TaxTMI 
TaxTMI 
2021 (9) TMI 556
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....her on the facts and in the circumstances of the case, no interest can be charged even for the period subsequent to the introduction of Section 234D merely on the ground that said section was introduced by Finance Act, 2003 with effect from 01.06.2003? and 3.Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that interest levied under Section 234D of the Income Tax Act cannot be charged for the assessment year 2001-02 especially when the assessment order was made after introduction of the said Section?" 3.When the matter came up for admission before the Division Bench, to which one of us (TSSJ) was a party, the substantial questions of law were re-framed by order dated 21.03.2014. For better appreciation, we quote the operative portion of the order hereunder:- "2.It is seen from the narration of the facts that originally as per the proceedings under Section 143(1) of the Income Tax Act, 1961, the assessee was granted refund of a sum of Rs. 27,53,15,828/-. However, there afterwards, the assessment was taken up for scrutiny and the same was completed under Section 143(3) of the Act resulting in additi....
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....bmitted that even though Explanation (2) inserted w.e.f. 1.6.2003, may apply to the assessment year 2001- 02, yet, considering the facts prevailing herein Section 234D itself would not be of any assistance to the Revenue to levy interest. He submitted that the said Section would have relevance only to a case of regular assessment. The assessee's case herein relates to an assessment order under Section 143(3) r/w 147 of the Act. Hence, the said Section would not apply to the proceedings under Section 147 of the Act. 8.We find that the said issue was not raised or considered before the Tribunal The assessee's appeal before the Tribunal was allowed going by the provisions of 234D as it then stood, where the order therein was made on 11.08.2011 and the Tribunal confirmed the order passed by the Commissioner of Income Tax (Appeals). Thus even though the insertion of Explanation (2) to Section 234D would be of relevance to the assessment herein as the Explanation itself was introduced w.e.f. 1.6.2003 under Finance Act, 2003, the question as to whether the provisions would be applicable to the proceeding under Section 147 of the Act was not raised or considered in the con....
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....by Ms.Madhunika Varadarajan, learned counsel counsel for the respondent-assessee. 7.The facts, which are necessary for deciding the above substantial questions of law are culled out as hereunder:- 7.1.The assessee, the United India Insurance Company Ltd., filed its return of income income on 31.10.2001, declaring a total loss of Rs. 91,70,56,335/-. The assessment was completed under Section 143(3) on 31.03.2004. Subsequently, notice was issued under Section 148 of the Act on 28.03.2008, informing the assessee that the Revenue proposes to reopen the assessment and calling upon the assessee to file its return of income pursuant to the notice issued under Section 148 of the Act. The assessee by letter dated 27.04.2008, requested the original return filed on 31.10.2001 to be treated as a return in response to the notice under Section 148 of the Act. Subsequently, notice under Section 143(2) was issued and thereafter, the assessee sought for reasons for reopening and the reasons were furnished and there was change of jurisdiction and ultimately, the assessment was completed by order dated 26.12.2008, under Section 143(3) read with Section 147 of the Act. There was an order of rect....
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....ssessment is made for the first time under Section 147 or Section 153A, the assessment so made shall be regarded as a regular assessment for the purposes of Section 234D of the Act. 8.5.Explanation (2) has been inserted for the removal of doubts and it has been declared that the provisions of Section 234D shall also apply to an assessment year commencing before the 1st day of June, 2003 if the proceedings in respect of such assessment year is completed after the said date. 8.6.Explanations (1) and (2) were inserted by Finance Act, 2012 with retrospective effect from 01.06.2003. Thus, the issue, which was before the CIT(A) and the Tribunal, which was the basis for the assessee to succeed, does not any longer survive on account of the provisions being given retrospective effect and admittedly, the assessment having been passed after 01.06.2003, Section 234D would stand attracted. But the only important a shuttle distinction in the case on hand is that whether the assessment, which has been completed on 26.12.2008, is an assessment made for the first time under Section 147 of the Act and if it is so, can it be regarded as a 'regular assessment'. 8.7.'Regular asses....
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....dgment reads as follows:- "9.Sub-section (40) of section 2 defines "regular assessment". According to the aforesaid section, at the relevant time, any assessment made under section 143 or section 144 of the Act is regarded as regular assessment. However, section 215 of the Act with effect from 1-4-1985 by way of amendment by Taxation Laws (Amendment) Act, 1984 (for short the "Amendment Act") has brought about important changes in the scheme of interest by the assessee. After the aforesaid amendment, sub-section (6) of section 215 provides that where in respect to an assessment year, an assessment is made for the first time under section 147, the assessment so made would be regarded as a regular assessment for the purposes of this section and sections 216, 217 and 273. 10.Firstly, taking up the case that an assessment had been framed in response to the return filed on 31-8- 1988, then it is manifest that first or initial assessment made by the Assessing Officer would be treated as regular assessment and in that situation assessment in pursuance to re-assessment proceedings cannot be termed as "first assessment" and does not come within the meaning of the expression....
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....egular assessment' would mean the 'first assessment'. 11.The learned counsel for the respondent-assessee placed reliance on a decision of the Vishakapattinam Bench of the Tribunal in Dredging Corporation of India Ltd. vs. Assistant Commissioner of Income-tax, Circle 3(1), Visakhapatnam [(2011) 13 taxmann.com 37 (Visakhapatnam)]. In the said case, the assessee was given a refund of Rs. 11.02 Crores while processing the return under Section 143(1). In the assessment order passed under Section 143(3), the refund amount was determined of Rs. 11.08 Crores. In the reassessment proceedings under Section 147, the refundable amount got reduced to Rs. 8.75 Crores. The Assessing Officer levied interest on the sum of Rs. 2.33 Crores which became collectable under Section 234D of the Act. The assessee challenged the said order before the Commissioner (Appeals), who held that interest was not chargeable in the hands of the assessee-company in re-assessment proceedings. The Revenue was on appeal before the Tribunal and the Tribunal held as follows:- "5.3.The second issue in "Other grounds" raised by the revenue in assessment year 2006-07 relates to the chargeability of int....
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....the sub-section (1) of section 234D: "234D(1) Subject to the other provisions of this Act, where any refund is granted to the assessee under sub-section (1) of section 143 and - (a) no refund is due on regular assessment; or (b) the amount refunded under subsection (1) of section 143 exceeds the amount refundable on regular assessment, the assessee shall be liable to pay simple interest at the rate of one - half per cent on the whole or the excess amount so refunded, for every month or part of a month comprised in the period from the date of grant of refund to the date of such regular assessment". On a plain reading of the above said section, we notice that the interest under section 234D is leviable only if the refund granted to the assessee under section 143(1) of the Act become collectable in the order passed under "regular assessment". The term "regular assessment" has been defined under section 2(40) of the Act as under: "(40) "regular assessment" means the assessment made under sub-section (3) of section 143 or section 144;". Under the Explanation given under section 234D the meaning of "regular assessment" is extended further as under: ....
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..... In this view of the matter, no interest under section 234D is chargeable in the appellant company's case". Accordingly we uphold the order of the learned CIT(A) on this issue. 12.The Tribunal agreed with the views expressed by the CIT(A), who held that re-assessment proceedings under Section 147 after completion of the assessment under Section 143(3) is excluded from the purview of regular assessment and taking note of the definition of regular assessment, in the facts of the said case, the assessment under Section 147 having not been made for the first time, but after the completion of the assessment under Section 143(3), the same cannot be termed as "regular assessment" and consequently, the provisions of Section 234D cannot be applied to the assessee's case. 13.We are informed that the decision in Dredging Corporation of India Ltd. (supra) has attained finality, as the research done as to whether any appeal has been preferred does not indicate the appeal to the High Court. 14.With a view to assist the Court in arriving at a correct decision on the substantial questions of law framed, Mr.T.Ravikumar, learned Senior Standing Counsel also referred to cer....
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.... years even though the regular assessments for such years were framed after 1st June, 2003 or refund was granted for those years after the said i date. This is not in conformity with the legislative intent of the provision. It is, therefore, proposed to clarify that the provisions of Section 234D would be applicable to any proceeding which is completed on or after 1st June, 2003, irrespective of the assessment year to which it pertains. This amendment will take effect retrospectively from the 1st day of June, 2003. [Clause 85]." 18.A reading of the above Memorandum shows that insertion of Explanation (2) was necessitated on account of a decision of the Court, which held that the provisions of Section 234D inserted with effect from 1.6.2003 would be applicable from the assessment year 2004-05 only and accordingly no interest could be charged for the earlier assessment years even though the regular assessments for such years were framed after 01.6.2003 or refund was granted for those years after the said date. The Memorandum would state that the said decision is not in conformity with the legislative intent of the said provision namely Section 234D....
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....ted case that the assessment of that year was completed prior to 01.6.2003 taking note of the fact that the Supreme Court held that having regard to the legal position, which has been clarified by the Parliament, by insertion of Explanation (2) to Section 234D of the Act, in the said case, where the assessment was completed prior to 01.6.2003, it was held that retrospectivity of Section 234D of the Act does not arise. The above decision would be squarely applicable to the case of the assessee, as, admittedly, the regular assessment was completed under Section 143(3) of the Act much prior to 01.6.2003 i.e. On 30.3.2001. For the above reasons, we are of the view that no interest can be charged under Section 234D of the Act for the assessment year in question. 23.In the result, the appeal filed by the assessee is allowed, the order passed by the Tribunal is set aside and the substantial questions of law are answered in favour of the assessee. No costs." 17.In CIT vs. Bishal Enterprises [(2002) 125 Taxman 52 (Madras)], the substantial question of law, which fell for consideration, was whether interest under Section 139(8) and under Section 217 of the Act is leviable in the ....