M/S Jacob Export House v. Commissioner Of Income Tax

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. I.T.A. No.851 of 2008 Date of decision: 20.7.2010 M/s Jacob Export House. Vs. Commissioner of Income Tax. -----Appellant. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOELHON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:-Mr. S.K. Mukhi, Advocate for the Assessee. Mr. Vivek Sethi, Standing counselfor the Revenue. --- ADARSH KUMAR GOEL, J. 1. This appeal has been preferred by the assesseeunder Section 260A of the Income Tax Act, 1961 (for short, “theAct”) against order dated 31.7.2008 of the Income Tax AppellateTribunal, Chandigarh in I.T.A. No.318/Chandi/2008 for theassessment year 2001-02, proposing following substantialquestions of law:- “1)Whether I.T.A.T. was justified in setting asidethe issue of charging of interest u/s 234B of theIncome Tax Act, 1961 for fresh adjudication tothe file of CIT(A) having decided the issue infavour of the appellant in view of the judgment ofHARYANA STATE CO-OPERATIVE SUPPLY& MARKETING FEDERATION LTD., [2007] 34IT. Rep.441(P&H) with a rider that once thethe issue of charging of interest u/s 234B of theIncome Tax Act, 1961 for fresh adjudication tothe file of CIT(A) having decided the issue infavour of the appellant in view of the judgment ofHARYANA STATE CO-OPERATIVE SUPPLY& MARKETING FEDERATION LTD., [2007] 34IT. Rep.441(P&H) with a rider that once the assessee is found to have defaulted in paymentof advance tax on the basis of law as prevalentin the relevant financial year, its subsequentvariation on account of further disallowancessuffered because of changed legal positionwould still empower the AO to charge interestu/s 234B of the Act, which is illegal, perverseand leads to allowing a second inning to thelower authorities which is unwarranted anduncalled for? 2)“Whether, on the facts and circumstances of thecase, the findings of ITAT are perverse andagainst the evidences on record thusunsustainable in law? case, the findings of ITAT are perverse andagainst the evidences on record thusunsustainable in law? 3)Whether the ITAT has misdirected itself in beinginfluenced by irrelevant factors and applyingerroneous criteria while deciding the issue ofeligibility for claiming deduction under section80IB of the Income Tax Act, 1961?” influenced by irrelevant factors and applyingerroneous criteria while deciding the issue ofeligibility for claiming deduction under section80IB of the Income Tax Act, 1961?” 2. Facts necessary for adjudication of this appeal maybe noticed. The assessee did not pay advance tax as perprovisions of Section 208 of the Act on the ground that its incomewas not liable to be taxed in view of provisions under Sections 80HHC and 80-IB of the Act. Claim of the assessee was notaccepted for deduction under the said provisions by theAssessing Officer. Demand of interest was also raised underSection 234B of the Act. On appeal, the CIT(A) upheld the pleaof the assessee that since advance tax was not paid under abonafide belief, interest under Section 234B of the Act was not attracted. On appeal by the revenue to the Tribunal, the view ofthe CIT(A) was reversed. It was held that bonafide belief of theassessee to estimate taxability of income could not be validground to avoid liability to pay interest under Section 234B of theAct on advance tax ultimately found due. 3. We have heard learned counsel for the parties andperused the record. 4. Learned counsel for the Assessee submitted that theTribunal is in error in holding that even if the assessee on abonafide calculation found that no advance tax was payable, stillliability of interest under Section 234B of the Act will be attracted.He relied upon following judgments:- “i)CITv. Haryana State Cooperative Supply andMarketing Federation Ltd.[2007] 34 IT Rep.441Marketing Federation Ltd.[2007] 34 IT Rep.441 (P&H); 3. We have heard learned counsel for the parties andperused the record. 4. Learned counsel for the Assessee submitted that theTribunal is in error in holding that even if the assessee on abonafide calculation found that no advance tax was payable, stillliability of interest under Section 234B of the Act will be attracted.He relied upon following judgments:- “i)CITv. Haryana State Cooperative Supply andMarketing Federation Ltd.[2007] 34 IT Rep.441Marketing Federation Ltd.[2007] 34 IT Rep.441 (P&H); ii)CITv. Kanti Kumar Sharma[1989] 179 ITR 114(P&H); (P&H); iii)United Commercial Bankv. CIT137 ITR 434 (Cal); iv)Saurashtra Packaging P. Ltd.v. CIT 204 ITR 443(Guj); (Guj); v)Kailash Chand Jain (HUF)v. CWT [2008] 5 DTR342 (M.P.)”342 (M.P.)” 5. On the other hand, learned counsel for the Revenueargued that Finance Act, 2001 has amended Explanation-I toSection 234B of the Act retrospectively w.e.f. 1.4.1989 and has laid down that assessed tax would mean tax on total incomedetermined under Section 143(1) or 143(3) of the Act as reducedby certain amount mentioned therein. He relied upon judgmentsof this Court inRaj Kumar Singalv. Union of India[2002] 255ITR 561 and Parkash Agrov. Deputy Commissioner ofIncome Tax[2008] 170 Taxman 479 in support of hissubmission. 6. It would be advantageous to reproduce Explanation-I,as amended by Finance Act, 2001 retrospectively w.e.f. 1.4.1989,which reads as under:- “Explanation 1. – In this Section, ‘assessed tax’means the tax on the total income determined undersub-section (1) of section 143 or on regularassessment as reduced by the amount of taxdeducted or collected at source in accordance withthe provisions of Chapter XVII on any income which issubject to such deduction or collection and which istaken into account in computing such total income.” 7. The matter is no longer res integra. This Court inParkash Agro’scase (supra), while considering the effect ofamendment to Explanation-I retrospectively w.e.f. 1.4.1989 hadheld that an assessee is liable to pay interest under Section 234Bof the Act on the amount of income assessed under Section 143(1) or 143(3) of the Act and not on the basis of income declared inthe return by the assessee. The relevant observations reads asunder:- “9. It is no doubt true that prior to the amendmentbrought by Finance Act, 2001, which has been madeeffective retrospectively from 1.4.1989, the interestunder section 234B of the Act was chargeable withreference to the total income as had been declared bythe assessee in its return and not on the assessedincome. Explanation 1 to section 234B of the Act wasamended by Finance Act, 2001. It reads thus:- “Explanation 1. – In this Section, ‘assessed tax’means the tax on the total income determinedunder sub-section (1) of section 143 or onregular assessment as reduced by the amountof tax deducted or collected at source inaccordance with the provisions of Chapter XVIIon any income which is subject to suchdeduction or collection and which is taken intoaccount in computing such total income. means the tax on the total income determinedunder sub-section (1) of section 143 or onregular assessment as reduced by the amountof tax deducted or collected at source inaccordance with the provisions of Chapter XVIIon any income which is subject to suchdeduction or collection and which is taken intoaccount in computing such total income. (b) in sub-section (3), for the words ‘one andone-half per cent’, the words ‘one andone-fourth per cent’ shall be substitutedwith effect from 1.6.2001.”one-half per cent’, the words ‘one andone-fourth per cent’ shall be substitutedwith effect from 1.6.2001.” (b) in sub-section (3), for the words ‘one andone-half per cent’, the words ‘one andone-fourth per cent’ shall be substitutedwith effect from 1.6.2001.”one-half per cent’, the words ‘one andone-fourth per cent’ shall be substitutedwith effect from 1.6.2001.” 10. The said Explanation was subject-matter ofchallenge before this Court in Raj Kumar Singhal’scase (supra) where the Division Bench whileupholding the validity of the said provision, interpretedit as under:-challenge before this Court in Raj Kumar Singhal’scase (supra) where the Division Bench whileupholding the validity of the said provision, interpretedit as under:- “......A comparison of the two provisions showsthat under the original provision interest wasleviable on the income as declared in the returnfiled by the assessee. By the amendedprovision, the interest is leviable on the incomeas determined by the assessing authority minusthe income on which the tax has been paid orthat under the original provision interest wasleviable on the income as declared in the returnfiled by the assessee. By the amendedprovision, the interest is leviable on the incomeas determined by the assessing authority minusthe income on which the tax has been paid or deducted. The amendment is only calculated toclarify the ambiguity that was felt in the originalprovision. It is not arbitrary or unreasonable.....(p.562)”. 8. The judgments relied upon by the assessee aredistinguishable as the effect of amendment by Finance Act, 2001was not under consideration in those cases. In view of clearprovision incorporated in the explanation and judgment of thisCourt inParkash Agro’scase (supra), chargeability of interest isbeyond question. 9. As regards question No.3, a perusal of impugnedorder shows that there was no ground raised relating to claimunder Section 80-IB of the Act before the Tribunal and, therefore,the same does not arise from the said order. 10. Accordingly, we do not find any merit in the appeal.No substantial question of law arises. The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE July 20, 2010ashwani ( AJAY KUMAR MITTAL ) JUDGE