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2023 (8) TMI 1026
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.... of the Assessee was selected for scrutiny assessment. In response to notices, the Assessee appeared and produced all books of accounts, papers & documents. In course of assessment proceedings, the Assessee voluntarily surrendered the LTCG for taxation. But the A.O added the entire receipt from sale of shares amounting to Rs. 10,45,266/- including the cost price/investment made by the Assessee amounting to Rs. 5,40,000/- as unexplained investment u/s. 69 of the Act vide its order dated 30.11.2017 passed u/s. 143 (3) of the Income Tax Act, 1961. Against which the Assessee carried the matter before the CIT(A). In the appellate proceeding, the CIT(A) upheld the action of A.O and dismissed the appeal of the Assessee. Being aggrieved by the order of CIT(A), the Assessee preferred an appeal before the ITAT, SMC Bench Ranchi and the said appeal was allowed vide impugned order dated 22.05.2019 and the AO was directed to delete Rs. 5,40,000/- out of the total addition made under Section 69 of the Act. The learned Tribunal has further directed the AO to delete the addition and charge the interest u/s. 234B of the Act on returned income instead of assessed income. 3. The instant appeal ....
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....ed ITAT has committed an error by holding that income of the past year cannot be taxed as an investment in purchase of shares during the year under consideration. 5. For the subsequent questions of law with regard to charging of interest u/s. 234 B of the Act, Mr. Sahay, counsel for the Revenue submitted that he doesn't want to press those questions of law as the same is covered by the judgment of the coordinate Bench of this Court. Since the judgment mentioned in the impugned order and referred by the learned counsel for the Revenue was of the year 2012, and the instant appeal was admitted on 03.08.2022 on aforementioned questions of law, this Court felt it necessary to ask from the officials of the Revenue as to whether they want to press the questions of law with regard to charging of interest. Thereafter, during course of proceeding the learned PCIT-Ranchi (Appellant herein), appeared before us and informed us that Mr. Rahul Lamba, who was erstwhile advocate on record in this case, but later on changed due to change in panel, has again been instructed by the Commissioner of Income Tax (PCIT) vide letter dated 05.07.2023 to put forth argument in support of contention for t....
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....come earned during assessment year 2015-16 and cannot tax the investment made in purchase of shares being income of past years. (c) On the question of 234 B, he submits that in the case of Ajay Prakash Verma this Court has held that the revenue can levy the interest only on the total income declared in the return and not on income assessed by the A.O. He further submits that against this order the revenue also filed civil review application but the same was also dismissed as such there is no error committed by the learned ITAT, as such no interference is required with the impugned judgment. 8. Having heard learned counsel for the rival parties and after going through the grounds taken by the respective counsels; at the outset it is necessary to decide the question of maintainability with regard filing of appeal being below the monetary limit. In this regard reference may be made to the circular No. 23/2019 dated 06.09.2019 (Annexure-1 to the supplementary affidavit dated 18.01.2023 filed by the Appellant). For brevity, relevant portion is extract hereinbelow: - Subject; -Exception to monetary limits for filing appeals specified in any Circular issued under Sect....
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....ssessee came to know that the said transaction is not correct and therefore to buy peace the assessee surrendered the aforesaid LTCG as income from other sources in his revised computation of taxable income. Thereafter, the A.O. issued notices u/s. 143 (3) of the I.T. Act, 1961 dated 06.12.2017 and added the entire sale consideration of Rs. 10,45,265.55/- received from sale of shares to the total income of the appellant as unexplained investment u/s. 69 of the I.T. Act, 1961. From the fact available on record, we are of the view that the A.O. should have added the Long-Term Capital Gain of Rs. 5,05,265/- only instead of Rs. 10,45,265/- being the income of the Assessee and not the entire sale receipts, which included Rs. 5,40,000/- being the investment made by the Assessee in purchase of shares, as the investment was duly shown in balance sheet of the Assessee in previous year and was made out of past earning & savings. The copy of balance sheet as on 31.03.2014 is also on record which was placed before the learned Tribunal. On perusal of the same, it reveals that Rs. 3,60,000/- and Rs. 1,80,000/- totaling to Rs. 5,40,000/- have been shown in the balance sheet in the name of Kail....
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....Hon'ble Patna High Court in the said judgment made the following finding: "From Explanation 4 appended to section 234A, quoted above, it is clear that interest is leviable on the tax on the total income "as declared in the return" and not on the total income as determined." The Hon'ble High Court in the said judgment inter alia held that the levy on interest on the assessed income under Section 234A is not justified. (iv) The said judgment of the Hon'ble Patna High Court, passed in the case of Ranchi Club Ltd v. Commissioner of Income Tax, was challenged by the Income Tax Department before the Hon'ble Supreme Court. The Hon'ble Supreme Court vide its judgment, dated 01.08.2000, passed in the case of Commissioner of Income Tax & Ors. v. Ranchi Club Ltd reported in (2013) 15 SCC 545 dismissed the said appeal preferred by the Income Tax Department vide the following order: "1. We have heard the learned counsel for the appellant. We find no merit in the appeals. 2. The civil appeals are dismissed. No order as to costs." (v) Subsequently, the Full Bench of the Hon'ble Patna High Court vide its judgment, dated 22.09.2000, passed i....
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....income remained as it was earlier when the aforementioned judgments were passed. The relevant portion of Section 234A applicable prior to the Finance Act, 2001 is reproduced herein below for ready reference: "234A. (1) Where the return of income for any assessment year under sub-section (1) or sub-section (4) of section 139, or in response to a notice under sub-section (1) of section 142, is furnished after the due date, or is not furnished, the assessee shall be liable to pay simple interest at the rate of and one-half per cent for every month or part of a month comprised in the period commencing on the date immediately following the due date, and,- (a) where the return is furnished after the due date, ending on the date of furnishing of the return; or (b) where no return has been furnished, ending on the date of completion of the assessment under section 144, on the amount of the tax on the total income as determined under sub-section (1) of section 143 or on regular assessment as reduced by the advance tax, if any, paid and any tax deducted or collected at source. Explanation 1.-In this section, "due date" means the date specified in sub-secti....
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....ere, in relation to an assessment year, an assessment is made for the first time under section 147, the assessment so made shall be regarded as a regular assessment for the purposes of this section. Explanation 3.-In Explanation 1 and in sub-section (3) "tax on the total income determined under sub-section (1) of section 143" shall not include the additional income-tax, if any, payable under section 143." (viii) Thereafter, a major amendment took place in the history of direct tax legislation, inasmuch as, the legislature, vide the Finance Act, 2001, amended Section 234A of the Income Tax Act, 1961 by deleting the aforementioned Explanation 4 to section 234A (1) with retrospective effect from 1.4.1989. Similarly, the Finance Act, 2001 also amended Section 234B of the Income Tax Act, 1961 by deleting earlier Explanation 1 to Section 234B (1) and by substituting a new Explanation with effect from 1.4.1989. (ix) Since the aforesaid amendments brought in Section 234A and 234B, subsequent to the Finance Act, 2001, the interest, both under Sections 234A & 234B, were required to be charged on the income as determined by the assessment done by an Assessi....
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....nety per cent of the assessed tax, the assessee shall be liable to pay simple interest at the rate of one and one-fourth 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 determine under sub-section-1 of section 143 or on regular assessment as reduced by the amount of tax deducted or collected at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income.] Explanation 2.-Where, in relation to an assessment year, an assessment is made for the first time under section 147, the assessment so made shall be regarded as a regular assessment for the purposes of this section. ....
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....ctively from April 1, 1989, the interest under section 234B of the Act was chargeable with reference to the total income as had been declared by the assessee in its return and not on the assessed income. Explanation l to section 234B of the Act was amended by the Finance Act, 2001. It reads thus: "Explanation 1.-In this section, 'assessed tax' means the tax on the total income determined under sub-section (1) of section 143 or on regular assessment as reduced by the amount of tax deducted or collected at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income. 9. The said Explanation was the subject-matter of challenge before this court in Raj Kumar Singul's cuse, [2002] 255 ITR 561 where the vision each while upholding the validity of the said provision, interpreted it as under (page 562): "A comparison of the two provisions shows that under the original provision interest was leviable on the income as declared in the return filed by the assessee. By the amended provision, the interest is leviable on the income as determined ....
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....turns. The relevant assessment year involved in the case of Ajay Parkash Verma (supra) was 2003-04; however, in its judgment the coordinate Division Bench did not consider the amendment, brought in Section 234A and 234B of the Income Tax Act, 1961, by way of Finance Act, 2001 which was subsequent to the said judgment of the Full Bench of Hon'ble Patna High Court passed in the case of Smt. Tej Kumani v. Commissioner of Income Tax. The relevant extract of the judgment passed by the coordinate Division Bench of this Court in the matter of Ajay Parkash Verma (supra) is reproduced herein below for ready reference: "23. Learned counsel for the appellant submitted that it has been ordered by the A.O. that interest be charged as per rule. Interest can be levied under Sections 234 A and 234 B of the Act. It is submitted that in view of the Judgment of Full Bench of Ranchi Bench of Patna High Court delivered in the case of Smt. Tej Kumari Vrs. Commissioner of Income-tax reported in [2001] 114 Taxman 404 (PAT.) (FB), the interest cannot be levied over the assessed income and it can be levied only on the income declared in the return. The revenue preferred S.L.P. before Hon'ble....
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....count in computing such total income." 11. The said provision has further been amended by the Finance Act, 2006 with effect from 1.4.2007 which however, is not relevant for ever purpose. It is evident from the aforesaid Explanation introduced by the Finance Act, 2001 that the decision of this Court as confirmed by the Apex Court in Ranchi Club Limited, will in no way be applicable to the present matter and the assessed tax on the total income determined under Section 143(1) or on regular assessment and not as computed by the assessee while paying the advance tax shall be treated as the basis for the purpose of payment of interest on advance tax paid short. In fact, there is a clear distinction made by the Income Tax Act in the provisions of Section 234B and 234C: with regard to interest under Section 234B, the calculation is to be made not on the returned income but on the tax as may be finally assessed and determined by the assessment whereas under Section 234C, what is to be determined is tax due on the returned income for the purpose of calculation of the shortfall in the advance tax paid." 14. Now the law is no more res integra regarding applicability of any provisi....
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....tion 91, on account of tax paid in a country outside India; and (vi) any tax credit allowed to be set off in accordance with the provisions of section 115JAA or section 115JD. Explanation 1.-In this section, "due date" means the date specified in sub-section (1) of section 139 as applicable in the case of the assessee. Explanation 2.-In this sub-section, "tax on the total income as determined under sub-section (1) of section 143" shall not include the additional income- tax, if any, payable under section 143. Explanation 3.-Where, in relation to an assessment year, an assessment 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 this section. A bare perusal of Section 234A shows that the interest has to be charged on the amount of the tax on the total income as determined under sub-section (1) of section 143, and where a regular assessment is made, on the amount of the tax on the total income determined under regular assessment, as reduced by the amount provided in section 234A(1) of the Act. Therefore, it is crystal clear that interest has to be c....
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....ub-section (1) of section 143" shall not include the additional income-tax, if any, payable under section 143. 16. Thus, from bare perusal of Section 234B of the Act it is crystal clear that the interest has to be charged 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. The term "assessed tax" has been defined in Explanation-1 of Section 234B (1). As per said Explanation-1 "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 the amount provided in Explanation-I to section 234B. Therefore, the interest under Section 234B has to be charged on the assessed income and not on the returned income of an Assessee. 17. At this stage, it is also pertinent to mention here that the judgment of the coordinate Division Bench of this Court rendered in the case of Ajay Parkash Verma (supra) is not binding in other cases in relation to the issue of chargeability of interest under Section 234A & 234B for the reason that in the ....
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....found, on that account to be demonstrably wrong. 68. Admittedly, the NWDT award did not provide for allotment of agricultural land to the major sons of such oustees. The States of Gujarat and Maharashtra had given concessions /relief over and above the said award. Thus, has been decided with the presumption that such a right had been conferred upon major sons by the NWDT award and has been decided following the said judgment and interpreting the definition of "family" contained in the R&R Policy. When the two earlier cases werec being considered by the Court, it had not been brought to its notice that the NWDT award did not provide for such an entitlement. In such cases, the issue is further required to be considered as to whether, as we will consider the definition of the word "family" at a later stage, the mistake inadvertently committed by this Court earlier, should be perpetuated. 69. The courts are not to perpetuate an illegality, rather it is the duty of the courts to rectify mistakes. While dealing with a similar issue, this Court in Hotel Balaji v. State of A.P. [1993 Supp (4) SCC 536 : AIR 1993 SC 1048] observed as under: (SCC p. 551, para 12) "1....