AI Structured Summary
Not yet generated for this judgment
Judgment
M. Katju, J.—This writ petition has been filed praying for quashing of the order dated September 7, 1998 (annexure 7 to the petition), and the demand notice dated March 30, 1995 (annexure 4 to the petition), in respect of interest under sections 234A and 234B of the Income Tax Act, 1961, and for a mandamus restraining the respondents from realising interest under those sections. It has further been prayed that the petitioners Appeal No. nil of 1995, be disposed of within a reasonable time.
Heard Sri V. B. Upadhyaya and Sri R. N. Singh, learned counsel for the petitioner, as well as learned counsel for the Department.
The petitioner is a company registered under the Indian Companies Act. It is a non-banking finance company controlled by the Reserve Bank of India. Its business is akin to that of a commercial bank and it accepts deposits, and invests the funds in hire purchase business. For the assessment year 1989-90, it filed a return showing loss of Rs. 62,510 including set-off of earlier losses of Rs. 49,113. The assessment for that year was completed on February 18, 1992, u/s 143(3) on a net loss of Rs. 7,133. A true copy of the assessment order has been annexed as annexure-1 to the petition. For the assessment year 1990-91, it showed a total loss of Rs. 46,940 and the assessment was completed on February 25, 1993. The Assessing Officer determined the income of the assessee on income of Rs. 6,74,930 after making addition of Rs. 7,08,616 and allowed absorbed loss of the previous assessment year at Rs. 49,113 creating a demand of Rs. 5,11,713 consisting of income of Rs. 4,37,355 plus interest of a sum of Rs. 43,740 u/s 234A and Rs. 30,618 u/s 234B. A true copy of the assessment order dated February 25, 1993, is annexed as annexure-2 to the petition.
The assessee filed an appeal against the assessment order dated February 25, 1993, before the Commissioner of Income Tax (Appeals) which was partly allowed vide order dated March 15, 1995, granting relief of Rs. 29,216 and directing the Assessing Officer to verify the facts of additions of Rs. 29,178 on account of accrued interest on FDRs of bank. A true copy of the order of the Commissioner of Income Tax (Appeals) dated March 15, 1995, is annexed as annexure 2 to the petition. In compliance with the order dated March 15, 1995, the Assessing Officer by the order dated March 30, 1995, granted relief of Rs. 58,533 and assessed taxable income at Rs. 6,16,400. A true copy of the order dated March 30, 1995, is annexed as annexure 3 to the petition. The Assessing Officer then issued demand notice u/s 156 along with interest u/s 220(2). The details of the same are given in paragraph 9 of the petition. A true copy of the demand notice dated March 30, 1995, is annexed as annexure 4 to the petition. The assessee company filed an appeal against the order of the Commissioner of Income Tax (Appeals) dated March 15, 1995, before the Tribunal vide annexure 5 to the petition and this appeal is still pending before the Tribunal at New Delhi.
The assessee company also moved an application u/s 154 before the Assessing Officer on December 22, 1997, for rectification of the mistake, particularly in respect of the interest on advance tax under Sec- lions 234A and 254B and also regarding interest on advance tax for changing the amount which was shown in the earlier order without giving" opportunity to the petitioner. A true copy of the said application is annexed as annexure 6 to the petition. This application was rejected on September 7, 1998, vide annexure 7 to the petition.
It is alleged in paragraph 19 of the petition that the assessee-company had filed a return showing loss, and hence in view of Clause (a) of Explanation 1 to Section 234B, the provisions of Section 234B were inapplicable and the interest charged was arbitrary and illegal.
In paragraph 20 of the petition it is alleged that since a loss return was filed for the assessment year 1990-91, there was no liability of the assessee to pay self-assessment tax or advance tax. The Assessing Officer had also not been of the opinion during the assessment year 1990-91, that the asses-see company was liable to pay advance tax, and no order in writing or notice of demand u/s 156 was issued to the assessee u/s 210(3) or (4) during the previous year relevant to the assessment year 1990-91. Hence, it is alleged that the assessee-company was not in default in payment of advance tax and was not liable to pay interest u/s 234B.
In paragraph 23 of the petition it is alleged that interest under sections 234A and 234B of the Act cannot be levied on the petitioner-assessee in view of the fact that the assessee had filed a return showing loss for the assessment year 1990-91, and the return submitted for the assessment year 1989-90 showing loss was accepted by the Assessing Officer.
In paragraph 24 of the petition it is alleged that the Assessing Officer wrongly rejected the petitioner''s application dated December 22, 1997. In paragraph 26 of the petition it is alleged that the Assessing Officer while passing the order dated March 30, 1995, had not passed any specific order regarding levy of interest under sections 234A and 234B and thus interest cannot be levied through notice of demand u/s 156. The Assessing Officer in his order dated March 30, 1995, only ordered in the last paragraph "revised accordingly. Issue fresh challan after taking into account the payment made so far. Also charge interest as per rules".
In paragraph 27 of the petition it is alleged that the notice of demand is like a decree of a civil court which must follow the order. Since the assessment order does not mention the specific amount to be charged the demand notice cannot contain such amount as it will be going beyond the assessment order. It is contended that the expression "charge interest as per rules" cannot be read to mean that the Assessing Officer has passed an order regarding charging of interest under sections 234A and 234B. A true copy of the demand notice dated February 25, 1995, u/s 156 is annexure 8 to the petition. The Assessing Officer sent notice u/s 221(1) dated December 9, 1994, on which interest payable u/s 234A was shown to be Rs. 43,740 and interest u/s 234B was shown to be Rs. 30,618. A true copy of notice dated December 9, 1994, is annexed as annexure 9 to the petition.
In paragraph 30 of the petition it is alleged that in the demand notice dated March 30, 1995, the amount of interest is shown to be Rs. 2,79,580. The Assessing Officer has rectified the interest u/s 234B in purported exercise of power u/s 154, but the Assessing Officer did not provide any opportunity to the petitioner before rectification of the said mistake, which was a mandatory requirement u/s 154(3) and hence it is illegal.
In paragraph 38 of the petition it is alleged that the order in respect of interest under sections 234A and 234B is not appealable and hence it can only be challenged in writ jurisdiction in this court.
A counter affidavit has been filed.
In paragraph 4 of the same it is admitted that the assessment for the year 1989-90 was completed at a net loss of Rs. 7,133.
In paragraph 5 of the same it is alleged that the return for the assessment year 1990-91 was belated. In paragraph 10 of the same it is stated that rectification u/s 154 was made on September 7, 1998, as there was a mistake while revising the assessment. In paragraph 13 it is stated that for the assessment year 1990-91, the assessee filed a loss return but his assessment was made on a total income of Rs. 6,74,930, the details of which have been given in paragraph 13. In paragraph 14 of the same it is stated that since the return was filed on May 7, 1991, belatedly the action in charging the interest was correct. In paragraph 22 of the same it is stated that the Assessing Officer rightly charged interest under sections 234A and 234B.
A rejoinder affidavit has also been filed and we have perused the same.
Learned counsel for the petitioner has relied on the decision of the Supreme Court in CIT v. N. D. George Polous [1998] 231 ITR 504 in which it has been held that an assessee is not under an obligation to file an estimate of advance tax for the assessment years 1967-68 and 1968-69 as it had been previously assessed at nil assessment for the assessment year 1965-66. He has also relied on the decision of the Patna High Court in Ranchi Club Ltd. Vs. Commissioner of Income Tax and Others . In that decision it was held that Explanation 4 to Section 234A makes it 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. In Director of Income Tax (Exemption) Vs. Shree Sitaram Public Charitable Trust, , the Calcutta High Court held that where the returned income and assessed income of the latest previous year is nil there is no obligation on the assessee to file statement of advance tax and no liability to pay interest. The same view has been taken by the Calcutta High Court in Commissioner of Income Tax Vs. Indian Molasses Co. (P.) Ltd.,
In our opinion, the above decisions squarely apply to the facts of the present case as admittedly the income assessed for the assessment year J989-90 was a loss. Hence, there was no liability of the assessee to pay advance tax on the basis of his estimate of his current income for the assessment year 1990-91.
Moreover, there was no order of the Assessing Officer u/s 210(3). Hence, no interest was payable u/s 234B.
Shri Prakash Krishna then submitted that since the assessee filed the returns belatedly he is liable to pay interest u/s 234A. In our opinion, since the return was that of loss hence there was no liability to pay interest as held by the Patna High Court in Ranchi Club Ltd. Vs. Commissioner of Income Tax and Others
In view of the above the writ petition is allowed.
The impugned orders dated September 7, 1998, and demand notice dated March 30, 1995, in respect of interest under sections 234A and 234B are quashed.
No order as to costs.