CIT vs. Bhagat Construction Co. Pvt. Ltd.. [2016] 383 ITR 9 (SC)
The
Supreme Court noted that on the facts of the case, it was an admitted
position that the assessment order dated March 29, 1995 of the Assistant
Commissioner of Income –Tax , New Delhi, did not not contain any
direction for the payment of interest. The appellate order merely stated
that interest was payable u/s. 234B of the Income-tax Act, 1961. In the
first round, before the Income-tax Appellate Tribunal, the Income-tax
Appellate Tribunal’s attention was not drawn to the payment of interest
at all.
On an application made, the Income-tax Appellate
Tribunal by its order dated November 12, 2002, specifically held that
since no direction had actually been given in the assessment order for
payment of interest, the assessee’s case would be covered by the
decision of the Supreme Court reported in CIT vs. Ranchi Club Ltd.
[2001] 247 ITR 209 (SC).
In an appeal to the High Court of Delhi
u/s. 260A of the Act, the impugned judgment dated July 23, 2003 merely
reiterated that the issue involved in the appeal had been decided by the
judgment in CIT vs. Ranchi Club Ltd. [2001] 247 ITR 209 (SC) referred
to above.
Before the Supreme Court the Revenue relied upon the
decision in Kalyankumar Ray vs. CIT (1991) 191 ITR 634 (SC) to contend
that the interest u/s. 234B is, in any case, part of Form I.T.N.S. 150
which is not only signed by the Assessing Officer but is really part of
the assessment order itself. It was submitted that the judgment in
Ranchi Club Ltd.’s case (supra) was distinguishable inasmuch as it arose
only in a writ petition and arose in the context of best judgment
assessment whereas on the facts of the present case, there was a
shortfall of advance tax that was paid, which, therefore, led to the
automatic levy of interest u/s. 234B. In addition, it was argued that
not only was section 234B a provision which was parasitic in nature, in
that, it applied the moment there was shortfall of advance tax or income
tax payable under the Act but that it was compensatory in nature.
Countering this submission, the counsel appearing for the respondent
assessee, supported the judgment of the Income-tax Appellate Tribunal
and the High Court by stating that the judgment in Ranchi Club Ltd.’s
case (supra) squarely covered the facts of this case.
According
to the Supreme Court, there was no need to go into the various
submissions made by Revenue as the appeal could be disposed of on a
short ground. The Supreme Court noted that In a three-judges Bench
decision, viz., Kalyankumar Ray v. CIT (supra) it took note of a similar
submission made by the assessee in that case and repelled it as
follows:
“In this context, one may take notice of the fact that
initially, rule 15(2) of the Income-tax Rules prescribed Form 8, a sheet
containing the computation of the tax, though there was no form
prescribed for the assessment of the income. This sub-rule was dropped
in 1964. Thereafter, the matter had been governed by Departmental
instructions. Under these, two forms are in vogue. One is the form of,
what is described as, the ‘assessment order’, (I.T. 30 or I.T. N.S. 65).
The other is what is described the ‘Income Tax Computation Form’ or
‘Form for Assessment or Tax/Refund’ (I.T.N.S. 150). The practice is that
after the ‘assessment order’ is made by the Income-tax Officer, the tax
is calculated and the necessary columns of I.T.N.S. 150 are filled up
showing the net amount payable in respect of the assessment year. This
form is generally prepared by the staff but is checked and signed or
initialed by the Income-tax Officer and the notice of demand follows
thereafter. The statute does not in terms require the service of the
assessment order or the other form on the assessee and contemplates only
the service of a notice of demand. It seems that while the ‘assessment
order’ used to be generally sent to the assessee, the other form was
retained on file and a copy occasionally sent to the assessee. I.T.N.S.
150 is also a form for determination of tax payable and when it is
signed or initialed by the Income-tax Officer it is certainly an order
in writing by the Income-tax Officer determining the tax payable within
the meaning of section 143(3). It may be, as stated in CIT vs. Himalaya
Drug Co. [1982] 135 ITR 368 (All), is only a tax calculation form for
Departmental purposes as it also contains columns and code numbers to
facilitate computerization of the particulars contained therein for
statistical purposes but this does not detract from its being considered
as an order in writing determining the sum payable by the assessee. We
are unable to see why this document, which is also in writing and which
has received the imprimatur of the Income-tax Officer should not be
treated as part of the assessment order in the wider sense in which the
expression has to be understood in the context of section 143(3). There
is no dispute in the present case that the Income-tax Officer has signed
the form I.T.N.S. 150. We therefore, think that the statutory provision
has been duly complied with and that the assessment order was not in
any manner vitiated.”
The Supreme Court also noted that its judgment in the Ranchi Club Ltd.’s case (supra) was a one line order which merely stated:
“We
have heard learned counsel for the appellant. We find no merit in the
appeals. The civil appeals are dismissed. No order as to costs”.
The
Supreme Court observed that the High Court judgment which was affirmed
by it as aforesaid arose in the context of a challenge to the vires of
sections 234A and 234B of the Act. After repelling the challenge to the
vires of the two sections, the High Court found that interest had been
levied on tax payable after assessment and not on the tax as per the
return. Following this court’s judgment in J.K. Synthetics Ltd. vs.
Commercial Taxes Officer [1994] 94 STC 422 (SC), the High Court had held
that the assessee was not supposed to pay interest on the amount of tax
which may be assessed in a regular assessment u/s. 143(3) or best
judgment under section 144 as he was not supposed to know or anticipate
that his return of income would not be accepted. The High Court further
held that interest was payable in future only after the dues were
finally determined.
The Supreme Court further observed that
under the provisions of section 234B, the moment an assessee who is
liable to pay advance tax has failed to pay such tax or where the
advance tax paid by such an assessee is less than 90 per cent of the
assessed tax, the assessee becomes liable to pay simple interest at the
rate of one per cent for every month or part of the month.
The
Supreme Court therefore held that the counsel for the Revenue was right
in stating that levy of such interest was automatic when the conditions
of section 234B were met.
According to the Supreme Court, the
facts of the present case were squarely covered by the decision
contained in Kalyankumar Ray’s case (supra) inasmuch as it was
undisputed that Form I.T.N.S. 150 contained a calculation of interest
payable on the tax assessed. This being the case, it was clear that as
per the said judgment this Form must be treated as part of the
assessment order in the wider sense in which the expression had to be
understood in the context of section 143, which was referred to in
Explanation 1 to section 234B.
This being the case, the Supreme Court set aside the judgment of the High Court and allowed the appeal of the Revenue.
