TaxTMI 
TaxTMI 
TaxTMI 
2003 (1) TMI 285
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....f s. 69 of the Act by considering the investment in construction of house by the assessee as unexplained. 3. I have heard the parties. 4. So far as the issue relating to charging of interest under ss. 234A and 234B in all these three years is concerned, the belief facts, which are common and as have been revealed from the records are that the assessee was carrying on the business of trading in cloth under the name and style of M/s Bhawani Cloth Stores, at Mugalkhod village, Taluka Raibag, District Belgaum and was a regular assessee. However, returns for asst. yrs. 1994-95, 1995-96 and 1996-97 were not furnished as required under s. 139(1) or under s. 139(4) of the Act. The returns of income of all these three years were furnished on 31st March, 1999, in response to the notices under s. 148 of the Act issued on 11th Jan., 1999 and served upon the assessee on 18th Jan., 1999 declaring the income as detailed below: Asst. yr. Business income Income from other sources Total 1994-95 Rs. 23,082 Rs. 15,000 Rs. 38,082 1995-96 Rs. 26,027 Rs. 18,000 Rs. 44,027 1996-97 Rs. 24,092 Rs. 21,000 Rs. 45,096 The assessments for all the three assessment years were completed under s.....
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....at) 368 : (1996) 217 ITR 72 (Pat), which was the subject-matter of civil appeal at the instance of Revenue before Hon'ble Supreme Court (2000) 164 CTR (SC) 200 : (2001) 247 ITR 209 (SC), was doubted before the Division Bench by the Revenue, the Double Bench had, in terms of judgment dt. 2nd July, 1996, Uday Mistanna Bhandar & Complex vs. CIT (1997) 137 CTR (Pat) 376 : (1996) 222 ITR 44 (Pat), passed in CWJS Nos. 3287, 2732 and 2780 of 1995 (had referred the aforesaid question No. 1 for consideration of the Full Bench. Question No. 2 was framed by the Hon'ble Full Bench itself. 5.3 The learned counsel further submitted that before the Hon'ble Full Bench of Patna the counsel for the assessee had submitted that both the questions stood settled by the decision of Hon'ble Supreme Court in case of Ranchi Club Ltd. in favour of the assessee and against the Revenue, whereas the counsel appearing for the Revenue had submitted that since the Hon'ble Supreme Court had dismissed the Revenue's appeal in limine it cannot amount to affirming the law laid down by Division Bench of Patna High Court in case of Ranchi Club Ltd. case. The Revenue's counsel have further submitted that summary rejectio....
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....es. In that case, the Supreme Court upholds the decision of the High Court or of the Tribunal from which the appeal is provided under cl. (3) of Art. 133. This doctrine of merger does not apply in the case of dismissal of a special leave petition under Art. 136. When an appeal is dismissed the order of the High Court is merged with that of the Supreme Court". 5.4 The learned counsel, therefore, submitted that so far as binding nature of decision of Hon'ble Supreme Court in the case of Ranchi Club Ltd. is concerned it has the binding effect as that of a law laid down by the Hon'ble Supreme Court and consequently charging of interest under ss. 234A and 234B of the Act without there being a specific order in any of three assessment order is illegal and bad in law. 5.5 The learned counsel further tried to explain the term "order" by referring to the decision of High Court of Andhra Pradesh in State of Andhra vs. Ballam Konda Venkata Subbkahi AIR 1957 AP 462, 463 and submitted that unless there is an indication by way of some expression of opinion which is to be carried out or enforced it cannot be said that there is an order. According to him it is the, conclusion of a body upon any ....
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....order for charging the interest. In other words, had there been not specific order for charging interest under those sections it could be claimed that the AO had waived the same. According to him it was to avoid this confusion that the necessity of passing a specific order was upheld, but this is not a case for charging interest under ss. 234A and 234B of the Act. He, therefore, submitted that the decision of Hon'ble Supreme Court is not applicable to the present case. 7. I have considered the rival submissions, facts and circumstances of the case, provision of law on the issue and various decisions such as: (1) Decision of Patna High Court in Ranchi Club Ltd. vs. CIT (2) Decision of Patna High Court in (i) Uday Mistanna Bhandar & Complex vs. CIT [CWJC No. 3287 of 1995 (R)] (ii) Tej Kumari Devi (CWJC Nos. 2732 and 2780 of 1995 (R)) (iii) Ranchi Club Ltd. (CWJC Nos. 3497, 3527, 3607, 3652 and 3682 of 1994 (R)) (3) CIT & Ors. vs. Ranchi Club Ltd. (SC). Decision of Patna High Court in case of Ranchi Club Ltd. vs. CIT (Pat) and Decision of Patna High Court in case of Ranchi Club Ltd. vs. CIT (CWJC No. 3494, 3527, 3609, 3562 and 3782 of 1995 (R)--(1997) 137 CTR (Pat) 376 : (1996....
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.... interest would obviously stand. This writ petition cannot, therefore, may dismiss merely because an appeal and assessment order has been preferred have been pending as held as under: "Now the question is whether interest on the amount of tax found payable on the assessed income can be levied at this stage. From the facts mentioned hereinabove it is clear that there was no default in filing the return and payment of self-assessed/advance-tax. The notice under s. 142(1) which is said to have been not complied with leading to the levy of interest, was sent after considering the show-cause filed by the petitioner pursuant to notice under s. 147/148 in the course of scrutiny of the return under s. 143(1)(a). In the aforesaid show-cause, the petitioner had taken a specific plea as to non-includibility of the amount of "entrance fee". As a matter of fact, in the written statement filed along with return itself a firm stand had been taken in that regard. Thus, it cannot be said to be a case of suppression or concealment of income. Of course, the plea has not been accepted by the assessing authority. But this is the subject-matter of appeal. It is difficult in my view, on these facts to ....
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.... for the assessee had submitted that the common issue involved in the writ petitions were: "(i) Whether interest under ss. 234A and 234B was liable to be charged on the tax payable on the returned income or the assessed income? (ii) Whether interest was chargeable under these sections only on the tax payable on such returned income which the assessee bona fide and in good faith believed to be the income liable to tax? (iii) Whether interest could be levied merely though a notice of demand under s. 156 of the Act where there was no specific order in the assessment order that interest was leviable and for charging that interest? (iv) Whether mere insertion of the words in the assessment order "charge interest, if any" or "charge interest as per rules" was sufficient for charging interest through the notice of demand? (v) Whether appeal lay against the order for charging interest under ss. 234A and 234B of the Act?". (d) In view of above facts, the Hon'ble High Court set aside the notices of demand claiming interest under any of the ss. 234A, 234B and 234C and consequently decided the issue at serial No. (iii) and serial No. (iv) in favour of the assessee. The common issue liste....
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....ect in the assessment order, the Revenue cannot demand interest but, since by that time another Division Bench of Patna High Court while disposing writ petitions No. CWJC 2296, 1495, 1507 and 2144 of 1996 (R) CIT vs. Quality (1998) 146 CTR (Pat) 283 : (1997) 224 ITR 77 (Pat), where question of charging of interest under s. 139(8) was involved, had held that mere not mentioning of the specific provisions under which interest is charged does not go to the root of the matter and does not make the order bad, the counsel for the Revenue had relied on this decision for the proposition that chargeability of the interest flows from the statute inasmuch as s. 139(8) of the Act creates a mandate to the effect that the assessee would be liable to pay interest without any adjudication by the assessing authorities. (a)(iii). In view of above conflicting views the Hon'ble Full Bench thought it fit to formulate a second question as below: "Whether in the absence of any specific order of the assessing authorities interest could be charged and recovered from the assessee?" (a)(iv). When the Special Bench was on way to hear the reference, the Revenue's appeal before the Hon'ble Supreme Court (Civ....
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....nted. That same principle would not apply in the case where a civil appeal was dismissed by the Supreme Court holding that the appeal had no merits. Once the civil appeal was dismissed after hearing the parties that the appeal had no merits then such matter becomes one which attract Art. 141 of the Constitution which provides that the law declared by the Supreme Court would be binding on all the Courts within the territory of Supreme Court.?" (b). "Interest under ss. 234A and 234B of the IT Act, 1961, is leviable on the tax on total income as declared in the return and not on the income as assessed and determined by the assessing authorities." (c) "In the absence of any specific order of the assessing authorities interest could not be charged and recovered from the assessee". 8.1 After having considered the rival submission, facts and circumstances of the case and the aforesaid various decisions. I am of the opinion that it is now settled law that prior to omission of Expln. 4 to s. 234A, substitution of Expln. 1 to s. 234B by a new explanation with retrospective effect from 1st April, 1989, interest under ss. 234A and 234B of the Act could be charged on the tax on the total inc....
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.... in nature, as has been held by the Hon'ble Supreme Court in Ghaswala's case, there is no necessity of passing specific order by the Revenue authorities either in the assessment order (if levied at the time of assessment) or in any other order (if levied during the time of passing of order)?" 10. To decide the aforesaid question it is necessary to consider the effect of a substantive or mandatory provisions as well as the procedural provisions. 11.1 In judicial parlance substantive laws determine the rights and liabilities of the parties concerned and when these rights are sought to be exercised, substantial rights get crystallised as on the date when "a proceeding" to enforce these rights is initiated, and it is so, because, any subsequent alternation in such rights is not to effect the parties concerned, unless it is expressly or impliedly so prescribed. Same is the position of mandatory provisions. Procedural rights, on the other hand, do not get crystallised in this manner, rather crystallises on the completion of the manner in which such rights or obligation are to be enforced or realised and if there is change in procedure, it is the changed procedure which will apply. 11....
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....ecided the issue pertaining to the power of the Commission to waive or reduce the interest chargeable under ss. 234A, 234B and 234C of the Act while passing orders of settlement under s. 245D(4) of the Act. We have not decided any other issue that might arise in all the appeals/petitions". 12.2(c) Secondly, from the detailed study of the aforesaid decision of Hon'ble Supreme Court (2001) 252 ITR 1 (SC), the concept of mandatory/ substantive provisions of law and the provisions of procedural provisions, I am of the opinion that the Hon'ble Supreme Court in 252 ITR 1 (SC) has nowhere held that a levy under the mandatory provision can be recovered without passing an order for such levy and consequently, I am of the opinion that for any mandatory levy to be recovered from the subjects, there has to be a proper order for charging such levy. 13. In view of above facts and circumstances and the discussion I am of the opinion that the decision of Hon'ble Supreme Court in case of Ghaswala, has neither overruled nor changed the provisions of law held by the apex Court in case of Ranchi Club Ltd. and, therefore, the proposition of law that "Interest under ss. 234A and 234B can't be charged ....
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.... 17.1 The facts relating to the issue are that during the previous year relevant to asst. yr. 1994-95 the assessee had purchased a jeep for consideration of Rs. 50,000 and when asked to explain the source, the assessee explained that the jeep was purchased out of money provided by his brother Shri Vijay Singh L. Rajput who was carrying on separate business of stone blasting for tubewells. It was further submitted that the vehicle was mainly used by his brother for his business. The AO did not accept the explanation on the plea that "there is no proof/evidence to show that the jeep had been purchased out of money provided by his brother", and therefore, considered the investment of Rs. 50,000 as unexplained and added the same. On appeal by the assessee, the CIT(A) also confirmed the addition for want of evidence that amount was given by assessee's brother. ITA Nos. 84 & 85 for asst. yrs. 1995-96 and 1996-97 17.2 The facts, which are common for these two appeals are that the assessee had constructed a house during the financial year 1994-95 and 1995-96 for an admitted cost Rs. 1,80,000 on a plot purchased in 1995 for Rs. 45,000. In the balance sheet as on 31st March, 1996, the as....
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.... where the Hon'ble Supreme Court affirmed the order of the Kerala High Court in CIT vs. Smt. P.K. Noorjahan (1980) 15 CTR (Ker) 138 : (1980) 123 ITR 3 (Ker). On merits the learned counsel submitted that the assessee was having agriculture land measuring seven acres and, therefore, income from agriculture and from other sources should be considered as having been invested in the concerned assets. The learned Departmental Representative, on the other hand, supported the order of the CIT(A). 19. I have considered the rival submissions, facts and circumstances of the case and the decision of the Hon'ble Supreme Court in case of Smt. P.K. Noorjahan as well as provision of s. 69 of the Act with almost care. 20. So far as the assessee's plea that under s. 69 of the Act the AO has been given a discretion in the matter of treating the source of investment, which has not been satisfactorily explained by the assessee, as the income of the assessee, because of the use of word "may", I am of the opinion there is no dispute with respect to this proposition, however, the matter is to be seen with regard to the facts of each case that the AO should exercise jurisdiction for not considering unex....
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.... more. It was, in view of aforesaid findings of facts by the Tribunal, that the Hon'ble High Court as well as Hon'ble apex Court upheld the findings as well as reasoning of the Tribunal that s. 69 of the Act conforms only the discretion on ITO to deal with investment as the income of the assessee, and that it did not make it mandatory on his part not to deal with the investment as income of the assessee as soon as latter's explanation is rejected. In view of above discussion I am of the opinion that the decision relied upon by the assessee being distinguishable on facts is not applicable to the present case. 23. Coming to the merits of the additions, I am of the opinion that the assessee having failed to furnish any evidence till the stage of hearing of appeal by the Tribunal, in support of his explanation that the amount used for the purchase of jeep in asst. yr. 1994-95 and the amount used for the construction of house for asst. yrs. 1995-96 and 1996-97 came from his brother and father, respectively, no fault can be found with the order of the CIT(A) and, therefore, the same are confirmed. 24. So far as assessee's claim that income from other sources and income from agricultu....