TaxTMI 
TaxTMI 
2008 (3) TMI 293
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....remises of the petitioner on 9^th December, 2004 and 10^th December, 2004, as a result of which certain books and papers were found and seized. The petitioners contend that their firm came in existence on 1^st May, 2002. During the search a diary relating to receipts and expenditure of the firm on its project was also seized. The entries in the diary are partly recorded in the books of accounts on the basis of which regular returns were filed. According to the petitioner as the entries in the diary, its reconciliation with books of accounts and their interpretation involved complex investigation, the petitioner approached the respondent No.1 by filing an application dated 14^th September, 2006 under Section 245C of the Income Tax Act, herei....
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....ggregate total income of Rs.51,70,820/- at Rs.18,55,032/- and paid Rs.25,59,932/- together with interest on 26^th May, 2007 i.e. well within time. A letter dated 11^th August, 2007 was sent to the Assessing Officer to that effect. 4. Prior to that the petitioner's Chartered Accountants M/s. Khandelwal Jain & Associates wrote a letter to the Respondent No.1 dated 11^th July, 2007 bringing to its notice that in view of the amendment made by Finance Act, 2007 to Section 245D (2D) there was an obligation to pay the additional tax and the interest on or before 31^st July, 2007 and that they have already paid additional tax and interest on the income declared in the settlement petition and further requested the respondent No.1 to confirm wheth....
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....itioner had disclosed the income of Rs.53,57,375/- while taxes etc., have been paid on income of Rs.51,71,070/- after adjusting not only the loss (Rs.93,112/-) of the relevant year but also the carry forward loss (Rs.93,193/-) of the preceding assessment year. The respondent No.1 held that if the carried forward loss of the earlier year is ignored then the tax paid is rendered inadequate thereby resulting in non-compliance of the provisions of Section 245D(2A) and accordingly held that the proceedings abated. 7. Reply has been filed by respondent No.3. The same objections based on which the respondent No.1 rejected the petitioners application as abated have been reiterated. 8. The questions for our consideration in this petition are:-....
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.... Explanation.—In respect of the applications referred to in this sub-section, the 31^st day of July, 2007 shall be deemed to be the date of the order of rejection or allowing the application to be proceeded with under sub-section (1)." 10. This sub-section along with some other sub-sections to Section 245D, were introduced by Finance Act, 2007 with effect from 1^st June, 2007. The judgment of the Division Bench of the Karnataka High Court is dated November 8, 2006 i.e. before the amendment. That judgment, therefore, cannot be considered while construing the provisions as amended. In our opinion considering the mandate of Section 245D(2A) the provision will have to be construed as mandatory, meaning thereby that the additional tax had t....
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....he income on which tax is payable under Section 245C read with Section 245D of the Income Tax Act. We may firstly refer to the judgment relied upon by the petitioner in the case of Commissioner of Income-tax v. Shirke Construction Equipment Ltd. (2007) 291 ITR 380 (S.C.). The Court noted that in IPCA Laboratory Ltd. v. Deputy C.I.T. [2004] 266 ITR 521 the Court had taken a view that (i) Section 80HHC of the Act is not independent of Section 80AB and would be governed by Section 80AB; and (ii) losses were to be set off against the profits earned from export of self-manufactured goods. Based on that it is submitted that while considering the income it was open to the petitioners to have set off the carry forward losses while computing the tot....
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....ld mean that the assessee while working out the total income if entitled to any deduction, would not be so entitled and because he has applied under Section 245C would have to pay the tax on income which otherwise would not have been payable. In our opinion this is not what Section 245C or for that matter Section 245D contemplates. The provisions were enacted so as to enable tax compliance so that the additional tax is paid and the party can avail of the benefits including non-prosecution. A reading of the Section cannot result in holding that if otherwise the assessee was entitled to the benefits of allowance or disallowance that cannot be considered for the purpose of working out the total income under Section 245C. 13. In our opinion ....