Commissioner Of Income Tax (Central), Ludhiana v. Arun Kapoor

ITA No. 149 of 2003 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 149 of 2003 Date of Decision: 22.7.2010 Commissioner of Income Tax (Central), Ludhiana ....Appellant. Versus Arun Kapoor ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. K.K. Mehta, Advocate for the appellant. None for the respondent. ADARSH KUMAR GOEL, J. 1.This order shall dispose of ITA Nos. 149 and 150 of 2003.Facts are said to be identical in both the appeals. Reference is made tofacts of ITA No. 149 of 2003. 2.The revenue has preferred this appeal under Section 260Aof the Income Tax Act, 1961 (in short “the Act”) against the order of theIncome Tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafterreferred to as “the Tribunal”) passed in ITA No. 333 (ASR)/96 on29.11.2002 for the assessment year 1994-95, proposing to raise thefollowing substantial question of law:- “Whether, on the facts and in the circumstances ofthe case, the ITAT was justified in upholding the orders of the CIT (Appeals) in deleting the interestcharged u/s 234B & 234C on the ground that theassessee could not be held liable for such interest onthe income surrendered u/s 132 (4) during the courseof search and seizure operation conducted after theclose of the financial year?” 3.The assessee is engaged in the business of trading of clothand filed return for the assessment year 1994-95 on 28.10.1994declaring an income of Rs.30,38,920/-. On 29.4.1994, a search wasconducted at the residential as well as business premises and onsearch, the assessee surrendered certain amounts as additionalincome. The assessment was completed on 23.11.1995 at the totalincome of Rs.30,63,930/-. The assessee made a request for adjustingthe cash amount seized during search on 30.5.1994. The said requestof the assessee was not accepted by the Assessing Officer. As thesearch operation had taken place on 29.4.1994 i.e. after the closing ofthe financial year, interest under Section 234B and 234C was levied. InSeptember, 1994 part of the seized cash was adjusted towards tax duein different cases for the assessment year 1994-95. As per Section 211of the Act, the assessee was required to pay advance tax in threeinstallments for the financial year ending on 31.3.1994. The due datesfor paying advance tax were 15.9.1993, 15.12.1993 and 15.3.1994.The Assessing Officer held that the assessee was liable to pay taxinstallment on the surrendered income from the date advance tax wasdue, i.e. 15.9.1993, 15.12.1993 and 15.3.1994 and charged interestunder Section 234B and 234C of the Act accordingly. On appeal, the CIT (A) and the Tribunal held that the demand of interest was notjustified and income surrendered after the close of the financial yearcould not be foreseen by the assessee for the purpose of payment ofadvance tax. The finding of the Tribunal is as under:- “After considering the rival submissions and goingthrough the material available on the record, itappears that in the instant cases, the assessees hadrequested soon after the search that whatever taxwas due on the income surrendered be adjusted outof the amounts seized from them. Therefore, whilefiling the returns, the assessees treated the entirecash seized as tax paid by them. It is not disputedat any stage that the assessees requested theDepartment on 30.5.1994 after the search andseizure operations to adjust a sum of Rs.42 Lacsseized from this group of cases towards the likelydemands arising in view of the surrender made undersection 132 (4) of the Act. Admittedly, the assessments were framed in all thecases on 29.11.1995 i.e. after the request of theassessees to adjust the cash seized, made on30.5.1994. In other words, the assessees hadrequested soon after the search that whatever taxwas due on the income surrendered be adjusted outof the amounts seized from them and the balance bereturned to them.” Admittedly, the assessments were framed in all thecases on 29.11.1995 i.e. after the request of theassessees to adjust the cash seized, made on30.5.1994. In other words, the assessees hadrequested soon after the search that whatever taxwas due on the income surrendered be adjusted outof the amounts seized from them and the balance bereturned to them.” 4.We have heard learned counsel for the revenue. Noneappears for the assessee. 5.Learned counsel for the revenue submits that the viewtaken by the Tribunal in deleting the interest cannot be sustained aspayment of interest was mandatory. Mere fact that the assessee couldnot foresee the interest liability was no ground not to demand interest.The interest was payable on the amount of assessed tax which may beheld to be due. Reliance has been placed on Explanation I to Section234B of the Act added in the year 2001 w.e.f. 1.4.1989 vide FinanceAct, 2001. 6.The chargeability of interest under Section 234B of the Actcame up for consideration in a recent judgment dated 20.7.2010passed in ITA No. 851 of 2008 (M/s Jacob Export House v.Commissioner of Income Tax) wherein it was held as under:- “7. The matter is no longer res integra. This Court inParkash Agro’s case (supra), while considering theeffect of amendment to Explanation-I retrospectivelyw.e.f. 1.4.1989 had held that an assessee is liable topay interest under Section 234B of the Act on theamount of income assessed under Section 143 (1) or143(3) of the Act and not on the basis of incomedeclared in the return by the assessee. The relevantobservations reads as under:- “9. It is no doubt true that prior to the amendmentbrought by Finance Act, 2001, which has been made effective retrospectively from 1.4.1989, theinterest under section 234B of the Act waschargeable with reference to the total income ashad been declared by the assessee in its returnand not on the assessed income. Explanation 1to section 234B of the Act was amended byFinance Act, 2001. It reads thus:- “Explanation 1. – In this Section, ‘assessedtax’ means the tax on the total incomedetermined under sub-section (1) of section143 or on regular assessment as reducedby the amount of tax deducted or collectedat source in accordance with the provisionsof Chapter XVII on any income which issubject to such deduction or collection andwhich is taken into account in computingsuch total income. (b) in sub-section (3), for the words ‘oneand one-half per cent’, the words‘one and one-fourth per cent’ shall besubstituted with effect from1.6.2001.” and one-half per cent’, the words‘one and one-fourth per cent’ shall besubstituted with effect from1.6.2001.” 10. The said Explanation was subject-matter ofchallenge before this Court in Raj Kumar Singhal’s case (supra) where the Division Benchwhile upholding the validity of the said provision,interpreted it as under:- “......A comparison of the two provisionsshows that under the original provisioninterest was leviable on the income asdeclared in the return filed by theassessee. By the amended provision, theinterest is leviable on the income asdetermined by the assessing authorityminus the income on which the tax hasbeen paid or deducted. The amendment isonly calculated to clarify the ambiguity thatwas felt in the original provision. It is notarbitrary or unreasonable..... (p.562)”. 7.Section 234C of the Act provides for interest for defermentof advance tax. Section 234C (1)(b) is relevant in the present case as itapplies in case of assessees other than company. According to theaforesaid provision, the assessee is liable to pay interest on thereturned income at the rate specified therein for the period for whichadvance tax has been deferred. 7.Section 234C of the Act provides for interest for defermentof advance tax. Section 234C (1)(b) is relevant in the present case as itapplies in case of assessees other than company. According to theaforesaid provision, the assessee is liable to pay interest on thereturned income at the rate specified therein for the period for whichadvance tax has been deferred. 8.In view of the above, though the assessee was entitled tobenefit of payment out of the seized cash from the date of hisapplication but the assessee was liable to pay interest under Section234B of the Act on the tax liability determined on the income assessed ITA No. 149 of 2003 by the Assessing Officer. 9.Similarly the assessee is liable to pay interest underSection 234C of the Act in terms thereof and shall be entitled to benefitof payment out of seized cash from the date of making application foradjustment of seized cash towards tax liability.View to the contrarytaken by the Tribunal cannot be sustained. 10.Accordingly, the substantial question of law is answered infavour of the revenue and the appeal is allowed in these terms. (ADARSH KUMAR GOEL) JUDGE July 22, 2010gbs (AJAY KUMAR MITTAL)JUDGE ITA No. 149 of 2003 -8- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 150 of 2003 Date of Decision: 22.7.2010 Commissioner of Income Tax (Central), Ludhiana Versus Ravi Kumar, Prop. M/s Shree Ganesh Textiles ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. K.K. Mehta, Advocate for the appellant. ADARSH KUMAR GOEL, J. For orders, see ITA No. 149 of 2003 (Commissioner of Income Tax (Central), Ludhiana v. Arun Kapoor). (ADARSH KUMAR GOEL) JUDGE July 22, 2010gbs (AJAY KUMAR MITTAL)JUDGE