TaxTMI 
TaxTMI 
2016 (8) TMI 82
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....l hearing for the AYs. 2005-06, 2008-09 & 2009-10 giving the dates of filing the returns, incomes returned, dates of order u/s. 143(1), date of Notice u/s. 153A and details of returns filed in response thereto and the date of order u/s. 143(3) r.w.s. 153A and r.w.s. 245D(4). For the sake of convenience, we deal with the facts relating to the AY. 2005-06. AY. 2005-06: 4. During the year under consideration, assessee filed its return on 03-01-2006 declaring an income of Rs. 69,17,240/-. After the return was processed u/s. 143(1), the intimation was received on 24-03-2006. For the shortfall of the advance tax paid, the AO charged an amount of Rs. 50,132/- as interest u/s. 234B of the Act. No scrutiny was taken up for this year. There was a search and seizure operation in the premises of the assessee and its sister concerns on 08-09-2010, consequent to which, a notice u/s. 153A was issued on 06-01-2011 to the erstwhile firm of M/s. Maheswari Brothers. The return was filed on 21-08-2012 in response to such Notice, declaring a total income of Rs. 2,07,10,115/-. Assessment was taken up in the FY. 2012-13. When the scrutiny assessment was in progress, an application u/s. 245D was fil....
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....isions of section 147 or section 153A, it would nevertheless have to be reckoned as a regular assessment. On the facts of the present case, the issue for determination is simple enough to be answered in yes/no terms. Was the assessee subjected to a regular assessment before issuance of notice u/s 153A? No. Is the order dt.03.12.2013 u/s 143(3) r.w.s 153A the first instance of scrutiny, with due process in terms of sec 143(2), etc ? Yes. In terms of the aforesaid Explanation 2, therefore, it is a self-evident proposition that this order is a 'regular assessment' and not a 're-assessment'. The time period for interest calculation under sec 234B cannot therefore, be anything other than what is spelt out in sub-section 1. To do otherwise would be to attribute redundancy to Explanation 2 . 08.2 The act of reading constituent parts of a section together is an obvious requirement. To posit an argument that it can be otherwise is a logical fallacy. To reiterate this position can hardly be construed as an act of interpretation, much less elaborate argument. On the contrary, not to do so would be perverse. The Assessing Officer also relied on a decision of the Madras High ....
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....r sub section 3 turned on the question whether the assessment order in question was an order of assessment or an order of re-assessment. As noticed hereinabove, this is plain enough to be answered in Yes/No terms. 08.5 While the specific facts of the case are more important than legal precedents, especially when they are clear enough to settle the impugned matter, several legal precedents, nevertheless, bear to be noticed, because of the light they shed on the jurisdictional scope of sec 154. When a statutory provision was lost sight of, the matter was an error apparent from the record, liable to be rectified, as held in the case of India Woollen Textile Mills Pvt Ltd vs CIT, 111 ITR 205[P&H]. In the case of CIT vs Mc Leod & Co, 134 ITR 674[Cal] it was held that where misreading a section resulted in a wrong view being taken and a wrong calculation being made, the provisions of section 154 are attracted. In the case of Dr Rajah Sir M.A. Muthaiah Chettiar (decd) by LR vs CIT, 238 ITR 505 [Mad], it was held that if the effect of the rectification is to make the assessment conform to the substantive law, the rectification is correct. It followed the proposition enunciated in CIT vs....
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....boration, in writing. The intimation u/s 143(1), even where adjustments are made u/s. 143(1)(a), can never be considered as an assessment. This is a distinction judicially noticed in several cases, in varying contexts - Hilltop Holdings India Pvt Ltd vs CIT & Ors, 278 ITR 501[Cal]; Tata Metaliks vs CIT, 368 I1R 643[Cal]; CIT vs Ravindran Prabhakar, 326 ITR 363[Mad]; Rajendra Prasad &Co vs CIT, 52 ITO 142[Pat]; CIT vs Orient Craft Ltd, 354 ITR 536[Del]; Airune Financial Services (India) Pvt Ltd, 36 DTR 30, ITAT[Mum], etc. It would appear from the above that the clarification supplied via Explanation 2 is nothing but a reiteration of the scheme of things in the Act as noticed above. 08.7 In the above light of the matter, the ground fails and is dismissed". 6. Before us, Ld. Counsel for assessee submitted that, the CIT(A) felt that the scheme of the Act for charge of Interest U/s. 234B is clear and no case law is required to understand these provisions. No doubt the scheme of the Act in this regard is clear but the CIT(A) has misconstrued the provisions relating to the calculation of Interest U/s.234B as envisaged in the section. It was felt that Explanation-2 under sub-section(....
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....est at the rate of [one] per cent for every month or part of a month comprised in the period commencing on the day following [the date of determination of total income under sub-section(1) of section 143 [and where a regular assessment is made as is referred to in sub-section(1) following the date of such regular assessment]] and ending on the date of the reassessment or recomputation 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 recomputation exceeds the tax on the total income determined [under sub-section(1) of section 143 or on the basis of the regular assessment aforesaid. " This is because, as in the case of the assessee, if the reassessment U/s.147/153A is preceded only by an Intimation U/s.143(1), the determination of Interest U/s.234B, as understood by the CIT(A), will be from 1st of April, ignoring the date of determination U/s.143(1). If the reassessment is preceded by an Intimation U/s.143(1) and a subsequent scrutiny assessment, the Interest U/s.234B should be calculated from the date of scrutiny assessment. In either case, the above underlined clauses in subsection (3) of Secti....
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.... in so far as Interest U/s.234B for any shortfall of advance tax in a reassessment U/s.147/153A is to be calculated from 1st of April of the relevant assessment year. The proposition put forth by the CIT(A) is obtained in the amended sub-section(3) of Section 234B. If this position is obtainable even before the amendment, this amendment is not necessary. This amendment also makes it very clear that the proposition put forth by the assessee under the un-amended provisions is correct. The relevant portions of the Notes on the clauses in the Finance Bill, 2015, available in 371 ITR Page No.272 is as under: "The existing provisions contained in sub-section(3) of the said section provides that where the total income is increased on reassessment under section 147 or section 153A, the assessee shall be liable for interest at the rate of one per cent on the amount of the increase in total income for the period commencing from the date of determination of total income under sub-section(1) of section 143 or on regular assessment and ending on the date of reassessment under section 147 or section 153A. It is proposed to amend sub-section(3) of the said section so as to provide that the ....
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.... 43,78,865 2008-09 1,00,06,397 2009-10 32,23,815 Subsequently, AO noticing that interest has to be levied under Sub-section (1) of Section 234B, he modified the levy of interest u/s. 234B considering the order passed on 03-12-2013, as 'first assessment' order and levied the following amounts in the impugned orders u/s. 154. He levied the interest from the first day of the assessment year till the date of the order ie upto 03-12- 2013. The modified interest so levied is as under: AY. (Rs) 2005-06 42,12,903 2008-09 1,35,28,878 2009-10 16,55,520 10.2. It seems there are no appeals on the consequential orders dt. 03-12-13, but the appeals were preferred only on the rectification orders passed u/s. 154. As can be seen from the above tables, the interest u/s. 234B revised in the order u/s. 154 is less than originally levied amount, in the consequential orders for AY. 2005-06 and AY. 2009-10. Only in AY. 2008-09, there is a higher levy of interest u/s. 234B. We are not sure why assessee has preferred appeals, when AO reduced the interest in AYs. 2005-06 and 2009-10 in the modification orders. 11. Be that as it may, assessee's contention is t....
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....t was elaborately explained in the Co-ordinate Bench decision in the case of ACIT Vs. Ronald Nardi [14 SOT 24 (Mumbai)], wherein it was held: "Once an order of reassessment is passed under section 143(3)/148, the original order determining the total income under section 143(1) or 143(3) or 144 gets merged with the order of reassessment for the simple reason that two orders determining the total income cannot stand together. It, therefore, logically follows that the figures of total income determined and tax, interest, etc., thereon have to be incorporated in the reassessment order passed under section 143(3)/147 and in the computation sheet accompanying therewith. if the Assessing Officer had not followed the aforesaid course of action, the total income originally determined under section 143(1) or 143(3) or 144 and tax, interest, etc., thereon would have escaped taxation. The assessee did not challenge the levy of interest under section 234B(1) as per the intimation originally issued under section 143(1). The Assessing Officer was, therefore, justified in incorporating the said figure of interest originally charged under section 234B(1) as per the intimation issued under sectio....
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....section 143(3)/147 on the amount by which the tax on the total income determined on the basis of the reassessment exceeded the tax on the total income determined under section 143(1)". 13. The Hon'ble High Court of Karnataka in the case of Sri Vijay Kumar Saboo (HUF) Vs. ACIT, Bangalore [201 Taxman 366 (Karnataka)] has held that interest u/s. 234B(3) is attracted in the case of re assessment completed and AO is bound to give a finding whether it is an order made for the first time u/s. 147 or it is a case of re-assessment or re-computation u/s. 147. It was held that in a case where there is determination of tax u/s. 143(1) or where regular assessment order is passed u/s. 143(3), then, order passed u/s. 147 is treated as an order of re-assessment or recomputation and in such case, interest u/s. 234B is leviable not from the first day of April next following such financial year, but from the date of determination of tax u/s. 143(1) or order of regular assessment u/s. 143(3). The Hon'ble High Court in the above referred case Vijay Kumar Saboo (HUF) Vs. ACIT, Bangalore [201 Taxmann 366 (Karnataka)](supra) has held as under: "A harmonious reading of entire section 234B mak....
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....herefore, the interest was to be calculated from 24-6-1991, the date on which determination of tax was made under section 143 (1)(a). To that extent, the order passed by the authorities was illegal and required to be set aside". 14. Similar view is also held by the Hon'ble High Court of Kerala in the case of CIT(Central), Cochin Vs. B. Lakshmikanthan [198 Taxman 485 (Ker)], wherein on a similar case as that of assessee where proceedings u/s. 153A were initiated, it was held that: "There was no substance in the contention raised by the revenue that in a reassessment completed under section 153A interest for nonpayment or short payment of advance tax was payable under section 2348(3) merely because the said reassessment under section 153A was completed by accepting the return filed under section 143(1). Interest for non-payment or short-payment of advance tax is payable under section 2348 for different periods under sub-sections (I) and (3) of the said section. In all cases of regular assessment completed under section 143(1), interest is to be charged for the period provided under section 2348(1). Further, if the first assessment is itself income escaping assessment made u....
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....that the assessment made on assessee was for the first time under Section 147 and on that fact the Hon'ble High Court held that interest was leviable under 234B(1). Thus, the provisions of the Act and various case law support the view that where intimation u/s. 143(1) was issued levying interest u/s 234B(1), the subsequent proceedings will attract only 234B(3) on the enhanced income/tax whereas interest levied originally u/s. 234B(1) will stand as such. Thus, interest u/s. 234B(1) is to be levied, from 1st April following the financial year till the date of processing u/s. 143(1) Us 234B(1) and then on enhanced income/enhanced tax u/s. 234B(3). Viewed in this perspective, there is no conflict in the provisions of the Act. 16. In this case, the dispute is with reference to whether the 143(1) order passed earlier is to be considered as an assessment? Ld. CIT(A) was of the opinion that 143(1) is not an assessment and is only an intimation. This view can be accepted in the context of re-opening of assessment as held by the Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers Pvt. Ltd., [291 ITR 500] or for any other provisions on assessment. For the purpose of levy ....