Ita/254/2014 Of M/S Mahesh Investments v. The Asst. Commissioner Of Income-Tax

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 6 DAY OF OCTOBER 2020| PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD LT.A. NO.254 OF 2014 BETWEEN: M/S. MAHESH INVESTMENTSA-1, MESEUM TERRACENO.29, MUSEUM ROAD.BANGALORE-56000 1. — ADPELLANT. (BY SRI. ASHOK A. KULKARNI, ADV.,) AND: THE ASST. COMMISSIONER OF INCOME-T AXCIRCLE-1(1), BANGALORE. ... RESPONDENT (BY SRI. K.V. ARAVIND, ADV.) THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT,196L ARISING OUT OF ORDER DATED O/7.02.2014 PASSED IN ITANO.1339/BANG/2012, ORDER OF THE COMMISSIONER OF INCOMETAX (APPEALS) DATED 31.07.2012 AND ASSESSMENT ORDER|DATED 25.11.2010, FOR THE ASSESSMENT YEAR 1992-93,|PRAYING THAT THIS HON'BLE COURT MAY BE PLEASED TO: (1) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW.STATED THEREIN. (II) ALLOW THE APPEAL AND SET ASIDE THE ORDERPASSED BY THE ITAT, BANGALORE ORDER DATED 7.2.2014 IN ITANO.1339/BANG/2012, ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 31.7.2012 AND ASSESSMENT ORDERDATED 25.11.2010. THISLIACOMINGONFOR.HEARING,THISDAY,ALOK ARADHE J.,DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260A of the Income Tax|Act, 1961 (hereinafter referred to as the Act for short)has been preferred by the assessee. The subject matterof the appeal pertains to the Assessment year 1992-93. The appeal was admitted by a bench of this Court videorder dated 28.10.2014 on the following substantialquestion of law: Whether on the facts and In the.circumstances of the case in the impugnedorder of assessment consequent upon set.aside by the order of the High Court.interest u/s 234 A, B & C can be levied as if such an order is a regular assessment.which alone attracts such levy of interest. 2. Facts leading to filing of the appeal Driefly|stated are that assessee on 13.09.1994 filed its return of income as a registered firm for the Assessment Year1992-93. The Assessing Officer, by an order dated30.03.1995, |nter alla)held that the assessee is notscarrying on any business activity and treated it as an|Association of Persons and completed the assessment.The Assessing Officer quantified the interest under.Section 234A, B and C at Rs.2,04,170/-, Rs.3,89,250/-|and Rs.250/- respectively, that is an aggregate sum of.Rs.5,95,923/-. The assessee filed an appeal before the|Commissioner of Income Tax (Appeals),|inter alia,—contending that it is a registered partnership firm and.has constructed the buildings which has been let out to various persons and the rent received from the building|is apportioned in terms of profit and loss shown in the|partnership deed. The Commissioner of Income Tax|(Appeals), by an order dated 23.02.1996,Inter|alia heldtnat the status of the assessee is tnat of a firm and|allowed the appeal preferred by the assessee. The.revenue thereupon filed an appeal before this Court. The appeal preferred by the assessee was admitted onthe following substantial question of law: “When the respondent - assessee is notcarrying on any business activities, whether the|authorities were Justified in holding that the|respondent - assessee is a firm and not anAssociation of Persons?”| 3. The aforesaid appeal was disposed of by.judgment dated 14.11.2007 on the following terms: 7. In the circumstances, without answeringthe question of law framed in this appeal, we are.required to set aside all the orders and remandthe matter to the Assessing Officer for fresn-consideration.Accordingly,thisappealISallowed and the metter is remanded to the'Assessing Officer. It is open for the respondent-assessee to produce necessary documents toprove its case and thereafter the Assessing|Officer shall pass appropriate order 4. Thereafter, the Assessing Officer by an order|dated 25.11.2010, maintained its earlier order which 3. The aforesaid appeal was disposed of by.judgment dated 14.11.2007 on the following terms: 7. In the circumstances, without answeringthe question of law framed in this appeal, we are.required to set aside all the orders and remandthe matter to the Assessing Officer for fresn-consideration.Accordingly,thisappealISallowed and the metter is remanded to the'Assessing Officer. It is open for the respondent-assessee to produce necessary documents toprove its case and thereafter the Assessing|Officer shall pass appropriate order 4. Thereafter, the Assessing Officer by an order|dated 25.11.2010, maintained its earlier order which was set aside by a Bench of this Court. The assesseepreferred an appeal. The Commissioner of Income Tax(Appeals), by an order dated 31.07.2012, determinedthe status of the assessee from Association of Personsto a firm, but upheld the levy of interest. The Tribunal,by an order dated 07.02.2014,|inter aliaheld thatOriginal order of assessment which has been effaced, is restored with all its characteristics of a _regularassessment for the purpose of levy of interest under.Section 234A, B and C of the Act. In the result, the|appeal preferred by the assessee was dismissed. In the.aforesaidfactualbackground,|theaSS@C@SSChas|approached this Court. 5. Learned counsel for the assessee, while inviting|our attention to explanation-3 to Section 234A(1) of the.Act, submitted that the aforesaid provision applies only|to regular assessment. It is also submitted that from.perusal of explanation-3, it is evident that where an| assessment is made for the first time under Section 147or under Section 153A, the assessment so made shall beregarded as regular assessment for the purposes of thisSection. It is also submitted that in view of sub-Section(4) of Section 234A of the Act, where income is varied inappeal / revision, the interest has to be _ varieaccordingly. Our attention has also been invited toSection 2(40) of the Act which defines the expression‘regular assessment’ and it has been submitted that theorder passed by the Tribunal is in contravention of thelaw laid down by the Supreme Court in‘MODTINDUSTRIESLTD.AND|OTHERS Vs.COMMISSIONER OF INCOME-TAX AND ANOTHER’216 ITR 759 SC,It is also urged that the decision.relied on by the Tribunal in259 ITR 258in the case of.‘DR, MRS. RENUKA DATLA AND OTHERS Vs.COMMISSIONER OF INCOME-TAX AND ANOTHER’has no application to the fact situation of the case.Learned counsel has also referred to the decision of this Court In‘CHARLES D’SOUZA Vs. COMMISSIONER OF|INCOME-TAX, KARNATAKA-II’ 147 ITR 694. 6. On the other hand, learned counsel for therevenue has submitted that even though in a proceedingfor remand, the original order of assessment getseffaced, and a fresh order of assessment is passed, theSame is passed under Section 143(3) of the Act and inview of the decision of the Supreme Court in.MODTINDUSTRIESf SUDPFadtheexpression‘regular.assessment’ has to be deemed to have been completedon the date when first order of assessment has been|passed and not when the modified order of assessmenthas been passed. It is further submitted that theTribunal has rightly held that interest is chargeable uptothe date of first assessment order passed by theAssessing Officer and the view taken by the Tribunal isjust and proper and relief has rightly been granted tothe assessee. In support of his submissions, he has placed reliance on the decision of the Supreme Court in‘COMMISSIONEROFINCOME-TAX|Vs.ANJUMM.H.GHASWALA’ 252 ITR 1(SC). | 7. We have considered the submissions made by the learned counsel! for the parties and nave perused therecord. Before proceeding further, it is apposite to takenote of the relevant extract of the provisions of tne Actnamely Sections 2(8), 2(40), explanation-3 to Section234A(1) of the Act: Section2(8)~ assessmentIncludesreassessmen.y Section 2(40)“regular assessment’ means theassessment made under sub- section (3) of] section 143or section 144. placed reliance on the decision of the Supreme Court in‘COMMISSIONEROFINCOME-TAX|Vs.ANJUMM.H.GHASWALA’ 252 ITR 1(SC). | 7. We have considered the submissions made by the learned counsel! for the parties and nave perused therecord. Before proceeding further, it is apposite to takenote of the relevant extract of the provisions of tne Actnamely Sections 2(8), 2(40), explanation-3 to Section234A(1) of the Act: Section2(8)~ assessmentIncludesreassessmen.y Section 2(40)“regular assessment’ means theassessment made under sub- section (3) of] section 143or section 144. 234A (1)Where the return of income for any.assessment year under sub-section (1) or sub-section(4) of section 139, or in response to a notice under sub-section (1) of|section 142,is furnished after the due|date, or is not furnished, the assessee shall be liable topay simple interest at the rate of one per cent for every month or part of a month comprised in the periodcommencing on the date immediately following the duedate, and,— Explanation/—Where, In|relationto.al)assessment year, an assessment is made for the firsttime under section 147 or section 153A, the assessmentSO made Shall be regarded as a regular assessment forthe purposes of this section. 8. From perusal of the aforesaid provisions, it is)axiomatic that the expression assessment Nas a wideconnotation and includes reassessment as well. Theinterest under Section 34A(1) of the Act is levied underthe circumstances mentioned therein namely where thereturn of Income has not been furnished under sub-Sections (1) and (4) of Section 139 or in response to thenotice under sub-Section (1) of Section 142 and / or isnot furnished after due date. In the aforesaidcircumstances, the assessee is liable to pay simpleinterest at the prescribed rate for every month. It isalso not in dispute that if an order of assessment get effaced, it ceases to exist and a fresh order of.assessment has to be passed. The Supreme Court inthe case of MODI INDUSTRIES, supra, has held that.the expression ‘regular assessment’ has to be deemed|to have been completed on the date when first order of|assessment has been passed and not when modified.order of assessment has been passed, as the assesseecannot be penalized for lapse of time between the first.assessment order and moadified assessment. ordewithout there being any fault on his part. Therefore, theinterest under Section 234A can be levied upto the date|of first assessment order only. 9. It is also pertinent to mention here tnat‘assessment’ as defined under Section 2(28) of the Act.has a comprehensive meaning and includes all steps andproceedings taken for determination of tax payable andfor imposing liability on the assessee. It Inciudesreassessment as well. Therefore, even after the matter is remitted, an order of assessment is passed, the sameis referable to Section 143 or Section 144. Explanation-3 only protects the assessee from levy of interest andconfines|theSalmewhentheOriginal order|Of assessment is passed and not when the modified orderof assessment is passed. 10. In view of preceding analysis, the substantialquestion of law is answered against the assessee and infavour of the revenue. In the result, we do not find any merit in this)appeal. The same fails and is hereby dismissed. | SS| Sd/-—JUDGE. Sd/-JUDGE.