TaxTMI 
TaxTMI 
2016 (2) TMI 633
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....est in the notice under section 156 directly?" 3.00. For the sake of convenience, Tax Appeal No.321 of 2000 is considered as a lead matter and the facts in Tax Appeal No.321 of 2000 are considered, which, in nutshell, are as under : 3.01. That the Assessing Officer passed order of assessment for the year 1990-91 under section 143(3) of the Act. That while submitting original Return of Income, the assessee declared total income of Rs. 1,15,57,730/- which was subsequently revised declaring total income of Rs. 1,14,49,920/-. That the Assessing Officer finalized the assessment and assessed the income at Rs. 3,16,81,450/-. 3.02. Feeling aggrieved and dissatisfied with the order passed by the Assessing Officer, the assessee preferred Appeal before the learned CIT(A). That the learned CIT(A) partly allowed the said appeal and also observed and passed an order that so far as the charging of the interest under section 234B of the Act is concerned, the same is consequential and therefore, the Assessing Officer will recalculate the interest while giving effect to order passed by him [CIT(A)]. 3.03. That feelings aggrieved and dissatisfied with the order passed by the learned CIT(A....
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....on 234B of the Act still the assessee is liable to pay interest on the "assessed income" and therefore, while issuing notice under section 156 of the Act, interest is mandatory and automatic and the assessee is liable to pay interest. 5.02. Mr.Mehta, learned counsel appearing on behalf of the revenue has further submitted that the Hon'ble Supreme Court in the case of CIT Versus Anjum M.H. Ghaswala, reported in [2001] 252 ITR 1 and in the case of Karanvir Singh Gossal Versus Commissioner of Income Tax, reported in (2012) 349 ITR 692, has specifically observed and held that the levy of interest under section 234B of the Act is mandatory and automatic. 5.03. Mr.Mehta, learned counsel appearing on behalf of the revenue has further submitted that when once levy of interest under section 234B of the Act is held to be mandatory and automatic, same can be demanded straightway in the notice under section 156 of the Act. 5.04. Mr.Mehta, learned counsel appearing on behalf of the revenue has also relied upon the decision of the Delhi High Court in the case of Commissioner of Income Tax, Delhi-IV Versus Insilco Ltd., reported in [2010] 321 ITR 105 (Delhi). It is submitted that in ....
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....itted that as such while passing order of assessment under section 143(3) of the Act, the Assessing Officer is required to assess the income and tax payable. It is submitted that interest leviable under section 234B of the Act is on the "assessed tax" assessed while passing order of assessment under section 143(3) of the Act. It is submitted that therefore, once in the subsequent decisions Civil Suit has held that the interest is not only mandatory but is also automatic, even in absence of any specific order passed by the Assessing Officer in the order of assessment, charging interest under section 234B of the Act, assessee is liable to pay interest under section 234B of the Act. 5.11. Mr.Mehta, learned counsel appearing on behalf of the revenue has further submitted that while passing assessment order under section 143(3) of the Act, Assessing Officer is not required to compute, assess and/or determine interest. 5.12. Mr.Mehta, learned counsel appearing on behalf of the revenue has further submitted that even in section 156 of the Act wordings are "consequent of assessment order" and not "arising out of assessment order". 5.13. Mr.Mehta, learned counsel appearing on behal....
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....] decided two Civil Appeals i.e. Civil appeal No.10360 of 1998 and Civil Appeal Nos.145 to 149 of 1997. It is submitted that the aforesaid appeals arose out of the revenue's appeal against the order passed by the Patna High Court in the case of Rachi Club Ltd. (supra) [222 ITR 44 (Patna)]. It is submitted that the Patna High Court in the case of Rachi Club Ltd. (supra) decided the question of levy of interest to find place in the assessment order itself. It is submitted that even in the subsequent decision, the Patna High Court in the case of Tejkumari reported in 247 ITR 210 also recorded the aforesaid facts and also put note of earlier decision in the case of Rachi Club Ltd. (supra) (222 ITR 44). It is submitted that in the subsequent decision in the case of Tejkumari reported in 247 ITR 210, the Full Bench of the Patna High Court also put note of the dismissal of the Civil Appeal by the Hon'ble Supreme Court, which was against the decision of the Division Bench in the case of Rachi Club Ltd. reported in 222 ITR 44. It is submitted that the Full Bench of the Patna High Court in the case of Tejkumari (supra) has specifically observed that the issue is already concluded by the ....
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....on'ble Supreme Court in the case of Anjum M. H. Ghaswala (supra) shall not be applicable to the facts of the case on hand, more particularly with respect to the issue / question involved in the present appeals and as such it does not lay down any contrary view than the law laid down by the Hon'ble Supreme Court in the case of Rachi Club Ltd. (supra). It is submitted that as such no contrary view has been taken by the Hon'ble Supreme Court to that of the view taken in decision in the case of Rachi Club Ltd. (supra) while deciding the question in Anjum M. H. Ghaswala (supra). 6.04. Mr.Soparkar, learned advocate appearing on behalf of the assessee has submitted that the Hon'ble Supreme Court in the case of Anjum M. H. Ghaswala (supra) has decided the order of the Settlement Commission comprising of 7 members of the Commission, which held that the Commission is vested with the power to waive or reduce interest chargeable under section 234A, 234B and 234C in the cases pending before it for the Assessment year 1989-90 and onwards. It is submitted that the Settlement Commission further held that the aforesaid powers can be exercised by any of the Benches constituted to ....
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....ssee has drawn attention of the Court to the following decisions of the Allahabad High Court, Himachal Pradesh High Court, Uttarakhand High Court and Gujarat High Court :- (1) Commissioner of Income-tax Versus Deep Awadh Hotels (P. Ltd.) - 351 ITR 185 (para 5 to 12); (2) Dehradun Club Limited - 351 ITR 296 (Uttarakhand) (para 7 to 17); (3) Ruchira Papers Ltd. - 259 CTR 692 (Himachal Pradesh) (para 17 and 18) and (4) S.K. Patel Family Trust - 251 CTR 427 6.07. Mr.Soparkar, learned advocate appearing on behalf of the assessee has further submitted that at the time when this Court decided the case in the case of S.K. Patel Family Trust (supra), though judgement in the case of Anjum M. H. Ghaswala was very much available by that time, it was rightly not pointed out by the revenue and not examined by the Bench, the same being not relevant to the issue in hand. 6.08. Mr.Soparkar, learned advocate appearing on behalf of the assessee has further submitted that reasons on merits why above High Courts have held the issue in favour of the assessee is that even if any provision of law is mandatory and provides for charging for tax or interest, the view....
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....Singh Gossal (supra) which has been heavily relied upon by the learned advocate appearing on behalf of the revenue, is throughly misplaced. It is submitted that the decision of the Hon'ble Supreme Court in the case of Karanvir Singh Gossal (supra) shall not be applicable with respect to the question raised in the present appeals. It is submitted that the Hon'ble Supreme Court in the case of Karanvir Singh Gossal (supra) was seized with the question as to "Whether levy of interest under section 234A/B is mandatory or not? It is submitted that before the Hon'ble Supreme Court there was no question that if the interest under section 234A/B could be levied vide notice of demand under section 156 of the Act in absence of any levy in the assessment order. It is submitted that hence the ratio decidendi in the case of Karanvir Singh Gossal (supra) is not relevant to the controversy at hand. 6.11. Mr.Soparkar, learned advocate appearing on behalf of the assessee has further submitted that even the observations made by the Hon'ble Supreme Court that "There was no need for the Assessing Officer to specifically recite in the order of assessment that penalty proceedings shoul....
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....mitted that even the interpretation of sections 143(3) and 156 of the Act show that the income, loss and the sum payable by the assessee on the basis of such assessment needs to be determined at the stage of assessment under section 143(3) of the Act only. It is submitted that notice under section 156 of the Act is a procedural requirement to let the assessee know that the demand is now raised upon him. It is submitted that notice per-se is not a charging provision but a procedural provision. It is submitted that words "in consonance of any order" clearly suggests that the notice of demand does not levy / charge any tax. It is submitted that it is only that a liability to pay tax arises at the time of service of notice. The quantum of such liability is determination by an order only. That the notice perse does not increase or decrease the quantum of liability that is found in the order. 6.15. It is submitted that, therefore, before any interest is demanded while issuing notice under section 156 of the Act, reference of charging interest under section 234B of the Act is sine qua non in the order of assessment. It is further submitted that even in the latest judgement of the Hon&#....
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....ered, which are as under : "Section 234B. Interest for defaults in payment of advance tax. (1) Subject to the other provisions of this section, where, in any financial year, an assessee who 15 liable to pay advance tax under section 208 has failed to pay such tax or, Where the advance tax paid by such assessee under the provisions of section 210 is less than ninety per cent of the assessed tax, the assessee shall be liable to pay simple interest at the rate of [one per cent.] for every month or part of a month comprised in the period from the 1st day of April next following such financial year [to the date of determination of total income under sub-section (1) of section 143 [and where a regular assessment is made, to the date of such regular assessment, on an amount]] equal to the assessed tax or, as the case may be, on the amount by which the advance tax paid as aforesaid falls short of the assessed tax. [Explanation 1. In this section, "assessed tax" means the tax on the total income determined under sub-section (1) of section 143 and where a regular assessment is made, the tax on the total income determined under such regular assessment as reduced by ....
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....ection (1) following the date of such regular assessment]] and ending on the date of the reassessment or re-computation [under section 147 or section 153A], on the amount by which the tax on the total income determined on the basis of the reassessment or re-computation exceeds the tax on the total [income determined under sub-section (1) of section 143 or on the basis of the regular assessment aforesaid.] (4) Where, as a result of an order under section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount on which interest was payable under sub-section (1) or subsection (3) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and-- (i) in a case where the interest is increased, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly; (ii) in a case where the interest i....
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....such return; (ii) in respect of which the information required to be furnished under this Act to substantiate such entry has not been so furnished; or (iii) in respect of a deduction, where such deduction exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction; (b) the acknowledgment of the return shall be deemed to be the intimation in a case where no sum is payable by, or refundable to, the assessee under clause (c), and where no adjustment has been made under clause (a). *(1A) For the purposes of processing of returns under sub-section (1), the Board may make a scheme for centralised processing of returns with a view to expeditiously determining the tax payable by, or the refund due to, the assessee 35 required under the said sub-section. +(1B) Save as otherwise expressly provided, for the purpose of giving effect *0 the scheme made under subsection (1A), the Central Government may, by "Notification in the Official Gazette, direct that any of the provisions of this Act relating to processing of returns shall not apply or shall apply with such exceptions, modifications and a....
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....able by the assessee on the basis of such assessment; (ii) issued under clause (ii) of sub-section (2), or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing Officer shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessment] [Provided that in the case of a- (a)[research association] referred to in clause (21) of section 10; (b) news agency referred to in clause (ZZB) of section 10; (c) association or institution referred to in clause (23A) of section 10; (d) institution referred to in clause (23B) of section 10; (e) fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (V) or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (via) of c....
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....e first proviso to clause (15) of section 2 become applicable in the case of such person in such previous year, whether or not the approval granted to such trust or institution or notification issued in respect of such trust or institution has been withdrawn or rescinded.] [(4) Where a regular assessment under sub-section (3) of this section or section 144 is made,- (a) any tax or interest paid by the assessee under sub-section (1) shall be deemed to have been paid towards such regular assessment; (b) if no refund is due on regular assessment or the amount refunded under sub-section (1) exceeds the amount refundable on regular assessment, the whole or the excess amount so refunded shall be deemed to be tax payable by the assessee and the provisions of this Act shall apply accordingly." ""Section 156. Notice of demand. - When any tax, interest, penalty, fine 01' any Other sum [***] is payable in consequence of any order passed under this Act, the [Assessing Officer] shall serve upon the assessee a notice of demand in the prescribed form specifying the sum so payable: [Provided that where any sum is determined to be payable by the asse....
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....d to hereinabove, which are relied upon by the learned counsel appearing on behalf of the assessee. However, it is true that the SLP preferred against the decision of the Patna High Court in the case of Rachi Club Ltd. (supra) has been dismissed by the Hon'ble Supreme Court. It is also required to be noted at this stage that some of the High Courts in the cases referred to hereinabove have simply followed the decision of the Patna High Court in the case of Rachi Club Ltd. (supra). However, it is required to be noted that the decision of the Hon'ble Supreme Court in the case of Rachi Club Ltd. (supra) is a decision of bench of Hon'ble Three Judges, however, the decision of the Hon'ble Supreme Court in the case of Anjum M.H. Ghaswala (supra) is decision of a bench consisting of Hon'ble Five Judges. It is also required to be noted that even the Hon'ble Supreme Court in the case of Karanvir Singh Gossal (supra) also took note of its earlier decision in the case of Rachi Club Ltd. (supra). Therefore, while deciding the question posed for consideration before this Court, the binding decisions of the Hon'ble Supreme Court in the case of Anjum M.H. Ghaswala (supra) and ....
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....mandatory and compensatory in nature. Therefore, as observed by the Hon'ble Supreme Court in the aforesaid decisions that once the levy of interest under section 234B is mandatory and recitation by the A.O. directing institution of penalty proceedings is not obligatory and penal proceedings could be initiated for such default without any specific direction from the A.O. In view of the above, the substantial question of law posed for consideration of this Court is required to be considered. 7.09. On conjoined reading of sections 143, 24B and 156 of the Income Tax Act and the Scheme of the Income Tax Act, it can be said that after the return is filed by the assessee under section 139 or in response to the notice under subsection (1) of section 142, such return shall be processed in the manner provided under section 143(1). That thereafter A.O. is required to process the return considering sub-section (2) of section 143. That thereafter, A.O. is required to pass final order of assessment determining the sum payable by the assessee on the basis of such assessment. 7.10. Section 234B provides levy of interest for defaults in payment of advance tax. Section 234B provides that s....
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.... 234B of the Act is held to be mandatory and automatic, and the same is on the difference between the advance tax paid and assessed tax and as observed hereinabove, A.O. has no discretion to levy any other interest other than provided under section 234B of the Act. Thereafter, levy of interest under section 234 of the Act would be consequential only and only arithmetically amount of interest is required to be calculated, we are of the opinion that even in absence of any direction by the A.O. while passing assessment order under section 143(3) of the Income Tax Act, which according to under section only for determining assessed tax, there can be demand of levy and demand of interest under section 156 of the Income Tax Act. It would have been a different fact if the A.O. had any discretion with respect to rate of interest and/or to levy any interest considering the facts and circumstances of the case. As observed hereinabove, as such, A.O. had no such discretion and moment he determines the "assessed tax" and on the eventuality as mentioned in section 234B, i.e. (i) an assessee who is liable to pay advance tax under section 208 has failed to pay such tax, or, where advance tax paid b....