Commissioner Of Income Tax-I, Chennai v. M/S.goyal's International Hotels And Resorts Ltd, Chennai

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 09.10.2006 Coram : THE HONOURABLE MR.JUSTICE R.BALASUBRAMANIANANDTHE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJA Tax Case (Appeal) No.191 of 2003 Commissioner of Income Tax-I,Chennai. Vs ..Appellant M/s.Goyal's International Hotelsand Resorts Ltd, Chennai ..Respondent Appeal under Section 260A of the Income Tax Act, 1961against the order of the Income Tax Appellate Tribunal, Madras,'C' Bench dated 24.04.2003 in I.T.A. No.1901/Mds/98 for theassessment year 1992-93. against the order of the Commissionerof Income Tax (Appeals) - IV Chennai - 34 dated 31.08.1998 in ITAppeal No 155/97-98 against the order of the AssistantCommissioner of Income Tax Central Circle I (3) Madras - 34dated 25.03.1997 in PANGIR NO for the Asst. year 1992-93 For Appellant : Mr.J.Narayanaswamy For Respondent : Mr.R.Sivaraman JUDGMENT (Judgment of the Court was delivered by P.P.S.Janarthana Raja,J.) This appeal is filed under Section 260A of the Income TaxAct, 1961 by the Revenue against the order of the Income TaxAppellate Tribunal, Madras, 'C' Bench dated 24.04.2003 passed inI.T.A. No.1901/Mds/98. On 11.11.2003, this Court admitted theappeal and formulated the following substantial question oflaw. "Whether in the facts and circumstances ofthe case, the Tribunal was right in holdingthat the assessment cannot be reopened wherethe assessee had not returned the incomewhich was subjected to Tax Deducting atSource." https://hcservices.ecourts.gov.in/hcservices/ 2.The facts leading to the above substantial question oflaw are as under: The assessee is a company incorporated on 01.10.1990. Therelevant assessment year is 1992-93 and the correspondingaccounting year ended on 31.03.1992. The assessee has notcommenced its business activities during the year. Hence noreturn of income was filed by the assessee. While perusing thereturn of income filed by the assessee for the assessment year1993-94, it was noticed that the assessee had deposited a sum ofRs.65,00,000/- with M/s.Classic Financial Services andEnterprises Ltd., Calcutta during the relevant previous year andthat the finance company has credited the account of theassessee a sum of Rs.2,43,080/- as interest on 31.03.1992. Thisinterest related to the period from 27.1.92 to 31.3.92. A sumof Rs.55,909/- was also deducted towards Income-tax and remittedto the Government Account. Therefore, the Assessing Officerinitiated proceedings under Section 147 of the Income-tax Act(hereinafter referred to as the "Act") and notice under Section148 was issued to the assessee on 02.02.1995. The assessee alsofiled Return on 10.03.1995 admitting a Nil total income. Thesaid Return was processed on 17.03.1995 and no adjustment wasmade. Later, notice under Section 143(2) of the Act was issuedon the same date. Subsequently, the Assessing Officer completedthe assessment under Section 143(3) of the Act, treating theinterest income of Rs.2,43,080/- credited to the assessee'saccount during the relevant previous year as the income of theassessee from other sources. Aggrieved by the order, theassessee filed an appeal to the Commissioner of Income-tax(Appeals). The C.I.T.(A) dismissed the appeal and confirmed theorder of the Assessing Officer. Aggrieved, the assessee filedan appeal to the Income-tax Appellate Tribunal (hereinafterreferred to as the "Tribunal"). The Tribunal allowed the appealand set aside the order of the lower authority. 3.Learned Standing Counsel appearing for the Revenuesubmitted that the Tribunal is wrong in holding that theinterest income not returned by the assessee cannot be assessedto tax on the reassessment proceedings on the ground that thetax has been deducted at source. Further it is submitted thatthe tax deducted at source will not absolve the assessee fromreturning the correct income. 3.Learned Standing Counsel appearing for the Revenuesubmitted that the Tribunal is wrong in holding that theinterest income not returned by the assessee cannot be assessedto tax on the reassessment proceedings on the ground that thetax has been deducted at source. Further it is submitted thatthe tax deducted at source will not absolve the assessee fromreturning the correct income. 4.Learned counsel appearing for the assessee submittedthat simply because the assessee has not filed the return forthe assessment year 1992-93, it cannot be said that the incomehas escaped assessment as the TDS was admittedly deducted fromthe amount paid to the assessee by the investment company.Therefore, that cannot be a reason for reopening the assessment. 5.Heard the counsel. The assessee company incorporatedon 01.10.1990 and commenced its business activity. The Returnof income was also not filed for the first two years. The firstReturn of income was filed for the assessment year 1993-94.While processing this Return under Section 143(1)(a) of the Act,the Assessing Officer noticed that the assessee had deposited asum of Rs.65,00,000/- with M/s.Classic Financial Services &Enterprises Ltd., Calcutta during the relevant previous year andthe aforesaid company had credited the account of the assesseeby a sum of Rs.2,43,080/- as interest on 31.03.1992. It wasalso noticed that a sum of Rs.55,909/- was also deducted towardsincome-tax and paid to the Government Account. Based on thisinformation, the Assessing Officer initiated proceedings underSection 147 for failure of the assessee to file the Return ofincome for the assessment year 1992-93 in respect of theaforesaid interest income. It is seen from the copy of the TDSCertificate that the amount was duly credited to the account ofthe assessee on 31.03.1992. The assessee could not substantiateits claim that the interest on deposit was payable only afterthe expiry of 92 days. The deposit had been renewed on30.04.1992 and at the time of renewal, the net amount ofinterest for 94 days was paid to the assessee by cheque dated30.04.1992 for Rs.2,70,681/- after reducing the amount of TDS ofRs.80,853/- at the rate of 23% of the total interest amount ofRs.3,51,534/- at the rate of 21% p.a. of principal amount ofRs.65,00,000/- for a period of 94 days i.e. From 27.1.1992 to28.04.1992. It is apparent that since the business had notcommenced, the amount was deposited on 27.1.1992 and theinterest income upto 31.03.1992 accrued to the assessee duringthe financial year 1991-92. This is an undisputed fact. Hencethe interest income was liable to be taxed as income under"other sources" on accrual basis for the previous year for theassessment year 1992-93. The period of deposit was of norelevance as income from "other sources" was to be taxed on thebasis of financial year as previous year. Since the amount wascredited to the account of the assessee on 31.03.1992 itself bythe payer, the income has not only accrued but has been receivedalso and payment by subsequent cheque along with furtherinterest did not change the the taxability of the accrued incomeon financial year basis. It is also relevant to note that thetax was deducted at source only at the particular rateprevailing during the relevant years. The amount of taxdeducted at source will always not equal to the tax payable bythe assessee. We are of the view that interest income has beenaccrued and also received during the financial year 1991-92relating to the assessment year 1992-93 because of the act ofcrediting interest to the accounts of the assessee on 31.03.1992by M/s.Classic Financial Services & Enterprises Ltd. So, we areof the view that the Assessing Officer has correctly invoked theprovision of Section 148 and rightly assessed the interest income of Rs.2,43,080/- for the assessment year 1992-93. Inview of the same, the question referred to us is answered infavour of the Revenue and against the assessee. It is seen fromthe records that the assessee had raised three issues in thegrounds of appeal. The first one relates to reopening of theassessment under Section 148 of the Act. The second one relatesto the addition of a sum of Rs.2,43,080/- as income from othersources. The third one relates to the consequential charging ofinterest under Sections 234A, 234B and 234C of the Act. 6.The Tribunal has considered the first issue aloneholding that reopening of the assessment under Section 148 ofthe Act, is unsustainable and is not valid in law. In view ofthe same, the Tribunal did not consider the other two issues.The remaining two issues relates to the merits of the case. Aswe stated earlier that reopening is valid in law, the Tribunalhas to consider the case on merits, i.e., the other two issuesstated above. Hence, we direct the Income-tax AppellateTribunal to take up the other two issues and decide the sameafter giving opportunity to both the parties to raise all thecontention and pass orders on merits, in accordance with law, assoon as possible. 7.With the above observation, the tax case is disposedof. No costs. km Sd/Asst.Registrar/true copy/ Sub Asst.Registrar To 1. The ASSISTANT REGISTRARINCOME TAX APPELLATE TRIBUNALBEACH 'C' CHENNAI 2. THE COMMISSIONER OF INCOMETAX (APPEALS) IICHENNAI 3. THE ASSISTANT COMMISSIONEROF INCOME-TAX CENTRAL CIRCLEI(3) MADRAS - 34 4. THE COMMISSIONER OF INCOMETAX I CHENNAI https://hcservices.ecourts.gov.in/hcservices/ 5. THE ASSISTANT REGISTRARINCOME TAX APPELLATETRIBUNAL RAJAJI BHAVANIII FLOOR BESANT NAGARCHENNAI 90 + ONE CC TO M/S. PUSHYA SITARAMAN, SENIOR STANDING COUNSEL FORINCOME TAX SR NO. 47117 bv(co)nm(26.10.2006) TC (A). 191 of 2003