Principal Commissioner Of Income Tax, Faridabad v. Shri Krishan Gopal (Huf

ITA No. 253 of 2015 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 253 of 2015 (O&M) Date of Decision: 15.9.2015 Principal Commissioner of Income Tax, Faridabad ....Appellant. Versus Shri Krishan Gopal (HUF) ...Respondent. 1.Whether the Reporters of the local papers may be allowed to see the judgment?the judgment? 2.To be referred to the Reporters or not? Yes3.Whether the judgment should be reported in the Digest?3.Whether the judgment should be reported in the Digest? CORAM:-HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.HON'BLE MR. JUSTICE RAMENDRA JAIN. PRESENT: Mr. Tajender K. Joshi, Advocate for the appellant. AJAY KUMAR MITTAL, J. 1.This appeal has been preferred by the revenue underSection 260A of the Income Tax Act, 1961 (in short “the Act”) against theorder dated 24.12.2014 (Annexure A-III) passed by the Income TaxAppellate Tribunal, Delhi Bench “G”, New Delhi (hereinafter referred toas “the Tribunal”) in ITA No. 3226/DEL/2010, for the assessment year2007-08, claiming the following substantial questions of law:- 1.Whether on facts and in the circumstances, theLd. ITAT was right in law in upholding the orderof CIT(A) in deleting interest u/s 234A of theIncome Tax Act and to restrict the levy ofinterest u/s 234B of the Income Tax Act chargedLd. ITAT was right in law in upholding the orderof CIT(A) in deleting interest u/s 234A of theIncome Tax Act and to restrict the levy ofinterest u/s 234B of the Income Tax Act charged 2. 3. by the Assessing Officer even though in thecharging of interest u/s 234A and 234B ismandatory in nature and is contrary to thedecision of the Hon'ble Supreme Court in thecase of CIT Vs. Anjum M.H. Ghaswala & others(2001) 252 ITR 1 (SC) wherein it is held thatSections 234A and 234B are independentprovisions of the Income Tax Act and ifconditions for attracting these provisions existthe Assessing Officer shall have to levy thesame as held that the levy of interest u/s 234Aand 234B is mandatory in nature? Whether on facts and in the circumstances, theLd. ITAT was right in law in upholding the orderof CIT(A) who without prejudice to the abovehad no jurisdiction u/s 246 of the Income TaxAct, 1961 to entertain and decide an appealagainst orders u/ss 234A, 234B and 234C;more so, when the returned income wasaccepted u/s 143(3) and there was nogrievance against the order and the separateITNS 150 was prepared to calculate tax andinterest and signed by the Assessing Officer?Whether on facts and in the circumstances, theLd. ITAT was right in law in upholding the orderof CIT(A) in passing a perverse order withoutmandate in the case where the assessee could ITA No. 253 of 2015 have filed a petition u/s 154 of the Income TaxAct to the Assessing Officer instead of filing anappeal before the CIT(A), which does not lie?Whether on the facts and in circumstances ofthe case and in law, the ITAT was right in law inupholding the order of CIT(A) wherein, havingno regards to the expressions used in Section45 and Section 48 for computation of long termcapital gain arising for accruing on transfer ofcapital, the CIT(A) held that it was a conditionalsale with sales considerations not fully receivedin the F.Y. 2006-07 and, therefore, liability u/s234A, u/s 234B and u/s 234C did not arise.The order of the CIT(A) and that of ITATupholding the order of CIT(A) are perverseinasmuch as Sections 45 and 48 do notrecognize conditional sale for computation ofcapital gains, rather, that capital gains have tobe computed on considerations received oraccruing? 2.Briefly stated, the facts necessary for adjudication of theinstant appeal as narrated therein may be noticed. The assessee is anagriculturist and had filed the return of income on 10.10.2007 for theassessment year 2007-08 declaring a total income of ` 11,69,85,910/-including long term capital gain of ` 11,69,05,260/- under Section 139(1)of the Act in which the assessee had voluntarily paid interest to the tuneof ` 5,24,261/-, ` 15,72,783/- and ` 2,62,130/- under Sections 234A, 234B and 234C of the Act respectively. The case of the assessee wasselected for scrutiny and the Assessing Officer vide order dated8.10.2009 (Annexure A-I) framed regular assessment under Section 143(3) of the Act by accepting the returned income of the assessee. As aresult thereof, ITNS 150 of the Act was prepared and a demand of `91,206/- was raised due to short levy of interest under Sections 234Aand 234B of the Act. Feeling aggrieved, the assessee filed an appealbefore the Commissioner of Income Tax (Appeals) [for brevity “the CIT(A)”]. The CIT(A) vide order dated 29.4.2010 (Annexure A-II) deleted theinterest amounting to ` 5,24,261/- charged under Section 234A of theAct and ` 2,62,130/- under Section 234C of the Act and restricted theinterest of ` 5,88,244/- charged under Section 234B of the Act. Beingdissatisfied with the order, Annexure A-II, the revenue filed an appealbefore the Tribunal who vide order dated 24.12.2014 (Annexure A-III)upheld the order of the CIT(A) and dismissed the appeal. This gave riseto the revenue to approach this Court by way of instant appeal. 4.Learned counsel for the revenue submitted that the firstappeal under Section 246 of the Act was not maintainable against thechargeability of interest under Sections 234A, 234B and 234C of the Actparticularly when the returned income was accepted under Section 143(3) of the Act and there was no grievance against the order and theseparate ITNS 150 was prepared to calculate tax and interest. It wasfurther urged that the CIT(A) and the Tribunal were not justified indeleting the interest under Sections 234A and 234C of the Act and inrestricting the interest charged under Section 234B of the Act. 5.After hearing learned counsel for the revenue, we do notfind any merit in the appeal. 6.In this appeal, two issues arise for consideration of thisCourt, namely, (i) Whether the CIT(A) was well within his jurisdiction toentertain the first appeal under Section 246 of the Act against thechargeability of interest by the Assessing Officer under Sections 234A,234B and 234C of the Act; and (ii) Whether the CIT(A) and the Tribunalwere justified in deleting the interest under Sections 234A and 234C ofthe Act and in restricting the interest charged under Section 234B of theAct. 7.Adverting to issue No. (i), it may be noticed that the questionregarding maintainability of appeal under Section 246 of the Act againstorder charging interest passed by the Assessing Officer under the Actwas considered by the Apex Court in Central Provinces Manganese 6.In this appeal, two issues arise for consideration of thisCourt, namely, (i) Whether the CIT(A) was well within his jurisdiction toentertain the first appeal under Section 246 of the Act against thechargeability of interest by the Assessing Officer under Sections 234A,234B and 234C of the Act; and (ii) Whether the CIT(A) and the Tribunalwere justified in deleting the interest under Sections 234A and 234C ofthe Act and in restricting the interest charged under Section 234B of theAct. 7.Adverting to issue No. (i), it may be noticed that the questionregarding maintainability of appeal under Section 246 of the Act againstorder charging interest passed by the Assessing Officer under the Actwas considered by the Apex Court in Central Provinces Manganese Ore Co. Ltd. v. CIT (1986) 160 ITR 961. It was observed that the levy ofinterest is the part of the process of assessment. Although Sections 143and 144 of the Act do not specifically provide for the levy of interest but itis nevertheless a part of the process of assessing the tax liability of theassessee. The Supreme Court held that since levy of interest is a part ofthe process of assessment, it could be challenged in appeal provided theassessee disputes the chargeability of interest on the ground that he isnot liable to the levy of interest at all. It was clarified that where theassessee claims waiver or reduction of the interest levied, that could notbe agitated in appeal under Section 246 of the Act but moreappropriately by resorting to revisional jurisdiction of the Commissioner.It was further observed that before the revisional jurisdiction of theCommissioner can be invoked for waiver or reduction, the assessee isrequired to demonstrate before the Assessing Officer that there is a casefor waiving or reducing the levy of interest. 8.Applying the aforesaid authoritative principles of lawenunciated by the Apex Court, the appeal filed by the assessee layingchallenge to the very levy of interest under Sections 234A, 234B and234C of the Act before the CIT(A) was clearly maintainable. 9.Similar contention raised by the revenue before the Tribunalagainst maintainability of appeal before the CIT(A), against levy ofinterest under Sections 234A, 234B and 234C of the Act, was repelledwith the following observations:- “12.We have occasion to go through the decision ofHon'ble Supreme Court in the case of CentralProvince Manganese Ore Co. Ltd. vs. CIT (1986) 160ITR 961 (SC) on an identical issue. The issue raisedbefore the Hon'ble Supreme Court was as to whetherorders levying interest under sub-section (8) ofsection 139 and under sec. 215 are appealable undersec. 246 of the Act. Hon'ble Supreme Court afterdetailed discussion has been pleased to hold that thelevy of interest is part of the process of assessment.Although Sections 143 and 144 do not specificallyprovide for the levy of interest and the levy is, in fact,attributable to sec. 139(8) or section 215, it isnevertheless a part of the process of assessing thetax liability of the assessee. It was held that, in asmuch as, the levy of interest is the part of the processof assessment, it is open to an assessee to disputelevy in appeal provided he limits himself to the groundthat he is not liable to the levy at all. The fact of that case before the Hon'ble Supreme Court is akin to thefact of the present case as in the present case as wellthe assessee in their first appeals had limitedthemselves to the grievance of non-leviable of interestunder Sections 234A, 234B and 234C of the Act at all.The contention of the assessee was that the chargingof interest under Sections 234A, 234B and 234C wasnot proper and justified in view of the facts andcircumstances of the case as only 20% of the salesconsideration was received prior to the end of therelevant financial year and balance 80% was receivedin the next financial year. Without prejudice to thisground, the assessee during the course of firstappellate proceedings also raised an additionalground that the assessee company could be fastenedwith the levy of interest to the extent of 20% only, i.e.the amount received by the assessee in the relevantfinancial year. Obviously, it was an alternative ground.The main contention as discussed above of theassessee remained that it was not liable to the levy ofinterest under Sec. 234A, 234B and 234C of the Act.Thus, respectfully following the ratio laid down by theHon'ble Supreme Court in the above cited case, wehold that the first appeal against the levy of thedisputed interest under Sec.234A, 234B and 234Cwas very much maintainable under sec. 246 of theAct. Hon'ble Supreme Court has been also pleased to observe that clause (c) of sec. 246 provides anappeal against an order where the assessee denieshis liability to be assessed under the Act or againstany assessment order under sub-section (3) ofsections 143 or 144, where the assessee objects tothe amount of income assessed or to the amount oftax determined or to the amount of loss computed orto the status under which he is assessed. Inasmuchas, the levy of interest is part of the process ofassessment, it is open to an assessee to dispute thelevy in appeal provided he limits himself to the groundthat he is not liable to the levy of interest at all. Theissue is thus decided in favour of the assessee. Inresult, ground No.2 involving the issue is rejected.” 10.Learned counsel for the revenue was unable to demonstratethat the approach of the Tribunal was erroneous or perverse in anymanner. Issue No.(i) is, thus, decided against the revenue. 11.Regarding issue No. (ii), the Tribunal has noticed that as theassessee had paid due taxes within 4 days of the receipt of the chequein the month of September, 2007 and filed the return voluntarily, thus, theCIT(A) had rightly held that interest under Section 234A of the Act be notcharged for the reasons that the sale was conditional sales which was tobe completed only after the realization of the last cheque and thusconsiderations were beyond the control of the assessee. Further,interest under Section 234B of the Act was also restricted by directingthe Assessing Officer to charge it only on the amount of capital gainworked out after taking sales consideration at the amount received by ITA No. 253 of 2015-9- the assessee during the financial year 2006-07 and deductingproportionate indexed cost of acquisition and allowing exemption underSection 54EC of the Act for ` 50 lacs out of the capital gain so workedout. Still further, the liability to pay interest under Section 234C of theAct qua the capital gains was held to be unwarranted in view of thespecific provisions of the Act and the CIT(A) was correct in deleting theinterest levied under Section 234C of the Act. The Tribunal hadrecorded as under:- ITA No. 253 of 2015-9- the assessee during the financial year 2006-07 and deductingproportionate indexed cost of acquisition and allowing exemption underSection 54EC of the Act for ` 50 lacs out of the capital gain so workedout. Still further, the liability to pay interest under Section 234C of theAct qua the capital gains was held to be unwarranted in view of thespecific provisions of the Act and the CIT(A) was correct in deleting theinterest levied under Section 234C of the Act. The Tribunal hadrecorded as under:- “13.Here, in the present case, it is not the case thatthe learned CIT(Appeals) has allowed the appeal ofthe assessee on the basis that in absence ofdirections in the assessment order interest under Sec.234A, 234B and 234C cannot be charged on thebasis of ITNS 150 or demand notice. Thus, there isno need to consider the arguments advanced by theparties in this regard. The learned CIT(Appeals)instead has allowed the alternative ground raisedbefore him by the assessee with the directions to theAssessing Officer to restrict the levy of interest underSection 234B of the Act on the amount of capital gainworked out after taking sales consideration at theamount received by the assessee during the financialyear 2006-07, deducting proportionate indexed cost ofacquisition and allowing exemption under Section54EC of the Act for Rs.50 lacs out of the capital gainsso worked out. Rest of the interest charged underSection 234B was directed to be deleted. As the assessee had paid due taxes within 4 days of thereceipt of the cheque in the month of September 2007and filed the return voluntarily, the learned CIT(Appeals) was of the view that interest under Section234A should not be charged for the reasons that thesales was conditional sales which was to becompleted only after the realization of the last chequeand thus considerations were beyond the control ofthe assessee. He found that the liability to payinterest under Section 234C of the Act was notwarranted in view of the specific provisions of the Actin respect of capital gains. He accordingly directed todelete the interest levied under Section 234C of theAct.” 12. 12.In view of the aforesaid findings which are not shown to beerroneous or perverse in any manner, the Tribunal was right in upholdingthe order of the CIT(A). Accordingly, no substantial question of lawarises in this appeal and the instant appeal is dismissed. (AJAY KUMAR MITTAL) JUDGE September 15, 2015(RAMENDRA JAIN) gbs JUDGE