Ita/20/2010 Of The Commissioner Of Income Tax v. Sri.b.lakshmikanthan

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE B.P.RAY THURSDAY, THE 20TH JANUARY 2011 / 30TH POUSHA 1932 ITA.No. 20 of 2010() -------------------- AGAINST ORDER IN ITA.960/COCH/2007 DATED 29/06/2009 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/RESPONDENT: ----------------------------------------- THE COMMISSIONER OF INCOME TX (CENTRAL) COCHIN. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): --------------- SHRI.B.LAKSHMIKANTHAN, M/S.BHIMA & BROTHERS, MULLACKAL, ALLEPPEY. ADV. SRI.S.ARUN RAJ FOR R1 THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 20/01/2011, ALONG WITH ITA NO. 41 OF 2010 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.R. C.N.RAMACHANDRAN NAIR & BHABANI PRASAD RAY, JJ. ---------------------------------- ITA Nos.20 & 41 of 2010 --------------------------------- Dated, this the 20[th] day of January, 2011 J U D G M E N T Ramachandran Nair, J. The common question raised in these two appeals filed by the Revenue against the very same assessee is whether in areassessment completed under Section 153A read with Section 143(1) of the Income Tax Act (hereinafter referred to as the Act forshort), interest for short payment of advance tax is to be demandedfor the period provided under Section 234B(1) or Section 234B(3) ofthe Act. While the case of the department is that interest is leviableunder Section 234B(1) for the period stated therein, the case of theassessee is that interest could be levied under Section 234B(3) forthe limited period specified therein. 2.We have heard learned Standing Counsel appearing forthe Revenue and Shri.Arun Raj learned counsel appearing for therespondent assessee. We have heard learned Standing Counsel appearing for 3. The respondent filed Income Tax returns for the ITA Nos.20 & 41/2010 -2- assessment years 2001-02 and 2002-03 on the due dates i.e. on30[th] October of the assessment years. Both the returns wereprocessed and proceedings issued under Section 143(1) within thetime provided under the Act. Since there was short payment ofadvance tax for the assessment year 2001-02 interest under Section234B(1) was charged for the period specified therein, on which thereis no dispute. For the next assessment year, i.e. 2002-2003, nointerest was charged under Section 234B as there was no shortpayment of advance tax on the income then assessed. However,later, the Department conducted search in the premises of theassessee and noticed escapement of income. Pursuant to thesearch, the assessee was called upon to furnish returns disclosingundisclosed income, and the assessee in fact returned undisclosedincome for both the assessment years. The Assessing Authorityprocessed the returns so filed, determined the tax payable thereonunder Section 143(1) and based on the shortage in payment ofadvance tax with reference to the revised income assessed, theAssessing Authority computed interest payable under Section 234B(1) for the periods provided therein. The assessee filed rectificationapplication before the Assessing Officer contending that interest in ITA Nos.20 & 41/2010 -3- ITA Nos.20 & 41/2010 -3- reassessment could be charged only under Section 234B(3),whereunder the period for which interest could be charged is fromthe date of first completion of Section 143(1) proceedings till thedate of the revision of assessment, which was done under Section143(1) read with Section 153A and not from the beginning of thefinancial year following the accounting year in which advance taxwas payable as provided under Section 234B(1) of the Act. TheAssessing Officer rejected the rectification application on theground that the reassessment under Section 153A itself iscompleted by processing the returns under Section 143(1) and somuch so interest is payable under Section 243B(1) and not underSection 234B(3) as claimed by the assessee. This order waschallenged in appeal. Though the first appellate authoritydismissed the appeal, the Tribunal held in favour of the assesseeagainst which the Revenue has filed these appeals. 4.The question to be decided is the application andmeaning of Sections 234B(1) and 234B(3) of the Act, and therefore,we extract hereunder these provisions for easy reference:- “234B(1)Subject to the other provisions of this section,where, in any financial year, an assessee who is liable to payadvance tax under section 208 has failed to pay such tax or, where the advance tax paid by such assessee under theprovisions of section 210 is less than ninety per cent of theassessed tax, the assessee shall be liable to pay simple interest atthe rate of (one) per cent for every month or part of a monthcomprised in the period from the 1[st] day of April next followingsuch financial year (to the date of determination of total incomeunder sub-section(1) of section 143 (and where a regularassessment is made, to the date of such regular assessment, onan amount)) equal to the assessed tax or, as the case may be, onthe amount by which the advance tax paid as aforesaid falls shortof the assessed tax. ------ ------ (3)Where, as a result of an order of reassessment orrecomputation under Section 147 (or section 153A), the amounton which interest was payable under sub-section (1) is increased,the assessee shall be liable to pay simple interest at the rate of(one) per cent for every month or part of a month comprised inthe period commencing on the day following (the date ofdetermination of total income under sub-section (1) of section143 (and where a regular assessment is made as is referred to insub-section (1) following the date of such regular assessment))and ending on the date of the reassessment or recomputationunder section 147 (or section 153A), on the amount by which thetax on the total income determined on the basis of thereassessment or recomputation exceeds the tax on the totalincome determined (under sub-section (1) of section 143 or) onthe basis of the regular assessment aforesaid.” 5.The contention of the Revenue is that in all cases, where income returned is accepted and demand is raised by processing ITA Nos.20 & 41/2010 -5- 5.The contention of the Revenue is that in all cases, where income returned is accepted and demand is raised by processing ITA Nos.20 & 41/2010 -5- the return under Section 143(1), interest is to be charged underSection 234B(1) and the same is for the period commencing fromthe first date of the financial year following the previous year duringwhich advance tax was payable. According to the learned StandingCounsel, pursuant to the search, notice was issued to the assesseeunder Section 153A, and by virtue of the operation of Clause (a) ofSection 153A(1) return filed pursuant to the notice under the saidprovision will be treated as the return filed under Section 139. Somuch so, the Department is entitled to process the return underSection 143(1) and issue the proceedings, which entitles theAssessing Officer to levy interest in terms of Section 234B(1) of theAct. It is further clarified by the learned Standing Counsel for theRevenue that intimation issued under Section 143(1) is not anassessment and so much so, Section 234B(1) applies even in a caseof intimation issued under Section 143(1) pursuant to the returncalled for after search under Section 153A of the Act. Learnedcounsel for the assessee, on the other hand, contended thatirrespective of the nature of proceeding completed pursuant to thereturn filed on receipt of notice under Section 153A, suchassessment is always a reassessment or recomputation under ITA Nos.20 & 41/2010 -6- Section 153A of the Act and the provision applicable for interest onshort payment or non-payment of advance tax is Section 243B(3) ofthe Act.6.After hearing both sides, we feel there is no substance inthe contention raised by the Revenue that in a re-assessmentcompleted under Section 153A interest for non-payment or shortpayment of advance tax is payable under Section 234B(3) merelybecause the said re-assessment under Section 153A is completedby accepting the return filed under Section 143(1) of the Act.Interest for non-payment or short payment of advance tax ispayable under Section 234B for different periods under sub Sections(1) and (3) of the said Section. In all cases of regular assessmentscompleted under Section 143(1) interest is to be charged for theperiods provided under Section 234B(1) of the Act. Further, if thefirst assessment itself is income escaping assessment made underSection 147 or under Section 153A, then such assessment will betreated as regular assessment and interest for non-payment orshort payment of advance tax in such cases will be payable underSection 234B(1) of the Act. However when an original assessmentcompleted under Section 143 is revised either under Section 147 or ITA Nos.20 & 41/2010 -7- ITA Nos.20 & 41/2010 -7- under Section 153A, then interest for non-payment or shortpayment of advance tax is payable only for the period mentioned inSection 234B(3) of the Act, which provides for interest from the dateof completion of regular assessment under Section 143(1) till thedate of completion of reassessment or re-computation underSection 147 or Section 153A of the Act. In our view, for the purposeof levy of interest under Section 234B(3), it is immaterial whetherrecomputation or re-assessment under Section 147 or underSection 153A is made by accepting the revised return filed and byprocessing the same under Section 143(1) or whether reassessmentis made by rejecting such returns and by determining the income.The fact that the procedure for calling for return and assessmentafter search or requisition under Section 153A is the same asprovided under Section 139 does not mean that a reassessmentcompleted under the said provision is a regular assessment ororiginal assessment. On the other hand, whatever be the procedureadopted for assessing escaped income or undisclosed incomepursuant to search or requisition, such assessment will always be are-assessment or recomputation under Section 153A, and unless itis a first assessment, that could be treated as the regular ITA Nos.20 & 41/2010 assessment in terms of explanation (2) to Section 234B(1), theninterest can be charged only under Section 234B(3) of the Act. In this case, the original returns were processed under Section143(1) of the Act and the proceedings so completed were issued tothe assessee. It is only thereafter the Department conducted searchand made revised assessments under Section 153A of the Actthough by accepting returns of undisclosed income filed and byissuing proceedings under Section 143(1) read with Section 153A ofthe Act. We, therefore, hold that the assessments under Section153A are revised assessments and so much so, interest could bedemanded for the period mentioned in Section 234(B)(3) of the Actas held by the Tribunal. In this view of the matter, we uphold theorder of the Tribunal and dismiss the Department appeals for boththe years. (C.N.RAMACHANDRAN NAIR, JUDGE) (BHABANI PRASAD RAY, JUDGE) jg