The assessee's income tax returns for A.Ys 2007-08 and 2009-10 were initially assessed without interest under sections 234B/234C, based on prevailing Supreme Court pronouncements. Following a search and seizure operation, a Section 153A assessment was made, which was later set aside by the CIT(A). During the process of giving appeal effect to the CIT(A)'s order, the Assessing Officer introduced a new issue of charging interest under sections 234B and 234C of the Income Tax Act.
Held
The Tribunal held that the Assessing Officer exceeded his jurisdiction by introducing a new issue of charging interest under sections 234B/234C during the appeal effect proceedings. This new issue was not part of the original assessment under Section 153A or the subsequent appellate order, and thus could not be raised through rectification. The Tribunal affirmed the CIT(A)'s decision to quash the AO's order.
Key Issues
Can the Assessing Officer levy interest under Sections 234B and 234C by introducing it as a new issue during appeal effect proceedings, when it was not part of the original assessment or appellate order?
Sections Cited
154, 234B, 234C, 115JB, 115J, 143(3), 153A, 143(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI ‘F’ BENCH,
Before: SHRI N.K. BILLAIYA, & SHRI CHALLA NAGENDRA PRASAD
PER N.K. BILLAIYA, ACCOUNTANT MEMBER:-
The above captioned two separate appeals by the Revenue are
preferred against two separate orders of the ld. CIT(A) – 30, New Delhi
dated 20.04.2023 pertaining to A.Ys 2007-08 and 2009-10.
Since the underlying facts in issues are identical in both these
appeals, they were heard together and are disposed of by this common
order for the sake of convenience and brevity.
Since the underlying facts are identical, we heard the
representatives on the facts of A.Y 2007-08 with an understanding that
since the facts are pari materia the same, the appeal for A.Y 2009-10 can
be disposed off accordingly.
The grievances of the Revenue read as under:
“1. Whether the CIT (A) was correct in holding that charging AO is incorrect as order u/s 154 is barred by limitation when it computation of tax and levy of interest u/s 234B/234C is connected with the computation of tax. 2. Whether the CIT (A) was correct in ignoring the decision case of Rolta India Ltd. Wherein it was held that computation of interest u/s 234B/234C is mandatory and it has no bearing on the tax it is calculated under normal provision or under 115JB (under MAT). 3. Whether on the facts and in the circumstances of the case the Ld. CIT(A) is justify in allowing the appeal of assessee/dismissing the appeal of the revenue ignoring the facts as held by Hon'ble Supreme Court of Commissioner of Income Tax vs Shelly Products Writ Petition 1997 May 8, 2003 that the liability to pay income-tax chargeable thus, does not depend on the assessment As soon as the Finance prescribed the rate or rates for any assessment year, the The assessee is himself required to compute his total income and thereon which involves a process of self- assessment.
Whether the CIT (A) was correct in holding that the order passed by the AO u/s 154/250 was barred by limitation when it was rectified within 4 interest u/s 234B/234C can be levied at any time as it is
is payable for default in payment of tax before the filing of return.
Whether the CIT (A) was correct in dismissing the appeal of the revenue when it will result in allowing the assessee legally for short payment of tax.
Whether the CIT (A) was correct in ignoring the decision ofHon'ble Apex Court in the case of ClT vs M.H Anjuman Ghaswaka wherein principal was laid down by the court that levy of penalty u/s 234B1234C is automatic as it is have power to change it.
That the grounds of appeal are without prejudice to each other. 8. That the appellant craves leave to add, amend, alter or either on or before the final hearing of the appeal.”
Ground No. 1 above speaks for itself and the entire controversy.
Having heard the rival submissions, we have carefully perused the
orders of the authorities below. The undisputed facts is that the assessee
filed its return of income on 30.10.2007 declaring an income of Rs.
1,32,88,33,425/- u/s 115JB of Income-tax Act, 1961 [the Act, for short].
Return was revised on 09.03.2009 at an income of Rs. 1,27,96,45,721/-
u/s 115JB of the Act.
On the date of filing of the return and revised return of income, law
laid down by the Hon'ble Supreme Court in the case of Kwality Biscuits
Limited 284 ITR 519 was prevailing wherein it was held by the Hon'ble
Supreme Court that for income returned u/s 115J of the Act, no interest
is chargeable u/s 234B and 234C of the Act.
Return was assessed u/s 143(3) of the Act on 23.12.2009 at an
assessed book profit of Rs. 1,27,96,45,720/- and since the law as it was
prevailing at that point of time, no interest was charged u/s 234B and
234C of the Act.
Search and seizure operation was conducted at the premises of the
assessee on 30.10.2012 and, accordingly, proceedings u/s 153A of the
assessee Act was initiated. The assessee filed its return of income u/s
153A of the Act on 17.11.2014 returning book profit u/s 115JB of the Act
at Rs. 1,27,96,45,721/-. Assessment order was framed u/s 153A of the
Act on 31.03.2015 where the income was assessed under normal
provisions of the Act. The ld. CIT(A), vide order dated 21.03.2017
deleted all the additions made in the assessment order framed u/s 153A
of the Act.
While giving appeal effect to the order of the appellate authority,
the Assessing Officer introduced a new issue of charging interest u/s
234B/234C of the Act and the said order was passed on 22.07.2021. This
order is under dispute and it has been held as barred by limitation by the
ld. CIT(A) who followed the earlier order of this Tribunal in assessee’s
own case in ITA No. 1452/DEL/2021.
There is no dispute that while giving appeal effect the Assessing
Officer introduced a new issue of charging of interest which was never
there in the earlier orders of the appellate authority. Therefore, we fail
to understand how the Assessing Officer can assume jurisdiction for
introducing a new issue while giving appeal effect to the order of the
appellate authority.
The Assessing Officer processed the revised return on 31.03.2010
u/s 143(1) of the Act wherein he charged interest u/s 234B and 234C of
the Act. This intimation was challenged before the ld. CIT(A) who set
aside the order holding that after section 143(3) of the Act, section
143(1) cannot be done and the Revenue was not in appeal. Therefore,
this order has attained finality.
Subsequently, after search assessment u/s 153A of the Act was
completed vide order dated 31.03.2015 which was rectified u/s 154 on
16.01.2017 and income was assessed u/s 115JB of the Act at Rs.
1,7,96,45,720/-. In this rectification also, no interest was charged u/s
234B and 234C of the Act.
Appeal against the order u/s 153A of the Act on account of
additions made in normal income was deleted by the ld. CIT(A) vide
appellate order dated 31.03.2017. The appeal effect was given vide
order dated 06.07.2017. Now the Assessing Officer wants to rectify this
order giving appeal effect by introducing a new issue of charging interest
u/s 234B and 234C of the Act.
In our considered opinion, the Assessing Officer has exceeded his
jurisdiction by rectifying appeal effect order for charging interest u/s
234B and 234C of the Act when the same was not material issue in order
u/s 153A of the Act and also not in appellate order of the ld. CIT(A).
Considering the facts from all possible angles, we do not find any
reason to interfere with the findings of the ld. CIT(A).
Before parting, the ld. DR has filed written submissions in which he
has heavily relied upon the decision of the Hon'ble Madhya Pradesh High
Court in the case of Ramesh Prasad Dhahayat 25 Taxmann 191 and Punjab
and Haryana High Court in the case of Upper India Steel Mfg, and Engg.
Co. Ltd 279 ITR 123.
We have given careful consideration to the issues raised by the ld.
DR in his written submissions. The decisions relied upon by the ld. DR are
in reference to levy of interest u/s 234B of the Act There is no doubt
that levy of interest is mandatory but the facts in hand show that when
the assessee filed its return of income, law laid down by the Hon'ble
Supreme Court in the case of Kwality Biscuits Limited [supra] was
prevailing and facts in hand suggest that the interest has been charged
while giving appeal effect which is not acceptable as mentioned
hereinabove.
But in the facts before us, there is no dispute that interest can be
charged but fact of the matter is that can on the given facts of the case
in hand, interest be charged by way of rectification order on an issue
which was not there while giving appeal effect? Therefore, the decision
relied upon by the ld. DR is not considered to be good on the facts of the
case.
In the result, both the appeals of the Revenue in ITA Nos. 1927 and
1928/DEL/2023 are dismissed.
The order is pronounced in the open court on 05.03.2024 in the
presence of both the representatives.
Sd/- Sd/-
[CHALLA NAGENDRA PRASAD] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 05th March, 2024.
VL/