Wp/11439/2004 Of M/S. Sanghi Polyesteres Limited v. The Commissioner Of Income Tax - Iii

THE HON'BLE SRI JUSTICE DILIP B. BHOSALEANDTHE HON'BLE SRI JUSTICE A.RAMALINGESWARA RAOWRIT PETITION No.11439 of 2004 ORDER:(Per Hon’ble Sri Justice A.Ramalingeswara Rao) Heard the learned Counsel for the petitioner and the learnedStanding Counsel for the respondents. This Writ Petition was filed for quashing the order dated 15.03.2004passed by the first respondent under Section 264 of the Income Tax Act,1961 (for short, the Act), for the assessment year 2000-2001 as contraryto Section 199 of the Act and for a consequential direction to therespondents to refund the tax deducted at source (TDS) ofRs.11,39,087/- together with applicable interest thereon. The facts of the case are that the assessee filed its return ofincome for the assessment year 2000-2001 on 30.11.2000 declaring netloss of Rs.370,28,17,200/- (including the brought forward losses). Thereturn was processed under Section 143(1) of the Act on 04.03.2002 andwhile processing the return, the TDS of Rs.11,39,087/- was not givencredit on the ground that the TDS related to the assessment year 1997-1998. The assessee filed a letter dated 01.11.2002 to the Commissionerof Income Tax under Section 264 of the Act seeking a direction to theAssessing Officer to give credit for the TDS amount of Rs.11,39,087/- inthe assessment year 2000-2001 since the Assessing Officer refused torectify the assessment and grant refund in his letter dated 05.06.2002. The Commissioner of Income Tax-III, Hyderabad, by his order dated15.03.2004 in H.Qrs.3/264(29)/2002-03, rejected the said petition on theground that the action of the Assessing Officer in not giving credit for theTDS amount of Rs.11,39,087/- was perfectly in order, as the said amountrelated to the assessment year 1997-1998 as per the certificate in FormNo.16A issued by Shaw Wallace & Co.Ltd., Calcutta and filed along withthe return of income. The Commissioner of Income Tax also noticed that the assessee was following and supposed to follow mercantile system ofaccounting and it should have calculated the interest at the rate at whichit was lent/deposited and offered the accrued interest for taxation in theassessment year in which it accrued. But, the assessee failed to do so. It was also held that the contention of the assessee that the matter wasin the Court was not a valid ground for not offering the accrued interest inthe assessment year 1997-1998. Accordingly, he rejected the petition forrevision under Section 264 of the Act. Learned Counsel for the petitioner submits that the assessment forthe year 1997-1998 was finalized without giving credit to the said TDSamount of Rs.11,39,087/- and the assessment for the year 2000-2001was processed without giving credit to the said amount. When it wasbrought to the notice of the Assessing Officer he refused to rectify theassessment and grant refund vide his letter dated 05.06.2002. Since theamount was received during the year 1999-2000 relevant to theassessment year 2000-2001, the rectification was sought but it was notdone and when the revision petition was filed before the Commissioner ofIncome Tax, he ought to have allowed the revision. Learned Standing Counsel for the respondents on the other handsubmits that the relevant period for giving credit is the assessment yearin which it was accrued, but not the accounting year in which it wasreceived. Learned Standing Counsel also submits that against theassessment made for the year 1997-1998 the petitioner preferred anappeal on the above ground under Section 154 of the Act and the samewas rejected and it has become final. We have perused the order passed by the Commissioner of IncomeTax-III, Hyderabad. The revision petition of the assessee was rejectedby the Commissioner of Income Tax-III, Hyderabad, with the followingobservations:- “The revision petition has been posted for hearing on Learned Standing Counsel for the respondents on the other handsubmits that the relevant period for giving credit is the assessment yearin which it was accrued, but not the accounting year in which it wasreceived. Learned Standing Counsel also submits that against theassessment made for the year 1997-1998 the petitioner preferred anappeal on the above ground under Section 154 of the Act and the samewas rejected and it has become final. We have perused the order passed by the Commissioner of IncomeTax-III, Hyderabad. The revision petition of the assessee was rejectedby the Commissioner of Income Tax-III, Hyderabad, with the followingobservations:- “The revision petition has been posted for hearing on 28.10.2003. In response to this Sri S.Brij Kumar, C.A., learnedAuthorised Representative of the petition is present and he is heard. The assessee’s petition for revision u/s.264 has been given carefulconsideration. From the records it is noticed that the return for theassessment year 2000-01 was processed u/s.143(1) of the I.T.Act on04.03.2002 wherein credit for TDS of Rs.11,39,087/- was not given as itrelated to the asst.year 97-98. The action of the Assessing Officer isperfectly in order as the TDS of Rs.11,39,087/- relates to the asst.year97-98 as per the certificate in Form No.16A issued by Shaw Wallace &Co.Ltd., Calcutta and filed along with the return of income. Theassessee is following and supposed to follow mercantile system ofaccounting. Where an assessee is following mercantile system theassessee should have calculated the interest at the rate at which it waslent/deposited and offered the accrued interest for taxation in the asst.year in which it accrued. The assessee failed to do so. Further, theassessee is not allowed to change its method of accounting as andwhen it wishes and suits to its requirements. The assessee’s contentionthat the matter was in the court is not a valid ground for not offering theaccrued interest in the asst. year 97-98. Therefore, the action of theAssessing Officer in not allowing credit for the TDS of Rs.11,39,087/- inthe asst. year 2000-01 is in accordance with the provisions of theI.T.Act.” Learned Counsel for the petitioner does not dispute that the relevantperiod for filing the credit is the period of accrual of interest, but not theaccounting year in which it was received. The interest accrued duringthe assessment year 1997-1998 and when TDS was not shown for theyear 1997-1998 and assessment was completed, the assesseechallenged the same and it was rejected. The assessee cannot ask forrectification of assessment for the year 2000-2001, though the TDScertificate was received by it on 06.01.2000. The Commissioner rightlycame to the conclusion that the rectification filed by the assessee andrejected by the Assessing Officer was not relevant for the assessmentyear 2000-2001 and it related to the assessment year 1997-1998. Though the learned Counsel for the petitioner relied on a decision ofthe Gauhati High Court in Assistant Commissioner of Income Tax v. Om Prakash Gattani[[1]], and submits that though the interest on depositaccrued during the assessment year 1997-1998, since the certificate wasissued at a later point of time, the credit ought to have been given for the assessment year 2000-2001, we find no force in the said contention,since the said decision relates to the deduction of tax at source and theliability of the person in not depositing the amount after deducting the taxat source. In the present case the assessee is supposed to claimdeduction during the relevant year of accrual of interest but claimedduring the accounting year in which it was received. Thus, the facts ofthe said case are distinguishable. Accordingly, we find no error in theorder passed by the first respondent and consequently the Writ Petitionis liable to be dismissed. The Writ Petition is, accordingly, dismissed. The miscellaneouspetitions pending, if any, shall stand closed. There shall be no order asto costs. ______________________ (DILIP B. BHOSALE, J) assessment year 2000-2001, we find no force in the said contention,since the said decision relates to the deduction of tax at source and theliability of the person in not depositing the amount after deducting the taxat source. In the present case the assessee is supposed to claimdeduction during the relevant year of accrual of interest but claimedduring the accounting year in which it was received. Thus, the facts ofthe said case are distinguishable. Accordingly, we find no error in theorder passed by the first respondent and consequently the Writ Petitionis liable to be dismissed. The Writ Petition is, accordingly, dismissed. The miscellaneouspetitions pending, if any, shall stand closed. There shall be no order asto costs. ______________________ (DILIP B. BHOSALE, J) ________________________________ (A.RAMALINGESWARA RAO, J) 19.01.2015 vs [1](2000) 242 ITR 638 (Gauhati)