DCIT, Hyderabad V. Laxmipriya Investments Ltd., Hyderabad

ITA 1107/HYD/2009

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1398 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-03-2011
• Assessment Year: 1999-2000
• Appeal Filed On: 12-11-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIDISHA KALRA
• Assessee Lawyers: A V RAGHURAM
• Keywords: Bonafide belief; Assessment record; Revised return
• Section: 143(3); 234B; 139(5); 246; 154; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 1107/HYD/2009 ASSESSMENT YEAR : 1999-2000 THE DY. COMMISSIONER OF INCOME-TAX, APPELLANT CIRCLE 16(1), HYDERABAD. VS. LAXMIPRIYA INVESTMENTS LTD., RESPONDENT HYDERABAD. (PAN NO. AABCL1590J) APPELLANT BY : SHRI VIDISHA KALRA RESPONDENT BY : SHRI A.V. RAGHURAM DATE OF HEARING : 16/11/2012 DATE OF PRONOUNCEMENT : 04/01/ 2013 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A)-V, HYDERABAD DATED 25/08/2012 FOR T HE ASSESSMENT YEAR 1999-2000. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSE SSEE COMPANY FILED ITS RETURN OF INCOME ON 31/12/1999 DECLARING A TOTAL INCOME OF RS. 1,95,14,049/- WHICH CONSISTS OF SHORT TERM CAPI TAL GAINS OF RS. 28,44,136/- AND LONG TERM CAPITAL GAINS OF RS. 1,66 ,69,923/-. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE IT ACT. ON FURTHER APPEAL, THE CIT(A) PASSED THE ORDER DATED 31/12/200 2. A 2 ITA NO. 1107/HYD/2009 LAXMIPRIYA INVESTMENTS LTD. CONSEQUENTIAL ORDER WAS PASSED ON 28/01/2003 GIVING EFFECT TO THE ORDER OF THE CIT(A) WHEREIN THE TOTAL INCOME WAS MO DIFIED TO RS. 6,39,28,073/-. 3. THE ASSESSEE VIDE LETTER DATED 20/03/2003 AND 12 /02/2008 HAD STATED THAT THERE WAS A MISTAKE IN ARRIVING AT TAXABLE INCOME AND CALCULATION OF INTEREST U/S 234B AND 220(2) OF THE IT ACT AND REQUESTED TO RECTIFY THE SAME. THE DCIT-16(1) WHILE PASSING ORDER U/S 154 OF THE IT ACT, DATED 31/03/2008 HELD AS UND ER:- 7.1 THE ASSESSEE HAS VIDE LETTER DATED 12/02/2008 H AS STATED THAT INTEREST U/S 234B SHOULD NOT BE LEVIED ON THE AMOUNT DISALLOWED OF RS. 54,15,180/-. THE EXTRACT OF THE R ELEVANT PART IS AS UNDER:-. THE ADDITION TO THE TOTAL INCOME ON ACCOUNT OF LO NG TERM CAPITAL LOSS BROUGHT FORWARD AND SET OFF WHICH HAS BEEN DISALLOWED BY THE CIT(A) TO THE TUNE OF RS. 54,15,1 80/- IS PURELY ON ACCOUNT OF LEGAL INTERPRETATION. WE REQUE ST YOU TO FOLLOW THE DECISION AS LAID DOWN IN CIT VS. SEDC O FOREX INTERNATIONAL DRILLING CO. LTD. [2004] 134 TAXMAN 1 09, WHEREIN IT HAS BEEN MADE VERY CLEAR THAT NO INTERES T U/S 234B SHOULD BE CHARGED ON SHORT PAYMENT OF ADVANCE TAX WHICH IS MAINLY BECAUSE OF BONAFIDE DISPUTE REGARDI NG INTERPRETATION OF LAW 7.2 THE CIT(A) HAS DISALLOWED THE AMOUNT OF RS. 54, 15,180/- AT PARA 4 OF HIS ORDER DATED 31/12/2002. THE RELEVA NT PART OF THE CIT(A) ORDER IS AS UNDER:- (4) AS MENTIONED AT PARA 2 OF THIS ORDER, THE APPE LLANT HAS CLAIMED A SET OFF OF THE BROUGHT FORWARD BUSINE SS LOSS OF RS. 54,15,180/-. ACCORDING TO THE APPELLANT, THI S LOSS PERTAINS TO THE AY 1998-99. I HAVE CALLED FOR THE ASSESSMENT RECORDS FOR AY 1998-99 AND VERIFIED WHET HER THE CLAIM IS CORRECT. IT IS FOUND THAT THE AO HAD N OT COMPUTED ANY LOSS TO THIS EXTENT AND ALLOWED IT TO BE CARRIED FORWARD. WHEN THIS WAS POINTED OUT TO THE A R, HE HAS SUBMITTED THAT THE APPELLANT COMPANY HAD, FOR A Y 1998-99, FILED A RETURN OF INCOME BEFORE THE DUE D ATE CLAIMING A LONG TERM CAPITAL LOSS OF RS. 54,15,180/ -, BUT 3 ITA NO. 1107/HYD/2009 LAXMIPRIYA INVESTMENTS LTD. THE RETURN WAS AFTER BEING INITIALLY ACCEPTED AND ACKNOWLEDGED, LATER REJECTED ON THE GROUND THAT SE LF ASSESSMENT TAX UNDER SEC. 140A WAS NOT REMITTED. I T IS FURTHER STATED THAT THE SAME RETURN WAS ACCEPTED I N JANUARY, 1999 WITHOUT THE SELF ASSESSMENT TAX BEING REMITTED. 4.1 I HAVE CAREFULLY CONSIDERED THE ISSUE. IT IS FO UND THAT THE APPELLANT HAD FILED A RETURN OF INCOME ON 12.1.1999 AND REVISED RETURN ON 31/12/1999. THE DIFFERENCE BETWEEN THESE TWO RETURNS ARE THAT WHILE IN THE ORIGINAL RETURN OF INCOME, NO LOSS ON ACCOUNT OF SA LE OF INVESTMENTS WAS CLAIMED, IN THE REVISED RETURN, THE APPELLANT COMPANY HAD CLAIMED A SUM OF RS. 45,40,04 8/- AS LOSS ON SALE OF INVESTMENTS. THE AO HAS ADDRES SED A LETTER ON 31/01/2000, REQUESTING THE APPELLANT TO S HOW CAUSE AS TO WHY THE REVISED RETURN SHOULD NOT BE LO DGED AS INVALID, IN VIEW OF THE DECISION OF THE SUPREME COURT IN THE CASE OF KUMAR JAGDISH CHANDRA SINHA VS. CIT REPORTED IN 220 ITR 67 (SC), WHEREIN THE APEX COURT HAD HELD THAT BELATED RETURN CANNOT BE REVISED. I FIND NO OBJECTION WAS FILED BEFORE THE AO AND THE AO HAS NO T EVEN DISCUSSED THIS ISSUE IN THE ASSESSMENT ORDER D ATED 27/03/2001 AND, THEREFORE, NO LOSS WAS ALLOWED TO B E CARRIED FORWARD. IN THESE CIRCUMSTANCES, I DIRECT T HE AO NOT TO ALLOW SET OFF RS. 54,15,180/- WHILE COMPUTIN G HE SHORT TERM CAPITAL GAIN OF THE APPELLANT. 7.3 AS SEEN FROM THE ABOVE, THE ASSESSEE WAS NOT EL IGIBLE FOR CARRY FORWARD LOSS OF RS. 54,15,180/- AS A RETURN F ILED BY THE ASSESSES U/S 139(4) OF THE IT ACT CANNOT BE REVISED BY THE ASSESSEE U/S 139(5). THIS POSITION WAS MADE CLEAR B Y THE HON. SUPREME COURT IN THE CASE OF KUMAR JAGDISH CHANDRA SINHA VS. CIT [1996] 220 ITR 67. THUS, THE LEGAL POSITION WAS MADE CLEAR BY THE SUPREME COURT IN 1996 AND THERE WAS NO DISPUTE IN RESPECT OF THIS ISSUE SUBSEQUENTLY. THE CARRY FO RWARD LOSS PERTAINING TO THE ASSESSEE RELATES TO AY 1998-99 IN RESPECT OF WHICH THE ASSESSEE FILED ORIGINAL RETURN OF INCOME ON 12/01/1999 AND REVISED RETURN OF INCOME ON 31/12/20 00. THUS, THERE WAS NO LEGAL DISPUTE OR LEGAL INTERPRET ATION INVOLVED WHEN THE ORIGINAL AND REVISED RETURNS OF I NCOME WERE FILED BY THE ASSESSEE IN THE YEAR 1999 AND THE MATT ER WAS CLEAR AND HAD BECOME FINAL IN VIEW OF THE SUPREME C OURT 4 ITA NO. 1107/HYD/2009 LAXMIPRIYA INVESTMENTS LTD. DECISION REFERRED ABOVE. AS SUCH, THE CONTENTION OF THE ASSESSEE THAT NO INTEREST U/S 234B IS CHARGEABLE TO IT ON THE AMOUNT OF RS. 54,15,180/- IN VIEW OF DISPUTE REGARD ING INTERPRETATION OF LAW IS NOT ACCEPTABLE. 7.4 ACCORDINGLY, THE CORRECT CHARGEABLE INTEREST U/ S 234B WHICH WORKS OUT TO RS. 78,52,996/- AS PER ANNEXURE A IS CHARGED. 4. THE DCIT-16(1), SUBSEQUENTLY, PASSED THE ORDER U /S 154 DATED 08/05/2008, MODIFYING HIS EARLIER ORDER PASSED ON 3 1/03/2008. 5. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE P REFERRED APPEAL BEFORE THE CIT(A) AMONG OTHER GROUNDS THAT T HE AO HAD WRONGLY COMPUTED INTEREST U/S 234B ON THE ADDITIONS MADE IN THE CONSEQUENTIAL ORDER DATED 28/01/2003 ON ACCOUNT OF DISALLOWANCE OF CAPITAL LOSS TO THE TUNE OF RS. 54,15,180. 6. BEFORE THE CIT(A), THE ASSESSEE CONTENDED AS FOL LOWS:- THE APPELLANT COMPANY FILED ITS ROI FOR THE AY 1998 -99 ON 30/11/1998 I.E. BEFORE THE DUE DATE SPECIFIED U/S 1 39(1). THE ROI HAS BEEN VERIFIED BY THE DEPARTMENT. HOWEVER, I T WAS LATER STAMPED AS INVALID/DEFECTIVE & TAX DUE AN D RETURNED BACK TO THE APPELLANT. [COPY OF THE IT ACKNOWLEDGME NT ENCLOSED FOR YOUR READY REFERENCE] THE APPELLANT COMPANY FILED THE SAME ROI AGAIN ON 12/01/1999, WHICH HAS BEEN ACCEPTED THOUGH THE TAXE S WERE NOT PAID EVEN ON 12/01/1999. THE INCOME GENERATED BY THE APPELLANT COMPANY DURIN G THE PREVIOUS YEAR 1997-98 [RELEVANT ASST. YEAR 1998-99] WAS ONLY BOOK INCOME AND THERE WAS NO CASH FLOW IN THAT YE AR, BECAUSE OF WHICH THE APPELLANT COULD NOT PAY THE SELF-ASSES SMENT TAX. THIS IS CLEARLY REFLECTED IN THE FACT THAT THE BANK BALANCES WERE NEGATIVE. 5 ITA NO. 1107/HYD/2009 LAXMIPRIYA INVESTMENTS LTD. A REVISED RETURN WAS FILED U/S 139(4) FOR AY 1998-9 9 CLAIMING A CAPITAL LOSS OF RS. 54,15,180/- ON ACCOUNT OF SAL E OF INVESTMENTS. SUCH LOSS WAS SET-OFF IN THE IT RETURN FILED FOR THE AY 1999-2000 (NOW IN APPEAL). SUCH CAPITAL LOSS OF RS. 54,15,180/- WAS ALLOWED FOR SET-OFF IN THE INTIMATION U/S 143(1)(A) AS WELL AS IN REGULAR ASSESSMENT U/S 143(3) DATED 28/03/2002. [COPIES ENCLOSED FOR Y OUR READY REFERENCE]. HOWEVER, THE CIT(A) SUO-MOTO DISALLOWED THIS CAPITA L LOSS TREATING THE REVISED RETURN FILED FOR THE AY 1998-9 9 AS INVALID STATING THAT BEING RETURN CANNOT BE REVISED QUOTING THE DECISION OF THE SUPREME COURT IN THE CASE OF KUMAR JAGDISH CHANDRA SINHA VS. CIT 220 ITR 67. [COPY OF CITATION ENCLOSED FOR YOUR READY REFERENCE] THE FACTS OF THE PRESENT CASE ARE DISTINGUISHABLE F ROM THE CASE LAW QUOTED BY THE CIT(A). IN THE CASE CITED BY THE CIT(A), THE APPELLANT DID NOT FILE THE ROI BEFORE THE DUE DATE SPECIFIED U/S 139(1). WHEREAS IN THE PRESENT CASE, THE APPELLANT HAD FILED THE ROI ON 30/1/1998 I.E. BEFORE THE DUE DATE. IT W AS THE DEPARTMENT WHICH AFTER INITIALLY VERIFYING AND ACCE PTING THE ROI, HAS RETURNED IT BACK. THE AR WOULD LIKE TO QUESTION THE DEPARTMENTS ACT ION OF TREATING THE ROI FILED ON 30/11/1998 AS DEFECTIVE . THE REASON FOR TREATING IT AS DEFECTIVE IS NON-PAYMENT OF SELF -ASSESSMENT TAX, WHICH IS CLEAR FROM THE STAMPING OF THE DEPART MENT: TAX DUE. IF SUCH IS THE CASE, HOW THE SAME ROI WITHOUT PAYMENT OF TAXES WERE ACCEPTED ON 12/01/1999 AND FURTHER PR OCEEDINGS LIKE INTIMATION U/S 143(1), REGULAR ASSESSMENT U/S 143(3) & APPEALS U/S 246 TAKEN UPON. THE QUESTION TO BE DECIDED HERE IS LEVYING OF INTER EST U/S 234B ON THE ADDITION MADE TO THE INCOME RETURNED FOR HE AY 1999- 2000 ON ACCOUNT OF DISALLOWANCE OF CARRY FORWARD OF CAPITAL LOSS TO THE TUNE OF RS. 54,15,180/-. THE AR WOULD LIKE TO SUBMIT THAT THERE WAS NO OPPOR TUNITY FOR THE ASSESSEE T PAY ADVANCE TAX/SELF-ASSESSMENT TAX ON THIS ADDITION, AS THE AO HIM ALSO HAS CONCURRED WITH THE VIEW OF THE APPELLANT THAT SUCH LOSS COULD BE SET-OFF AND HAD H IMSELF 6 ITA NO. 1107/HYD/2009 LAXMIPRIYA INVESTMENTS LTD. ALLOWED SUCH SET-OFF BOTH IN THE PROCEEDINGS U/S 14 3(1) & 143(3). I WOULD LIKE TO BRING TO YOUR KIND NOTICE THAT SEC. 234B INTEREST IS IN THE NATURE OF COMPENSATION FOR DELAYED PAYMEN T TAX TO THE DEPARTMENT AND NOT IN THE NATURE OF PENALTY, AS HAS BEEN HELD BY THE UTTARANCHAL HIGH COURT OF IN CIT VS. SE DCO FOREX DRILLING CO. LTD. [COPY OF THE CITATION ENCLOSED]. FOR INTEREST TO BE CHARGEABLE U/S 234B, THE DELAY I N THE PAYMENT OF TAXES SHOULD BE ATTRIBUTABLE TO THE APPE LLANT. IN THE INSTANT CASE, THE DEMAND HAD ARISEN OUT OF THE SU0-MOTO ADDITION OF THE CIT(A) IN AN APPEAL ON THE 143(3) O RDER. THE DEMAND NEVER EXISTED: . DURING THE PREVIOUS YEAR 1998-99 [RELEVANT AY 199 9- 2000]. . ON THE DUE DATE OF FILING OF THE ROI I.E. 30/11/1 998 . PROCEEDINGS U/S 143(1). . REGULAR ASSESSMENT U/S 143(3) DATED 28/03/2002. AS THERE WAS NO DEMAND EXISTING, THE APPELLANT DID NOT HAVE ANY OPPORTUNITY TO PAY THE TAXES. THE TAX DEMAND WA S CREATED ONLY BY THE ORDER OF CIT(A) DT. 31/12/2002, WHICH A LSO WAS WRONG AS THE CASE LAW CITED WAS INAPPROPRIATE WITH THE FACTS OF THE CASE. AS 234B IS NOT PENAL IN NATURE AND ONLY COMPENSATOR Y, WHEN THERE NO DEMAND EXISTING DURING THE PERIOD 01/04/19 99 [STARTING OF THE AY 1999-2000] TO 31/12/2002 (CIT(A ) ORDER DATE), THE QUESTION OF COMPENSATING FOR THE INTERES T U/S 234B DOES NOT ARISE. SEC. 234B(1) STATES THAT INTEREST ON SHORT PAYMENT OF ADVANCE TAX SHOULD BE CHARGED FROM THE 1 ST DAY OF APRIL OF THE RELEVANT ASST. YEAR TO THE DATE OF DETERMINATION OF TOTAL IN COME UNDER SUB-SECTION (1) OF SECTION 143 [AND WHERE A REGULAR ASSESSMENT IS MADE, TO THE DATE OF SUCH REGULAR ASS ESSMENT, 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. 7 ITA NO. 1107/HYD/2009 LAXMIPRIYA INVESTMENTS LTD. IN THE INSTANT CASE, EVEN ON THE DATE OF REGULAR AS SESSMENT, THE TAX DEMAND DID NOT EXIST, SO HOW DOES THE QUEST ION OF PAYING INTEREST U/S 234B ARISE?. IT HAS ALSO BEEN LAID DOWN CIT VS. SEDCO FOREX DRIL LING CO. THAT SHORT FALL IN PAYMENT OF ADVANCE TAX ON ACCOUN T OF LEGAL INTERPRETATION DOES NOT WARRANT LEVY OF INTEREST U/ S 234B. IN THAT INSTANT IT IS THE LEGAL INTERPRETATION OF THE CIT(A) THAT THE REVISED RETURN FILED BY THE APPELLANT IS DEFECTIVE BECAUSE OF WHICH THE DEMAND HAS ARISEN. THEREFORE FOLLOWING TH E RATIO IN THE ABOVE CASE, INTEREST U/S 234B SHOULD NOT BE CHA RGED. IN VIEW OF THE ABOVE, I REQUEST YOU TO KINDLY DELET E THE INTEREST RAISED U/S 234B ON THE PORTION OF THE INCO ME ARISING ON ACCOUNT OF DISALLOWANCE OF CAPITAL LOSS TO THE T UNE OF RS. 54,15,180/-. 7. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE CIT(A) OBSERVED THAT THE ENTIRE GRIEVANCE OF THE ASSESSEE WAS AGAINST THE ORDER OF HIS PREDECESSOR CIT(A) WHEREIN HE HAD SPEC IFICALLY DIRECTED THE AO NOT TO ALLOW SET-OFF OF RS. 54,15,180/- WHIL E COMPUTING THE SHORT TERM CAPITAL GAIN OF THE ASSESSEE AND THE AO HAD GIVEN EFFECT TO THE ORDER OF THE PREDECESSOR CIT(A). THE CIT(A) OPINED THAT HE CANNOT ADJUDICATE UPON THE ORDER OF HIS PREDECESSOR CIT(A) AS PER LAW. HOWEVER, THE CIT(A) GAVE A FINDING RELYING UPO N THE DECISION IN THE CASE OF CIT VS. SEDCO FOREX INTERNATIONAL DRILL ING CO. LTD., [2003] 264 ITR 320 (UTTARANCHAL) THAT THE ASSESSEE WAS UNDER BONAFIDE BELIEF THAT NO ADVANCE WAS PAYABLE IN RESP ECT OF INCOMES IN AY 1992-93 AND, HENCE, THE CIT(A) POINTED OUT THAT ON THE DATE OF FIRST FILING OF RETURN, THERE WAS NO INDICATION THA T CARRY FORWARD OF LOSS WAS NOT TO BE ALLOWED. HE, FURTHER HELD THAT A LTHOUGH THE RETURN WAS NOT ACCEPTED, EVEN THOUGH, IT WAS FILED IN TIME , WHICH WAS LATER ON ACCEPTED IN THE SAME FORM, NEITHER IN ORDER U/S 143(1) NOR IN ORDER U/S 143(3) THE CARRY FORWARD LOSS WAS DISALLO WED AND, 8 ITA NO. 1107/HYD/2009 LAXMIPRIYA INVESTMENTS LTD. THEREFORE, THE ASSESSEE WAS UNDER THE BONAFIDE BELI EF THAT ADVANCE WAS NOT TO BE PAID. THE ORDER OF FOR DISALLOWANCE OF CARRY FORWARD OF LOSS WAS PASSED BY THE CIT(A). THE CIT(A) WAS CL EARLY OF THE VIEW THAT THE RATIO OF THE DECISION CITED SUPRA WAS APPL ICABLE IN THE CASE OF THE ASSESSEE AND HELD THAT INTEREST U/S 234B OF THE ACT IS NOT LEVIABLE AND ORDERED THE SAME TO BE DELETED. 8. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS OF A PPEAL:- 1. THE LEARNED CIT(A) HAS ERRED BOTH IN FACTS AND I N LAW IN IGNORING THE MATERIAL FACTS THAT THE ASSESSEE HAD F ILED BELATED RETURN OF INCOME FOR THE AY 1998-99 WITHOUT ANY IND ICATION OF LONG TERM CAPITAL LOSS OF RS. 57,15,180/- THAT THE ASSESSEE CAME TO MAKE THE CLAIM OF LONG TERM CAPITAL LOSS OF RS. 57,15,180/- ONLY IN THE REVISED RETURN OF INCOME FO R THE AY 1998-99 WHICH IS NON-EST UNDER THE PROVISIONS OF SE C. 139(5) [VIDE ANNEXURES A! & A2, B-1 TO B2.]. 2. THE LEARNED CIT(A) HAS ERRED BOTH IN FACTS AND I N LAW IN IGNORING THE VITAL FACT THAT THE ASSESSEE HAD FILED A BELATED RETURN OF INCOME FOR THE AY 1998-99 WITHOUT EVEN PA YING THE SELF-ASSESSMENT TAX DUE AS PER THE RETURN. 3. THE LEARNED CIT(A) HAS ERRED BOTH IN FACTS AND I N LAW IN IGNORING THE FACT THAT THE ORIGINAL RETURN OF INCOM E FOR THE AY 1999-00 AND THE UNLAWFUL REVISED RETURN OF INCOME F OR THE AY 1998-99 WERE ACTUALLY FILED ON THE SAME DATE I.E. 3 1/12/1999, CONTAINING THE CLAIM OF DEDUCTION OF RS. 57,15,180/ - WHICH WAS APPARENTLY A CONTRIVED CLAIM AND THE DISALLOWANCE O F WHICH HAD BEEN UPHELD BY THE ITAT [VIDE ANNEXURES C1 TO C2] . 4. THE LEARNED CIT(A) HAS ERRED BOTH IN FACTS AND I N LAW IN RELYING ON TOTALLY INAPPLICABLE DECISIONS IN THE CA SES OF CIT VS. SEDCO FOREX INTERNATIONAL DRILLING CO. LTD. [2003] 264 ITR 320 (UTTARANCHAL) AND HARYANA WAREHOUSING CORPORATION V S. DCIT [2001] 252 ITR 34 (ITAT-DEL.) WHERE FACTS AND CIRCU MSTANCES WERE ENTIRELY DIFFERENT. 9 ITA NO. 1107/HYD/2009 LAXMIPRIYA INVESTMENTS LTD. 5. THE LEARNED CIT(A) HAS ERRED BOTH IN FACTS AND I N LAW IN DELETING INTEREST U/S 234B TO WHICH THE ASSESSEE WA S CERTAINLY LIABLE UNDER THE PROVISIONS OF THE IT ACT AND ALSO IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE ASSESSEES CASE. 6. THE LEARNED CIT(A) HAS ERRED BOTH IN FACTS AND I N LAW IN ENTERTAINING THE ASSESSEES APPEAL UNDER 246A AGAIN ST 154 ORDER DT. 31/03/2008 WHICH HAD EVIDENTLY BEEN PASSE D BEYOND THE STATUTORY EXPIRY OF TIME LIMIT OF 4 YEARS PERMI TTED U/S 154 OF THE IT ACT, IN AS MUCH AS THE SUBJECT ORDER U/S 154 HAD BEEN PASSED IN JANUARY, 2003. 9. THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED BEFO RE US AS FOLLOWS: I) HOW THE SAME ROI WITHOUT PAYMENT OF TAXES WERE A CCEPTED ON 12/01/1999 AND FURTHER PROCEEDINGS WHILE INTIMAT ION U/S 143(1) REGULAR ASSESSMENT U/S 143(3) AND APPEALS U/ S 246A WERE TAKEN UP BY THE DEPARTMENT. II) THAT THERE WAS NO OPPORTUNITY TO THE ASSESSEE T O PAY ADVANCE TAX/SELF ASSESSMENT TAX ON THIS ADDITION AS THE AO HIMSELF HAD ALLOWED SET OFF IN THE PROCEEDINGS U/S 143(1) AND 143(3) OF THE ACT. 10. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SU BMITTED THAT TO CHARGE INTEREST U/S 234B, DELAY IN PAYMENT OF TAX S HOULD BE ATTRIBUTABLE TO THE ASSESSEE WHEREAS IN THIS CASE T HE CIT(A) HAS SUO-MOTO MADE THE ADDITION. THIS DEMAND WAS CREATED ONLY BY THE ORDER OF THE CIT(A) DATED 31/12/2002 AND THERE WAS NO DEMAND EXISTING PRIOR TO IT I.E. DURING THE PERIOD FROM 01 /04/1999 TO 31/12/2002 AS THE SECTION 234B IS ONLY COMPENSATORY AND NOT PENAL IN NATURE, THEREFORE, THE SAME IS NOT APPLICABLE IN THE PRESENT CASE. FURTHER, SEC. 234B(1) STATES THAT INTEREST ON SHORT PAYMENT OF 10 ITA NO. 1107/HYD/2009 LAXMIPRIYA INVESTMENTS LTD. ADVANCE TAX SHOULD BE CHARGED FROM THE 1 ST DAY OF APRIL OF THE RELEVANT ASST. YEAR TO THE DATE OF DETERMINATION OF TOTAL INCOME UNDER SUB-SECTION (1) OF SECTION 143 [AND WHERE A R EGULAR ASSESSMENT IS MADE, TO THE DATE OF SUCH REGULAR ASS ESSMENT, ON AN AMOUNT] EQUAL TO THE ASSESSED TAX OR, AS THE CASE M AY BE, ON THE AMOUNT BY WHICH THE ADVANCE TAX PAID AS AFORESAID F ALLS SHORT OF THE ASSESSED TAX. IN THE INSTANT CASE, EVEN ON THE DATE OF REGULAR ASSESSMENT, THE TAX DEMAND DID NOT EXIST, SO THE Q UESTION OF PAYING INTEREST U/S 234B DOES NOT ARISE. THE LEARNE D COUNSEL REFERRED TO THE DECISION OF THE HONBLE UTTARANCHAL HIGH COURT IN THE CASE OF CIT VS. SEDCO FOREX INTERNATIONAL DRILLING LTD., [2003] 264 ITR 320. 11. THE LEARNED DR RELIED ON THE ORDER OF THE AO. 12. WE HAVE HEARD THE ARGUMENTS OF LEARNED DR SMT. VIDISHA KALRA AND THE LEARNED COUNSEL FOR THE ASSESSEE SHRI A.V. RAGHURAM AND PERUSED THE RECORD AS WELL AS THE ORDERS OF THE AUT HORITIES BELOW. WE FIND FROM THE FACTS OF THE CASE THAT THE ASSESSE E COMPANY FILED RETURN OF INCOME FOR AY 1998-99 ON 13/11/1998 I.E. BEFORE THE DUE DATE SPECIFIED U/S 139(1) OF THE ACT, AND WHEN THE SAME WAS RETURNED BACK TO THE ASSESSEE BY THE DEPARTMENT AS INVALID/DEFECTIVE, THE ASSESSEE FILED THE SAME RO I ON 12/01/1999 AND THE SAME WAS ACCEPTED EVEN THOUGH THE TAXES WER E NOT PAID ON 12/01/1999. IT WAS CONTENDED BY THE ASSESSEE THAT T HE INCOME GENERATED BY THE ASSESSEE COMPANY DURING THE PREVIO US YEAR 1997- 98 RELEVANT TO AY 1998-99 WAS ONLY BOOK INCOME AND THERE WAS NO CASH FLOW IN THAT YEAR, BECAUSE OF WHICH THE ASSE SSEE COULD NOT PAY THE SELF-ASSESSMENT TAX. A REVISED RETURN WAS F ILED U/S 139(4) 11 ITA NO. 1107/HYD/2009 LAXMIPRIYA INVESTMENTS LTD. FOR AY 1998-99 CLAIMING A CAPITAL LOSS OF RS. 54,15 ,180/- ON ACCOUNT OF SALE OF INVESTMENTS. SUCH LOSS WAS SET-OFF IN TH E IT RETURN FILED FOR THE AY 1999-2000, I.E. THE YEAR UNDER APPEAL. 13. SUCH CAPITAL LOSS OF RS. 54,15,180/- WAS ALLO WED FOR SET-OFF IN THE INTIMATION U/S 143(1)(A) AS WELL AS IN REGULAR ASSESSMENT U/S 143(3) DATED 28/03/2002. HOWEVER, THE CIT(A) SUO-MO TO DISALLOWED THIS CAPITAL LOSS TREATING THE REVISED RETURN FILED FOR THE AY 1998-99 AS INVALID. 14. IN THE CASE OF JACOB EXPORT HOUSE VS. CIT, [201 1] 330 ITR 53 (P&H), THE HONBLE PUNJAB & HARYANA HIGH COURT HELD AS UNDER:- 6. IT WOULD BE ADVANTAGEOUS TO REPRODUCE EXPLN. 1, AS AMENDED BY FINANCE ACT, 2001 RETROSPECTIVELY W.E.F. 1ST APRIL, 1989, WHICH READS AS UNDER : 'EXPLANATION 1.IN THIS SECTION, 'ASSESSED TAX' MEA NS THE TAX ON THE TOTAL INCOME DETERMINED UNDER SUB-S. (1) OF S. 143 OR ON REGULAR ASSESSMENT AS REDUCED BY THE AMOUNT OF TAX DEDUCTED OR COLLECTED AT SOURCE IN ACCORDANCE WITH THE PROVISIO NS OF CHAPTER XVII ON ANY INCOME WHICH IS SUBJECT TO SUCH DEDUCTI ON OR COLLECTION AND WHICH IS TAKEN INTO ACCOUNT IN COMPU TING SUCH TOTAL INCOME.' 7. THE MATTER IS NO LONGER RES INTEGRA. THIS COURT IN PARKASH AGRO'S CASE (SUPRA), WHILE CONSIDERING THE EFFECT OF AMEND MENT TO EXPLN. 1 RETROSPECTIVELY W.E.F. 1ST APRIL, 1989 HAD HELD THA T AN ASSESSEE IS LIABLE TO PAY INTEREST UNDER S. 234B OF THE ACT ON THE AMOUNT OF INCOME ASSESSED UNDER S. 143(1) OR 143(3) OF THE AC T AND NOT ON THE BASIS OF INCOME DECLARED IN THE RETURN BY THE ASSES SEE. THE RELEVANT OBSERVATIONS READ AS UNDER : '9. IT IS NO DOUBT TRUE THAT PRIOR TO THE AMENDMENT BROUGHT BY FINANCE ACT, 2001, WHICH HAS BEEN MADE EFFECTIVE RETROSPECTIVELY FROM 1ST APRIL, 1989, THE INTEREST UNDER S. 234B 12 ITA NO. 1107/HYD/2009 LAXMIPRIYA INVESTMENTS LTD. OF THE ACT WAS CHARGEABLE WITH REFERENCE TO THE TOT AL INCOME AS HAD BEEN DECLARED BY THE ASSESSEE IN ITS RETURN AND NOT ON THE ASSESSED INCOME. EXPLANATION 1 TO S. 234B OF THE AC T WAS AMENDED BY FINANCE ACT, 2001. IT READS THUS : 'EXPLANATION 1.IN THIS SECTION, 'ASSESSED TAX' MEA NS THE TAX ON THE TOTAL INCOME DETERMINED UNDER SUB-S. (1) OF S. 143 OR ON REGULAR ASSESSMENT AS REDUCED BY THE AMOUNT OF TAX DEDUCTED OR COLLECTED AT SOURCE IN ACCORDANCE WITH THE PROVISIO NS OF CHAPTER XVII ON ANY INCOME WHICH IS SUBJECT TO SUCH DEDUCTI ON OR COLLECTION AND WHICH IS TAKEN INTO ACCOUNT IN COMPU TING SUCH TOTAL INCOME. (B) IN SUB-S. (3), FOR THE WORDS 'ONE AND ONE-HALF PER CENT', THE WORDS 'ONE AND ONE-FOURTH PER CENT' SHALL BE SUBSTITUTED W.E.F. 1ST JUNE, 2001.' 8. THE SAID EXPLANATION WAS SUBJECT-MATTER OF CHALL ENGE BEFORE THIS COURT IN RAJ KUMAR SINGHAL'S CASE (SUPRA) WHERE THE DIVISION BENCH WHILE UPHOLDING THE VALIDITY OF THE SAID PROVISION, INTERPRETED IT AS UNDER : '......A COMPARISON OF THE TWO PROVISIONS SHOWS THA T UNDER THE ORIGINAL PROVISION INTEREST WAS LEVIABLE ON THE INC OME AS DECLARED IN THE RETURN FILED BY THE ASSESSEE. BY THE AMENDED PROVISION, THE INTEREST IS LEVIABLE ON THE INCOME AS DETERMINE D BY THE ASSESSING AUTHORITY MINUS THE INCOME ON WHICH THE T AX HAS BEEN PAID OR DEDUCTED. THE AMENDMENT IS ONLY CALCULATED TO CLARIFY THE AMBIGUITY THAT WAS FELT IN THE ORIGINAL PROVISI ON. IT IS NOT ARBITRARY OR UNREASONABLE........'.' THE JUDGMENTS RELIED UPON BY THE ASSESSEE ARE DISTI NGUISHABLE AS THE EFFECT OF AMENDMENT BY FINANCE ACT, 2001 WAS NOT UN DER CONSIDERATION IN THOSE CASES. IN VIEW OF CLEAR PROV ISION INCORPORATED IN THE EXPLANATION AND JUDGMENT OF THIS COURT IN PARKA SH AGRO'S CASE (SUPRA), CHARGEABILITY OF INTEREST IS BEYOND QUESTI ON. 15. IN VIEW OF THE ABOVE DISCUSSION AND RESPECTFULL Y FOLLOWING THE RATIO LAID DOWN BY THE HONBLE P&H HIGH COURT IN TH E CASE OF JACOB 13 ITA NO. 1107/HYD/2009 LAXMIPRIYA INVESTMENTS LTD. EXPORT HOUSE (SUPRA), WE SET ASIDE THE ORDER OF THE CIT(A) AND ALLOW THE APPEAL OF THE REVENUE. 16. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON 04/01/2013. SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAY ARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 4 TH JANUARY, 2013 KV COPY TO:- 1) ACIT, CIR-16(1,) ROOM NO. 612, 6 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 2) LAXMIPRIYA INVESTMENTS LTD., PLOT NOS. 14 & 15, ROA D NO. 9, JUBLEE HILLS, HYDERABAD 3) THE CIT(A)-V, HYDERABAD 4) CIT-IV, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYD ERABAD.