The Short Controversy Involved In The Presentappeal And On The Question Raised Is That An Assessment v. Ranchi Club Ltd.:(2001) 247 Itr 209 And Of This Court In The Case Of Citvs. Autolite Industries Ltd.: (2002) 256 Itr 303 (Raj.),Deleted The Interest

IN THE HIGH COURT OF JUDICATURE FOR RAJASTHANBENCH AT JAIPUR DB Income Tax Appeal No.89/2006The Commissioner of Income Tax, AlwarVs. M/s. Khetan Chemicals Ltd. Date of Order :::: 10/05/2016 Hon'ble Mr. Justice M.N. BhandariHon'ble Mr. Justice J.K. Ranka Mrs. Parinitoo Jain, counsel for the appellant Mr. Anant Kasliwal, counsel for the respondent BY THE COURT (Per: Hon'ble J.K. Ranka, J.) 1.Instant appeal under Section 260A of the Income Tax Act, 1961 (for short, 'Act') is directed against theorder dt.14/09/2005 passed by the Income TaxAppellate Tribunal, Jaipur Bench, Jaipur (for short,'Tribunal'). It relates to the assessment year 1994-95. 2.Two substantial questions of law which have been raised by the Revenue read as under:- “(i) Whether the findings of the Tribunalare perverse in holding that the interestunder Section 234A and 234B are notleviable, when such charging of interest ismandatory as per the statute ? (ii) Whether under the facts andcircumstances of the case the Tribunal wasjustified in deleting the interest chargedunder Section 234A and 234B on the basisthat no specific directions were given bythe AO whereas such interest wasdetermined in the notice of demand raisedunder Section 156 which formed the part ofassessment order ?” 3.We have heard counsel for the parties finally at this stage with their consent. 4.The short controversy involved in the presentappeal and on the question raised is that an assessment order was passed by the Assessing Officer (for short,'AO') on 26/03/2002 computing taxable income atRs.45,64,267/-. The AO has observed in the concludingportion “Assessed. Issue necessary forms. Initiatepenalty proceedings u/s. 271(1)(c) separately.” Ademand notice being income tax computation form(ITNS 150) was also annexed to the assessment order bywhich the AO levied interest under Section 234A atRs.94,480/- and interest under Section 234B atRs.45,35,040/- . Apart from the additions made in theassessment order, the assessee also objected to levy ofinterest under Section 234A and 234B as aforesaidbefore the learned Commissioner of Income Tax(Appeals) (for short, 'CIT(A)'). The CIT(A) in so far as theinterest is concerned, deleted the interest on thepremise that in the assessment order there was nodirection relating to charging of interest under Section234A and 234B and placing reliance on the judgment ofthe Apex Court in the case of CIT Vs. Ranchi Club Ltd.:(2001) 247 ITR 209 and of this Court in the case of CITVs. Autolite Industries Ltd.: (2002) 256 ITR 303 (Raj.),deleted the interest. 5.The Revenue assailed the same before the Tribunalwho in the light of the aforesaid judgments in the caseof CIT Vs. Ranchi Club Ltd. (supra) and CIT Vs. AutoliteIndustries Ltd. (supra) dismissed the departmental appeal. 6.Learned counsel for the Revenue contended thatthe AO had observed in the assessment order aboutissuing necessary forms which contained calculation ofinterest leviable on the assessee on account of thedelayed filing of the return or/and non-payment ofadvance tax and once necessary form in the shape ofthe Income Tax Computation Form (ITNS 150),admittedly is accompanied with the assessment orderbeing served on the assessee, the Tribunal erred incoming to the said conclusion. She contended that it isnot necessary that there should be an order in theassessment order about charging of interest whenadmittedly the form (ITNS 150) contained thecalculation and charge of interest and the same was inthe nature of levy of interest though separatelycomputed. In this regard, she relied upon the judgmentsrendered by the Apex Court Court in the case ofKaranvir Singh Gossal Vs. Commissioner of Income-Taxand another: [2012] 349 ITR 692 (SC) where the ApexCourt has held that levy of interest is mandatory andcompensatory in nature. 7.On the contrary, learned counsel for therespondent-assessee vehemently contended that hugeamount of interest has been levied which is unjust andthere ought to have been a specific direction to charge in the assessment order itself. Merely mentioning thatissue necessary forms is not sufficient to confer aliability fastened on the assessee and there ought tohave been a satisfaction of the AO to levy interest in theassessment order itself. Form ITNS-150 cannot be said tobe an order by the AO. He contended that the ApexCourt in the case of CIT Vs. Ranchi Club Ltd. (supra) andthis Court in the case of CIT Vs. Autolite Industries Ltd.(supra), has also taken into consideration this very issueand contended that the order of the Tribunal is just andproper and is not required to be interfered with. 8.We have considered the arguments advanced bycounsel for the parties and have perused the orders andthe judgments cited. 9.In our view, Form ITNS-150 dt.26/03/2002 whichaccompanied the assessment order and had been dulyserved on the assessee alongwith the assessment order,clearly reveals that the same is duly signed by the AOafter it was prepared and checked by two lower officialsand apart from levy of tax payable, indicates “interestpayable by/payable to the assessee under Section 234Aat Rs.94,480/- Section 234B at Rs.45,35,040/- of theAct and the amount payable under the said provisionswere clearly mentioned. Admittedly, this form ITNS-150forms part of the assessment order and by this formalone, the assessee came to know about levy of interest which was challenged by the assessee in appeal. It is notthe case that the assessee was unaware of levy ofinterest through the accompanying form ITNS-150. In ourview, the judgment of the Apex Court in the case ofKalyankumar Ray Vs. The Commissioner of Income Tax:AIR 1992 (SC) 159, is squarely applicable where similarcontroversy was raised in as much as in that case alsothe assessment order did not contain any direction andthe Apex Court repealing the contention of the assessee observed as under:- ““The statute does not, however, requirethat both the computations (i.e. of the totalincome as well as of the sum payable) shouldbe done on the same sheet of paper, thesheet that is superscribed assessmentorder”. It does not prescribe any form ofthe purpose. It will be appreciated that oncethe assessment of the total income iscomplete with indications of the deductions,rebates, reliefs and adjustments available tothe assessee, the calculation of the net taxpayable is a process which is mostlyarithmetical but generally time consuming.If, therefore, the I.T.O. first draws up anorder assessing the total income andindicating the adjustments to be made,directs the office to compute the taxpayable on that basis and then approves ofit, either immediately or some time later,no fault can be found with the process,though it is only when both the computationsheets are signed or initialled by the I.T.O.that the process described in S. 143(3) willbe complete.” 10.From reading of the above, it is clear that form ITNS -150 as also the form for determination of the taxpayable, when it is signed or initialed by the AO, it is anorder in writing by the AO determining the tax payable so also interest leviable. The Apex Court in the aforesaidjudgment in the case of Kalyankumar Ray Vs. TheCommissioner of Income Tax (supra) further observed as under:- “We are unable to see why this document,which is also in writing and which hasreceived the imprimatur of the I.T.O.,should not be treated as part of theassessment order in the wider sense inwhich the expression has to be understoodin the context of S. 143(3). There is nodispute in the present case that the I.T.O.has signed the form I.T.N.S. 150. We,therefore, think that the statutory provisionhas been duly complied with and that theassessment order was not in any mannervitiated.” so also interest leviable. The Apex Court in the aforesaidjudgment in the case of Kalyankumar Ray Vs. TheCommissioner of Income Tax (supra) further observed as under:- “We are unable to see why this document,which is also in writing and which hasreceived the imprimatur of the I.T.O.,should not be treated as part of theassessment order in the wider sense inwhich the expression has to be understoodin the context of S. 143(3). There is nodispute in the present case that the I.T.O.has signed the form I.T.N.S. 150. We,therefore, think that the statutory provisionhas been duly complied with and that theassessment order was not in any mannervitiated.” 11.In the case of Karanvir Singh Gossal Vs. Commissioner of Income-Tax and another (supra), theApex Court had simply held that interest under Section234B/234C is mandatory in nature and once it ismandatory, the AO need not specifically recite in theorder of assessment. The Apex Court took intoconsideration the judgment relied upon by counsel forthe respondent in the case of CIT Vs. Ranchi Club Ltd.(supra). 12.The Apex Court in the case of Commissioner ofIncome Tax Vs. Anjum M.H. Ghaswala and others: (2001)252 ITR 1 examined the character of interest payableunder the provisions of Section 234A, 234B and 234C andopined that interest for default in furnishing the returnof income, default in payment of advance tax and interest for deferment of advance tax is mandatory innature. It would be appropriate to quote theobservations made by the Apex Court which reads ad-infra:- “Nextly, the Commission has elaboratelydiscussed the object of introduction ofChapter XIX-A in the Act, the history behindtheintroductionandschematicrationalisation of the provisions of ChapterXIX-A brought about through the FinanceAct, 1987, to hold that in exercising itspower under Chapter XIX-A it has almost anunbridled power to arrive at a settlement.This exercise of purposive interpretation bylooking into the object and scheme of theAct and the legislative intendment wouldarise, in our opinion, if the language of thestatute is either ambiguous or conflicting orgives a meaning leading to absurdity. We donot find any such problem in the provisionsof the Act to which we have alreadyreferred. Sections 234A, 234B and 234C inclear terms impose a mandate to collectinterest at the rates stipulated therein. Theexpression “shall” used in the said sectioncannot by any stretch of imagination beconstrued as “may”. There are sufficientindications in the scheme of the Act to showthat the expression “shall” used in sections234A, 234B and 234C is used by theLegislature deliberately and it has not leftany scope for interpreting the saidexpression as “may”. This is clear from thefact that prior to the Amendment broughtabout by the Finance Act, 1987, theLegislature in the corresponding sectionpertaining to imposition of interest used theexpression “may” thereby giving a discretionto the authorities concerned to eitherreduce or waive the interest. The changebrought about by the Amending Act (FinanceAct, 1987) is a clear indication of the factthat the intention of the Legislature was tomake the collection of statutory interestmandatory.” took into consideration the amendment made by theFinance Act, 1987 where the word “shall” wassubstituted by the word “may” in Section 234A, 234Band 234C of the Act and such a substitution clearlyindicates that the intention of the legislature was tomake the payment of interest mandatory in nature andnot merely directory. took into consideration the amendment made by theFinance Act, 1987 where the word “shall” wassubstituted by the word “may” in Section 234A, 234Band 234C of the Act and such a substitution clearlyindicates that the intention of the legislature was tomake the payment of interest mandatory in nature andnot merely directory. 14.The Apex Court yet again, in the case ofCommissioner of Income-tax, Delhi Vs. BhagatConstruction Co. (P) Ltd. [2015] 60 Taxman.com 334(SC), wherein it was an admitted position that theassessment order passed by the Assistant Commissionerof Income Tax, New-Delhi did not contain any directionfor the payment of interest and the Apex Court takinginto consideration the judgment rendered in the case ofKalyankumar Ray Vs. The Commissioner of Income Tax(supra), observed as under:- “We are of the view that the facts of thepresent case are squarely covered by thedecision contained in Kalyankumar Ray'scase (supra) inasmuch as it is undisputedthat Form I.T.N.S. 150 contained acalculation of interest payable on the taxassessed. This being the case, it is clear thatas per the said judgment, this Form must betreated as part of the assessment order inthe wider sense in which the expression hasto be understood in the context of Section143, which is referred to in Explanation 1 toSection 234B. This being the case, we setaside the judgment of the High Court andallow the appeal of the Revenue.”The Apex Court in the aforesaid case, considered the judgment relied upon by the Tribunal in the case ofCIT Vs. Ranchi Club Ltd. (supra) and distinguishing thejudgment of CIT Vs. Ranchi Club Ltd. (supra), it wasobserved as under:- “The Supreme Court judgment in the RanchiClub Ltd.'s case (supra), is a one line orderwhich merely states:- “We have heard learned counsel forthe appellant. We find no merit in theappeals. The civil appeals aredismissed. No order as to costs.” The High Court judgment which wasaffirmed by this Court as aforesaid arose inthe context of a challenge to the vires ofSections 234A and 234B of the Act. Afterrepelling the challenge to the vires of thetwo sections, the High Court found thatinterest had been levied on tax payableafter assessment and not on the tax as perthe return. Following this Court's judgmentin JK Synthetics Ltd. v. CTO [1994] 94 STC422, the High Court held that the assessee isnot supposed to pay interest on the amountof tax which may be assessed in a regularassessment under Section 143(3) or bestjudgment under Section 144 as he is notsupposed to know or anticipate that hisreturn of income would not be accepted.The High Court further held that interest ispayable in future only after the dues arefinally determined.” 16.Gujarat High Court in the case of Assistant Commissioner of Income-tax Vs. Norma Detergent (P) ltd.: [2016] 67 taxmann.com 256 (Gujarat) has held as under:- “Considering the totality of the facts and onconjoint reading of the aforesaid provisionsof sections 143, 234B and 156 of the IncomeTax Act and when levy of interest undersection 234B of the Act is held to bemandatory and automatic, and the same ison the difference between the advance taxpaid and assessed tax and as observed 16.Gujarat High Court in the case of Assistant Commissioner of Income-tax Vs. Norma Detergent (P) ltd.: [2016] 67 taxmann.com 256 (Gujarat) has held as under:- “Considering the totality of the facts and onconjoint reading of the aforesaid provisionsof sections 143, 234B and 156 of the IncomeTax Act and when levy of interest undersection 234B of the Act is held to bemandatory and automatic, and the same ison the difference between the advance taxpaid and assessed tax and as observed hereinabove, AO has no discretion to levyany other interest other than providedunder section 234B of the Act. Thereafter,levy of interest under section 234 of the Actwould be consequential only and onlyarithmetically amount of interest isrequired to be calculated, we are of theopinion that even in absence of anydirection by the AO while passingassessment order under section 143(3) ofthe Income Tax Act, which according tounder section only for determining assessedtax, there can be demand of levy anddemand of interest under section 156 of theIncome Tax Act. It would have been adifferent fact if the AO had any discretionwith respect to rate of interest and/or tolevy any interest considering the facts andcircumstances of the case. As observedhereinabove, as such, AO had no suchdiscretion and moment he determines the“assessed tax” and on the eventuality asmentioned in section 234B, i.e, (i) anassessee who is liable to pay advance taxunder section 208 has failed to pay such tax,or, where advance tax paid by such assesseeunder the provisions of section 210 is lessthan 90% of the “assessed tax”, assesseeshall, be liable to pay simple interest at therate of 1% for every month or part of amonth comprised in the period from thefirst day of April next following suchfinancial year to the date of determinationof total income under sub-section (1) ofsection 143 and (ii) where regularassessment is made to the date of suchregular assessment, on the amount equal toassessed tax, or, as the case may be, on theamount by which advance tax paid, asaforesaid, falls short of assessed tax. Underthe circumstances and considering thesubsequent decisions of the Hon'ble SupremeCourt in the case of Anjum M.H. Ghaswala(supra) and in the case of Karanvir SinghGossal (supra), question of law posed forconsideration of this Court is to beanswered in favour of the revenue andagainst the assessee.” 17.Patna High Court in the case of Commissioner of Income-tax (I) Patna Vs. Natraj Engineers (P) Ltd.: [2016] 66 taxmann, com 48 (Patna) has held as under:- “It is further clear that both theprovisions are in mandatory terms and wouldapply automatically, as has been held by theApex Court also in the Bhagat ConstructionCo. case (supra), the moment there is anyshortfall in deposit of advance tax in termsof the provisions of Sections 234B and 234Cof the Act. Thus, we are of the view that thepresent matter is squarely covered in favourof the appellant revenue by the decision ofthe Supreme Court in Kalyan Kumar Ray'scase (supra). The first substantial questionof law is, accordingly, answered in favour ofthe Revenue and it is held that the Tribunalshould have held the computation sheet anddemand notice as integral parts of theassessment order and thus charging of theinterest was legal and valid.” 18.Taking into consideration the above judgments, 18.Taking into consideration the above judgments, this Court in the case of CIT Vs. Autolite (I) Pvt. Ltd.:256 ITR 303 (Raj.) simply followed the judgment of theApex Court in the case of CIT Vs. Ranchi Club Ltd.(supra) which has been distinguished by the judgmentsof the Apex Court itself. We have already taken in toconsideration the observations of the Hon'ble Apex Courtin the case of Commissioner of Income Tax Vs. AnjumM.H. Ghaswala and others (supra). Therefore, once theconditions of Section 234A, 234B and 234C are satisfied,in our view, the AO has no option but to charge theinterest at the rate mentioned in the said provisions.Prior to the Finance Act, 1987, Section 234A, 234B and234C of the Act had used the word “may”. However, in1987 the word “shall” was substituted from the word“may”. Therefore, since the word “may” has been substituted by the word “shall”, such a substitutionclearly indicates that the intention of the legislaturewas to make the payment of interest is mandatory innature and not more directory. Though there may notbe a direction in the assessment order to charge interestbut once admittedly ITNS 150 is part of the assessment,in our view, the argument of the counsel for theassessee that the AO must indicate his satisfaction inthe assessment order for charging interest is withoutforce. Taking into consideration the amendment madeby the Finance Act, 1987 where “shall” was substitutedby the word “may” the interest was automatic andmandatory. The assessment year involved is for a laterperiod than the amendment brought in. Therefore, wehold that the answer to the question posed by theRevenue is squarely covered by the judgments in thecase of Commissioner of Income-tax, Delhi Vs. BhagatConstruction Co. (P) Ltd. (supra); Karanvir Singh GossalVs. Commissioner of Income-Tax and another (supra);Commissioner of Income Tax Vs. Anjum M.H. Ghaswalaand others (supra) and we hold that the calculationsheet/demand notice/ ITNS 150, is integral part of theassessment order, being only arithmetical calculation,which was attached to the assessment order, charging ofinterest was mandatory, legal and valid. 19.Consequently, the appeal of the Revenue succeeds and is hereby allowed. The orders passed bythe Tribunal dt.14/09/2005 and the CIT (A) dt.21/07/2003 are quashed & set aside and the orderpassed by the AO dt.26/03/2002 is upheld. No costs. [J.K. Ranka],J. [M.N. Bhandari],J. Raghu/p.13/ Certificate:All corrections made in the judgment/order have beenincorporated in the judgment/order being e-mailed.Raghu, Sr. PA.