V.UMAYAL,COIMBATORE vs. ITO, COIMBATORE

आदेश / O R D E R

PER D.S.SUNDER SINGH, ACCOUNTANT MEMBER:

This is an appeal filed by the assessee against the Order dated

30.12.2015 of Commissioner of Income Tax (Appeals)-2, Coimbatore, in

ITA No.216/14-15 for the AY 2009-10 and raised on the following

grounds:-

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1) The learned CIT(A) ought to have held that interest u/s.234C was not chargeable at all, by the AO on the basis of ‘tax due on the returned income’, u/s.147 of the I.T.Act, 1961, as there was no deferment of advance tax, read with ‘Explanation’ to section 234C, the Appellant having furnished a return u/s.139, entitling her to a refund of tax, in the facts and the circumstances of the case and in law. 2) The learned CIT(A), ought to have held that “tax due on the returned income” under Explanation to Section 234C of the I.T.Act, 1961, means the “tax chargeable on the total income declared in the return furnished by the Appellant u/s.139(1) of the Act”, and not on the basis of a second return filed in response to the notice issued u/s.148 of the Act, unless such return was the only return furnished by the Appellant, for the assessment year, in the facts and the circumstances of the case and in law. 3) The learned CIT (A), is wrong in holding, that the appellant is liable to pay advance tax, on the basis of the total income declared in the second return furnished u/s.148, by interpreting the meaning of the words “tax due on the returned income”, applicable in respect of not only the return furnished u/s.139 (1) of the Act, but also in respect of the second and subsequent returns, furnished u/s.148, for the same assessment year, in the facts and the circumstances of the case and in law. 4) For these and other additional grounds of appeal that may be adduced at the time of hearing, the order of the Commissioner of Income Tax (Appeals)-2, Coimbatore, is opposed to law and unsustainable in the facts and the circumstances of the case.

2.0 All the grounds of the appeal are related to charging of interest

u/s.234C of the Income Tax Act (in short ‘the Act’). The assessee filed

return of income declaring total income of Rs.6,27,130/- on 29.07.2009

for the AY 2009-10. Subsequently, a survey u/s.133A was conducted in

the case of Shri RM Vellayan (assessee’s husband) on 04.09.2013 and

during the course of survey, the assessee admitted additional income of

Rs.13,00,000/- and filed revised returns consequent to the issue of notice

u/s.148 of the Act on 25.11.2013. The Assessing Officer (hereinafter

referred to as ‘AO’) while computing the interest u/s.234C charged the

interest on the revised income filed in response to the notice issued

u/s.148. The assessee filed petition u/s.154 before the AO objecting for

charging interest u/s.234C on the revised return of income. According to

the assessee, the levy of interest u/s.234C is applicable only in the case of

first return of income filed u/s.139(1) or if no return is filed. In case, the

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assessee revised the return of income u/s.148, the provisions of section

234C are not applicable on the difference income admitted in response to

the notice issued u/s.148. The AO rejected the petition made by the

assessee for rectification u/s.154 stating that the interest u/s.234C was

charged correctly on the income declared in the return of income

furnished by the assessee on 19.12.2013.

3.0 Aggrieved by the order of the AO, the assessee went on appeal

before the Learned Commissioner of Income Tax (Appeals) (hereinafter

referred to as ‘Ld.CIT(A)’) and the Ld.CIT(A) confirmed the addition of the

AO. The Ld.CIT(A) has elaborately discussed the issue in his order in Para

No.4.2 which is extracted for the sake of convenience is as under:

“4.2 As per provisions of section 234C, interest under this section attracts when the assessee who is liable to pay advance tax fails to pay or payment of installments of advance tax till a specified date in the previous year falls short of specified percentage of tax due on the returned income and such interest shall be calculated at one percent per month for a period of three months. So, the shortfall i.e., the amount on which interest u/s. 234C is charged, is computed with reference to tax due on the returned income. As per Explanation to section 234C(1), tax due on the returned income is tax chargeable on the total income declared in the return of income furnished by the assessee as reduced by the TDS , TCS, etc., The appellant is liable to pay advance tax going by her tax liability on the total income of the year as declared in the return furnished u/s.148 and because no advance tax was paid, whole of the advance tax due on specified dates becomes the short fall till that quarter. It is important to note that interest u/s.234B or 234C is compensatory interest levied for not correctly estimating the income of the year chargeable to tax and for not paying appropriate advance tax installments during the previous year. It is clear from the opening words of section 234C that interest under this section attracts in cases of total failure of advance tax also. The dispute, therefore, boils down to a limited point of whether return of income furnished by the assessee pursuant to notice u/s 148 can be the basis for computing the tax due on the returned income and consequent interest u/s.234C. A plain reading of section 234C reveals no such bar or distinction. Any return furnished by the assessee, whether u/s.139 or u/s.148, forms the basis for computing tax due on the income returned therein. Under normal circumstances, as per provisions of section 139(1), any assessee whose total income in a year exceeds taxable income is required to file return of income by a specified date. Such return is allowed to be filed within an extended date as per provisions of section 139(4). While furnishing these returns, tax liability and interest is computed on the income declared after taking into account advance tax paid, TDS etc., and self assessment tax is paid. Further, any assessee is allowed to file a revised return to correct any errors or omissions in the return earlier filed. In a case where a valid revised return is filed, such revised return substitutes the original return. Consequently, the total income declared in the revised return filed by an assessee shall be the basis for computing tax and interest liability u/s.234B and 234C. Even where an assessee files a return beyond time limit allowed u/s.139(4), the total income declared therein is the basis for computing

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tax and interest liability. Another occasion of furnishing of return of income by any assessee arises when the AO issues notice u/s.148 and the return filed pursuant to that shall become the latest and subsisting return for that year. Since this return is also furnished by the assessee, there is no reason to bar the application of section 234C to return filed pursuant to notice u/s.148. Further, as per the provisions of section 148(1), all other provisions of the Act shall, so far as may be , apply to the return filed in response to notice under this section as if it is a return furnished u/s.139. Thus, interest u/s.234C is also leviable on the basis of return furnished in response to notice u/s.148, if the advance tax payments fall short of tax due on the income declared in such return. In the light of the above discussion, I reject the arguments of the AR and the relevant grounds of appeal. Accordingly, interest levied u/s. 234C is sustained”.

4.0 Aggrieved by the order of the Ld.CIT(A) the assessee is on appeal

before us.

Appearing for the assessee the Learned Authorized Representative

(hereinafter referred to as ‘Ld.AR’) argued that the interest u/s.234C is

chargeable on total income declared in the returns furnished u/s.139(1) of

the Act and not on difference of income filed in response to the notice

issued u/s.148 of the Act(second return). According to the assessee, tax

due on returned income in Sec.234C of the Act, refers only the return of

income furnished u/s.139(1) of the Act but not the return filed in response

to the notice issued u/s.148 of Act. On the other hand, the Learned

Departmental Representative (hereinafter referred to as ‘Ld.DR’) relied on

the lower authorities orders and contended that the interest u/s.234C is

chargeable on the total income admitted by the assessee in the return

filed in response to the notice issued u/s.148 of Act.

5.0 We heard the rival submissions and perused the material placed on

record.

We have carefully gone through the provisions of Sec. 234C of Act,

which reads as under:

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[Interest for deferment of advance tax.

78 234C. (1) 79[Where in any financial year,—

80 an assessee, other than an eligible assessee in respect of the eligible business referred [ to in section 44AD, who is liable to pay advance tax under section 208 has failed to (a) pay such tax or—

(i) the advance tax paid by such assessee on its current income on or before the 15th day of June is less than fifteen per cent of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of September is less than forty-five per cent of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of December is less than seventy-five per cent of the tax due on the returned income, then, the assessee shall 81 be liable to pay simple interest at the rate of one per cent per month for a period of three months on the amount of the shortfall from fifteen per cent or forty-five per cent or seventy-five per cent, as the case may be, of the tax due on the returned income;

(ii) the advance tax paid by the assessee on the current income on or before the 15th day of March is less than the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate of one per cent on the amount of the shortfall from the tax due on the returned income:

Provided that if the advance tax paid by the assessee on the current income, on or before the 15th day of June or the 15th day of September, is not less than twelve per cent or, as the case may be, thirty-six per cent of the tax due on the returned income, then, the assessee shall not be liable to pay any interest on the amount of the shortfall on those dates; ] 81a an eligible assessee in respect of the eligible business referred to in section 44AD, [ who is liable to pay advance tax under section 208 has failed to pay such tax or the (b) advance tax paid by the assessee on its current income on or before the 15th day of March is less than the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate of one per cent on the amount of the shortfall from the tax due on the returned income: ] 82[Provided that nothing contained in this sub-section shall apply to any shortfall in the payment of the tax due on the returned income where such shortfall is on account of under- estimate or failure to estimate—

(a) the amount of capital gains; or (b) income of the nature referred to in sub-clause (ix) of clause (24) of section 2; 82a[or] 82a income under the head "Profits and gains of business or profession" in cases where [ the income accrues or arises under the said head for the first time, ] (c)

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and the assessee has paid the whole of the amount of tax payable in respect of income referred to in clause (a) or clause (b) 82a[or clause (c)], as the case may be, had such income been a part of the total income, as part of the 83[remaining installments of advance tax which are due or where no such installments are due], by the 31st day of March of the financial year:]

84[Provided further that nothing contained in this sub-section shall apply to any shortfall in the payment of the tax due on the returned income where such shortfall is on account of increase in the rate of surcharge under section 2 of the Finance Act, 2000 (10 of 2000), as amended by the Taxation Laws (Amendment) Act, 2000 (1 of 2001), and the assessee has paid the amount of shortfall, on or before the 15th day of March, 2001 in respect of the installment of advance tax due on the 15th day of June, 2000, the 15th day of September, 2000 and the 15th day of December, 2000 :]

85[Provided also that nothing contained in this sub-section shall apply to any shortfall in the payment of the tax due on the returned income where such shortfall is on account of increase in the rate of surcharge under section 2 of the Finance Act, 2000 (10 of 2000) as amended by the Taxation Laws (Amendment) Act, 2001 (4 of 2001) and the assessee has paid the amount of shortfall on or before the 15th day of March, 2001 in respect of the installment of advance tax due on the 15th day of June, 2000, the 15th day of September, 2000 and 15th day of December, 2000.]

86[Explanation.—In this section, "tax due on the returned income" means the tax chargeable on the total income declared in the return of income furnished by the assessee for the assessment year commencing on the 1st day of April immediately following the financial year in which the advance tax is paid or payable, as reduced by the amount of,—

(i) any tax deductible or collectible at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income; (ii) any relief of tax allowed under section 90 on account of tax paid in a country outside India; (iii) any relief of tax allowed under section 90A on account of tax paid in a specified territory outside India referred to in that section; (iv) any deduction, from the Indian income-tax payable, allowed under section 91, on account of tax paid in a country outside India; and (v) any tax credit allowed to be set off in accordance with the provisions of section 115JAA87[or section 115JD].]

(2) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989 and subsequent assessment years.]] closeReload Corresponding Citation

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6.0 Now, the question before us is whether to charge interest u/s.234C

only on the income disclosed in the return of income filed u/s.139 or the

income disclosed in the return of income filed u/s.148. As per Sec.234C,

the assessee is liable to pay simple interest @1% on the amount of

shortfall from the tax difference on the returned income. It does not

distinguish the income admitted by the assessee u/s.139 or Sec.148,

which is a provision to bring the income escaped from the assessment

from the tax net. The income admitted by the assessee in response to the

notice issued u/s.148 is within the knowledge of the assessee and the

assessee should have estimated the advance tax and paid the same on

total income. The proviso to Sec.234C refers to only two exceptions as

under:

(a) the amount of capital gains; or (b) income of the nature referred to in sub-clause (ix) of clause (24) of section 2; 82a[or] 82a income under the head "Profits and gains of business or profession" in cases where the income accrues or arises under the said head for the first time, ]

No other exception is provided u/s.234C for charging interest.

Therefore, we are of the considered opinion that the returned income

includes the income admitted in response to the notice issued u/s.148

also. Therefore, we are unable to accept the contention of the assessee

that the interest u/s.234C is chargeable only in respect of income returned

u/s.139(1) but not the income admitted in the revised return of income.

As discussed above, except in two circumstances provided in Sec.234C as

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per the proviso referred above, in all the remaining cases interest u/s.234C is chargeable without any exception. This view is supported by the Hon’ble jurisdictional High court decision in the case of MRF Ltd. v. Deputy Commissioner of Income-tax, Large Tax Payer Unit, Chennai, reported in [2016] 76 taxmann.com 282 (Madras).

Therefore, we find no error in the Order of Ld.CIT(A) and the same is upheld.

In the result, the appeal of the assessee is dismissed. 7.0

Order pronounced in the Open Court on 31st January, 2017, at Chennai.

Sd/- Sd/- (एन.आर.एस. गणेशन) (�ड.एस. सु�दर �संह) (N.R.S. GANESAN) (D.S.SUNDER SINGH) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER

चे�नई/Chennai, �दनांक/Dated: 31st January, 2017. tln

आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 4. आयकर आयु�त/CIT 5. �वभागीय ��त�न�ध/DR 2. ��यथ�/Respondent 6. गाड� फाईल/GF 3. आयकर आयु�त (अपील)/CIT(A)