TaxTMI 
TaxTMI 
2003 (7) TMI 62
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.... under section 143(1), the assessee preferred a rectification application before the Assessing Officer which was dismissed by him on January 16, 2001. He held that there is no mistake apparent on the face of the record and the Assessing Officer had jurisdiction to make such adjustment in the computation of interest in exercise of his jurisdiction under section 143(1)(a) of the Act. The appeal filed by the assessee before the Commissioner of Income-tax (Appeals) was dismissed on November 2, 2001. We may notice here that no controversy arises before us in respect of variation made in the computation of interest under section 234B. Only the issue with respect to addition on account of interest computation under section 234C of the Act survives. The assessee's contention in that regard has been, firstly that the Assessing Officer was not justified in making such recomputation of interest chargeable under section 234C on the basis of different interpretation of law. Making such addition is outside the purview and scope of the power vested under section 143(1) of the Act. On the merits, it was contended that the provisions of section 234C were inserted by the Act of 1987, wit....
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.... assessee that the Assessing Officer was not justified in charging interest for the period prior to the date the liability to tax arose. It held that on reasonable interpretation of law, the assessee was liable to pay interest only for one month during which advance tax was not paid in respect of capital gains which had arisen after March 15, 2000. With this finding the appeal of the assessee was allowed. Under the aforesaid circumstances, this appeal has been preferred by the Revenue. While admitting the appeal, the following question was framed as a substantial question required to be considered in this appeal: "Whether, on the facts and in the circumstances of the case, the holding of the Income-tax Appellate Tribunal is incorrect in law that the interest is payable only for one month on account of non-payment of instalment of advance tax on the capital gain which has arisen after March 16, 2000, whereas the entire advance tax due on such capital gain was not deposited by March 31, 2000, and is contrary to the provision of section 234C(1)(b) of the Act ?" The Tribunal has traced the long journey of amendment of section 143(1). It shows that the endeavour has been made f....
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.... made in the return or not and vice versa to disallow any allowance or relief claimed in the return, which on the basis of the information available in the accounts and documents was "prima facie" inadmissible. Under section 143(1)(b), the Assessing Officer was further enabled to make adjustment by giving due effect to the allowance referred to in sections 32, 32A, 33, 33A, 35A, 350, 36, 72, 73, 74 and 74A and 80(5), which all related to the claims to deduction on account of depreciation, investment allowance, development rebate or development allowance and certain other specified deductions enumerated in provision referred to in section 143(1)(b) including claims to set off and carry forward of losses or unabsorbed specified deduction. A significant consequence was that prior to the amendment with effect from April 1, 1971, the order passed under section 143(1) was a final assessment order and the remedy available to the Revenue was by way of having recourse to the revision of the order by the Commissioner under section 263 or the Assessing Officer could take recourse to initiate proceedings for reassessment subject to satisfaction of pre-conditions and before the period of lim....
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....on under section 154. The term assessment was also not assigned to the adjustment made under section 143(1) but was simply described as intimation. The only remedy made available against intimation issued under section 143(1) and demand raised in pursuance of such intimation was to apply for rectification under section 154. The provisions of appeal against such intimation did not find place on the statute book until section 46 was amended vide Finance Act of 1994, with effect from June 1, 1994. Under the provisions which came into force with effect from April 1, 1989, the scope of adjustment was further limited by restricting it to adjust arithmetical errors, in the computation of loss to be carried forward, deduction, allowance or relief which on the basis of the information in such return, accounts or documents is prima facie admissible but which is not claimed in the return to be allowed and conversely any loss, deduction or allowance claimed in the return which on the basis of the information available in such return accounts or documents is prima facie inadmissible is disallowed. There was no room for determining any debatable issue at any stage of making adjustment for com....
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....remain outstanding on such computation or order refund, of the amount if any, which is found to have been paid in excess of tax and other dues payable on such income under the Act. The question of any determination as to the liability of interest on the tax otherwise than as per the claims made by the assessee is not within the scope of sub-section (1) of section 143 as it has come into force with effect from April 1, 2000, and governs the assessment proceedings for the assessment year 2000-2001. However, it is apparent that the Assessing Officer has indulged in determination of a question of law as to what ought to be the liability of the interest in respect of capital gains which has been earned after the last date for the payment of the last of the instalments of advance tax, by interpreting section 234C This exercise in our opinion apparently could not fall within the exercise of calculation envisaged under sub-section (1) of section 143 with effect from April 1, 2000. There is no room for determining any disputed or debatable question or undertaking any interpretative exercise while computing the tax or interest payable on the basis of the information emanating from retu....
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....may notice that the Finance Minister in his speech while introducing the Finance Bill, 1999, along with the memorandum explaining the amendment in direct taxes in the Finance Bill, 1999, had given indication that provision enabling the Assessing Officer to make prima facie adjustment and the provision for levy of additional tax on any such additional demand raised on the basis of such adjustment was to spare the time and to utilise other important work which has not been properly understood by the Revenue. authorities and has given rise to more litigation than to save. The following explanation while proposing to amend section 143 circulated by the Central Board of Direct Taxes is relevant : "46.2 It is seen that the present system of prima facie adjustments has become some sort of assessment in itself where every return is examined minutely and such adjustments are also open to appellate remedy. Most of the time of the Assessing Officer is utilised in processing the returns in the above manner leaving very little time for thorough investigation and other important activities. The ever increasing number of returns resulting from the drive to widen the tax base may make it mor....
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....fficer had no authority to make such adjustment to interest statutory provision and on which possibly two opinions can exist. Such issues can be determined only under section 143(3) and not under section 143(1). Therefore, it was beyond the jurisdiction of the Assessing Officer to have increased the interest liability by deciding the question of extent of interest chargeable on capital gains accruing after 15th March, 2000, unilaterally without notice to the assessee. This issue in our opinion notwithstanding noticed by the Tribunal, has not been decided by it at all but has been examined on the arguability of the issue of the liability to pay interest under section 234C of the Act. It must be noticed that exercise of jurisdiction which clearly did not vest in the assessing authority in determining the liability to pay interest for a period otherwise than what was admitted by the assessee was a question related to jurisdiction and if the jurisdiction has been exercised apparently on wrong premises, it becomes a mistake apparent on the face of the record liable to be rectified and such issue could have been decided by recourse to the regular assessment proceedings. The Tribuna....
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.... aspect also and do not consider it proper to pursue the assessment proceedings de novo and leave this case again to go through the same process. The Tribunal too has decided the appeal on the merits of the issue. The rival views of the Revenue as well as the assessee have been noticed above. It will be relevant to notice here the provisions of section 234C to find an answer. Section 234C as it prevailed during the relevant assessment year 2000-01 reads as under: "234C Interest for deferment of advance tax. -(1) Where in any financial year, (a) the company which is liable to pay advance tax under section 208 has failed to pay such tax or- (i) the advance tax paid by the company on its current income on or before the 15th day of June is less than fifteen per cent. of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of September is less than forty-five per cent. of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of December is less than seventy-five per cent. of the tax due on the returned income, then, the company shall be liable to pay simple interest at the rate of on....
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....t and the machinery for assessment can be put into action. It is to make bridge between the taxing event and the collection of tax on being determined through the assessment so that the flow of tax to the public exchequer remains uninterrupted, it was devised that every assessee periodically pay estimated tax on such income earned during the previous year. Provision for advance tax has been made in Part C of Chapter XVII, which provides for collection and recovery of tax under section 207, and creates a liability for payment of advance tax when it says that the tax shall be payable in advance during any financial year in accordance with the provisions of sections 208 to 219 in respect of the total income of the assessee which would be chargeable to tax for the assessment year, immediately following the financial year. Section 208 provides that advance tax shall be payable during a financial year in every case where the amount of such tax payable during that financial year as computed in accordance with the provisions of Chapter XVII is Rs. 5,000 or more. This limit has been altered from time to time. Apparently, this requires calculation of current income periodically during ....
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....liability to tax as per return the provision for payment of interest on shortfall in payment of advance or excess payment of advance tax has also been made. The difference of advance tax and the actual tax liability as per return results either because the assessee has paid less tax than what becomes payable by him on his income earned during the previous year as per his own showing or the assessee may have paid more amount than what is payable by him on the basis of the return submitted by him after the previous year ended. It is for this deficient or excess payment of tax, provision has been made in the Income-tax Act, both for payment of interest by the Government to the assessee on the excess advance tax paid by the assessee than his tax liability as well as interest to be paid by the assessee to the State for shortfall in advance tax. Section 214 of Chapter XVII mandates the Central Government to pay simple interest at the rate, which has been varied from time to time, from the first day of the next financial year to the date of regular assessment for the assessment year immediately after the financial year. Likewise, an assessee is required to pay interest with effect f....
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....e estimated at any given point of time up to that period, the income which accrues or arises on completion of a particular transaction only and not out of any current or regular activity, obviously cannot be the subject matter of estimate before the event actually occurs. Considering the impossibility for the assessee or the Assessing Officer to estimate any income arising out of any particular transaction which has not occurred or come into existence, a proviso has been made to sub-section (1) of section 234c. It provides that the provision relating to the liability on the basis of difference between the tax payable on the returned income and advance tax paid on assessment will not apply to any shortfall in the payment of tax on the basis of the returned income where such underestimate or failure to estimate the amount of capital gains, and the assessee has paid the whole of the amount of tax payable in respect of income referred to in clause (a) or clause (b), as the case may be, had such income been a part of the total income, as part of the remaining instalment or instalments which are due, or where no such instalment is due, by the 31st day of March of the financial year. A....
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.... no deficit amount can be determined in respect of advance tax payable on the current income on the 15th September. Likewise, if no capital gains have arisen prior to the 15th March of any financial year, as in the present case, the assessee had no liability to include the same in the computation of current income on that date and to pay tax in respect of such income with last instalment due on the 15th March. Therefore, he has no occasion to make payment of any advance tax on such part of the income during the previous year. To collect tax even on such taxing event which occurred after the 15th March, the proviso to section 234C envisages that, the assessee pay advance tax in respect of such capital gains earned by the 31st March. However, it does not result in creating any obligation to pay advance tax on any capital gains prior to the date it accrues. The provision relating to payment of advance tax and consequence of non-payment or deficient payment has to be considered compendiously as part of one wholesome scheme and not divorced from each other. In the aforesaid backdrop, it is reasonable to construe the provisions of this nature where interest is chargeable on delayed or....