Ita/194/2015 Of The Commissioner Of Income Tax v. M/S Canara Bank

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 23RD DAY OF NOVEMBER 2070.PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD1T.A. NO.194 OF 2O15 BEITWEEN 1.THE COMMISSIONER OF INCOME-TAX. LTU, JSS TOWERS, BSK III STAGE BANGALORE-560085. 2D.THE JOINT COMMISSIONER OF INCOME-TAX LTU, JSS TOWERS, BSK III STAGE BANGALORE-560085. ... APPELLANTS (BY SRI. K.V. ARAVIND, ADV.) AND M/S. CANARA BANKBALANCE SHEET AND CENTRAL |ACCOUNTS SECTIONHEAD OFFICE, 112, J.C. ROADBANGALORE-560002PAN: AAACC 6106G. (BY SRI. T. SURYANARAYANA, ADV.) ... RESPONDENT THIS I.T.A. IS. FILED UNDER SECTION 260-A OFIL.T.ACT, 1961, ARISING OUT OF ORDER DATED 28-11-2014 PASSED IN ITA NO.317/BANG/2014, FOR THE ASSESSMENTYEAR 2007-08, PRAYING TO: I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAWSTATED ABOVE. I]. ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSEDBY THE ITAT, BANGALORE IN ITA NO.317/BANG/2014DATED 28-11-2014 CONFIRMING THE ORDER OF THEAPPELLATE COMMISSIONER AND CONFIRM THE ORDER|PASSED BY THE JOINT COMMISSIONER OF INCOME TAX,LTU, BANGALORE. THIS I.T.A. COMING ON FOR HEARING, THIS DAY,|ALOK ARADHE J.,DELIVERED THE FOLLOWING: JUDGMENT Mr.K.V.Aravind, learned counsel for the revenue. Mr.T.Suryanarayana,learnedcounselfortheaSSe@SSAEC 2. This appeal under Section 260-A of the IncomeTax Act, 1961 (hereinafter referred to as ‘the Act’, forShort) has been preferred by the revenue. The subject|matter of the appeal pertains to the Assessment Year2007-08. The appeal was admitted by a Bench of this.Court vide order dated 07.09.2015 to consider the'following substantial questions of law: /.Whether the Tribunal was correctin deleting interest under section 234C of theAct even thougn the same was calculatedwhile processing return a U/S. 143(1) of theAct? ITWhether the Tribunal was correctin holding tnat interest under section 220(2)of the Act is not chargeable during theperiod of stay, as the same is against the.provisions of income tax Act, where the staywas sought by tne assessee and not given.suo moto by the assessing officer? 3. Facts leading to filing of this appeal brieflystated are that the assessee is a banking company. Tneassessee filed the return for the Assessment Year 200/708. The Assessing Officer concluded the assessment|under Section 143(3) of the Act and assessed thetaxable income at Rs.1/772,81,/8,854/- as againstRs.593,48,/70,1/78/- declared by the assessee. Theorder passed by the Assessing Officer was subjectmatter of the proceeding under Section 263 of the Act|before the Commissioner of Income Tax (Appeals), who. by an order dated 07.03.2011 directed the Assessing|Officer to re-assess a sum of Rs.52,/7,81,540/-.representing the write back of stale demand drafts. Theaforesaid order of the Commissioner of Income Tax!(Appeals) was challenged by the assessee before theIncome Tax Appellate Tribunal. The Tribunal quashedthe order of the Commissioner of Income Tax (Appeals)to the extent that it pertained to the assessment of write.back of stale demand drafts. Thereafter, the AssessingOfficer passed an order on 07.03.2011 giving effect to the order dated 07.09.2012 passed by the Tribunal. TheAssessing Officer charged the interest under Section.234C of the Act. The assessee challenged the levy of.interest under Section 220(2) of the Act for the period.during which the Assessing Officer himself has grantedthe stay of recovery. The Assessing Officer also grantedrefund of interest under Section 244A of the Act which.according to the assessee was not properly calculated. |Being aggrieved, the assessee filed an appeal. The| Commissioner of Income Tax (Appeals), by an orderdated 25.11.2013,|inter aliaheld that interest under|Section 7234C of the Act could not have been levied. It!was further held that sofar as grant of interest on refundof amount to the assessee under Section 244A of the Actis concerned, the assessee gave a computation ofinterest payable by the department. The Commissionerof Income Tax (Appeals) directed the Assessing Officerto verify the same. With regard to the issue of levy ofinterest under Section 220(2) of the Act, it was held by.the Commissioner of Income Tax (Appeals) that theshort period covered by the stay issued by the AssessingOfficer is not for the period from December 2009 to.February 2010. In the result, the appeal was partlyallowed. Thereupon, the revenue filed an appeal beforethe Tribunal. The Tribunal, by an order dated)28.11.2014 maintained the order passed by theCommissioner of Income Tax (Appeals). In the)aforesaid factual background, this appeal Nas been filed. 4. At the outset, learned counsel for the revenuesubmitted that he does not intend to press the firstsubstantial question of law. Learned counsel for theassessee submitted that the Tribunal grossly erred in|holding that the interest under Section 220(2) of the Actis not chargeable during the period of stay as the same.is against the provisions of the Act and where the levyof |interest was challenged by the assessee and was notgiven suo motu by the Assessing Officer. On the otherhand, learned counsel for the revenue has defended the|order passed by the Commissioner as well as theTribunal and submitted that the view taken by theTribunalISjustandDIrOPeTIn|thefactsandcircumstances of the case and does not call for!interference by this Court. 5. We have considered the submissions made onboth sides and have perused the record. The levy ofinterest under Section 220(2) of the Act is prescribed bythe statute. When stay is granted to a party, it is always subject to a statutory provision and it is well|settled in law that mere grant of stay does not preventthe running of the interest. Therefore, the findingrecorded by the Commissioner as well as the Tribunalthat the interest under Section 220(2) of the Act is notchargeable during the period of stay is perverse as theinterest is mandatorily leviable under Section 220(2) ofthe Act. For the aforementioned reasons, the secondsubstantial question of law is answered in favour of therevenue and against the assessee. In the result, the appeal is partly allowed. Sd/-JUDGE Sd/-'JUDGE