Commissioner of Income Tax vs Industrial Cables (India) Limited

J.S. Khehar, J.—In the present appeal the respondent-assessee filed the return of its income on January 29, 1996. Consequent upon the processing of the return u/s 143 of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), the Assessing Officer required the respondent-assessee to be charged interest u/s 234B of the Act on account of non-payment of advance tax. Vide an order dated September 29, 1996, the Assessing Officer required the respondent-assessee to pay Rs. 23,48,846 as interest u/s 234B of the Act. The order of the Revenue determining the liability of the respondent-assessee towards Income Tax, as well as, on the issue of payment of interest u/s 234B of the Act was subjected to challenge before the Commissioner of Income Tax (Appeals), as well as, the Income Tax Appellate Tribunal. It is not a matter of dispute that the aforesaid proceedings culminated on September 23, 2004. With the disposal of the appeals at the hands of the Income Tax Appellate Tribunal, vide order dated September 23, 2004, the Assessing Officer by his order dated April 7, 2005, passed an order giving effect to the order dated September 23, 2004, passed by the Income Tax Appellate Tribunal.

It is the case of the learned Counsel for the appellant that while computing the appeal effect based on the order passed by the Income Tax Appellate Tribunal dated September 23, 2004, the Assessing Officer did not comply with the mandate of Section 140A. Sub-section (1) of Section 140A of the Act which is relevant for the present controversy is being extracted hereunder:

140A. (1) Where any tax is payable on the basis of any return required to be furnished u/s 115WD or Section 115WH or Section 139 or Section 142 or Section 148 or Section 153A or, as the case may be, Section 158BC after taking into account,--

(i) the amount of tax, if any, already paid under any provision of this Act;

(ii) any tax deducted or collected at source;

(iii) any relief of tax or deduction of tax claimed u/s 90 or Section 91 on account of tax paid in a country outside India;

(iv) any relief of tax claimed u/s 90A on account of tax paid in any specified territory outside India referred to in that section; and

(v) any tax credit Claimed to De set on m accordance with the provisions of Section 115JAA,

the assessee shall be liable to pay such tax together with interest payable under any provision of this Act for any delay in furnishing the return or any default or delay in payment of advance tax, before furnishing the return and the return shall be accompanied by proof of payment of such tax and interest.

Explanation.--Where the amount paid by the assessee under this sub-section falls short of the aggregate of the tax and interest as aforesaid, the amount so paid shall first be adjusted towards the interest payable as aforesaid and the balance, if any, shall be adjusted towards the tax payable.

Referring to the Explanation u/s 140A(1) of the Act, it is the vehement contention of learned Counsel for the appellant, that the amount which was payable at the hands of the assessee was in the first instance liable to be adjusted against the interest liability (on the tax determined). Only after the interest component came to be satisfied, the amount paid by the assessee could have been adjusted against the tax payable. Since the aforesaid procedure had not been followed by the Assessing Officer while giving appeal effect to the order passed by the Income Tax Appellate Tribunal dated September 23, 2004, the mistake was liable to be rectified. It is, therefore, the submission of learned Counsel for the appellant that a notice was issued u/s 154 of the Act to the respondent-assessee on February 20, 2006, for the correction of the order dated April 7, 2005 (wherein the procedure referred to hereinabove had not been followed). On the culmination of the proceedings initiated u/s 154 of the Act, the Assessing Officer passed an order dated April 27, 2006. It is the instant order dated April 27, 2006, passed u/s 154 of the Act is now the subject-matter of challenge and consideration.

The order dated April 27, 2006, referred to in the foregoing paragraph was challenged in the first instance, by way of an appeal by the respondent-assessee. The Commissioner of Income Tax (Appeals) dismissed the appeal preferred by the assessee vide an order dated October 5, 2006. Dissatisfied with the order passed by the Commissioner of Income Tax (Appeals), the respondent-assessee preferred a second appeal before the Income Tax Appellate Tribunal. The appeal preferred by the respondent-assessee was allowed by the Income Tax Appellate Tribunal vide an order dated November 27, 2007.

Through the instant appeal, the Revenue has impugned the order passed by the Income Tax Appellate Tribunal dated November 27, 2007. In the present appeal, the solitary issue under consideration is the validity of the order dated April 27, 2006, passed by the Assessing Officer u/s 154 of the Act.

From the sequence of facts narrated hereinabove, it is apparent that the order passed by the Assessing Officer dated April 27, 2006, u/s 154 of the Act, was an effort at his hands, to correct the order dated April 7, 2005, earlier passed by the Assessing Officer, while giving appeal effect to the order passed by the Income Tax Appellate Tribunal dated September 23, 2004. In the aforesaid order dated April 7, 2005, that the Assessing Officer failed to adhere to the manner of making payments u/s 140A of the Act. In sum and substance, the procedure envisaged, in the Explanation u/s 140A(1) of the Act, had not been followed at the time of passing of the order dated April 7, 2005.

During the course of hearing, learned Counsel for the respondent-asses-see does not dispute the fact that the amount recoverable from the respondent-assessee had not been determined/calculated in terms of the Explanation u/s 140A(1) of the Act. It is also acknowledged that when the Assessing Officer had passed the earlier order dated April 7, 2005, he had not abided by the said procedure. It is also not a matter at dispute that the amount now determined by the Assessing Officer while passing the order dated April 27, 2006, is in consonance with the Explanation u/s 140A(1) of the Act. Thus viewed, we have no hesitation to conclude that the order dated April 27, 2006, is in consonance with the statutory provisions of the Act.

Before concluding this order, it is imperative for us to take into consideration one of the submissions advanced by learned Counsel for the respondent-assessee, namely, that the order dated April 27, 2006, passed by the Assessing Officer was barred by limitation, u/s 154(7) of the Act. In this behalf, it is the vehement contention of learned Counsel for the respondent-assessee, that the computation of interest u/s 234B of the Act was determined by the Assessing Officer in the first instance by an order dated September 29, 1996, which ultimately culminated in an order dated March 23, 1998 (passed u/s 143 of the Act). After making the respondent-assessee liable to interest on account of delayed payment of advance tax, the period of limitation envisaged u/s 154(7) of the Act, according to the learned Counsel for the respondent-assessee, must be determined with reference to the order dated September 29, 1996/March 23, 1998, i.e., the date on which the Assessing Officer subjected the respondent-assessee to the liability u/s 234B of the Act. It is, therefore, the submission of learned Counsel for the respondent-assessee, that the order dated April 27, 2006, having been passed more than four years after the end of the financial year in which the order dated September 29, 1996/March 23, 1998, had been passed, the Assessing Officer had no right whatsoever, to invoke the authority vested in him u/s 154 of the Act.

We have considered the solitary objection raised by the learned Counsel for the respondent, during the course of hearing of the present appeal. We find no merit therein. Through the order dated April 27, 2006, the Assessing Officer did not venture to correct either the order dated September 29, 1996, or the order dated March 23,1998. As a matter of fact, the aforesaid orders eventually culminated in the order passed by the Income Tax Appellate Tribunal dated September 23, 2004. The order passed by the Income Tax Appellate Tribunal dated September 23, 2004, was given effect to by the Assessing Officer vide an order dated April 7, 2005. It is the instant order dated April 7, 2005, giving appeal effect to the order passed by the Income Tax Appellate Tribunal, which the Assessing Officer found was contrary to Section 140A of the Act. It is, therefore, that the Assessing Officer issued a notice u/s 154 of the Act to the respondent-assessee on February 20, 2006, where after, the impugned order dated April 27, 2006, was passed by the Assessing Officer. What was sought to be corrected by the Assessing Officer in exercise of his power u/s 154 of the Act was obviously the order dated April 7, 2005. The issue to be adjudicated upon while examining the submissions of learned Counsel for the respondent, therefore, is whether the order dated April 27, 2006, was passed within the period of limitation stipulated u/s 154(7) of the Act, while modifying/correcting the order dated April 7, 2005. Between the order dated April 7, 2005, and the order passed u/s 154 of the Act dated April 27, 2006, the period of four years envisaged u/s 154(7) of the Act had not elapsed, and as such, it cannot be stated that the order dated April 27, 2006, had been passed by the Assessing Officer, beyond the period of limitation stipulated therein. For the reasons recorded hereinabove, the instant appeal is liable to be allowed. Ordered accordingly. The order passed by the Income Tax Appellate Tribunal dated November 27, 2007, in so far as the determination of the liability of the respondent-assessee u/s 234B of the Act is hereby set aside. In view of the above, the following questions of law which arose for determination of this Court in the facts and circumstances of the present case are answered in favour of the Revenue and against the respondent-assessee:

(1) Whether, on the facts and circumstances of the case, the Income Tax Appellate Tribunal was justified in deleting the interest charged u/s 234B of the Act (short charged earlier)?

(2) Whether, on the facts and circumstances of the case, the Income Tax Appellate Tribunal was justified in holding that the invoking of the Explanation below Section 140A(1) of the Act by taking recourse to the rectification powers envisaged u/s 154 of the Act was impermissible ignoring the facts, that the provisions of a particular section of the Act should be, necessarily, interpreted in the light of the Explanation, if any, thereunder?