The Commissioner Of Income Tax-Ii, Jalandhar v. Ravinder Singhania

IN THE HIGH COURT OF PUNJAB AND HARYANA AT|CHANDIGARH ITA352014Date of decision:06.07.2015 The Commissioner of Income Tax-II, Jalandhar ...Appellant Versus Ravinder Singhania ...Respondent CORAMHONBLE MR. JUSTICE S.J. VAZIFDAR, ACTING CHIEF JUSTICEHON5BLE MR. JUSTICE G.S. SAANDHAWALI Present: Mr. Vivek Sethi, Advocate, for the appellant. Mr. Pankaj Jain, Senior Advocate,with Mr. Divya Suri, Advocate, ©and Mr. Deepanshu Jain, Advocate,for the respondent. 7 S.J. VAZIFDAR, A.C.J. (ORAL) This is an appeal under Section 260-A of the Income Tax Act, 1961| (in short the Act) against the order of the Tribunal in respect of the assessment year 1997-1998. 2 |The appeal is admitted on the following substantial question of law:- “O(l) Whether on the facts and in _ thcircumstances of the case, the ITAT is right inlaw in holding that interest u/s 234A and 234Bis to be levied on returned income instead ofassessed income in view of the retrospectiveamenament made by the Finance Act, 2001w.e.f. OL.04.1989?” 4.|It is not necessary to consider the other questions of law raised in this| appeal in favour of the appellant/revenue. On 14.02.2000, the Assessing Officermade an assessment order under Section 143(3) of the Act. He charged interestunder Section 234-B not on the returned income, but on the assessed income.The Supreme Court inCIT Vs Ranchi Club Ltd., (2001) 247 ITR 209 (SC)had. held that interest was chargeable on the returned income and not on the assessed income. The respondent filed an appeal before the CIT (Appeals). TheCIT (Appeals) directed interest to be charged on the returned incomepresumably in view of the judgement of the Supreme Court. | A |By the Finance Act, 2001 Section 234-B was amended with)retrospective effect from 01.04.1939. By this amendment, interest was.chargeable on the assessed income. The constitutional validity of thisamendment has been upheld by a Division Bench of this Court inRaj KumarSingal Vs Union of India [2002] 255 ITR 561 (P&H)_A Division Bench of thisCourt inParkash Agro Industries Vs Dy. Commissioner ofIncome Tax, (2009)316 ITR 149 (P&H)has answered the question in favour of the department. Itwas held that in view of the amendment by the Finance Act of 2001, interest ischargeable on the assessed income and not on the returned income. Thequestion on which the appeal has been admitted must, therefore, be answered infavour of the appellant. | 5.|It is not necessary to go into the question as to whether theCIT (Appeals) had the power to rectify the order dated 23.02.2001 in exerciseof powers under Section 154 of the Act in view of the subsequent proceedings.In view of the subsequent proceedings, that issue has become academic. Thefacts in this regard are as follows:-| On 02.05.2001, the Assessing Officer applied for/recommended the|rectification of the order dated 23.02.2001 in view of the Finance Act, 2001.On 04.05.2001, the department filed an ITA-194-2001 against the order of theCIT (Appeals) dated 23.02.2001. On 06.12.2001, the CIT (Appeals) rectifiedthe order dated 23.02.2001 by levying interest on the assessed income and noton the returned income. The respondent/assessee had also filed an appealagainst the order dated 06.12.2001. The Tribunal by an order dated 25.08.2006 disposed of the appeals|filed by both the parties, inter alia, by remanding the same to theCIT (Appeals). The CIT (Appeals) ultimately by an order dated 22.03.2010held that interest would be chargeable on the assessed income and not on thereturned income. This was a common order in both the proceedings, namely, inthe appeal that had been filed by the assessee before the CIT (Appeals) inwhich the original order dated 23.02.2001 was passed and in the rectificationproceedings initiated under Section 154 of the Act. The Tribunal by an order dated 25.08.2006 disposed of the appeals|filed by both the parties, inter alia, by remanding the same to theCIT (Appeals). The CIT (Appeals) ultimately by an order dated 22.03.2010held that interest would be chargeable on the assessed income and not on thereturned income. This was a common order in both the proceedings, namely, inthe appeal that had been filed by the assessee before the CIT (Appeals) inwhich the original order dated 23.02.2001 was passed and in the rectificationproceedings initiated under Section 154 of the Act. 6.|In view of the judgements of this Court, we have referred to, the)question of law must be answered in favour of the department. It is notnecessary to consider whether the proceedings under Section 154 of the Actwere maintainable or not for the simple reason that the main issue, namely,Whether interest was chargeable on the returned income or on the assessedincome had to be decided by the CIT (Appeals) in the subsequent proceedingswhich included the appeal filed by the appellant. It cannot be disputed that theCIT (Appeals) had not only the jurisdiction, but the obligation to decide thisissue in the assessee’s appeal. — 7.|The Tribunal, however, set aside the order of the CIT (Appeals) by|the impugned order dated 19.08.2013. We are bound by the decision of thisCourt in Parkash Agro Industries Vs Dy. Commissioner of Income Tax (supra).which has answered this question in favour of the appellant. © 8S.Mr. Jain, learned senior counsel appearing on behalf of the)respondent submitted that the judgement in Parkash Agro Industries Vs Dy.Commissioner of Income Tax (Supra) 1s not applicable to the present case. Weare unable to agree. Questions (1) and (4) raised in that case read as under:- “I. Whether the appellant having paid the taxpayable as per return, to visit him with a liabilityof interest which he could not have imagined andas held in J.K. Synthetics Ltd. Vs. CTO [1994] 94 STC 422 (SC), would be asking him to do therare impossible? 4. Whether in view of the fact that the return ofthe appellant had been accepted under Section143(1) of the Act, interest could be charged evenon the basis of the amended Explanation when itspecifically defines assessed tax as the tax ontotal income determined under sub-section (1) ofSection 143 ofthe Act?” In paragraph 5, the Division Bench of this Court had in Raj Kumar) Singal Vs Union of India (supra) upheld the vires of the Finance Act, 2001. TheDIvi1sionBenchSCT|OUT.theamendmentintroducedbyFinance Act, 2001. The Division Bench reproduced the observations of thisCourt in Raj Kumar Singal’s case (supra) to the effect that by the amendedprovision the interest was leviable on the income as determined by theassessing authority minus the income on which the tax had been paid ordeducted and that the amendment was only calculated to clarify the ambiguitythat was felt in the original provision and was neither arbitrary norunreasonable. the The above questions were, therefore, answered by the Division|Bench in favour of the department and against the assessee. The judgement isapplicable to the present case. Q |The appeal is, therefore, allowed. The impugned order of the)Tribunal is set aside. The question of law is answered in favour of theappellant. 06.07.2015Amodh (S.J. VAZIFDAR)ACTING CHIEF JUSTICE (G.S. SANDHAWALIA) |JUDGE