refundIn the summary assessment under section 143(1), certain amount was found to be refundable and consequent upon the passing of an order under section 155, not only the refund payable was reduced to nil but it all turned into creation of the fresh demand. The question was whether any appeal was maintainable against said order. Held: As the orders under section 154/155 had the effect of reducing refund, the appeal was rightly maintainable under clause (f) of section 246(1).
1. This appeal by the assessee emanates from the order passed by the DCIT(A) on 1k4.1.1997 in relation to the assessment year 1989-90.
2. The only issue raised in this appeal relates to the confirmation of the action of the A.O. in charging interest under Section 234B upto the date of the date of regular assessment of the firm in which the assessee was partner instead of upto the date of the assessment of the assessee, resulting into an additional demand of Rs. 5166/-.
2.1. Briefly stated the facts of the case are that the case are that the assessee, at the relevant time, was a partner in the firm M/s. K.T.Oil Mills, Jaitu. His return was processed under Section. 143(1) accepting the returned income at Rs. 9690/- thereby refunding the amount of advance tax with interest. It transpires that the assessment of the firm was determined at Rs. 67867/-.Thereafter, order Under Section 155 was passed in the case of the assessee partner considering the revised share in the firm and also charging interest of Rs. 7632/- Under Section 234B upto the date of the regular assessment of the firm.
The assessee moved a rectification petition Under Section 154 urging that the interest Under Section 234B should be charged only upto the date of issuance of intimation in his case. The same was dismissed. The first appeal also failed to change the fortune of the assessee.
2.2. Before us, the learned counsel for the assessee opened his arguments by contending that the first appellate authority erred in holding that the interest Under Section 234B was chargeable upto the date of regular assessment of the firm i.e. M/s. K.T. Oil Mills, Jaitu, in which the assessee was partner. Relying on the provisions of Section 234B(1), it was contended that the interest was rightly chargeable upto the date of regular assessment or the date of passing of intimation of the assessee. The learned A.R. raised an additional ground to the effect that no interest under Section 234B could have been charged in view of the decision of the Hon'ble Supreme Court in the case of C.I.T.v. Ranchi Club Ltd. (supra) (2001) 247-ITR-209(SC). It was contended that in the absence of specific charge having been made in the order Under Section 155, the learned A.O. was not justified in charging the interest.
2.3. Per contra, the learned D.R. argued that the appeal of the assessee was not maintainable in view of the fact that the only question raised therein was the reduction of the interest under Section. 234B. Relying on the decision of the Hon'ble Apex court in the case of Central Provinces Manganese Ore Co. Ltd; v. C.I.T. (1986) 160-ITR-961(SC), it was urged that the appeal was not maintainable as the subject only being the reduction in interest charged Under Section 234B was not appelable. On merits, the learned D.R. relied on the impugned order which, in turn, was based on the detailed speaking order passed by the first appellate authority in the case of Sh. Vinod Kumar and Sh. Anil Kumar, two other partners of the same firm for the same assessment year. He also relied on Section 234B(4) in support of his case. On the additional ground, the learned D.R. stated that the facts in the present case were distinguishable and the case of Ranchi Club Ltd (supra) was not applicable. He relied on the decision of the Hon'ble jurisdictional High court in Vinod Khurana v. CIT and Ors.
(2002) 253-ITR-579(P & H) to contend that the charging of interest Under Section 234B was justified. The learned D.R. finally urged that there was no infirmity in the impugned order D.R. finally urged that there was no infirmity in the impugned order warranting any intereference.
2.4. In the rejoinder, the learned Authorised Representative argued at length that the appeal was maintainable. It was stated that the first appellate authority while disposing of the appeal, had not taken into consideration this aspect and, therefore, it was too late for the department to take up such a contention at this distance of time.
However, it was stated that the appeal was maintainable in view of the fact that the interest was charged in the order Under Section 155 and not in the regular assessment against which the assessee was aggrieved to the extent that the interest should have been charged for a lower period. Distinguishing the case of Central Provinces Manganese Ore Co.
Ltd; (supra), the learned A.R. relied on the case of Dibrugrah Co. Ltd; v. C.I.T. (1989) 179-ITR-718-20 (Cal). to state that the appeal was maintainble. Further reliance was placed on the cases of CIT v. Sarju Prasad (1984) 148-ITR-824718 (All). and CIT v. Prabhat Krishna Rohatgi (1985) 154-ITR-824(Cal). In the light of these precedents, it was tendered that the appeal was maintainable and liable to be allowed.
2.5. We have considered the rival submissions in the light of the material placed before us and precedents relied upon. Before going into the merits of the appeal, we would like to examine the preliminary issue of maintainability of the appeal. There is no dispute about the fact that the return was processed Under Section 143(1) and the returned income was accepted which was below the taxable limit resulting into the position that the amount of advance tax Rs. 3200/- became refundable together with the interest of Rs. 288/-. No regular assessment was made in the hands of the assessee partner. Pursuant to the assessment of the firm M/s. K.T. Oils Mills, Jaitu, in which the assessee was partner, an order Under Section 155 was passed in the assessee wherein the interest Under Section 234B was charged for the period 1.4.89 to 31.3.92 i.e. the date of regular assessment of the firm. The assessee moved an application Under Section 154 praying for the reduction of interest Under Section 234B which was rejected. The present appeal is against the order passed by the first appellate authority upholding the order passed by the A.O. Under Section 154. It is true that the solitary subject matter of the instant appeal is the reduction of interest Under Section 234B charged by the A.O. It is equally true that the Hon'ble Apex court in the A.O. It is equally true that the Hon'ble Apex court in the case of Central Provinces (supra) has laid down that the question of reduction or waiver of the interest levied Under Section 139(8) or Section 215 cannot be subject matter of n appeal Under Section 246(c) of the Act. But the fact ramains that the appeal in the present case was filed before the first appellate authority against the order Under Section 154, which falls under Clause (f) Section 246(1). This clause provides that subject to the provisions of Section 246(2), an assessee aggrieved by the order Under Section 154 or Under Section 155 having the effect of enhancing the assessment or reducing the refund or an order refusing to allow the claim made by the assessee under either of the said sections may appeal to the DCIT(A) against such orders. Since the appeal in question was undisputedly against the order Under Section 154, in our considered opinion, the ration laid down by their lordships in Central Provinces Manganese Ore Co. Ltd;(supra) would not be applicable in as much as in that case the subject matter for consideration was the maintainability of the appeal Under Section 246(c) of the I.T. Act which was in relation to an order "where the assessee denies the liability to be assessed under the Act" or against any assessment order Under Section 143 or 144 where the assessee objects to the amount of income assessed etc.. On the other hand, it is observed that the order appealed before the first appellate authority was that passed Under Section 154 for which a separate and independent clause, namely (f) of Section 246(1) has been incorporated in the Act. As per the prescription of this clause, an order Under Section 154 or Section 155 having the effect of enhancing the assessment or reducing a refund etc. is appealable before the first appellate authority in terms of Section 246(1)(f). Reverting to the facts of the present case, we notice that in the summary assessment Under Section 143(1), an amount of Rs. 3488/- was found to be refundable and consequent upon the passing of an order Under Section 155, not only the refund payable was reduced to nil but that turned into creation of the fresh demand. As the orders Under Section 154/155 had the effect of reducing refund, in our considered opinion, the appeal was rightly maintainable under Clause (f) Section 246(1). We, therefore, hold that the reliance by the learned D.R. on the decision of the Apex court is misconceived. On the contrary, the decision of the Hon'ble Calcutta High Court in Dibrugarh Co. Ltd; (supra) which was rendered after the above noted Apex court decision clearly upholds the maintainability of appeal in such circumstances. In this case, the Hon'ble Court held that when the interest levied in the assessment order is enhanced by an order of rectification, the appeal is from the order of rectification and as such appeal lies. The other decision in the case of Sarju Parsad (supra) having been relied upon by the learned A.R. also fortifies the above said view, in which it was held upon by the learned A.R. also fortifies the above said view, in which it was held that the remedy in respect of levy of interest Under Section 217 (1A) for non payment of advance tax was not by an appeal against the regular assessment order but by way of rectification Under Section 154.
In view of these facts, we hold that the appeal was maintainable; for it emanated from a rectification order Under Section 154 and came with in the sweep of Section 146(1)(f), which is distinct and independent of Clause (c) of the same sub-section.
2.6. Now we would examine and evaluate the contentions raised by the rival parties on merits. The controversy in the present appeal centers around the question as to whether the interest Under Section 234B in the hands of the partner assessee is chargeable upto the date of regular assessment of the firm i.e. 31.3.1992 or the date of passing of intimation Under Section 143(1) in assessee's own case on 27.12.1989.
At this juncture, it would be in order to note down the provisions of Section 234B at the relevant point of time. Sub-section (1) provides that subject to the other provisions of the section, where in any financial year, an assessee was liable to pay advance tax Under Section 2l08 has failed to pay such tax or where the advance tax paid is less than 99% of the assessed tax, the assessee shall be liable to pay simple interest @ 2% for every month or part of a month comprised in the period from the first day of April next falling such financial year to the date of determination of such total income Under Section 146(1) or 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. There is no quarrel over the proposition, that the preliminary conditions of Section 234B are fulfilled in the present case. On the satisfaction of the said conditions, we find that two aspects, viz, (i) the amount on which and (ii) the period for which interest is chargeable, remain to be examined. In so far as the quantum of income on which interest Under Section 234B is chargeable that has not been disputed by the learned A.R. either before the first appellate authority or before us because the share of the assessee partner in the firm, appears to have been finally accepted at the amount determined by the A.O. the only question remains to be seen is the period for which interest is chargeable Under Section 234B. The only question remains to be seen is the period for which interest is chargeable Under Section 234B. The aspect of period for which interest is chargeable has again got two limbs (i) being the starting point and (ii) being the terminating point. Here also, there is no dispute about the starting point for the charge of interest under this section which in the instant case is at 1.4.1989. The controversy is on the second limb, namely; the terminating point for the charge of interest. Whereas the A.O. charged interest upto 31.3.1992 (i.e.) the date of regular assessment of the firm M/s. K.T. Oil mills in which the assessee was partner,) the assessee's contention is that it should have been charged only upto the date of intimation passed in the case of assessee himself on 27.12.1989. The learned DCIT(A) while disposing of the appeals of the other two related assessee, which order has been followed in the impugned order found that Section 234B did not specify the date of assessment. Going by the "spirit of the section he came to the conclusion "on equitable consideration" that the date of assessment of the firm should be considered for the charge of interest unless partner's regular assessment is subsequently completed. On the threadbare analysis of Sub-section (1) of Section 234B. It is found that the interpretation placed by the first appellate authority is not only not in accordance with the provisions but against its mandate. As noted above, the interest is chargeable "to the date of the determination of total income in Sub-section (1) of section 143 or regular assessment". No regular assessment in the case of the assessee was framed. Only the income was determined Under Section 143(1) by accepting the returned income below taxable limit as such. Such determination was made on 27.12.1989. In our considered opinion, the terminating date for the charge of interest Under Section 234B cannot be any date other than it. We are at loss to appreciate as to how the authorities below have proceeded to take into consideration the date of regular assessment of the firm while charging the interest in the hands of the partner. Since both are distinct and independent taxable entities, it is not open to the department to consider the date of regular assessment of one assessee while calculating the interest of the other assessee Section 234B casts an obligation on the assessee to pay interest. Such being the position, there cannot be any question of looking into the so called "spirit of the section", not emerging either from the speech of the Finance Minister or the memorandum explaining the provisions of the Finance Bill, to burden the assessee with additional amount of interest. It is a settled legal position that the provisions casting additional burden on the assessee are to be strictly construed and it is impermissible to the department to import words which are not appearing in the language of section to widen its ambit.
2.7. The learned DR, during the course of arguments, had also relied on Sub-section(4) of Section 234B to state that if an order Under Section 154 or 155 is passed, the interest would increase or reduce in accordance with the upward or downward direction of the income in such order and hence the charge of interest by the AO was in order. After meticulously going through this sub section, we find that it deals with the quantum of income which moves in north or south as result of the orders referred to in the Sub-section and the consequential increase or reduction in the interest chargeable. It states that the interest is to be increased or reduced as result of change in the quantum of income pursuant to the order passed, inter alia, Under Section 154. We have noted in the foregoing para that the share of the assessee from the profits of the firm was revised upward due to regular assessment of the firm, which aspect has not been assailed before us. In the instant appeal, we are concerned only with the period for which interest is chargeable, on which issue, Sub-section (4) is not relevant, and only Sub-section (1) governs the situation. This contention of the learned D.R., therefore, fails.
3. On the question of the additional ground raised by the assessee for not charging the interest Under Section 234B in view of Ranchi Club Ltd; (supra), we find that the facts are little different. Initially intimation Under Section 143(1) was issued in which the returned income of Rs. 9690/- was accepted. Since this amount was below taxable limit, there was no question of charging interest Under Section 234A to 234C.Despite that it is manifest from the copy of the intimation Under Section 143(1) that a separate column is made for the charge of interest under these sections against which the A.O. has mentioned the word 'Nil'. Thereafter, when the order Under Section 155 was passed, the learned A.O. charged interest Under Section 234B. It was fairly admitted by the learned A.R. that the mention of charging interest Under Section 234B in the notice of demand was made which was accompanying the order Under Section 155. In view of these facts the ratio decidendi of the decision of Ranchi Club Ltd (supra) is not applicable in the present case. Be that as it may, we find that the decision of the jurisdictional High Court in the case of Vinod Khurana (supra) would come into picture which unequivocally states that if the demand notice specifies the quantum of interest charged Under Section 234B which is passed by the same A.O. alongwith the assessment order on the same day, such charge of interest is valid. The Hon'ble jurisdictional High Court while reaching this conclusion duly considered the case of Ranchi Club Ltd. (supra) alongwith earlier decision in the case of Kalyankumar Ray v. CIT (1991) 191-ITR-634 (SC).
It is further found that the SLP against the said decision stands dismissed by the Hon'ble Supreme Court in (2002) 254 ITR-277 (St). In the light of these facts, the additional ground raised by the assessee is rejected.
3.1. To sum up we hold that the first appellate authority was not justified in upholding the action of the A.O. in charging interest Under Section 234B upto the date of regular assessment of the firm. On the contrary, the interest was chargeable upto the date of passing of intimation Under Section 143(1) in assessee's own case.