Jacob Export House v. Commissioner Of Income-Tax

Adarsh Kumar Goel, J.:— This appeal has been preferred by the assessee under section 260A of the Income-tax Act, 1961 (for short, “the Act”) against the order dated July 31, 2008 of the Income-tax Appellate Tribunal, Chandigarh in I.T.A No. 318.Chandi/2008 for the assessment year 2001-02, proposing the following substantial questions of law:

“(1) Whether the Income-tax Appellate Tribunal was justified in setting aside the issue of charging of interest under section 234B of the Income-tax Act, 1961 for fresh adjudication to the file of the Commissioner of Income-tax (Appeals) having decided the issue in favour of the appellant in view of the judgment of CIT v. Haryana State Co-operative Supply and Marketing Federation Ltd., [2007] 34 IT Rep. 441 (P&H) with a rider that once the assessee is found to have defaulted in payment of advance tax on the basis of law as prevalent in the relevant financial year, its subsequent variation on account of further disallowances suffered because of changed legal position would still empower the Assessing Officer to charge interest under section 234B of the Act, which is illegal, perverse and leads to allowing a second inning to the lower authorities which is unwarranted and uncalled for?

(2) Whether, on the facts and circumstances of the case, the findings of the Income-tax Appellate Tribunal are perverse and against the evidence on record thus unsustainable in law?

(3) Whether the Income-tax Appellate Tribunal has misdirected itself in being influenced by irrelevant factors and applying erroneous criteria while deciding the issue of eligibility for claiming deduction under section 80-IB of the Income-tax Act, 1961?”

2. The facts necessary for adjudication of this appeal may be noticed. The assessee did not pay advance tax as per the provisions of section 208 of the Act on the ground that its income was not liable to be taxed in view of provisions under sections 80HHC and 80-IB of the Act. The claim of the assessee was not accepted for deduction under the said provisions by the Assessing Officer. Demand of interest was also raised under section 234B of the Act. On appeal, the Commissioner of Income-tax (Appeals) upheld the plea of the assessee that since advance tax was not paid under a bona fide belief, interest under section 234B of the Act was not attracted. On appeal by the Revenue to the Tribunal, the view of the Commissioner of Income-tax (Appeals) was reversed. It was held that the bona fide belief of the assessee to estimate taxability of income could not be valid ground to avoid liability to pay interest under section 234B of the Act on advance tax ultimately found due. We have heard learned counsel for the parties and perused the record.

3. Learned counsel for the assessee submitted that the Tribunal is in error in holding that even if the assessee on a bona fide calculation found that no advance tax was payable, still the liability of interest under section 234B of the Act will be attracted. He relied upon the following judgments:

(i) CIT v. Haryana State Co-operative Supply and Marketing Federation Ltd., [2007] 34 IT Rep. 441 (P&H);

(ii) CIT v. Kanti Kumar Sharma, [1989] 179 ITR 114 (P&H);

(iii) United Commercial Bank v. CIT, [1982] 137 ITR 434 (Cal);

(iv) Saurashtra Packaging P. Ltd. v. CIT, [1993] 204 ITR 443 (Guj);

(v) Kailash Chand Jain (HUF) v. CWT, [2008] 5 DTR 342 (MP).

4. On the other hand, learned counsel for the Revenue argued that the Finance Act, 2001, has amended Explanation 1 to section 234B of the Act retrospectively with effect from April 1, 1989, and has laid down that assessed tax would mean tax on total income determined under section 143(1) or 143(3) of the Act as reduced by certain amounts mentioned therein. He relied upon the judgments of this court in Raj Kumar Singal v. Union of India, [2002] 255 ITR 561 (Parkash Agro Industries v. Deputy Commissioner Of Income-Tax, [2008] 170 Taxman 479; [2009] 316 ITR 149 (P&H) in support of his submission.

5. It would be advantageous to reproduce Explanation 1, as amended by the Finance Act, 2001 retrospectively with effect from April 1, 1989, which reads as under:

“Explanation 1.— In this section, ‘assessed tax’ means the tax on the total income determined under sub-section (1) of section 143 or on regular assessment as reduced by the amount of tax deducted or collected at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income.”

6. The matter is no longer res integra. This court in Parkash Agro's case, [2009] 316 ITR 149 (P&H), while considering the effect of amendment to Explanation 1 retrospectively with effect from April 1, 1989, had held that an assessee is liable to pay interest under section 234B of the Act on the amount of income assessed under section 143(1) or 143(3) of the Act and not on the basis of income declared in the return by the assessee. The relevant observations read as under (page 152):

“9. It is no doubt true that prior to the amendment brought by the Finance Act, 2001, which has been made effective retrospectively from April 1, 1989, the interest under section 234B of the Act was chargeable with reference to the total income as had been declared by the assessee in its return and not on the assessed income. Explanation 1 to section 234B of the Act was amended by the Finance Act, 2001. It reads thus:

‘Explanation 1.— In this section, “assessed tax” means the tax on the total income determined under sub-section (1) of section 143 or on regular assessment as reduced by the amount of tax deducted or collected at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income.

(b) in sub-section (3), for the words “one and one-half per cent.”, the words “one and one-fourth per cent.” shall be substituted with effect from June 1, 2001’.”

7. The said Explanation was the subject-matter of challenge before this court in Raj Kumar Singhal's case, [2002] 255 ITR 561 where the Division Bench while upholding the validity of the said provision, interpreted it as under (page 562):

“… A comparison of the two provisions shows that under the original provision interest was leviable on the income as declared in the return filed by the assessee. By the amended provision, the interest is leviable on the income as determined by the assessing authority minus the income on which the tax has been paid or deducted. The amendment is only calculated to clarify the ambiguity that was felt in the original provision. It is not arbitrary or unreasonable…”

8. The judgments relied upon by the assessee are distinguishable as the effect of the amendment by the Finance Act, 2001 was not under consideration in those cases. In view of the clear provision incorporated in the Explanation and the judgment of this court in Parkash Agro's case, [2009] 316 ITR 149 (P&H), chargeability of interest is beyond question. As regards question No. 3, a perusal of the impugned order shows that there was no ground raised relating to the claim under section 80-IB of the Act before the Tribunal and, therefore, the same does not arise from the said order.

9. Accordingly, we do not find any merit in the appeal. No substantial question of law arises. The appeal is dismissed.