M.M.J. Plantations Vs. Deputy Commissioner of Income Tax - Court Judgment

Excerpt:
1. this appeal is directed against the order of the cit(a), dt. 31st aug., 1994, for the asst. yr. 1991-92. this appeal was disposed of by the tribunal earlier vide its order dt. 21st july, 1995 (in ita no.754/coch/94). at the instance of the revenue, the following questions of law were also referred under section 256(1) of the it act for the opinion of the hon'ble kerala high court vide the order of the tribunal dt. 13th feb., 1997, in ra no. 294/coch/1995 : 1. whether, on the facts and in the circumstances of the case, the tribunal is justified in law and facts in directing the interest under section 234b is to be calculated in the status of "registered firm"? 2. whether, on the facts and in the circumstances of the case, the tribunal is justified in setting aside the direction of the.....

Judgment:
1. This appeal is directed against the order of the CIT(A), dt. 31st Aug., 1994, for the asst. yr. 1991-92. This appeal was disposed of by the Tribunal earlier vide its order dt. 21st July, 1995 (in ITA No.754/Coch/94). At the instance of the Revenue, the following questions of law were also referred under Section 256(1) of the IT Act for the opinion of the Hon'ble Kerala High Court vide the order of the Tribunal dt. 13th Feb., 1997, in RA No. 294/Coch/1995 : 1. Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law and facts in directing the interest under Section 234B is to be calculated in the status of "Registered firm"? 2. Whether, on the facts and in the circumstances of the case, the Tribunal is justified in setting aside the direction of the CIT(A) to treat the assessee-firm as unregistered firm for the levy of interest under Section 234B, particularly when the Tribunal has upheld the refusal of registration in the assessee's appeal challenging the status 3. Whether, on the facts and in the circumstances of the case the Tribunal is right in holding that interest under Section 234B is to be calculated upto the date of processing the return under Section 143(1)(a) even in cases where assessment is subsequently completed under Section 143(3) 2. Vide its judgment dt. 28th Oct., 1999, the Hon'ble Kerala High Court directed the Tribunal to take a fresh view in the light of certain amendments made in Section 234B of the IT Act by Finance Act, 1995, with retrospective effect from 1st April, 1989, and also to consider the issue relating to registration of the assessee-firm. The case was posted for hearing on 25th Jan., 2000, 3rd March, 2000, 23rd Oct., 2000, and finally on 15th Dec., 2000. On the last two occasions the notice was sent by registered post. However, there was no response from the assessee on any of these occasions and there is not even an adjournment petition. In the circumstances, we are constrained to dispose of the appeal ex-parte qua the assessee, after hearing the learned Departmental Representative.

"The CIT(A) has erred in directing that interest under Section 234B is to be charged on the tax payable by the appellants as an unregistered firm. This direction is opposed to law and it is, therefore, prayed that the enhancement in the levy of this interest which is directed to be made may be cancelled." 4. The assessee-firm filed a return of income on 31st Oct., 1991, admitting a total income of Rs. 19,62,860. It claimed its status as registered firm. The return was processed under Section 143(1)(a) and certain adjustments were made and in the said intimation interest was levied under Section 234B in an amount of Rs. 53,847. Subsequently the assessment was completed on the assessee-firm under Section 143(3) on 29th March, 1994, and in this assessment order interest under Section 234B was levied at an amount of Rs. 6,94,634. Aggrieved by the levy of interest under Section 234B in the assessment under Section 143(3), the assessee appealed to the CIT(A). The CIT(A) observed that the prima facie adjustments made under Section 143(1)(a) were deleted and accordingly there is no variation between the income brought to tax in the intimation under Section 143(1)(a) and in the assessment under Section 143(3), and accordingly held that the levy of interest under Section 234B in terms of the said section is valid only upto the date of the intimation under Section 143(1)(a) and that no further interest after that period can be levied. CIT(A), however, held that the status of the assessee-firm has been taken as unregistered firm in the regular assessment and so the interest can be levied under Section 234B on the tax as applicable to an unregistered firm, though the interest is to be levied only upto the date of intimation under Section 143(1)(a). The relevant remarks of the CIT(A) are as under : "6. In the present case the intimation under Section 143(1)(a) interest under Section 234B of Rs. 53,847 was levied on 28th Sept., 1992. The AO in the 143(3) order dt. 29th March, 1994, assessed the total income at Rs. 21,20,690. However, after the deletion of the addition on account of Section 243B there is no variation between the income assessed under Sections 143(1)(a) and 143(3). Considering this, the appellant's claim for levy of interest under Section 234B only upto the date of intimation under Section 143(1)(a) is upheld and the AO is directed to delete the interest under Section 234B upto the date of regular assessment.

7. In the order under Section 143(1)(a) the interest under Section 234B was charged treating the firm as registered firm. However, vide my order dt. 30th Aug., 1994, it has been held that the firm is not entitled to registration and the status of the firm should be treated as unregistered firm. Under the circumstances, the AO is directed to charge the interest under Section 234B after calculating the tax on the firm as unregistered firm.

Aggrieved by the above order of the CIT(A), the assessee is in appeal before us and has taken the ground, which we have extracted hereinabove. The Revenue is not in appeal before us. Section 234B after its amendment by Finance Act, 1995, with retrospective effect from 1st April, 1989, reads as under : "234B.--(1) Subject to the other provisions of this section, where, in any financial year, an assessee who is liable to pay advance tax under Section 208 has failed to pay such tax or, where the advance tax paid by such assessee under the provisions of Section 210 is less than ninety per cent of the assessed tax, the assessee shall be liable to pay simple interest at the rate of two 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." **Substituted for "or regular assessment, on an amount" by the Finance Act, 1995, w.e.f. 1st April, 1989.

Because of the said amendment, interest under Section 234B can be levied upto the date of regular assessment, and regular assessment has been defined in Section 2(40) of the IT Act as the assessment under Section 143(3). But we cannot ignore the fact that the Revenue is not in appeal before us against the order of the CIT(A). The CIT(A) has held that the interest can be levied only upto the date of the intimation under Section 143(1)(a) and the assessee, who is in appeal before us, is not aggrieved by this finding of the CIT(A). The grievance of the assessee before us is only to the direction of the CIT(A) that the interest should be levied on the tax as applicable to an unregistered firm which is altogether a different issue. It may be mentioned that the order of the AO refusing registration has been upheld by the Tribunal vide its order dt. 21st July, 1995, in ITA No.755/Coch/1994, but such refusal of registration is consequent to or in the course of the assessment framed under Section 143(3) and it is not relatable to the intimation sent under Section 143(1)(a). The finding of the CIT(A) is that the interest is to be levied only upto the date of intimation under Section 143(1)(a) in terms of the provisions of s, 234B, as they stood prior to the above-mentioned amendment by Finance Act, 1995, with retrospective effect from 1st April, 1989. The subsequent amendment of the section is supportive of the case of the Revenue, but unfortunately the Revenue has not come in appeal before us. So, we are of the view that the said amendment is not of any assistance to the Revenue in the present case. The questions that were referred at the instance of the Revenue for the opinion of the Hon'ble Kerala High Court, as mentioned herein-above, have to be seen in the light of the fact that there is no appeal by the Revenue against the finding of the CIT(A) that the interest under Section 234B should be levied only upto the date of intimation. So, the assessed tax for the purpose of levy of interest under Section 234B is the tax levied in the intimation under Section 143(1)(a) which is the tax as applicable to a registered firm, as claimed by the assessee and not the tax as applicable to an unregistered firm consequent to the refusal or registration in the assessment under Section 143(3). In this view of the matter, we find no merit in the contention of the learned Departmental Representative before us that the interest under Section 234B should be levied upto the date of the regular assessment in view of the above-mentioned amendment introduced by the Finance Act, 1995, and also that the interest should be levied on the tax as applicable to an unregistered firm.

5. So far as the ground taken by the assessee before us is concerned, we find merit in it, because while holding that the interest should be levied upto the date of the intimation under Section 143(1)(a), the CIT(A) has held, to our mind, somewhat inconsistently, that it should be levied on the tax as applicable to an unregistered firm. There is no reference to the refusal of registration in the intimation under Section 143(1)(a). So we are of the view that the direction of the CIT(A) in this regard is erroneous because while levying the interest upto the date of intimation under Section 143(1)(a), the Revenue cannot be allowed to anticipate an event of the future, i.e., refusal of registration in the assessment under Section 143(3). To our mind, the Revenue has missed the bus by not filing an appeal against the order of the CIT(A) before the Tribunal. Having missed the bus, by failure to file the appeal, the Revenue cannot possibly set up a new case at subsequent stages by reference to the retrospective amendment to Section 234B by the Finance Act, 1995. Actually, the Revenue could not have filed an appeal because at the relevant time the amendment was not on the statute book. At the most, the Revenue could have filed a belated appeal before the Tribunal after the amendment in question in 1995 and sought for condonation of delay which, at any rate, they have not done. This is a case where the Revenue seeks to take advantage of some findings in the order of the Tribunal and the questions of law referred under Section 256(1) in the context of those findings. The only contention that is permitted to the Revenue is whether, even without the amendment in Section 234B mentioned above, the Revenue is justified in levying interest under Section 234B on the basis of tax applicable to an unregistered firm, though the levy is to be restricted to the date of intimation under Section 143(1)(a). We are of the view that, when the levy itself is restricted to the date of intimation under Section 143(1)(a), the tax has to be levied as applicable to the status of the assessee as adopted in the said intimation under Section 143(1)(a) and not to the status as adopted in a subsequent order under Section 143(3). In this view of the matter, we modify the order of the CIT(A) to the effect that the interest under Section 234B should be levied upto the date of intimation under Section 143(1)(a), but as applicable to a registered firm. The appeal is allowed.