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1/8 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 4th DAY OF SEPTEMBER 2017
BEFORE
THE HON'BLE Dr.JUSTICE VINEET KOTHARI
WRIT PETITION Nos.50321-50328/2015 (T- IT)
BETWEEN:
M/s Hotel Hamilton Complex Hamilton Circle, Opp.D.C’s Office Mangalore – 575001, Represented by its Managing Partner Sri M.C.Mohammed Yahya Aged 71 years Son of Sri M.C.Ahmed.
... PETITIONER
(BY SMT JINITA CHATTERJEE, ADV. FOR SRI S.PARTHASARATHI, ADV.)
AND:
The Income Tax Settlement
Commission
Additional Bench,
640, Anna Salai, Nandanam
Chennai – 600 035,
Represented by its Secretary.
The Income-Tax Officer
Ward-2(2), C.R. Building,
Income Tax Office
N.G.Road, Attavar
Mangalore – 575 001.
The Chief Commissioner
Of Income Tax
Pundalik Niwas
Near Patto Bridge R
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Rue-de-Ourem Road
Patto – Panaji Goa – 403 001.
..RESPONDENTS
(BY SRI. K.V.ARAVIND, ADV.)
THESE WRIT PETITIONS ARE FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDERS DATED 11.4.2008 GIVING EFFECT TO THE ORDER OF THE FIRST RESPONDENT FOR THE ASSESSMENT YEARS 1989-90 TO 1996-97 BY THE SECOND RESPONDENT VIDE ANNEXURE B, B-1, B-2, B-3, B-4, B-5, B-6, B-7.
THESE WRIT PETITIONS COMING ON FOR ORDERS THIS DAY, THE COURT MADE THE FOLLOWING:-
ORDER
MRS. JINITA CHATTERJEE, ADV. FOR MR. S.PARTHASARATHI, FOR PETITIONERS, Mr .K.V.ARAVIND, ADV. FOR RESPONDENTS
The grievance made in the present case is that the Assessing Authority while giving appeal effect to the order passed by the Settlement Commission of the Income Tax, has charged excessive interest under Section 234B of the Income Tax Act, 1961 beyond the date of the order passed by the Settlement Commission under Section 245D of the Act in Chapter 20A of the Income Tax Act, 1961.
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In the present case, the order was passed by the Settlement Commission on 11.03.2008 for the block of the Assessment Years 1989-1990 to 1996- 1997. While appeal effect orders was passed by the Assessing Authority on 11.04.2008 vide Annexure ‘B’ series, he has charged interest under Section 234B of the Act apparently beyond the date of the order passed by the Settlement Commission on 11.03.2008.
Learned counsel for the petitioner relied upon the Judgment of the Constitution Bench of the Supreme Court in the case of BRIJ LAL & ORS. Vs COMMISSIONER OF INCOME TAX decided on 21.10.2010 reported in (2010) 235 CTR 0417= (2010) 328 ITR 0477 in which the Hon’ble Supreme Court interalia, disapproving the earlier decision in the case of CIT vs Hindustan Bulk Carriers ((2003) 179 CTR (SC) 362) = ((2003) 259 ITR 449 (SC)), held as under:
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“By its very nature, advance tax is a pre- assessment collection of tax either by deduction at source or by payment of advance tax which has to be adjusted towards income-tax levied on the total income. In fact, section 190(1) of the Income-tax Act, 1961, clarifies that this method of payment of tax will not prejudice the charge of tax under section 4(1) nor modify the liability of the assessee to pay income-tax pursuant to an assessment order.
MODI INDUSTRIES LIMITED v. CIT [1995] 216 ITR 759 (SC) followed. The meaning of the expression “assessment” in a given provision must be determined on an examination of the relevant provisions in question and the fact that it is used in the narrower sense elsewhere does not mean that it is so used in the provision under examination.
C.A. ABRAHAM v. ITO [1961] 41 ITR 425 (SC) relied on. Section 234B comes into operation when there is default in payment of advance tax, whereas liability to pay interest under section 245D(2C) arises when the additional amount of income-tax is not paid within the time specified in section 245D(2A). Section 245D(6A) imposes liability to pay interest only when the tax payable in pursuance of an order of the Settlement Commission under section 245D(4) is not paid within the specified time. Consequently, section 234B, section 245D(2C) and section 245D(6A) in Chapter XIX-A operate in different fields.
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When one reads the provisions of sections 245C and 245D one has to keep in mind the concept of self-assessment, assessment, regular assessment and computation of total income which have been engrafted in Chapter XIX-A which deals with settlement of cases. The special procedure under sections 245C and 245D in Chapter XIX-A shows that the special type of computation of total income is engrafted in the said provisions, which is nothing but assessment which takes place at the section 245D(1) stage. However, in that computation one finds that provisions dealing with regular assessment, self-assessment and levy and computation of interest for default in payment of advance tax, etc., are engrafted.
In the case of proceedings before the Settlement Commission, till the Commission decides to admit the case under section 245D(1) the proceedings under the normal provisions remain open. But once the Commission admits the case, after being satisfied that the disclosure is full and true, the proceedings commence with the Settlement Commission. In the meantime, the applicant has to pay the additional amount of tax with interest without which the application for settlement would not be maintainable. Thus, interest under section 234B would be payable up to the stage of section 245D(1). Parliament has not extended the provisions and the liability to pay interest beyond the date of application for settlement. There is no provision either under Chapter XIX-A or even under section 140A (dealing
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with self –assessment) to charge interest beyond the date of the application for settlement after it is admitted by the Commission under section 245D(1). There are two distinct stages under Chapter XIX – A, and the Legislature had not contemplated levy of interest between the order under the section 245D(1) stage and the section 245D(4) stage.
The Settlement Commission cannot reopen its proceedings under section 154 of the Income – tax Act, 1961, so as the levy interest under section 234B, particularly in view of section 245-I.”
Learned counsel for the respondent/department Mr.Aravind has submitted that on the date when the appellate orders was passed by the Assessing Authority for these assessment years on 11.04.2008, the Constitution Bench decision in the case of Brij Lal (supra) was not available and therefore, the appellate orders passed by the Appellate Authority in terms of the earlier decision of the Hon’ble Supreme Court in CIT vs Hindustan Bulk Carriers was justified and can be sustained.
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On the contrary, learned counsel for the petitioner/assessee submits that the impugned orders cannot be sustained in view of the law declared by the Constitution Bench of the Hon’ble Supreme Court of India in Brij Lal’s case in which it is clearly held that the interest under Section 234B of the Act cannot go beyond the stage of S.245D(I) before the Settlement Commission.
Having heard the learned counsel for the parties, this Court finds considerable force in the submission made by the learned counsel for the assessee and the impugned orders passed by the Assessment Authority charging interest under Section 234B of the Act beyond the date of the order passed by the Settlement Commission under Section 245D(I) cannot be sustained. The law declared by the Constitution Bench would prevail over the earlier decision which is relied upon by the learned counsel for the respondent/Department, which stands disapproved
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and overruled by the Constitution Bench. The law declared by the Constitution Bench will apply to the period prior to the date of the said Judgment also which was rendered on 21.10.2010. 7. Consequently, the petition deserves to be allowed and the same is accordingly allowed. The impugned orders passed by the Assessing Authority vide Annexure ‘B’ series on 11.04.2008 for all the assessment years i.e., 1989-90 to 1996-97 are quashed and set-aside and the matter is remanded back to the Assessing Authority to pass fresh orders in accordance with the law declared by the Hon’ble Supreme Court in Brij Lal’s case (supra) and the order passed by Settlement Commission in the present case. No costs.
Sd/- JUDGE brn