Commissioner Of Income Tax vs Jai Balaji Sponge Ltd.

The Court : No real question of law has been sought to be raised here, but the issue canvassed by the Revenue is as to whether the Commissioner

(Appeals) completed the exercise as was directed by a Supreme Court order of March 26, 2012. According to the Revenue, the Commissioner

(Appeals) failed to conduct the exercise in terms of the Supreme Court order and the Appellate Tribunal erred in failing to appreciate the default on

the part of the Commissioner (Appeals).

An issue arose on a previous appeal before this Court as to whether the assessee herein was liable to pay advance tax. This Court was of the view

that the assessee was not liable to pay advance tax. The matter was carried by the Revenue to the Supreme Court. Prior to the Supreme Court taking

up the matter, a judgment was rendered in the case of JCIT vs. Rolta India Ltd. (330 ITR 470) where the Supreme Court held that the advance tax

was payable by an assessee as the present one. In dealing with the relevant appeal arising out of this Court’s order on the previous appeal, the

Supreme Court directed as follows by its order of March 26, 2012:

“Having heard learned counsel on both sides, we are of the view that the question of deficiency in payment of Advance Tax has not been gone into

by the lower Authorities and, consequently, by the High Court. In the circumstances, that question needs to be examined by the commissioner of

Income Tax (Appeals). The question, which has been examined by the High Court, is, whether Advance Tax is payable on Book Profits? That issue

has been decided by this court in favour of the Revenue in the case of Joint Commissioner of Income Tax vs. Rolta India Ltd., reported in (2011) 330

ITR 470. Thus, we direct the Commissioner of Income Tax (Appeals) to examine the question of shortfall, if any, in payment of Advance Tax on the

basis that the judgement in the case of Rolta India Ltd. (supra) now applies to the facts of the present case.â€​

Thus, the Commissioner (Appeals) was required to assess whether there was any shortfall in the payment of advance tax since the assessee was

liable to pay advance tax in view of the principle enunciated in Rolta India Ltd. The Commissioner found at paragraph 5 of his order dated November

27, 2012 as follows:

“5. …The book profit declared by the appellant was Rs.30,57,08,974/- and the total tax liability on the book profit including the surcharge and

education cess was computed by the appellant company at Rs.2,57,25,410/-. As against the said tax liability, there was TDS of Rs.28,23,475/- and the

appellant company paid the Advance Tax of Rs.2,58,06,000/-, making the total tax payment at Rs.2,86,29,475/-. Thus, as on 31.03.2006, the appellant

company had paid tax amount in excess of total tax liability of the year under appeal and there was no shortfall in the payment of Advance Tax. The

appellant company filed the return of income on 13.11.2006, and the income was computed under the normal provisions as well as u/s. 115JB of the

Act on the basis of provisions of law existing on the Statute at the relevant time. However, by the time, the assessment proceedings for the A.Y.

2006-07 were initiated and the assessment was completed, there was an amendment in the provisions of section 115JB by the Finance Act, 2008,

w.r.e.f. 01.04.2001.

The amendment was brought in section 115JB(2) Explanation (1)(h), wherein the amount of deferred tax and provision therefor, was required to be

added to compute the book profit. Therefore, in view of the said amendment brought on the Statute by the Finance Act, 2008, w.r.e.f. 01,04,2001, the

AO, while completing the assessment, added sum of 10,34,37,589/- on account of deferred tax to the book profit declared by the appellant company.

This resulted into enhancement in the book profit by that amount and increased tax liability u/s.115JB and resultantly, shortfall in the payment of

Advance Tax on the amount of Rs.10,34,37,589/-.

For the said shortfall in the advance tax, the AO charged interest u/s 234B and 234C of the Act which has been disputed by the appellant company.

From the above facts, it is apparent that at the time of filing of return of income on the basis of existing provisions on the statute during the relevant

financial year, there was no default on the part of the appellant company in making payment of advance tax and there was no shortfall at all. The

shortfall in the payment of advance tax was arisen only because of subsequent amendment in the provisions of the Act, with retrospective effect.

However, an assessee cannot visualise that there will an amendment at a later stage and that too with retrospective effect and his tax liability will

increased. The appellant had comuted its income/book profit on the basis of existing provisions of the Act and on such income/book profit paid the

advance tax. Hence, there was no shortfall in the payment of advance tax on the part of the appellant company on the basis of provisions of the Act

existing on the statute during the relevant financial year.â€​

On the basis of what is evident from paragraph 5 of the Commissioner’s order, it cannot be said that the Commissioner did not undertake the

exercise that was required of him by the Supreme Court order of March 26, 2012. What really appears to be the Revenue’s case is that in view of

the subsequent amendment to Section 115JB of the Income Tax Act, 1961, the deficit on the part of the assessee on account of deferred tax liability

should have been taken into account as a shortfall and consequential interest payable thereon should have been determined.

For a start, going by the strict letter of the Supreme Court order of March 26, 2012, the Commissioner (Appeals) was not required to assess the

shortfall on the basis of the amended provision or the consequential interest that the assessee may have been liable to pay. The Commissioner was

required to assess whether there was any shortfall in the payment of advance tax. The Commissioner undertook the exercise in the appropriate

perspective and ascertained whether, at the relevant point of time, there was any shortfall in payment of advance tax by the assessee.

The question of interest or penalty would arise if a default is committed by an assessee in depositing the tax as required by law. At the relevant point

of time, without the amendment to Section 115JB having come into effect, the assessee could only have paid so much as the law then required. The

Commissioner (Appeals) found that the quantum of advance tax deposited by the assessee was adequate in accordance with law as it stood then.

The Commissioner then went on to ascertain what would have been the additional quantum that the assessee ought to have paid by way of advance

tax upon the amended provision coming into effect retrospectively. The Commissioner also arrived at a figure on such score. But the Commissioner

found that since there was no default on the part of the assessee at the relevant point of time, the assessee could not be visited with any penal

consequence for not having committed any default.

If anything, the Commissioner can be faulted for having undertaken the additional exercise. However, such conduct of the Commissioner cannot be

questioned since the Commissioner completed the totality of the picture by not only arriving at a finding that there was no default at the relevant point

of time when the advance tax was deposited by the assessee but also that even if there was a default upon the retrospective operation of the

amendment to Section 115JB, no claim on account of interest could be foisted on the assessee in the circumstances. The order of the Commissioner

(Appeals) can only be faulted for its completeness.

In the circumstances, it does not appear that the Commissioner failed to undertake the exercise as called upon by the relevant order of March 26,

2012 as passed by the Supreme Court or that the Appellate Tribunal erred in failing to appreciate that the Commissioner had fallen into error. There is

no merit in the appeal. ITAT No.355 of 2016 and GA No.2781 of 2016 are dismissed. There will be no order as to costs.