BIRLA GROUP HOLDINGS LTD, MUMBAI V. JCIT (OSD) RG2(1), MUMBAI

ITA 1201/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1341 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 28-04-2010
• Assessment Year: 2000-2001
• Appeal Filed On: 20-02-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S S RANA; ANILKUMAR MISHRA
• Assessee Lawyers: SU NIL HINAWAT
• Keywords: Sale consideration of property below Jantri Value; Business income; Depreciation; Rectification of order; Revised return
• Section: 244A; 6; 154; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, B, MUMBAI BEFORE SHRI S V MEHROTRA, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 1201/MUM/2009 (ASSESSMENT YEAR: 2000-01) M/S BIRLA GROUP HOLDINGS LTD INDUSTRY HOUSE 159 BACKBAY RECLAMATION CHURCHGATE, MUMBAI-400020 PAN: AAACR2250C .APPELLANT VS JCIT(OSD) RANGE -2(1) MUMBAI RESPONDENT APPELLANT BY : SHRI VIJAY MEHTA AND SU NIL HINAWAT RESPONDENT BY : S/SHRI S S RANA AND ANIL K UMAR MISHRA O R D E R PER VIJAY PAL RAO,JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 02.01.2009 OF CIT(A)-II, MUMBAI ARISI NG FROM THE ORDER PASSED U/S 154 OF THE ACT FOR THE ASSESSMEN T YEAR 2000-2001. ITA NO. 1201/MUM/2009 (ASSESSMENT YEAR: 2000-01) 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS I N THIS APPEAL: 1. INTEREST U/S 234C (I) ON FACTS AND IN LAW, THE LEARNED THE LD. CIT(A) HAD FAILED TO APPRECIATE THAT CHARGING OF INTEREST U/S 234C ON RETURNED INCOME WHICH DUE TO ARITHMETIC ERROR WAS SHOWN HIGHER IN THE COMPUTATION OF INCOME BY RS.1,35,00,000/- IS NOT ACCORDING TO LAW. UNDER THE FACTS AND CIRCUMSTANCES OF THE MATTER, HE OUGHT TO HAVE DIRECTED TO AO TO CHARGE THE INTEREST U/S 234C ON THE REVISED TOTAL INCOME OF RS.11,55,50,397/- II) ON FACTS AND IN LAW, THE LEARNED CIT(A) HAD FAILED TO APPRECIATE THAT ACCEPTING RETURNED INCOM E WITHOUT CORRECTING ARITHMETICAL ERROR WILL LEAD ABS URD RESULT AND IS AGAINST THE PROVISION OF LAW. UNDER THE FACTS AND CIRCUMSTANCES OF THE MATTER, HE SHOUL D HAVE DIRECTED THE AO TO ACCEPT THE RETURNED INCOME AFTER CORRECTING THE ARITHMETICAL MISTAKES FOR CHARGING INTEREST U/S 234C. 2. ALLOWING INTEREST U/S 244A ON THE FACTS AND IN LAW, THE LEARNED CIT(A) HAD ERRED IN NOT DIRECTING THE ASSESSING OFFICER TO GRA NT INTEREST U/S 244A FROM 1.4.2000 ONWARDS. UNDER THE FACTS AND CIRCUMSTANCES OF THE MATTER, HE OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO GRANT INTER EST U/S 244A FROM 1.4.2000 ONWARDS 3. THE RELEVANT FACTS OF THE CASE ARE THAT THE A SSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ON 30.11.2000 SHOWING A TOTAL INCOME OF RS.12,70,50,397/-. THE RETURN OF THE ASSESSEE WAS PROCESSED U/S 143(1) ON 28.3.2002. THE AO PASSED THE ORDER DATED 4.7.2003 U/S 154 AND RECOMPUTED THE TOTAL INCOME AT RS.12,90,50,400/- AFTER ADJUSTING THE ASSESSED BU SINESS LOSS ITA NO. 1201/MUM/2009 (ASSESSMENT YEAR: 2000-01) 3 FOR ASSESSMENT YEAR 1999-2000. A DEMAND NOTICE U/S 156 WAS ISSUED FOR A DEMAND OF RS.5,99,250/-. THIS DEMAND WAS ADJUSTED AGAINST THE REFUND ORDER FOR THE ASSESSMEN T YEAR 2002-03. THE ASSESSEE THEREAFTER FILED AN APPLICA TION DATED 3.1.2004 U/S 154 FOR RECTIFICATION OF ARITHMETICAL MISTAKE IN THE COMPUTATION OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION AND HENCE PLEADED THAT THE TOTAL INC OME WAS OVERSTATED BY RS.1,35,00,000/- THE ASSESSEE ALSO R EQUESTED FOR GRANT OF REFUND OF TAX ALONG WITH INTEREST U/S 244A OF THE ACT. THE AO HAS PASSED THE RECTIFICATION ORDER O N 19.4.2006 AND THEREBY REVISED TOTAL INCOME AT RS.11,55,50,397 /-. THE AO ALSO CALCULATED INTEREST U/S 234C AT RS.13,03,269/ -. AS FAR AS THE INTEREST U/S 244A IS CONCERNED, THE AO HAS G RANTED THE SAME FOR THE PERIOD FROM 6.1.2004 TILL 19.4.2006. THE ASSESSEE CHALLENGED THE ORDER PASSED U/S 154 DATED 19.4.2006 BEFORE THE CIT(A) ON THE ISSUE OF CHARGIN G OF INTEREST U/S 234C ON THE RETURNED OF INCOME AS WELL AS THE CLAIM OF INTEREST U/S 244A GRANTED BY THE AO ONLY FROM 6.1.2004 TO 19.4.2006 INSTEAD OF FROM 1.4.2000 AS CLAIMED BY THE ASSESSEE. THE CIT(A) HAS TURNED DOWN THE CLA IM OF THE ASSESSEE ON BOTH THE ISSUES HENCE THIS APPEAL BY TH E ASSESSEE. 4. THE ISSUE NO.1 IS REGARDING CHARGING OF INTEREST U/S 234C ON THE RETURNED INCOME. ITA NO. 1201/MUM/2009 (ASSESSMENT YEAR: 2000-01) 4 5. THE LEARNED AR OF THE ASSESSEE HAS SUBMITTED TH AT THERE WAS AN ARITHMETICAL MISTAKE IN THE COMPUTATI ON OF INCOME WHICH HAS RESULTED INTO OVERSTATEMENT OF INC OME BY RS.1,35,00,000/-. THE LEARNED AR OF THE ASSESSEE F URTHER SUBMITTED THAT THE ASSESSEE CANNOT BE CHARGED WITH INTEREST U/S 234C ON THE INCORRECT RETURNED INCOME. HE HAS POINTED OUT FROM THE COMPUTATION OF INCOME THAT GROSS BUSIN ESS INCOME IS SHOWN AT RS.18,85,96,906/- IN THE STATEM ENT OF TOTAL INCOME AT PAGE 8 OF THE PAPER BOOK. A SUM OF RS.59 ,063,868/- BEING THE INCOME CONSIDERED SEPARATELY AS REDUCED FROM THE GROSS BUSINESS INCOME OF RS.18,85,96,906/- AND THE BUSINESS INCOME COMES TO RS.12,95,33,038/-. BUT IN THE STAT EMENT OF TOTAL INCOME THE NET BUSINESS INCOME WAS WRONGLY SH OWN AT RS.14,30,33,038/-. HE HAS POINTED OUT THAT THE AS SESSEE HAS REALIZED THIS MISTAKE OF CALCULATION IN THE STATE MENT OF INCOME WHEN THE ASSESSEE RECEIVED THE ORDER DATED 4 .7.2003 PASSED BY THE AO U/S 154 AND THEREFORE THE ASSESSE E HAS FILED A RECTIFICATION APPLICATION DATED 3.1.2004 U /S 154. THE AO RECEIVED THIS APPLICATION ON 6.1.2004 AND CONSEQ UENTLY, HE PASSED THE IMPUGNED RECTIFICATION ORDER U/S 154 ON 19.4.2004 DETERMINING REVISED TOTAL CORRECT INCOME OF ASSES SEE AS RS.11,55,50,397. IT IS CONTENDED BY THE LEARNED AR THAT WHEN THE AO HAS CORRECTED THE ARITHMETICAL MISTAKE WHILE COMPUTING TOTAL INCOME BY PASSING THE RECTIFICATION ORDER DA TED 19.4.2006, THEN THE INTEREST CHARGED U/S 234C AT ITA NO. 1201/MUM/2009 (ASSESSMENT YEAR: 2000-01) 5 RS.13,03,269/- WITHOUT TAKING INTO CONSIDERATION T HE RECTIFIED INCOME IS AGAINST THE BASIC PRINCIPLE OF NATURAL JU STICE. THE ASSESSEE CANNOT BE HELD LIABLE TO PAY THE INTEREST WHICH OTHERWISE NOT PAYABLE BY THE ASSESSEE. HE HAS RE LIED UPON THE ORDER OF DELHI BENCH OF THE TRIBUNAL IN THE CAS E OF GAURAV SONDHI MANBIR SONDHI V/S ITO REPORTED IN 38 ITD 1 29 (DEL). 6. ON THE OTHER HAND, THE LEARNED DR HAS SUBMITTED THAT THE ASSESSEE DEFAULTED IN PAYMENT OF THE ADVANCE T AX ON SELF ASSESSMENT. THE ASSESSEE WAS REQUIRED TO PAY TAX A S PER THE RETURNED INCOME AND THEREFORE THE ADVANCE TAX LIABI LITY OF THE ASSESSEE IS BASED ON THE RETURNED INCOME IRRESPECTI VE OF THE ASSESSED LIABILITY OF THE TAX. ACCORDINGLY, WHEN T HE ASSESSEE FAILED TO PAY ADVANCE TAX ON ITS RETURN INCOME, THE INTEREST U/S 234C WAS CORRECTLY CHARGED BY THE AO. THERE IS A M ISTAKE IN THE RETURNED INCOME AND NO REVISED RETURN WAS FILED BY THE ASSESSEE. IN SUCH CIRCUMSTANCES, THE AO CANNOT RED UCE THE RETURNED INCOME. HE HAS RELIED UPON THE ORDERS OF LOWER AUTHORITIES. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND REL EVANT RECORD. IT IS UNDISPUTED FACT THAT THERE WAS AN ARI THMETICAL MISTAKE IN THE RETURN OF INCOME OF THE ASSESSEE WHI CH WAS SUBSEQUENTLY RECTIFIED VIDE ORDER DATED 19.4.2006 WHEN THE ASSESSEE MOVED AN APPLICATION DATED 3.1.2004 U/S 15 4. THE ITA NO. 1201/MUM/2009 (ASSESSMENT YEAR: 2000-01) 6 PROVISIONS OF SECTION 234C PROVIDES LEVY OF INTERES T IN CASE THE ASSESSEE WHO IS LIABLE TO PAY ADVANCE TAX UNDER SEC TION 208 FAILED TO PAY SUCH TAX OR THE ADVANCE TAX PAID BY THE ASSESSEE IS LESS THAN THE PRESCRIBED PERCENTAGE OF TAX DUE ON RETURN OF INCOME. AS PER EXPLANATION TO SUB-SECT ION 1 OF SEC 234C THE AMOUNT OF TAX DUE ON RETURNED INCOME IS THE TAX CHARGEABLE ON THE TOTAL INCOME DECLARED IN THE RET URN OF INCOME FURNISHED BY THE ASSESSEE FOR THE ASSESSMENT YEAR REDUCED BY THE AMOUNT OF INCOME TAX DEDUCTIBLE OR COLLECTIBLE AT SOURCE, ANY RELIEF OF TAX ALLOWED UNDER SECTION 90; SECTION 90A SECTION 91, AND ANY TAX CREDIT ALLOWED TO BE S ET OFF IN ACCORDANCE WITH THE PROVISIONS OF SECTION 115JAA. THE TAX CHARGEABLE ON THE TOTAL INCOME RETURNED BY THE ASSE SSEE SHOULD BE THE CORRECT TOTAL INCOME AS PER THE RETUR N AND NOT AS A RESULT OF ANY MISTAKE WHICH IS APPARENT AND MANIF EST ON THE FACE OF IT. THE TAX CHARGEABLE SHOULD BE ON A COR RECT AND PROPER INCOME INTENDED TO BE RETURNED BY THE ASSESS EE AND NOT INCORRECT INCOME DUE TO SOME ARITHMETICAL AND C ALCULATION MISTAKE WHILE COMPUTING THE INCOME. THEREFORE, WH EN THE ASSESSEE IS NOT AT ALL LIABLE TO PAY TAX ON SUCH A INCOME WHICH IS NOT CORRECTLY COMPUTED BUT OVERSTATED DUE TO SOME ARITHMETICAL MISTAKE THEN THE INTEREST CANNOT BE C HARGED ON SUCH NON-CHARGEABLE TAX. ITA NO. 1201/MUM/2009 (ASSESSMENT YEAR: 2000-01) 7 8. IN THE CASE OF GAURAV SONDHI MANBIR SONDHI, TH E DELHI BENCH OF THE TRIBUNAL VIDE PARAGRAPH 6 HAS HELD AS UNDER : 6..IF AS A CONSEQUENCE OF A MISTAKE COMMITTED BY AN ASSESSEE, HIGHER INCOME WAS SHOWN OR NON TAXABLE INCOME WERE SHOWN OR CLAIM DUE TO THE ASSESSEE WERE NOT MADE WHICH ARE VERY APPARENT ON THE FACT OF THE RECORD LIKE CARRY FORWARD AND SET O FF OF DEPRECIATION OR BUSINESS LOSSES ETC, IT DOES NOT MEAN THAT THE RETURN FILED WAS A PROPER RETURN ON T HE BASIS OF WHICH TAX WAS PAYABLE. THE PROFIT AND LOS S ACCOUNT OF AN ASSESSEE MAY SHOW INCOME BUT IF THAT INCOME WAS SET OFF AGAINST THE PREDETERMINED CARRY FORWARD OF LOSSES EITHER OF BUSINESS OR OF DEPRECIATION, THE INCOME SO SHOWN MAY BECOME A NEGATIVE FIGURE ON WHICH NO TAX WAS PAYABLE. IF BY MISTAKE, THE ASSESSEE FILES A RETURN SHOWING ONLY THAT INCOME WITHOUT CLAIMING BENEFIT OF SET OFF OF LOSS, CAN, CAN IT BE SAID THAT ANY TAX WAS PAYABLE BY THE ASSESSEE? IF NO TAX WAS PAYABLE BY THE ASSESSEE AND IF THE MISTAKE WAS DISCOVERED BY THE ASSESSEE LATER, CAN IT BE SAID THAT THE ASSESSEE COMMITTED A DEFAULT IN THE PAYMENT OF SELF ASSESSMENT TAX? THEREFORE,, WHAT IS TO BE SEEN IS WHEN A PROPER RETURN WAS FILED BY THE ASSESSEE ADMITTING INCOME TAXABLE UNDER THE ACT AND NOT A RETURN SHOWING INCOMES UNDER MISTAKEN IMPRESSIONS, WHICH ARE NOT TAXABLE UNDER THE ACT AT ALL. WHEN THERE WAS NO TAX PAYABLE AT ALL BY THE ASSESSEE OR WHEN THE INCOME SHOWN BY THE ASSESSEE WERE BELOW TAXABLE LIMIT IT CANNOT BE SAID THAT THE ASSESSEE H AD A LIABILITY FOR PAYING ANY TAX MUCH LESS SELF ASSESSMENT TAX AND TO LEVY PENALTY FOR ANY ALLEGED DEFAULT IN NOT DEPOSITING THE TAX WOULD BE THE VER Y ANTI-THESIS OF THE OBJECT OF SELF ASSESSMENT TAX. THEREFORE, WHEN THE LEGISLATURE USED THE WORDS TAX PAYABLE ON THE BASIS OF ANY RETURN, IT ONLY MEAN TAX PAYABLE ON THE BASIS OF A CORRECT RETURN AND NOT AN INCORRECT RETURN. THIS IS A WELL RECOGNIZED PRINCI PLE OF INTERPRETATION OF STATUTES PUNISHMENTS CAN BE IMPOSED ONLY IF THE CIRCUMSTANCES OF THE CASE FALL CLEARLY WITHIN THE WORDS OF THE ENACTMENT. THIS I S BASED UPON THE PRINCIPLE OF CONSTRUCTION OF WORDS IN BONAM PARTEM. THE LEADING CASE OF THIS PRINCIPLE O F IN BONAM PARTEM WAS DECIDED IN R V HULME ITA NO. 1201/MUM/2009 (ASSESSMENT YEAR: 2000-01) 8 (1870) L R 5QB 377. IN THIS CASE THE STATUTE PROVIDED: A STATUTE PROVIDED THAT WHERE ANY WITNESS SHALL ANSWER EVERY QUESTION RELATING TO THE MATTERS AFORESAID, COMMISSIONERS APPOINTED TO INQUIRE INTO CORRUPT ELECTION PRACTICES SHOULD ISSUE HIM WITH A CERTIFICATE WHICH WOULD ENTIRE HIM TO CERTAIN IMMUNITIES. THE CASE TURNED ON THE MEANING OF THE WORDS, SHALL ANSWER EVERY QUESTION , DOES THAT MEAN, ASKED BLACKBURN J (AT PP 384,385), IF HE SHALL GIVE AN ANSWER IN FACT, THOUGHT IT MAY BE FAL SE TO HIS KNOWLEDGE; THOUGH IT MAY BE A MATTER OF RIDICULE, AND TURNING THE WHOLE COMMISSION AND INQUIRY INTO CONTEMPT, CAN IT BE INTENDED THAT IF T HE WITNESS GIVES AN ANSWER WHICH IS TRANSPARENTLY FALSE, HE SHOULD GET THE IMMUNITY? IT WAS HELD THAT IT WAS NOT SO INTENDED. WHENEVER THE LEGISLATURE IN THIS ACT REQUIRES A PERSON TO ANSWER QUESTION THE MEANING IS THAT HE SHALL ANSWER THEM TRULY, TO THE BEST OF HIS KNOWLEDGE AND BELIEF ONLY THEN WOUL D BE ENTITLED TO THE STATUTORY CERTIFICATE. THE PRINCIPLE, THAT WHERE AN ACT REFER TO A THING BEING DONE, IT IS TO BE TAKEN AS REFERRING TO THE T HING BEING LAWFULLY DONE, HAS BEEN APPLIED IN SEVERAL RECENT CASES WE ARE OF THE OPINION THAT THIS PRINCIPLE CAN JUST LY BE APPLIED TO THE INTERPRETATION OF THE WORDS ON THE BASIS OF ANY RETURN TO MEAN ON THE BASIS OF AN Y VALID RETURN IN THE SENSE DISCLOSING CORRECT INCOM E. SINCE IN THIS CASE, IT WAS AGRED THAT THE INCOME DISCLOSED FROM INTEREST ON FIXED DEPOSIT WAS HIGHLY INFLATED AND DID NOT RELATE TO THE YEAR UNDER APPEA L BUT RELATED TO SEVERAL OTHER YEARS AND SINCE IT IS CORRECT IN LAW OLY TO TAKE THE INCOME RELATABLE TO THIS YEAR AND IF BY TAKING THAT INCOME ALONG, THERE WAS NO LIABILITY TO PAY TAX AT ALL, THE QUESTION OF PA YING SELF-ASSESSMENT TAX ON THE BASIS OF SUCH A WRONG RETURN DOES NOT SIMPLY ARISE AND TO LEVY A PENALTY FOR NOT PAYING THE TAX NOT DUE ON THE BASIS OF A WRONG RETURN WAS ITSELF UNJUST AND UNFAIR AND IS NOT REQUIRED BY LAW NOR CAN IT BE SAID THAT THE LAW REQUIRES PAYMENT OF TAXES IN SUCH CIRCUMSTANCES. WE ARE, THEREFORE, OF THE OPINION THAT THE AUTHORIT IES BELOW WERE NOT JUSTIFIED IN CONFIRMING THE LEVY OF TAX WHEN THERE WAS NO LIABILITY TO TAX AT ALL. MERELY ON THE BASIS OF HIGHLY TECHNICAL INTERPRETATIONS OF SECOND 140A OF THE INCOME TAX ACT, WITHOUT HAVING ITA NO. 1201/MUM/2009 (ASSESSMENT YEAR: 2000-01) 9 REGARD TO THE PITH AND SUBSTANCE AND THE CARE AND OBJECT OF SECTION 140A. WE, THEREFORE, CANCEL THE PENALTY AND ALLOW THE APPEAL 9. IN VIEW OF THE ABOVE ORDER OF THE DELHI BENCH O F THE TRIBUNAL, WE ARE OF THE VIEW THAT NO INTEREST CAN BE LEVIED U/S 234C ON THAT PART OF INCOME ON WHICH NO TAX IS DUE BEING OVERSTATED DUE TO ARITHMETICAL MISTAKE. ACCORDINGL Y, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES QUA THIS ISSUE AND DIRECT THE AO TO EXCLUDE OVERSTATED INCOME IN THE RETURN OF INCOME WHICH WAS INCLUDED DUE TO ARITHMETICAL MISTA KE FOR THE PURPOSE OF CHARGING OF INTEREST U/S 234C. 10. GROUND NO.2 IS REGARDING THE CLAIM U/S 244A. AFTER RECTIFICATION ORDER DATED 19.6.2006, THE ASSE SSEE CLAIMED INTEREST U/S 244A FOR THE PERIOD FROM 1.4.2 000 TILL THE DATE OF GRANTING REFUND AS AGAINST THE INTEREST GR ANTED BY THE AO FOR THE PERIOD FROM 1.6.2004 TO 19.4.2006. 11. THE CIT(A) HAS DENIED THE CLAIM OF THE ASSESSEE ON TWO COUNTS. FIRSTLY, THE ASSESSEE FILED THE RETURN OF INCOME ON 30.11.2002 AND AS PER THE PROVISIONS OF SECTION 23 9 THE CLAIM FOR THE REFUND WOULD HAVE BEEN MADE UP TO 31.3.2002 . SINCE THE ASSESSEE MADE THE CLAIM FOR GRANT OF REFUND ONL Y ON 3.1.2004 ALONG WITH INTEREST U/S 244A, THE SAID CL AIM COULD ITA NO. 1201/MUM/2009 (ASSESSMENT YEAR: 2000-01) 10 NOT HAVE BEEN ALLOWED AS PER THE PROVISIONS OF SECT ION 239(2)(C). 12. SECONDLY, AS PER THE PROVISIONS OF SECTIONS 244 A(2) NO INTEREST SHALL BE GRANTED FOR THE PERIOD FOR WHICH THE DELAY IS ATTRIBUTABLE TO THE ASSESSEE. SINCE THE ASSESSEE FILED THE APPLICATION FOR RECTIFICATION U/S 154 AND MADE THE CLAIM OF REFUND ON 3.1.2004, THEREFORE, THE ASSESSEE IS NOT ELIGIBLE FOR THE INTEREST FOR THE PRIOR PERIOD. 13. BEFORE US, THE LEARNED AR SUBMITTED THAT AS PE R THE PROVISIONS OF SUB-SECTION (2) TO SECTION 244A, IF THE DELAY IN THE PROCEEDINGS RESULTED IN REFUND IS ATTRIBUTED T O THE ASSESSEE THEN THE SAID PERIOD SHALL BE EXCLUDED FR OM THE PERIOD FOR WHICH THE INTEREST IS PAYABLE. IN THE ASSESSEES CASE THE RETURN OF INCOME WAS PROCESSED U/S 143(1) AND THE AO HAS PASSED THE ORDER DATED 28.3.2002. HE HAS FURTHER CONTENDED THAT AS PER THE PROVISIONS OF SECTION 143 (1) (A) (I) THE TOTAL INCOME OR LOSS SHALL BE COMPUTED AFTER MA KING THE ADJUSTMENT INTERALIA FOR ANY ARITHMETICAL ERROR IN THE RETURN. THUS, THE LEARNED AR OF THE ASSESSEE HAS URGED THA T WHEN THE AO WAS UNDER THE OBLIGATION TO RECTIFY THE ARIT HMETICAL MISTAKE IN THE RETURN WHILE PASSING THE ORDER U/S 143(1) THEN THE DELAY IN RECTIFYING THE MISTAKE ON THE APPLICAT ION FILED BY THE ASSESSEE CANNOT BE ATTRIBUTABLE TO THE ASSESSEE . THUS, ITA NO. 1201/MUM/2009 (ASSESSMENT YEAR: 2000-01) 11 THE LEARNED AR OF THE ASSESSEE HAS MADE AN ALTERNAT IVE PLEA THAT IF THE ASSESSEE IS NOT ENTITLED FOR THE INTERE ST U/S 244A FROM 1.4.2000 THEN AT LEAST THE INTEREST MAY BE GRA NTED FROM 28.3.2002 WHEN THE AO PASSED THE ORDER U/S 143(1). HE HAS FURTHER CONTENDED THAT FOR REFUND WHICH IS DUE AS P ER THE PROVISIONS OF LAW NEED NOT BE CLAIMED BY THE ASSES SEE AND THEREFORE THE INTEREST IS PAYABLE ONCE THE REFUND B ECOMES DUE AS PER THE SECTION 244A. THE LD. AR HAS SUBMITTE D THAT IN THE SUB-SECTION 1 OF SECTION 244A THE WORDS WHER E REFUND ON ANY AMOUNT BECOMES DUE TO THE ASSESSEE UNDER THIS ACT WERE SUBSTITUTED FOR THE PHRASE FOR WERE IN PURSU ANCE OF ANY ORDER PASSED UNDER THIS ACT VIDE AMENDMENT WITH E FFECT FROM 1.4.1989. THUS, THE INTEREST PAYABLE ON THE REFUND BECOMES DUE TO THE ASSESSEE UNDER THIS ACT AND NOT DUE TO ANY ORDER PASSED IN APPEAL OR OTHER PROCEEDINGS AS REFERRED U /S 240 OF THE ACT. THE REFUND IN THE CASE OF THE ASSESSEE IS DEEMED TO HAVE BEEN ARISEN ON THE DATE WHEN THE AO PASSED TH E ORDER U/S 143(1) AND WAS REQUIRED TO RECTIFY THE ARITHMET ICAL MISTAKE IN THE RETURN OF INCOME. SINCE THE AO HAS FAILED T O RECTIFY THE ARITHMETICAL MISTAKE IN THE RETURN THEN THE DELAY I N PROCEEDINGS U/S 154 RESULTING REFUND IS ATTRIBUTA BLE TO THE AO AND NOT TO THE ASSESSEE. HE HAS REFERRED TO TH E CBDT CIRCULAR NO.14 (XL-35) DATED 11.4.1955 AND SUBMITTE D THAT IT IS THE DUTY OF THE AO TO COLLECT THE CORRECT TAX AND T HEREFORE TO ALLOW THE CORRECT INTEREST U/S 244A. THE GOVERNMEN T IS NOT ITA NO. 1201/MUM/2009 (ASSESSMENT YEAR: 2000-01) 12 SUPPOSED TO ADOPT THE MODUS OPERENDI TO DENY THE IN TEREST U/S 244A MERELY BECAUSE THE ASSESSEE HAD ADVERTENTLY SH OWN HIGH INCOME IN THE RETURN OF INCOME DUE THE ARITHME TICAL MISTAKE. HE HAS FURTHER CONTENDED THAT THE DEPARTME NT MUST NOT TAKE ADVANTAGE OF IGNORANCE OF ASSESSEE AS TO H IS RIGHT. WHILE REFERRING THE ABOVE CIRCULAR NO. 14 (XL-35) D ATED 11.4.1955, HE HAS ALSO RELIED UPON THE ORDER OF A C O-ORDINATE BENCH OF THIS TRIBUNAL DATED 29.11.2001 IN THE CA SE OF KOMAL FINANCIAL SERVICES LTD V/S DCIT IN ITA NO.409/M/200 0, ORDER DATED 29.11.2001. 14. ON THE OTHER HAND, THE LEARNED DR HAS SUBMITTED THAT THE PROCESS OF RETURN UNDER SECTION 143(1) IS NOT A N ORDER PASSED BY THE AO BY APPLYING HIS MIND BUT THE SAM E IS ONLY AN ACKNOWLEDGMENT GENERATED THROUGH COMPUTER BY EFF ECTING THE PARTICULARS STATED BY THE ASSESSEE IN THE RETUR N OF INCOME. SINCE THE ACKNOWLEDGMENT IS NOT GENERALLY DONE BY T HE AO BUT MOSTLY BY THE MINISTERIAL STAFF THEREFORE, IT IS PRACTICALLY NOT POSSIBLE FOR THE AO TO MAKE OUT ANY MISTAKE IN THE RETURN OF INCOME AND PARTICULARLY IN THE COMPUTATION PART OF INCOME. HE HAS STRONGLY CONTENDED THAT THE MISTAKE IN THE PRES ENT CASE IS ON THE COMPUTATION PART OF THE RETURN OF INCOME WH ICH IS A STATEMENT OF COMPUTATION OF INCOME AND NOT IN THE R ETURN FORM NO.1. SINCE THE RETURN IS PROCESSED BY THE COMPUTE RIZED SYSTEM AND THE ACKNOWLEDGMENT IS GENERATED FROM THE ITA NO. 1201/MUM/2009 (ASSESSMENT YEAR: 2000-01) 13 COMPUTER, THE AO WAS NOT SUPPOSED TO GO INTO THE COMPUTATION PART OF INCOME WHILE PROCESSING THE RET URN U/S 143(1). THE DETAILS PROVIDED IN THE FORM OF RETURN ARE FEEDED IN THE COMPUTER AND THEREFORE THERE WAS NO OCCASION FOR THE AO TO LOOK INTO THE MISTAKE IN THE COMPUTATION PART . HE HAS REFERRED TO THE PROVISIONS OF SECTION 240 OF THE AC T AND SUBMITTED THAT THE INTEREST U/S 244A IS ALLOWABLE WHEN THE REFUND BECOMES DUE AS A RESULT OF ANY ORDER OR PROC EEDINGS UNDER THIS ACT. WHEN THE REFUND BECOMES DUE ONLY BECAUSE OF THE PROCEEDINGS U/S 154 OF THE ACT THEN THE ASS ESSEE IS NOT ENTITLED FOR THE INTEREST PRIOR TO THE DATE OF PROC EEDINGS U/S 154. HE HAS FURTHER CONTENDED THAT WHEN THE REFUN D BECOMES DUE TO THE ASSESSEE ONLY WHEN THE ORDER U/S 154 WAS PASSED THEN PRIOR TO THE ORDER U/S 154, NO REFUND WAS DUE TO THE ASSESSEE AS PER THE SUB-SECTION 2 OF SECTION 244A. THE ASSESSEE IS NOT ENTITLED FOR THE INTEREST FOR THE P ERIOD UPTO TO THE DATE OF FILING OF THE PETITION U/S 154 BECAUSE THE ASSESSEE HAS COMMITTED A MISTAKE IN THE RETURN OF INCOME AND NO REVISED RETURN WAS FILED BY THE ASSESSEE THEREFORE THERE WAS A DELAY IN INITIATION OF THE PROCEEDINGS U/S 154 ON THE PART OF THE ASSESSEE WHICH RESULTED INTO THE REFUND DUE TO THE ASSESSEE. THUS, THE LEARNED DR HAS FORCEFULLY SUBM ITTED THAT THE PERIOD UP TO THE FILING OF THE APPLICATION U/S 154 IS TO BE EXCLUDED AS THE SAID PERIOD OF DELAY IS ATTRIBUTAB LE TO THE ASSESSEE AND NOT TO THE AO. ITA NO. 1201/MUM/2009 (ASSESSMENT YEAR: 2000-01) 14 15. IN REBUTTAL, THE LEARNED AR HAS REFERRED FORM N O.1 AND SUBMITTED THAT THE STATEMENT OF INCOME IS PART AND PARTIAL OF THE RETURN OF INCOME AND THE AO IS UNDER OBLIGA TION TO CORRECT THE ARITHMETICAL MISTAKE IF ANY IN THE RETU RN OF INCOME WHILE PROCESSING THE INCOME U/S 143(1). 16. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, THE D ECISIONS RELIED UPON BY BOTH THE PARTIES AND RECORD. THE IN TEREST ON THE REFUND BECOMES DUE TO THE ASSESSEE IS PAYABLE AS PER THE PROVISIONS OF SECTION 244A. THE TERM USED IN THE S UB-SECTION 1 OF SECTION 244A IS UNDER THIS ACT WHEREAS THE INTEREST PAYABLE U/S SECTION 244 ON THE REFUND BECOMES DUE T O THE ASSESSEE IN PURSUANCE OF AN ORDER REFERRED IN SECTI ON 240. THEREFORE THERE IS A DISTINCTION IN THE SITUATION I N WHICH TWO SECTIONS VIS 244 AND 244A ARE APPLICABLE . SECTIO N 244A HAS A WIDER SCOPE WHICH HAS BEEN INSERTED IN THE STATU E BECAUSE OPERATION OF SECTION 244 WAS CEASED TO APPLY FROM T HE ASSESSMENT YEAR COMMENCING ON 1.4.1989 OR IN SUBSEQ UENT YEARS. THEREFORE, THE PROVISIONS OF SECTION 244 AR E APPLICABLE ONLY UP TO THE ASSESSMENTS PRIOR TO THE ASSESSMENT YEARS 1989 TO 1990. UNDER THE PROVISIONS OF SECTION 244, THE INTEREST WAS PAYABLE ON THE REFUND DUE IN PURSUANCE OF AN O RDER PASSED IN APPEAL OR OTHER PROCEEDINGS UNDER THE ACT AS PROVIDED U/S 240 BUT THE INTEREST PAYABLE U/S 244A IS ON THE ITA NO. 1201/MUM/2009 (ASSESSMENT YEAR: 2000-01) 15 REFUND BECOMES DUE TO THE ASSESSEE UNDER THIS ACT W HICH INCLUDES THE REFUND BECOMES DUE TO THE ASSESSEE UND ER THE PROVISIONS OF THIS ACT APART FROM THE ORDERS AND OT HER PROCEEDINGS UNDER THIS ACT. AS FAR AS THE FINDING OF THE CIT(A) THAT THE ASSESSEE IS NOT ENTITLED FOR REFUND BECAUS E THE ASSESSEE MADE THE CLAIM OF REFUND AFTER THE EXPIRY OF ONE YEAR FROM THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. F ROM 1.4.2000 IS CONCERNED WHEN THE REFUND HAS ALREADY B EEN GRANTED AND THE ISSUE IS ONLY REGARDING THE INTERES T U/S 244A THEN IN OUR VIEW, THE CIT(A)S FINDINGS ARE IMPROPE R AND NOT CORRECT AS WELL AS IRRELEVANT. THEREFORE, ONLY I SSUE BEFORE US IS WHETHER THE ASSESSEE IS ENTITLED FOR INTEREST UN DER SECTION 244A ON THE REFUND GRANTED BY THE AO VIDE ORDER DAT ED 19.4.2006 FROM 1.4.2000 TILL 19.4.2006 OR FROM ANY OTHER DATE AND IF SO WHETHER THE DELAY IN GRANTING OF REFUND I S ATTRIBUTABLE TO THE ASSESSEE AS PER THE PROVISIONS OF SECTION 24 4A (2)? SINCE, THE CLAIM OF INTEREST IS NOT DISPUTED BY TH E AO AND THE AO HAS ALREADY GRANTED THE INTEREST U/S 244A FROM 6.1.2004 WHEN THE PETITION FOR RECTIFICATION U/S 154 WAS REC EIVED BY THE AO TILL 19.4.2006 WHEN THE REFUND WAS GRANTED WHILE DECIDING THE PETITION U/S 154, THEREFORE, THE LIMITATION QU ESTION REMAINS TO BE DECIDED IS WHETHER THE ASSESSEE IS ELIGIBLE FOR INTEREST PRIOR TO 6.1.2004 ON THE REFUND GRANTED OR THE DE LAY UP TO 6.1.2004 IS ATTRIBUTABLE TO THE ASSESSEE AS PER THE PROVISIONS OF SUB-SECTION 2 OF SECTION 244A. AS HELD BY THE H ON. ITA NO. 1201/MUM/2009 (ASSESSMENT YEAR: 2000-01) 16 SUPREME COURT IN THE CASE OF SANDVIC ASIA LTD V/ S CIT REPORTED IN 280 ITR 643, THE PERSON SHOULD ONLY BE TAXED IN ACCORDANCE WITH LAW AND HENCE WHERE EXCESS AMOUNT O F TAX ARE COLLECTED FROM THE ASSESSEE OR ANY AMOUNT WRONG LY COLLECTED FROM THE ASSESSEE WITHOUT ANY AUTHORITY O F LAW THE REVENUE MUST COMPENSATE THE ASSESSEE. THERE IS NO DISPUTE ABOUT THE PAYMENT OF INTEREST ON THE EXCESS AMOUNT OF TAX PAID BY THE ASSESSEE WHEN THE REFUND BECOMES DUE B UT WAS NOT PAID WITHIN THE PERIOD PRESCRIBED BY THE LAW. THE ASSESSEE HAS RAISED THE INTERESTING ISSUE ABOUT TH E OBLIGATION OF THE AO IS TO RECTIFY ALL THE ARITHMETIC MISTAKES IN THE RETURN OF INCOME WHILE PROCESSING RETURN U/S 143(1) BUT A T THE SAME TIME WE FIND SOME FORCE IN THE CONTENTION OF THE LE ARNED DR THAT WHEN THE RETURN IS PROCESSED AND THE ACKNOWLED GMENT BY COMPUTERIZED SYSTEM THEN IT IS NOT PRACTICALLY PO SSIBLE FOR THE AO TO FIND OUT ANY SUCH ERROR IN THE COMPUTATION OF INCOME PARTICULARLY WHEN THIS WORK IS PERFORMED BY THE MIN ISTERIAL STAFF. HOWEVER, WE ARE OF THE VIEW THAT WHEN SUB- SECTION 2 OF SECTION 244A SPECIFICALLY PROVIDES JURISDICTION OF CHIEF COMMISSIONER OF INCOME TAX OR COMMISSIONER OF INCOM E TAX AS THE CASE MAY BE TO DECIDE THE QUESTION AS TO THE PERIOD TO BE EXCLUDED AND THE DECISION OF THE CHIEF COMMISSIO NER OR COMMISSIONER SHALL BE FINAL. FOR THE SAKE OF CONVE NIENCE SUB-SECTION 2 OF SECTION 244A IS PRODUCED BELOW: ITA NO. 1201/MUM/2009 (ASSESSMENT YEAR: 2000-01) 17 244A. (1) ... (2) IF THE PROCEEDINGS RESULTING IN THE REFUND ARE DELAYED FOR REASONS ATTRIBUTABLE TO THE ASSESSEE, WHETHER W HOLLY OR IN PART, THE PERIOD OF THE DELAY SO ATTRIBUTABLE TO HIM SHALL BE EXCLUDED FROM THE PERIOD FOR WHICH INTEREST IS P AYABLE, AND WHERE ANY QUESTION ARISES AS TO THE PERIOD TO B E EXCLUDED, IT SHALL BE DECIDED BY THE CHIEF COMMISSI ONER OR COMMISSIONER WHOSE DECISION THEREON SHALL BE FINAL. (3) 17. ACCORDINGLY WHEN HE STATUTE PRESCRIBES AN AUTHO RITY TO DECIDE THE QUESTION REGARDING THE REASONS FOR DELA Y ATTRIBUTABLE TO THE ASSESSEE OR NOT AND THE PERIOD OF DELAY SO ATTRIBUTABLE TO HIM THEN NO OTHER AUTHORITY CAN EXE RCISE THE JURISDICTION ON THE SUBJECT UNTIL AND UNLESS THE A UTHORITY PRESCRIBED BY THE STATUTE HAS DECIDED THE QUESTION FIRST. OUR VIEW IS SUPPORTED BY THE DECISION OF THE KERALA HIG H COURT IN THE CASE OF KERALA STATE CIVIL SUPPLIES CORPORATI ON LTD V/S JCIT REPORTED IN 317 ITR 279, WHERE THE HON. HIGH COURT HAS OBSERVED AT PAGE 283 AS UNDER .. .IT MAY BE NOTICED THAT U/S 244A(2) OF THE ACT, I F THE PROCEEDINGS RESULTING IN THE REFUND ARE DELAYED FOR REASONS ATTRIBUTABLE TO THE ASSESSEE WHETHER WHOLLY OR IN PART, THE PERIOD OF THE DELAY SO ATTRIBUTABLE TO HIM SHALL BE EXCLUDED FROM THE PERI OD FOR WHICH INTEREST IS PAYABLE. WHERE ANY QUESTION ARISES AS TO THE PERIOD TO BE EXCLUDED, IT SHALL BE DECIDED BY CHIEF COMMISSIONER OR COMMISSIONER WHOSE DECISION SHALL BE FINAL. THOUGH AS PER THE SAID PROVISION, IT IS THE CHIEF COMMISSIONER OR TH E COMMISSIONER TO DECIDE AS TO WHICH PORTION SHALL BE EXCLUDED, IT GOES WITHOUT SAYING THAT IN SO DECIDIN G, THE QUESTION AS TO WHETHER THE DELAY IS ATTRIBUTABL E ON THE PART OF THE ASSESSEE OR THE AO, HAS NECESSARILY TO BE CONSIDERED. THE CONCLUSION THAT I T IS FOR THE AO TO DECIDE WHETHER THE DELAY IS ATTRIBUTABLE ON THE PART OF THE ASSESSEE OR ON THE AO AND WHAT HAS BEEN LEFT TO BE DECIDED BY THE CHIEF ITA NO. 1201/MUM/2009 (ASSESSMENT YEAR: 2000-01) 18 COMMISSIONER OR THE COMMISSIONER, AS THE CASE MAY BE, IS ONLY TO BE REJECTED AS OPPOSED TO THE VERY OBJECT OF CONFERRING THE JUDGMENT ON THE HIGH ER AUTHORITY. BEFORE THE AO WHEN A QUESTION ARISES AS TO WHETHER THE DELAY IS ATTRIBUTABLE ON THE PART OF THE ASSESSEE OR THE AO, HE HIMSELF CANNOT DECIDE THE SAME, SINCE HE WILL BE DECIDING ON HIS OWN CASE . THE LEGISLATURE , IN THE CIRCUMSTANCES, CONFERRED EXCLUSIVE JURISDICTION ON A HIGHER AUTHORITY, NAMEL Y, THE CHIEF COMMISSIONER OR THE COMMISSIONER TO DECIDE THE SAME. IN THIS REGARD, IT HAS TO BE SEEN THAT SUB-SECTION (2) OF SECTION 244A OF THE ACT, THOUGH SAYS THAT THE DELAY SO ATTRIBUTABLE SHALL B E EXCLUDED FROM THE PERIOD TO BE DECIDED BY THE CHIE F COMMISSIONER OR THE COMMISSIONER, THE QUESTION AS TO WHICH PERIOD SHOULD BE EXCLUDED AND WHICH PERIOD SHOULD BE INCLUDED WILL NECESSARY DEPEND ON THE FINDING AS TO WHETHER THE DELAY IS ATTRIBUTABLE ON WHOSE PART. SO, IT HAS TO BE HELD THAT WHENEVER A QUESTION ARISES AS TO WHETHER THERE IS A DELAY ATTRIBUTABLE ON THE PART OF THE ASSESSEE OR THE AO, IN TERMS OF SECTION 244A(2) IT HAS TO BE DECIDED BY TH E CHIEF COMMISSIONER OR THE COMMISSIONER, AS THE CASE MAY BE. THAT HAS BEEN DECIDED IN THIS CASE. THE NET RESULT OF THE PROCEEDINGS UNDER SECTION 154 EARLIER INITIATED AGAINST THE ASSESSEE AS A MATTER OF FACT, WOULD BE COMPLETED IN THE SENSE THAT ONCE HE NOTICED THAT HE COULD NOT HAVE PASSED AN ORDER COMPLETING THE ASSESSMENT WITHOUT DECIDING THIS ISSUE AND WITHOUT REFERRING THE SAME TO THE CHIEF COMMISSIONER, HE WOULD HAVE ONLY CANCELLED THE ASSESSMENT AND THEN, AFTER OBTAINING THE DECISION FROM THE CHIEF COMMISSIONER, HE COULD HAVE INCORPORATED THE SAME AND COMPLETED THE ASSESSMENT. THE SAME HAS BEEN DONE BY VIRTUE OF EXHIBIT P-13 BY THE AO, IF SO, WE DO NOT FIND ANY GOOD GROUND TO INTERFERE WITH THE JUDGMENT UNDER APPEAL. ACCORDINGLY,, THE APPEAL IS DISMISSED. HOWEVER, NO ORDER AS TO COSTS 18. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT( A) QUA THIS ISSUE AND REMIT THE MATTER TO THE FILE OF THE AO WI TH A DIRECTION TO PRESENT THE ISSUE BEFORE CHIEF COMMISSIONER OF INCOME TAX OR COMMISSIONER AS THE CASE MAY BE FOR DECIDI NG THE ITA NO. 1201/MUM/2009 (ASSESSMENT YEAR: 2000-01) 19 SAME AFTER CONSIDERING THE CONTENTIONS RAISED BY TH E PARTIES BEFORE US AS WELL AS ANY OTHER CONTENTIONS IF SO TO BE RAISED BY THE PARTIES. 19. IN THE RESULT, THE APPEAL OF THE ASSESSEE I S PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 24.06.2010 SD SD (S V MEHROTRA ) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 24TH JUNE 2010 SRL:4510 COPY TO: 1. M/S BIRLA GROUP HOLDINGS LTD INDUSTRY HOUSE 159 BACKBAY RECLAMATION CHURCHGATE, MUMBAI-400020 2. JCIT(OSD) RANGE -2(1) MUMBAI 3. CIT-II, MUMBAI CITY, MUMBAI 4. CIT(A)-II, MUMBAI 5. DR B BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI