MBG Commodities (P) Ltd., Hyd, Hyderabad V. DCIT, Central Circle 1(3), Hyderabad, Hyderabad

ITA 1323/HYD/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6341 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 30-11-2015
• Court: TRIBUNAL
• Department Lawyers: R M MUJUMDAR
• Assessee Lawyers: B SATYANARAYANA MURTHY
• Keywords: Rectification of order; Search and seizure; Revised return
• Section: 143(3); 153A; 234B; 115JB; 147; 154; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. ASST. YEAR APPELLANT RESPONDENT 1321/HYD/2015 2005 - 06 M/S. MBG COMMODITIES (P) LTD., (FORMERLY KNOWN AS M/S. MAHESWARI BROTHERS) , HYDERABAD [PAN: AAICM1188N] THE DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE- 1(3), HYDERABAD 1322/HYD/2015 2008 - 09 1323/HYD/2015 2009 - 10 FOR ASSESSEE : SHRI B. SATYANARAYANA MURTHY, AR FOR REVENUE : SHRI R.M. MUJUMDAR, DR DATE OF HEARING : 28-04-2016 DATE OF PRONOUNCEMENT : 15-07-2016 O R D E R PER B. RAMAKOTAIAH, A.M. : THESE ARE THREE APPEALS BY ASSESSEE FOR THE AYS. 200 5-06, 2008-09 AND 2009-10. THE ONLY ISSUE IN THESE APPEAL S RELATE TO THE RECTIFICATION U/S. 154 OF THE INCOME TAX ACT [ACT] FO R RECALCULATION OF INTEREST U/S. 234B. SINCE THE FACTS IN ALL THE APPEALS ARE SIMILAR, WE ARE ADJUDICATING ALL THE APP EALS BY THIS COMMON ORDER. 2. ASSESSEE WAS A FIRM IN ALL THESE IMPUGNED YEARS KNOWN AS M/S. MAHESWARI BROTHERS. THE FIRM WAS CONVERTED INTO A COMPANY IN AUGUST 2012 UNDER THE NAME OF M/S. MBG ITA NOS. 1321, 1322 & 1323/HYD/2015 M/S. MBG COMMODITIES (P) LTD., (FORMERLY KNOWN AS M/S. MAHESWARI BROTHERS) :- 2 -: COMMODITIES (P) LTD. THE COMPANY IN ITS NAME, PURSUED THE APPEALS BEFORE THE CIT(APPEALS) FOR THESE THREE YEARS. 3. A TABULAR STATEMENT WAS FILED IN THE COURSE OF THE APPEAL HEARING FOR THE AYS. 2005-06, 2008-09 & 2009- 10 GIVING THE DATES OF FILING THE RETURNS, INCOMES RETURNED, DATES O F ORDER U/S. 143(1), DATE OF NOTICE U/S. 153A AND DETAILS OF RETURNS FILED IN RESPONSE THERETO AND THE DATE OF ORDER U/S. 143(3) R.W .S. 153A AND R.W.S. 245D(4). FOR THE SAKE OF CONVENIENCE, WE DE AL WITH THE FACTS RELATING TO THE AY. 2005-06. AY. 2005-06: 4. DURING THE YEAR UNDER CONSIDERATION, ASSESSEE FI LED ITS RETURN ON 03-01-2006 DECLARING AN INCOME OF RS. 69,1 7,240/-. AFTER THE RETURN WAS PROCESSED U/S. 143(1), THE INTIMATIO N WAS RECEIVED ON 24-03-2006. FOR THE SHORTFALL OF THE ADVA NCE TAX PAID, THE AO CHARGED AN AMOUNT OF RS. 50,132/- AS INTEREST U/ S. 234B OF THE ACT. NO SCRUTINY WAS TAKEN UP FOR THIS YEAR. T HERE WAS A SEARCH AND SEIZURE OPERATION IN THE PREMISES OF THE A SSESSEE AND ITS SISTER CONCERNS ON 08-09-2010, CONSEQUENT TO WHICH, A NOTICE U/S. 153A WAS ISSUED ON 06-01-2011 TO THE ERSTWHILE F IRM OF M/S. MAHESWARI BROTHERS. THE RETURN WAS FILED ON 21-08-20 12 IN RESPONSE TO SUCH NOTICE, DECLARING A TOTAL INCOME OF R S. 2,07,10,115/-. ASSESSMENT WAS TAKEN UP IN THE FY. 201 2-13. WHEN THE SCRUTINY ASSESSMENT WAS IN PROGRESS, AN APPLI CATION U/S. 245D WAS FILED ON 26-03-2013 BEFORE THE SETTLEMENT COMM ISSION. THE SETTLEMENT COMMISSION PASSED AN ORDER ON 30-07-201 3. SUBSEQUENTLY, THE ASSESSMENT WAS COMPLETED IN ACCORDAN CE WITH THE DIRECTIONS OF THE SETTLEMENT COMMISSION THROUGH ORDER U/S. ITA NOS. 1321, 1322 & 1323/HYD/2015 M/S. MBG COMMODITIES (P) LTD., (FORMERLY KNOWN AS M/S. MAHESWARI BROTHERS) :- 3 -: 143(3) R.W.S. 153A AND R.W.S. 245D(4) ON 03-12-2013 . INTEREST U/S. 234B WAS CHARGED FOR THE SHORTFALL OF THE ADVANCE TAX FROM THE DATE OF ORDER U/S. 143(1). SUBSEQUENTLY, THE AO ISSUE D A NOTICE U/S. 154 FOR CHARGE OF INTEREST U/S. 234B FROM 01-04- 2005 IE. FROM THE BEGINNING OF ASSESSMENT YEAR. IN RESPONSE TO THAT NOTICE, ASSESSEE FILED A REPLY ON 17-12-2014 OBJECTING TO THE SAME RELYING ON THE PROVISIONS OF THE ACT. HOWEVER, REJECTING THE CONTENTIONS OF ASSESSEE, THE AO PASSED AN ORDER U/S. 154 CHARGING I NTEREST U/S. 234B FROM 01-04-2005. AGAINST THE SAME, ASSESSEE FI LED AN APPEAL BEFORE THE CIT(A). 5. DURING THE COURSE OF APPELLATE PROCEEDINGS, LD. C IT(A) WHILE UPHOLDING THE ORDER OF AO, DISMISSED THE APPEA LS ON THIS ISSUE WITH THE FOLLOWING OBSERVATIONS: 08.0 I HAVE GONE THROUGH THE FACTS OF THE CASE AND CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT. A MIS TAKE SHOULD EXIST AND IT SHOULD BE APPARENT FROM THE RECORD IN SUCH A WAY THAT ITS DISCOVERY SHOULD NOT BE DEPENDENT ON AN ELABORATE PROCESS OF REASONING OR ARGUMENT. APPARENT MEANS VISIBLE, MANIFEST OR OBVI OUS. THE TEST OF TS BALARAM VS VOLKART BROTHERS, 82 ITR 50 [SC] IS THAT IT SHOULD BE A MISTAKE SIMPLICITER, AND APPARENT FROM THE RECORD. IT SHOU LD APPEAR TO BE SO EX- FACIE, AND SHOULD BE INCAPABLE OF DEBATE OR ARGUMEN T. 08.1 UNDISPUTED FACTS OF THE CASE ARE THAT NEITH ER THE CHARGE OF TAX NOR THE LEVY OF INTEREST U/S 234B IS DISPUTED, ONLY THE QUANTIFICATION OF INTEREST LEVIED IS ASSAILED. THE ASSESSING OFFICER NOTICED F ROM THE RECORD THAT THE ASSESSMENT ORDER DT. 03.12.2013 WAS THE FIRST ORDER OF ASSESSMENT, AND THEREFORE, NOT AN ORDER OF REASSESSMENT. SINCE SEC 234B(3) IS TRIGGERED IN CASES WHERE INCOME COMPUTED INCREASES UPON AN ORDER OF REASSESSMENT, AS DISTINCT FROM A REGULAR ASSESSMENT, THE SUB-SECT ION HAD BEEN ERRONEOUSLY EMPLOYED. IT IS SUB-SECTION 1 TO SECTIO N 234B WHICH PROVIDES FOR INTEREST CALCULATION UPON REGULAR ASSESSMENT. E XPLANATION 2 TO SECTION 234B(1) AS AMENDED BY FINANCE ACT 2003, W.E.F 01-06 -2003, IMMEDIATELY PROVIDES THE CLARIFICATION THAT IN A CASE WHERE AN ASSESSMENT IS MADE FOR THE FIRST TIME, BY HAVING TO TAKE RECOURSE TO THE P ROVISIONS OF SECTION 147 OR SECTION 153A, IT WOULD NEVERTHELESS HAVE TO BE RECK ONED AS A REGULAR ASSESSMENT. ON THE FACTS OF THE PRESENT CASE, THE I SSUE FOR DETERMINATION IS SIMPLE ENOUGH TO BE ANSWERED IN YES/NO TERMS. WA S THE ASSESSEE ITA NOS. 1321, 1322 & 1323/HYD/2015 M/S. MBG COMMODITIES (P) LTD., (FORMERLY KNOWN AS M/S. MAHESWARI BROTHERS) :- 4 -: SUBJECTED TO A REGULAR ASSESSMENT BEFORE ISSUANCE O F NOTICE U/S 153A? NO. IS THE ORDER DT.03.12.2013 U/S 143(3) R.W.S 153A TH E FIRST INSTANCE OF SCRUTINY, WITH DUE PROCESS IN TERMS OF SEC 143(2), ETC ? YES. IN TERMS OF THE AFORESAID EXPLANATION 2, THEREFORE, IT IS A SELF-EV IDENT PROPOSITION THAT THIS ORDER IS A 'REGULAR ASSESSMENT' AND NOT A 'RE-ASSES SMENT'. THE TIME PERIOD FOR INTEREST CALCULATION UNDER SEC 234B CANNOT THER EFORE, BE ANYTHING OTHER THAN WHAT IS SPELT OUT IN SUB-SECTION 1. TO DO OTHE RWISE WOULD BE TO ATTRIBUTE REDUNDANCY TO EXPLANATION 2 . 08.2 THE ACT OF READING CONSTITUENT PARTS OF A SE CTION TOGETHER IS AN OBVIOUS REQUIREMENT. TO POSIT AN ARGUMENT THAT IT C AN BE OTHERWISE IS A LOGICAL FALLACY. TO REITERATE THIS POSITION CAN HAR DLY BE CONSTRUED AS AN ACT OF INTERPRETATION, MUCH LESS ELABORATE ARGUMENT. ON THE CONTRARY, NOT TO DO SO WOULD BE PERVERSE. THE ASSESSING OFFICER ALSO RE LIED ON A DECISION OF THE MADRAS HIGH COURT [TEXTILE DYE-CHERN CORPORATIO N VS ACIT(2013-TIOL- 487-HC-MAD-IT)]. THIS WAS PLAINLY UNNECESSARY. NO P RINCIPLE OF INTERPRETATION OR CONSTRUING STATUTES HAS IT THAT A SECTION BE READ DE HORS THE EXPLANATION APPENDED IMMEDIATELY THERE-UNDER. T HE MATTER BEING SELF EVIDENT ON A PLAIN READING OF THE SECTION, AN ACT O F INVOKING CASE-LAW IN SUPPORT OF THE PROPOSITION CAN HARDLY MAKE THE POSI TION ARGUABLE. WHILE THE ASSESSING OFFICER DID NOT REQUIRE SUCH CASE-LAW TO STATE HIS CASE, SUCH AN ACT BY ITSELF CANNOT RENDER IT A POINT OF VIEW. THIS HAS TO BE SEEN AS THE ONLY POINT OF VIEW. 08.3 DURING THE HEARING LD AR FURNISHED A COPY OF THE DECISION IN THE CASE OF DATAMATIES LTD VS ACIT 110 ITO 24[MUM] BY W AY OF PLACING RELIANCE THEREON. ON A CONSIDERATION OF FACTS IT EM ERGES THAT IN THIS CASE THE ASSESSEE IS NOT CONTESTING THE DETAILS OF LEVY OF INTEREST SUCH AS PERIOD, AMOUNT, ETC. RATHER, THE ASSESSEE IS DENYING IT'S L IABILITY TO THE LEVY OF INTEREST ALTOGETHER, IN CONTRAST TO THE ASSESSING O FFICER'S STAND THAT INTEREST U/S 234B IS MANDATORY. IT WAS CONTENDED TH AT SINCE IT HAD A NET REFUND POSITION AT THE POINT OF THE INTIMATION U/S 143(1)(A), THE THRESHOLD REQUIREMENT FOR CHARGE OF INTEREST U/S 234B VIZ, AD VANCE TAX PAID FALLING SHORT OF 90% OF 'ASSESSED TAX' AS DEFINED IN EXPLAN ATION 1 TO SEC 234 WAS NOT SATISFIED. THE HON'BLE ITAT AGREED WITH THE ASS ESSEE THAT THERE COULD BE NOTHING MANDATORY ABOUT LEVY OF INTEREST U/S 234 B UNDER THESE CIRCUMSTANCES. IT WAS HELD THAT IF NOTHING WAS CHAR GEABLE AT THE OUTSET, THERE WOULD BE NOTHING FOR ENHANCEMENT IN SUBSEQUEN T PROCEEDINGS. THE CASE, THEREFORE, PROVIDES NO BASIS TO DECIDE THE PR ESENT CASE EITHER WITH REFERENCE TO MERITS OR EVEN THE ASSUMPTION OF JURIS DICTION. 08.4 A GROUND HAS BEEN RAISED TO THE EFFECT THAT IS SUE BEING 'CONTROVERSIAL', OR NEEDING ELABORATE ELUCIDATION, DID NOT PERMIT AS SUMPTION OF JURISDICTION U/S 154 - WHICH HAS TO CONFINE ITSELF TO ANY MATTER APPARENT FROM THE RECORD. IT HAS BEEN NOTICED HEREINABOVE, THAT A PLA IN READING OF THE RELEVANT PROVISIONS, IN THEIR FACTUAL CONTEXT, PERM ITTED NO OTHER VIEW. AN ITA NOS. 1321, 1322 & 1323/HYD/2015 M/S. MBG COMMODITIES (P) LTD., (FORMERLY KNOWN AS M/S. MAHESWARI BROTHERS) :- 5 -: ISSUE DOES NOT BECOME ARGUMENTATIVE OR CONTENTIOUS MERELY BECAUSE IT IS SO CLAIMED. IT HAS TO BE DECIDED WHETHER ANY OTHER VIEW IS POSSIBLE ON A PLAIN READING OF THE SECTION, IN ITS ENTIRETY. THE CENTRAL ISSUE DETERMINING WHETHER SUB SECTION 1 WAS TO BE INVOKED OR SUB SECT ION 3 TURNED ON THE QUESTION WHETHER THE ASSESSMENT ORDER IN QUESTION W AS AN ORDER OF ASSESSMENT OR AN ORDER OF RE-ASSESSMENT. AS NOTICED HEREINABOVE, THIS IS PLAIN ENOUGH TO BE ANSWERED IN YES/NO TERMS. 08.5 WHILE THE SPECIFIC FACTS OF THE CASE ARE M ORE IMPORTANT THAN LEGAL PRECEDENTS, ESPECIALLY WHEN THEY ARE CLEAR ENOUGH T O SETTLE THE IMPUGNED MATTER, SEVERAL LEGAL PRECEDENTS, NEVERTHELESS, BEA R TO BE NOTICED, BECAUSE OF THE LIGHT THEY SHED ON THE JURISDICTIONAL SCOPE OF SEC 154. WHEN A STATUTORY PROVISION WAS LOST SIGHT OF, THE MATTER W AS AN ERROR APPARENT FROM THE RECORD, LIABLE TO BE RECTIFIED, AS HELD IN THE CASE OF INDIA WOOLLEN TEXTILE MILLS PVT LTD VS CIT, 111 ITR 205[P&H]. IN THE CASE OF CIT VS MC LEOD & CO, 134 ITR 674[CAL] IT WAS HELD THAT WHERE MISREADING A SECTION RESULTED IN A WRONG VIEW BEING TAKEN AND A WRONG CA LCULATION BEING MADE, THE PROVISIONS OF SECTION 154 ARE ATTRACTED. IN TH E CASE OF DR RAJAH SIR M.A. MUTHAIAH CHETTIAR (DECD) BY LR VS CIT, 238 ITR 505 [MAD], IT WAS HELD THAT IF THE EFFECT OF THE RECTIFICATION IS TO MAKE THE ASSESSMENT CONFORM TO THE SUBSTANTIVE LAW, THE RECTIFICATION I S CORRECT. IT FOLLOWED THE PROPOSITION ENUNCIATED IN CIT VS ALANKAR BOREWELLS, 13.3 TAXMAN 91[MAD], THAT ANY FAILURE TO FOLLOW THE CLEAR POSIT ION OF LAW GENERATES RECTIFICATION UNDER SEC 154. IN S.I.J CHAINS PVT LT D VS ASST CIT, THE HON'BLE ITAT[ASR] 284 ITR 246, HAD TO DECIDE WHETHER IN THE CIRCUMSTANCES OF THE CASE, PROVISIONS OF SEC 115JB WERE APPLICABLE OR NO T, AND WHETHER THE MATTER COULD HAVE BEEN DECIDED U/S 154. RELYING ON NORTHERN AIR PRODUCTS VS CIT 274 ITR 225[MP], IT WAS HELD THAT GRANTING A BENEFIT TO ASSESSEE IN IGNORANCE OF A STATUTORY REQUIREMENT IS A MISTAKE A TTRACTING THE RIGOURS OF SECTION 154 OF THE ACT. IN THE CASE OF CIT VS KESAR IA TEA CO LTD 233 ITR 700 [KER], FACTS RELATED TO A WRONG APPLICATION OF SEC 356, CORRECTED BY THE ASSESSING OFFICER U/S 154. RELYING ON THE SUPREME C OURT'S DECISION IN THE CASE OF TS BALARAM ITO VS VOLKART BROS & ORS, 82 IT R 50, THE HIGH COURT DISTINGUISHED BETWEEN A LONG DRAWN PROCESS OF REASO NING' AND A 'MANDATORY APPLICATION OF PROVISIONS OF THE ACT', A ND UPHELD THE STAND OF REVENUE BY REVERSING THE ORDER OF THE ITAT. THE DEL HI HIGH COURT IN THE CASE OF ESCORTS LTD VS VOL & ORS, 189 ITR 81, HELD ON THE SPECIFIC FACTS OF THE CASE, THAT THE WITHDRAWAL BY AN ORDER U/S 154 O F A DEDUCTION THAT WAS EARLIER ALLOWED U/S 436, WAS VALID. IT WAS HELD THAT IN VIEW OF THE CLEAR AND UNAMBIGUOUS LANGUAGE EMPLOYED, NO SCOPE F OR INTERPRETATION EXISTED AND IT COULD NOT BE SAID THAT TWO VIEWS WER E POSSIBLE. HENCE, JURISDICTION WAS VALIDLY ASSUMED U/S 154. 08.6 IT WAS URGED BY THE LD AR DURING THE HEAR ING, THAT AN INTIMATION U/S 143(1) WAS AN ORDER TOO. HENCE, THE ORDER UNDER SEC 143 R.W.S 153A WAS A SUBSEQUENT ORDER OF ASSESSMENT INSOFAR AS THE ASSESSEE WAS CONCERNED. CONSTRUED THUS, IT WAS SUGGESTED THAT TH E FACT OF A SUBSEQUENT ITA NOS. 1321, 1322 & 1323/HYD/2015 M/S. MBG COMMODITIES (P) LTD., (FORMERLY KNOWN AS M/S. MAHESWARI BROTHERS) :- 6 -: ORDER QUALIFIED THE ASSESSEE FOR AN INTEREST CALCUL ATION UNDER SUB-SECTION 3, ESPECIALLY WHEN THE ORDER RESULTED IN AN ENHANCE D ASSESSABLE INCOME. I AM UNABLE TO PERSUADE MYSELF TO SEE ANY MERIT IN TH IS POSITION. AS ALREADY NOTED, THIS INVOLVES OVERLOOKING THE LITERAL MEANIN G SELF EVIDENT FROM A PLAIN READING OF THE SUB-SECTION AND THE EXPLANATIO N 2 APPENDED THERE- UNDER. SEMANTICS APART, AN INTIMATION U/S 143(1) AN D ASSESSMENT U/S 143(3) ARE VASTLY DIFFERENT IN THEIR SCOPE AND PROC ESS OF DETERMINATION EMPLOYED. SO MUCH SO, THAT WHILE THE FORMER IS AN ' INTIMATION', THE LATTER IS AN 'ORDER'. THE FORMER IS SUMMARY WHILE THE LATT ER IS AN ELABORATION, IN WRITING. THE INTIMATION U/S 143(1), EVEN WHERE ADJU STMENTS ARE MADE U/S. 143(1)(A), CAN NEVER BE CONSIDERED AS AN ASSESSMENT . THIS IS A DISTINCTION JUDICIALLY NOTICED IN SEVERAL CASES, IN VARYING CON TEXTS - HILLTOP HOLDINGS INDIA PVT LTD VS CIT & ORS, 278 ITR 501[CAL]; TATA METALIKS VS CIT, 368 I1R 643[CAL]; CIT VS RAVINDRAN PRABHAKAR, 326 ITR 3 63[MAD]; RAJENDRA PRASAD &CO VS CIT, 52 ITO 142[PAT]; CIT VS ORIENT C RAFT LTD, 354 ITR 536[DEL]; AIRUNE FINANCIAL SERVICES (INDIA) PVT LTD , 36 DTR 30, ITAT[MUM], ETC. IT WOULD APPEAR FROM THE ABOVE THAT THE CLARIF ICATION SUPPLIED VIA EXPLANATION 2 IS NOTHING BUT A REITERATION OF THE S CHEME OF THINGS IN THE ACT AS NOTICED ABOVE. 08.7 IN THE ABOVE LIGHT OF THE MATTER, THE GROU ND FAILS AND IS DISMISSED. 6. BEFORE US, LD. COUNSEL FOR ASSESSEE SUBMITTED THA T, THE CIT(A) FELT THAT THE S CHEME OF THE ACT FOR CHARGE OF INTEREST U/S. 234B IS CLEAR AND NO CASE LAW IS REQUIRED TO UNDERSTA ND THESE PROVISIONS. NO DOUBT THE SCHEME OF THE ACT IN THIS REGA RD IS CLEAR BUT THE CIT(A) HAS MISCONSTRUED THE PROVISIONS RELATING TO THE CALCULATION OF INTEREST U/S.234B AS ENVISAGED IN THE SECTION. IT WAS FELT THAT EXPLANATION-2 UNDER SUB-SECTION(1) OF THE SECTIO N WILL BE REDUNDANT IF THE CONTENTION RAISED BY THE APPELLANT IS AC CEPTED. ON THE OTHER HAND, THE SCHEME OF THE SECTION CAN BE UNDERS TOOD CLEARLY WITHOUT RESULTING IN ANY REDUNDANCY IF THE PR OVISIONS ARE CORRECTLY INTERPRETED. THE SECTION HOLDS THAT THE INTEREST UNDER THAT SECTION IS TO BE CALCULATED FOR ANY SHORTFALL OF ADVAN CE TAX PAID, FIRSTLY, UNDER THE ASSESSMENT U/S.143(1) FROM THE BEGI NNING OF THAT ASSESSMENT YEAR. IF THERE IS A SCRUTINY ASSESSMENT, THE INTEREST WILL BE CALCULATED U/S.234B FROM THE FIRST DAY OF THE RELEVANT ASSESSMENT YEAR UPTO THE DATE OF SCRUTINY ASSESSMENT. ITA NOS. 1321, 1322 & 1323/HYD/2015 M/S. MBG COMMODITIES (P) LTD., (FORMERLY KNOWN AS M/S. MAHESWARI BROTHERS) :- 7 -: SUBSEQUENTLY, IF THERE IS A REASSESSMENT EITHER U/S.147 OR U/S.153A, INTEREST WILL BE RECALCULATED ON THE SHORTFA LL EITHER FROM THE DATE OF INTIMATION U/S.143(1) OR FROM THE DATE OF R EGULAR ASSESSMENT IN CASE OF A REGULAR ASSESSMENT. THE CIT(A ) HAS GIVEN A NARROW MEANING TO THE WORD 'ASSESSMENT' IN THE EXPLAN ATION-2. EXPLANATION-2 READS AS UNDER: 'EXPLANATION 2. - WHERE, IN RELATION TO AN ASSESSME NT YEAR, AN ASSESSMENT IS MADE FOR THE FIRST TIME UNDER SECTION 147 [OR SECTION 153A], THE ASSESSMENT SO MADE SHALL BE REGARDED AS A REGULAR ASSESSMENT FOR THE PURPOSES OF THIS SECTION.' IT WAS CONTENDED THAT THE CIT(A) HAS UNDERSTOOD THAT THE DETERMINATION OF INCOME U/S.143(1) AND THE TAX OR REF UND, INVOLVED IN SECTION 143(1) IS NOT AN ASSESSMENT. THE WORD 'ASSE SSMENT' SHOULD BE UNDERSTOOD DEPENDING ON THE CONTEXT IN WHIC H IT IS TO BE USED. WHEN THE INCOME OF THE ASSESSEE, THE TAX LIABILIT Y AND THE INTEREST U/S.234A, 234B AND 234C ARE COMPUTED IN THE PR OCESSING U/S.143(1) AND AN INTIMATION IS MADE THEREAFTER TO THE A SSESSEE, THIS ALSO SHOULD BE UNDERSTOOD AS AN ASSESSMENT FOR PU RPOSES OF EXPLANATION-2. ONLY WHEN UNDERSTOOD THUS, THE PROVISION S OF SUB- SECTION(3) IN TOTAL WILL BE OPERATIVE. IF THE VIEW ADOP TED BY THE CIT(A) THAT THE ASSESSMENT MADE, AS IN THE CASE OF THE A SSESSEE U/S.143(3) R.W.S.153 AND R.W.S.245D(4), IS THE ASSES SMENT MADE FOR THE FIRST TIME AND INTEREST IS TO BE COMPUTED U/S.234B FROM 1ST OF APRIL'05 (FOR THE AY. 2005-06), THE UNDERLINED CLA USES IN SUB- SECTION(3) WILL BE INOPERATIVE AND REDUNDANT: '(3) WHERE, AS A RESULT OF AN ORDER OF REASSESSMENT OR RECOMPUTATION UNDER SECTION 147 [OR SECTION 153A}, THE AMOUNT ON WHICH INTEREST WAS PAYABLE UNDER SUB-SECTION(1) IS INCREA SED, THE ASSESSEE SHALL BE LIABLE TO PAY SIMPLE INTEREST AT THE RATE OF [ON E] PER CENT FOR EVERY MONTH OR PART OF A MONTH COMPRISED IN THE PERIOD COMMENCIN G ON THE DAY FOLLOWING [THE DATE OF DETERMINATION OF TOTAL INCOM E UNDER SUB-SECTION(1) OF SECTION 143 [AND WHERE A REGULAR ASSESSMENT IS MA DE AS IS REFERRED TO IN ITA NOS. 1321, 1322 & 1323/HYD/2015 M/S. MBG COMMODITIES (P) LTD., (FORMERLY KNOWN AS M/S. MAHESWARI BROTHERS) :- 8 -: SUB-SECTION(1) FOLLOWING THE DATE OF SUCH REGULAR ASS ESSMENT]] AND ENDING ON THE DATE OF THE REASSESSMENT OR RECOMPUTATION UN DER SECTION 147 [OR SECTION 153A], ON THE AMOUNT BY WHICH THE TAX ON THE TO TAL INCOME DETERMINED ON THE BASIS OF THE REASSESSMENT OR RECOMP UTATION EXCEEDS THE TAX ON THE TOTAL INCOME DETERMINED [UNDER SUB-SECTIO N(1) OF SECTION 143 OR ON THE BASIS OF THE REGULAR ASSESSMENT AFORESAID. ' THIS IS BECAUSE, AS IN THE CASE OF THE ASSESSEE, IF TH E REASSESSMENT U/S.147/153A IS PRECEDED ONLY BY AN INTIMATION U/S.1 43(1), THE DETERMINATION OF INTEREST U/S.234B, AS UNDERSTOOD BY THE CIT(A), WILL BE FROM 1ST OF APRIL, IGNORING THE DATE OF DETER MINATION U/S.143(1). IF THE REASSESSMENT IS PRECEDED BY AN INTI MATION U/S.143(1) AND A SUBSEQUENT SCRUTINY ASSESSMENT, THE INTEREST U/S.234B SHOULD BE CALCULATED FROM THE DATE OF SCRUTI NY ASSESSMENT. IN EITHER CASE, THE ABOVE UNDERLINED CLAUS ES IN SUB- SECTION (3) OF SECTION 234B WILL BE INOPERATIVE, IF THE COMMISSIONER OF INCOME TAX(APPEALS)'S VERSION WILL BE ACCEPTED. 6.1. IT WAS SUBMITTED THAT TO UNDERSTAND THE CORRECT POSITION, AS TO THE SCHEME OF CALCULATION OF INTEREST U/S .234B, A CHART SHOWING 3 HYPOTHETICAL CASES WAS SUBMITTED AS UND ER: CASE-1 CASE-2 CASE-3 RETURN OF INCOME FILED IN THE NORMAL COURSE: RETURN OF INCOME FILED IN THE NORMAL COURSE: BELATED RETURN OF INCOME/NO RETURN OF INCOME/RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S. 147/153A: ORDER U/S. 143(1) ORDER U/S. 143(1) -- ORDER U/S. 143(3) -- -- ORDER U/S. 147/153A ORDER U/S. 147/153A ORDER U/S. 147/153A IN CASE-1, A NORMAL RETURN IS FOLLOWED AN INTIMATION U/S.143(1), THERE IS SCRUTINY ASSESSMENT AND SUBSEQU ENTLY, A REASSESSMENT. IN SUCH A CASE, INTEREST U/S.234B IS CA LCULATED FROM 1ST OF APRIL FOR THE SHORTFALL IN THE INTIMATION U/S.14 3(1). THE INTEREST IS RECALCULATED IN THE SCRUTINY ASSESSMENT FROM 1 ST OF ITA NOS. 1321, 1322 & 1323/HYD/2015 M/S. MBG COMMODITIES (P) LTD., (FORMERLY KNOWN AS M/S. MAHESWARI BROTHERS) :- 9 -: APRIL. IN THE REASSESSMENT, THE INTEREST U/S.234B IS C ALCULATED FOR THE SHORTFALL FROM THE DATE OF SCRUTINY ASSESSMENT. IN CASE-2, THE RETURN IS FILED IN THE NORMAL COURSE A ND IT IS PROCESSED U/S.143(1). INTEREST U/S.234B IS CALCULATED FOR THE SHORTFALL FROM 1 ST OF APRIL OF THE RELEVANT ASSESSME NT YEAR IN THE INTIMATION U/S.143(1). IN THE REASSESSMENT U/S.147/153A , THE INTEREST U/S.234B IS CALCULATED FROM THE DATE OF INTIMATI ON U/S.143(1) UPTO THE DATE OF SUCH REASSESSMENT ON THE S HORTFALL. IN CASE-3, THERE IS NO RETURN IN THE NORMAL COURSE OR THERE IS BELATED RETURN OR RETURN IS FILED IN RESPONSE TO THE NO TICE U/S.147/153A. THERE IS NO INTIMATION U/S.143(1). THER E IS NO SCRUTINY ASSESSMENT. THE ASSESSMENT U/S.147/153A WAS MADE AS THE FIRST ASSESSMENT. IT IS IN THIS CASE, THE INTEREST U/S .234B IS CALCULATED FROM 1 ST OF APRIL OF THE RELEVANT ASSESSMENT YEAR. IT IS IN THIS CASE, THE EXPLANATION-2 UNDER SUB-SECTION( 1) OF SECTION 234B WILL COME TO OPERATION. 6.2. THUS, IT WAS SUBMITTED THAT ALL THE PROVISIONS I NCLUDING EXPLANATION-2 AND THE UNDERLINED PORTIONS CONTAINED IN SUB- SECTION(3) WILL BE OPERATIVE AND THERE IS NO REDUNDAN CY IF THE SECTION 234B IS INTERPRETED IN THIS MANNER. THIS IS TH E SCHEME OF CALCULATION OF INTEREST U/S. 234B AS UNDERSTOOD BY AS SESSEE. 7. LD. COUNSEL ALSO REFERRED TO THE AMENDMENTS MADE B Y THE FINANCE ACT, 2015, WHERE SUB-SECTION(3) HAS UNDERG ONE A CHANGE, IN SO FAR AS INTEREST U/S.234B FOR ANY SHORTFA LL OF ADVANCE TAX IN A REASSESSMENT U/S.147/153A IS TO BE CALCULATED FROM 1ST OF ITA NOS. 1321, 1322 & 1323/HYD/2015 M/S. MBG COMMODITIES (P) LTD., (FORMERLY KNOWN AS M/S. MAHESWARI BROTHERS) :- 10 -: APRIL OF THE RELEVANT ASSESSMENT YEAR. THE PROPOSITION PUT FORTH BY THE CIT(A) IS OBTAINED IN THE AMENDED SUB-SECTION(3) OF SECTION 234B. IF THIS POSITION IS OBTAINABLE EVEN BEFORE THE AM ENDMENT, THIS AMENDMENT IS NOT NECESSARY. THIS AMENDMENT ALSO MA KES IT VERY CLEAR THAT THE PROPOSITION PUT FORTH BY THE ASSESSEE UNDER THE UN-AMENDED PROVISIONS IS CORRECT. THE RELEVANT PORTION S OF THE NOTES ON THE CLAUSES IN THE FINANCE BILL, 2015, AVAILA BLE IN 371 ITR PAGE NO.272 IS AS UNDER: 'THE EXISTING PROVISIONS CONTAINED IN SUB-SECTION(3) OF THE SAID SECTION PROVIDES THAT WHERE THE TOTAL INCOME IS INCREA SED ON REASSESSMENT UNDER SECTION 147 OR SECTION 153A, THE ASSESSEE SHAL L BE LIABLE FOR INTEREST AT THE RATE OF ONE PER CENT ON THE AMOUNT OF THE INCRE ASE IN TOTAL INCOME FOR THE PERIOD COMMENCING FROM THE DATE OF DETERMINATION OF TOTAL INCOME UNDER SUB-SECTION(1) OF SECTION 143 OR ON REGULAR A SSESSMENT AND ENDING ON THE DATE OF REASSESSMENT UNDER SECTION 147 OR SE CTION 153A. IT IS PROPOSED TO AMEND SUB-SECTION(3) OF THE SAID S ECTION SO AS TO PROVIDE THAT THE PERIOD FOR WHICH THE INTEREST IS TO BE COMPUTED WILL BEGIN FROM THE 1ST DAY OF APRIL NEXT FOLLOWING THE FINANCIAL YEAR A ND END ON THE DATE OF DETERMINATION OF TOTAL INCOME UNDER SECTION 147 OR SECTION 153A. THESE AMENDMENTS WILL TAKE EFFECT FROM 1ST DAY OF JU NE, 2015. 8. IT WAS SUBMITTED THAT THE INTERPRETATION MADE BY THE REVENUE IS NOT CORRECT AND AO HAS CORRECTLY CALCULATED THE INTEREST WHILE GIVING EFFECT TO THE DIRECTIONS OF SETTLEMENT COMMI SSION IN THE ORDER PASSED. 9. LD. DR SUPPORTED THE ACTION OF AO/ CIT(A). LD. D R ALSO REITERATED THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF TEXTILE DYE-CHEM CORPORATION [35 TAXMANN.COM 4 67 (MAD)]. HE SUBMITTED THAT ASSESSMENT USED IN THE I NCOME TAX ACT CANNOT EXTEND TO THE INTIMATION U/S. 143(1) AND RELIAN CE WAS PLACED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ITA NOS. 1321, 1322 & 1323/HYD/2015 M/S. MBG COMMODITIES (P) LTD., (FORMERLY KNOWN AS M/S. MAHESWARI BROTHERS) :- 11 -: RAJESH JHAVERI STOCK BROKERS PVT. LTD., [291 ITR 500]. HIS SUBMISSIONS ARE THAT PROCESSING UNDER SECTION 143(1) C ANNOT BE CONSIDERED AS AN ASSESSMENT AND SINCE ASSESSMENT H AS BEEN COMPLETED U/S. 147 AND THIS ASSESSMENT BEING FIRST TIME MADE, PROVISIONS OF SUB-SECTION 3 OF SEC.234B WILL APPLY. HE ALSO RELIED ON THE FOLLOWING DECISIONS: I. HILLTOP HOLDINGS INDIA P. LTD., [278 ITR 501 (CAL); II. TATA METALIKS LTD., [368 ITR 643 (CAL)]; III. RAVINDRA PRABHAKAR [326 ITR 363 (MAD); AND IV. RAJENDRA PRASAD & CO [52 ITRD 142 (PAT)] 10. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERU SED THE MATERIAL AVAILABLE ON RECORD. THE UNDISPUTED FAC TS IN THIS CASE ARE THAT THE RETURNS WERE ACCEPTED U/S. 143(1) AND THER E IS NO ASSESSMENT U/S. 143(3) INITIALLY. IN THE INTIMATIONS IS SUED WHEN ASSESSEE HAS FILED RETURNS, THE INTIMATIONS INDICATE THA T THE FOLLOWING INTERESTS WERE LEVIED U/S. 234B: AY. DATE OF INTIMATION U/S. 143(1) AMOUNT OF INTEREST (RS) 2005-06 24-03-2006 50,132 2008-09 19-02-2010 8,41,533 2009-10 28-03-2011 6,67,766 10.1. CONSEQUENT TO THE SEARCH AND SEIZURE OPERATIONS , A NOTICE U/S. 153A WAS ISSUED. DURING PENDENCY OF SU CH PROCEEDINGS, ASSESSEE FILED AN APPLICATION U/S. 234D . CONSEQUENT ITA NOS. 1321, 1322 & 1323/HYD/2015 M/S. MBG COMMODITIES (P) LTD., (FORMERLY KNOWN AS M/S. MAHESWARI BROTHERS) :- 12 -: TO THE ORDERS PASSED BY THE SETTLEMENT COMMISSION ON 30- 07- 2013, THE PROCEEDINGS HAVE BEEN FINALISED BY ISSUING A CONSEQUENTIAL ORDER U/S. 143(3) R.W.S. 153A AND R.W. S. 245D(4) ON 03-12-2013. IN THOSE ORDERS, AO LEVIED INTEREST U/S . 234B AS UNDER: AY. (RS) 2005-06 43,78,865 2008-09 1,00,06,397 2009-10 32,23,815 SUBSEQUENTLY, AO NOTICING THAT INTEREST HAS TO BE LEVIED UNDER SUB-SECTION (1) OF SECTION 234B, HE MODIFIED THE LEVY OF INTEREST U/S. 234B CONSIDERING THE ORDER PASSED ON 03-12-20 13, AS FIRST ASSESSMENT ORDER AND LEVIED THE FOLLOWING AMOUNTS IN THE IMPUGNED ORDERS U/S. 154. HE LEVIED THE INTEREST FROM THE FIRST DAY OF THE ASSESSMENT YEAR TILL THE DATE OF THE ORDER IE UP TO 03-12- 2013. THE MODIFIED INTEREST SO LEVIED IS AS UNDER: AY. (RS) 2005-06 42,12,903 2008-09 1,35,28,878 2009-10 16,55,520 10.2. IT SEEMS THERE ARE NO APPEALS ON THE CONSEQUENTI AL ORDERS DT. 03-12-13, BUT THE APPEALS WERE PREFERRED ON LY ON THE RECTIFICATION ORDERS PASSED U/S. 154. AS CAN BE SEEN FROM THE ABOVE TABLES, THE INTEREST U/S. 234B REVISED IN THE ORDE R U/S. 154 IS LESS THAN ORIGINALLY LEVIED AMOUNT, IN THE CONSEQU ENTIAL ORDERS FOR AY. 2005-06 AND AY. 2009-10. ONLY IN AY. 2008- 09, THERE IS A ITA NOS. 1321, 1322 & 1323/HYD/2015 M/S. MBG COMMODITIES (P) LTD., (FORMERLY KNOWN AS M/S. MAHESWARI BROTHERS) :- 13 -: HIGHER LEVY OF INTEREST U/S. 234B. WE ARE NOT SURE WH Y ASSESSEE HAS PREFERRED APPEALS, WHEN AO REDUCED THE INTEREST I N AYS. 2005-06 AND 2009-10 IN THE MODIFICATION ORDERS. 11. BE THAT AS IT MAY, ASSESSEES CONTENTION IS THAT INTER ESTS ARE TO BE CONSIDERED U/S. 234B(3) RATHER THAN U/S 234B (1) AS WAS DONE BY THE AO IN THE ORDERS U/S. 154. THE ENTIRE SUB MISSIONS MADE BY ASSESSEE ARE ON THE NOTION THAT INTEREST U/S. 23 1B(1) AND INTEREST U/S. 234B(3) ARE MUTUALLY EXCLUSIVE. THIS IS NOT CORRECT. AS PER THE SCHEME OF ACT, INTEREST U/S. 234B(1) IS LEV IABLE FROM THE PERIOD 1 ST APRIL OF THE ASSESSMENT YEAR FOLLOWING THE CLOSURE O F THE FINANCIAL YEAR TILL THE DATE OF INTIMATION U/S. 143(1) OR COMPLETION OF ASSESSMENT U/S. 143(3). THE EXPLANATION PROVIDED U/S. 234B(1) STATES THAT WHERE THE ASSESSMENT WAS DONE U/S. 147 OR U/ S. 153A FOR THE FIRST TIME, THEN, THE INTEREST IS TO BE LEVIED U/ S. 234B(1). IN OTHER WORDS, THE INTEREST LIABILITY U/S. 234B(1) IS ATTRA CTED IF THERE IS ANY SHORTFALL OF ANY ADVANCE TAX FROM THE FIRST DAY OF THE ASSESSMENT YEAR TILL THE COMPLETION OF/PROCESSING OF RE TURN FOR THE FIRST TIME. INTEREST IS COMPENSATORY IN NATURE. THEREF ORE, THE LEGISLATURE HAS PROVIDED FOR LEVY OF INTEREST FOR SHO RTFALL OF ADVANCE TAX AND THE INTEREST IS CALCULATED FROM THE FIRST DAY OF THE ASSESSMENT YEAR TILL ASSESSEE DISCHARGES ITS LIABILITY U/S. 140A OR IF THERE IS A FURTHER SHORTFALL, TILL THE COMPLETION OF A SSESSMENT FOR THE FIRST TIME EITHER UNDER 143(3) OR 147 OR 153A OR PR OCESSING U/S. 143(1). THE AO ACCORDINGLY LEVIED INTEREST U/S. 234B (1) IN THE INTIMATIONS GIVEN IN RESPECTIVE ASSESSMENT YEARS (AS S TATED ABOVE IN PARA 10). 11.1. IN CASE OF RE-ASSESSMENT AND RE-DETERMINATION OF INCOME EITHER U/S. 147 OR U/S. 153A, THE STATUTE PROVID ES FOR ITA NOS. 1321, 1322 & 1323/HYD/2015 M/S. MBG COMMODITIES (P) LTD., (FORMERLY KNOWN AS M/S. MAHESWARI BROTHERS) :- 14 -: FURTHER LEVY OF INTEREST ON THE HIGHER AMOUNT OF TAX DET ERMINED IN THE RE-ASSESSMENT PROCEEDINGS. THE PERIOD OF LEVY IS FROM THE DATE OF FIRST ORDER EITHER U/S 143(1) OR 143(3) OR 147 OR 153A AS THE CASE MAY BE TO THE DATE OF REVISED ORDER. THUS, THERE IS LEVY OF INTEREST FROM THE FIRST DAY OF THE ASSESSMENT YEAR TILL THE COMPLE TION OF ASSESSMENT/PROCESSING FOR THE FIRST TIME ON THE RETURNED INCOME/ASSESSED INCOME U/S 234B(1) AND A FURTHER ENH ANCEMENT OF INTEREST U/S. 234B(3) ON THE ADDITIONAL TAX DETERMIN ED IN THE RE- ASSESSMENT PROCEEDINGS FOR THE LATER PERIOD.. THUS, T HERE ARE TWO SEPARATE CALCULATIONS OF INTEREST U/S. 234B(1) AND 23 4B(3). SINCE INTEREST WAS ALREADY DEMANDED IN EARLIER PROCEEDINGS ONLY FRESH DEMAND IS RAISED U/S 234B(3). THUS THE LEVY OF INTER EST ARE COMPLIMENTARY AND NOT EXCLUSIVE. 12. THIS MECHANISM OF LEVY OF INTEREST WAS ELA BORATELY EXPLAINED IN THE CO-ORDINATE BENCH DECISION IN THE CA SE OF ACIT VS. RONALD NARDI [14 SOT 24 (MUMBAI)], WHEREIN IT WAS HE LD: ONCE AN ORDER OF REASSESSMENT IS PASSED UNDER SECTI ON 143(3)/148, THE ORIGINAL ORDER DETERMINING THE TOTA L INCOME UNDER SECTION 143(1) OR 143(3) OR 144 GETS MERGED WITH THE ORDER OF REASSESSMENT FOR THE SIMPLE REASON THAT TWO ORDERS DETERMINING THE TOTAL INCOME CANNOT STAND TOGETHER. IT, THEREFORE, LOGICALLY FOLLOWS THAT TH E FIGURES OF TOTAL INCOME DETERMINED AND TAX, INTEREST, ETC., THEREON HAVE TO BE INCORPORATED IN THE REASSESSMENT ORDER PASSED UNDER SECTION 143(3)/147 AND IN THE COMPUTATION SHEET ACCOMPANYING THEREWITH. IF THE AS SESSING OFFICER HAD NOT FOLLOWED THE AFORESAID COURSE OF ACTION, THE TO TAL INCOME ORIGINALLY DETERMINED UNDER SECTION 143(1) OR 143(3) OR 144 AN D TAX, INTEREST, ETC., THEREON WOULD HAVE ESCAPED TAXATION. THE ASSESSEE D ID NOT CHALLENGE THE LEVY OF INTEREST UNDER SECTION 234B(1) AS PER THE I NTIMATION ORIGINALLY ISSUED UNDER SECTION 143(1). THE ASSESSING OFFICER WAS, THEREFORE, JUSTIFIED IN INCORPORATING THE SAID FIGURE OF INTER EST ORIGINALLY CHARGED UNDER SECTION 234B(1) AS PER THE INTIMATION ISSUED UNDER SECTION 143(1) IN THE COMPUTATION SHEET ACCOMPANYING THE ORDER OF REA SSESSMENT PASSED UNDER SECTION 143(3)/147. WHILE SUB-SECTION (1) OF SECTION 234B IS APPLICABLE TO CASES INVOLVING DETERMINATION OF TOTAL INCOME UNDER SECTION 143(1) OR REGULAR ASSESSMENT ITA NOS. 1321, 1322 & 1323/HYD/2015 M/S. MBG COMMODITIES (P) LTD., (FORMERLY KNOWN AS M/S. MAHESWARI BROTHERS) :- 15 -: MADE UNDER SECTION 143(3) OR UNDER SECTION 144, SUB -SECTION (3) OF SECTION 234B IS APPLICABLE, INTER ALIA, TO A CASE WHERE THE AMOUNT OF TAX ON THE TOTAL INCOME DETERMINED ON THE BASIS OF REASSESSMEN T OR RE-COMPUTATION UNDER SECTION 147 EXCEEDS THE TAX ON THE TOTAL INCO ME ORIGINALLY DETERMINED UNDER SUB-SECTION (I) OF SECTION 143. IT WAS NOT IN DISPUTE THAT THE ASSESSING OFFICER HAD ORIGINALLY DETERMINED THE INCOME UNDER SECTION 143(1) AND CHARGED INTEREST UNDER SECTION 234B(1) T HEREON. PROVISIONS OF SECTION 234B(1) WERE RELEVANT TILL THAT STAGE, I.E. , THE STAGE OF DETERMINATION OF TOTAL INCOME UNDER SECTION 143(1). THE ASSESSING OFFICER, SUBSEQUENTLY, ISSUED A NOTICE UNDER SECTION 147 AND REASSESSED THE INCOME WITH THE RESULT THAT THE TAX ON TOTAL INCOME DETERMINED ON SUCH REASSESSMENT EXCEEDED THE TAX ON TOTAL INCOME EARLI ER DETERMINED UNDER SUB-SECTION (I) OF SECTION 143. RESULTANTLY THE ASS ESSEE BECAME LIABLE TO PAY INCREMENTAL INTEREST FOR EVERY MONTH OR PART OF A MONTH COMPRISED IN THE PERIOD COMMENCING ON THE DAY FOLLOWING THE DAY OF DETERMINATION OF TOTAL INCOME UNDER SUB-SECTION (1) OF SECTION 143 A ND ENDING ON THE DAY OF REASSESSMENT OR RE-COMPUTATION UNDER SECTION 147. 1 T IS NOT PERMISSIBLE UNDER SECTION 234B(3) TO CHARGE INTEREST FROM THE F IRST DAY OF THE ASSESSMENT YEAR TILL THE DATE OF REASSESSMENT OR RE -COMPUTATION UNDER SECTION 147 WHERE THE INCOME HAS BEEN DETERMINED UN DER SECTION 143(1) AND ALLOWED TO BECOME FINAL. THEREFORE, THE ASSESSING OFFICER WAS DIRECTED TO MO DIFY THE ORDER UNDER SECTION 154 AS : (A) THE FIGURE OF INTEREST ORIGINALLY CHARGED UNDER SECTION 234B(1) AS PER THE INTIMATION ISSUED UNDER SECTION 143(1) WAS TO B E INCORPORATED AND INCLUDED IN THE COMPUTATION SHEET ACCOMPANYING THE REASSESSMENT ORDER PASSED UNDER SECTION 143 (3)/148; AND (B) IN ADDITION TO THE ABOVE, THE INCREMENTAL INTER EST REQUIRED TO BE CHARGED UNDER SECTION 234B(3) WAS ALSO TO BE CHARGED FOR EV ERY MONTH OR PART OF A MONTH .COMPRISED IN THE PERIOD COMMENCING ON THE DA Y FOLLOWING THE DATE OF DETERMINATION OF TOTAL INCOME UNDER SUB-SECTION (I) OF SECTION 143 AND ENDING ON THE DATE OF REASSESSMENT UNDER SECTION 14 3(3)/147 ON THE AMOUNT BY WHICH THE TAX ON THE TOTAL INCOME DETERMI NED ON THE BASIS OF THE REASSESSMENT EXCEEDED THE TAX ON THE TOTAL INCO ME DETERMINED UNDER SECTION 143(1). 13. THE HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF SRI VIJAY KUMAR SABOO (HUF) VS. ACIT, BANGALORE [201 TA XMAN 366 (KARNATAKA)] HAS HELD THAT INTEREST U/S. 234B(3) IS ATTRAC TED IN THE CASE OF RE ASSESSMENT COMPLETED AND AO IS BOUND TO GI VE A FINDING WHETHER IT IS AN ORDER MADE FOR THE FIRST TIME U/S. 147 OR IT IS A CASE OF RE-ASSESSMENT OR RE-COMPUTATION U/S. 147. IT W AS HELD ITA NOS. 1321, 1322 & 1323/HYD/2015 M/S. MBG COMMODITIES (P) LTD., (FORMERLY KNOWN AS M/S. MAHESWARI BROTHERS) :- 16 -: THAT IN A CASE WHERE THERE IS DETERMINATION OF TAX U/S. 143(1) OR WHERE REGULAR ASSESSMENT ORDER IS PASSED U/S. 143(3) , THEN, ORDER PASSED U/S. 147 IS TREATED AS AN ORDER OF RE-ASSESSM ENT OR RE- COMPUTATION AND IN SUCH CASE, INTEREST U/S. 234B IS LE VIABLE NOT FROM THE FIRST DAY OF APRIL NEXT FOLLOWING SUCH FINANC IAL YEAR, BUT FROM THE DATE OF DETERMINATION OF TAX U/S. 143(1) OR O RDER OF REGULAR ASSESSMENT U/S. 143(3). THE HON'BLE HIGH COURT IN THE ABOVE REFERRED CASE VIJAY KUMAR SABOO (HUF) VS. ACIT, BAN GALORE [201 TAXMANN 366 (KARNATAKA)](SUPRA) HAS HELD AS UNDER: A HARMONIOUS READING OF ENTIRE SECTION 234B MAKES I T CLEAR THAT IF NO ADVANCE TAX IS PAID OR WHAT IS PAID IS LESS THAN 90 PER CENT OF THE ASSESSED TAX, THE ASSESSEE IS LIABLE TO PAY INTERES T ON THE DIFFERENCE IN THE TAX. FOR THE PURPOSE OF LEVYING TAX, IT IS COMPUTED FROM FIRST DAY OF APRIL NEXT FOLLOWING, TILL THE DATE OF DETERMINATION OF T AX UNDER SUB-SECTION (1) OF SECTION 143 OR FROM THAT DAY TILL THE DATE OF REGUL AR ASSESSMENT. IF IN A GIVEN CASE, THERE IS NO DETERMINATION OF TAX UNDER SUB-SECTION (1) OF SECTION 143 OR REGULAR ASSESSMENT AND THE ASSESSMENT IS MAD E FOR THE FIRST TIME UNDER SECTION 147, SUCH ASSESSMENT IS ALSO TREATED AS A REGULAR ASSESSMENT AND INTEREST IS PAYABLE FROM THE FIRST D AY OF APRIL NEXT FOLLOWING TILL THE DATE OF ASSESSMENT ORDER. HOWEVE R, IF PROCEEDINGS UNDER SECTION 147 ARE INITIATED IN A CASE WHERE THERE IS DETERMINATION OF TAX UNDER SUB-SECTION (1) OF SECTION 143 OR WHERE A REG ULAR ASSESSMENT ORDER IS PASSED UNDER SUB-SECTION (3) OF SECTION 143, THE N THE ORDER PASSED UNDER SECTION 147 IS TREATED AS AN ORDER OF REASSES SMENT OR RECOMPUTATION. IN THE CASE OF ORDER OF REASSESSMENT OR RECOMPUTATION, THE INTEREST IS LEVIABLE NOT FROM THE FIRST DAY OF APRI L NEXT FOLLOWING, BUT FROM THE DATE OF DETERMINATION OF TAX UNDER SUBSECTION ( 1) OF SECTION 143 OR ORDER OF REGULAR ASSESSMENT UNDER SECTION 143(3). T HEREFORE, WHEN THE ASSESSMENT ORDER IS PASSED UNDER SECTION 147 AND TH AT IS MADE THE BASIS FOR LEVYING INTEREST, THE ASSESSING AUTHORITY HAS T O FIND OUT WHETHER IT IS AN ORDER MADE FOR THE FIRST TIME UNDER SECTION 147 OR IS IT A CASE OF RE- ASSESSMENT OR RECOMPUTATION UNDER SECTION 147. DEPE NDING ON THAT FINDING, THE INTEREST IS TO BE CALCULATED EITHER FR OM THE DATE OF FIRST DAY OF APRIL NEXT FOLLOWING SUCH FINANCIAL YEAR OR FROM TH E DATE OF DETERMINATION OF TAX UNDER SUB-SECTION (1) OF SECTION 143 OR REGU LAR ASSESSMENT UNDER SECTION 143(3). IN THE INSTANT CASE, THERE WAS A DETERMINATION OF T AX UNDER SECTION 143(1)(A) AND RETURN FILED BY THE ASSESSEE WAS ACCE PTED BY THE DEPARTMENT BY ITS ORDER DATED 24-6-1991. IT WAS THE REAFTER, PROCEEDINGS WERE INITIATED UNDER SECTION 147. IN PURSUANCE OF T HE NOTICE ISSUED, REVISED RETURN WAS FILED ON 30-12-1993. IT WAS ON T HAT RETURN THAT THE ITA NOS. 1321, 1322 & 1323/HYD/2015 M/S. MBG COMMODITIES (P) LTD., (FORMERLY KNOWN AS M/S. MAHESWARI BROTHERS) :- 17 -: ORDER CAME TO BE PASSED UNDER SECTION 143(3) ON 28- 1-1994. THEREFORE, IT WAS NOT A CASE OF ASSESSMENT MADE FOR THE FIRST TIM E. IT WAS A CASE OF ORDER OF REASSESSMENT OR RECOMPUTATION UNDER SECTIO N 147. THEREFORE, THE INTEREST WAS TO BE CALCULATED FROM 24-6-1991, THE D ATE ON WHICH DETERMINATION OF TAX WAS MADE UNDER SECTION 143 (1) (A). TO THAT EXTENT, THE ORDER PASSED BY THE AUTHORITIES WAS ILLEGAL AND REQ UIRED TO BE SET ASIDE. 14. SIMILAR VIEW IS ALSO HELD BY THE HON'BLE H IGH COURT OF KERALA IN THE CASE OF CIT(CENTRAL), COCHIN VS. B. LAK SHMIKANTHAN [198 TAXMAN 485 (KER)], WHEREIN ON A SIMILAR CASE A S THAT OF ASSESSEE WHERE PROCEEDINGS U/S. 153A WERE INITIATED, IT WAS HELD THAT: THERE WAS NO SUBSTANCE IN THE CONTENTION RAISED BY THE REVENUE THAT IN A REASSESSMENT COMPLETED UNDER SECTION 153A INTEREST FOR NON- PAYMENT OR SHORT PAYMENT OF ADVANCE TAX WAS PAYABLE UNDER SECTION 2348(3) MERELY BECAUSE THE SAID REASSESSMENT UNDER SECTION 153A WAS COMPLETED BY ACCEPTING THE RETURN FILED UNDER SECTI ON 143(1). INTEREST FOR NON-PAYMENT OR SHORT-PAYMENT OF ADVANCE TAX IS PAYA BLE UNDER SECTION 2348 FOR DIFFERENT PERIODS UNDER SUB-SECTIONS (I) A ND (3) OF THE SAID SECTION. IN ALL CASES OF REGULAR ASSESSMENT COMPLETED UNDER SECTION 143(1), INTEREST IS TO BE CHARGED FOR THE PERIOD PROVIDED UNDER SECT ION 2348(1). FURTHER, IF THE FIRST ASSESSMENT IS ITSELF INCOME ESCAPING ASSE SSMENT MADE UNDER SECTION 147 OR UNDER SECTION 153A, THEN SUCH ASSESS MENT WILL BE TREATED AS REGULAR ASSESSMENT AND INTEREST FOR NON-PAYMENT OR SHORT PAYMENT OF ADVANCE TAX IN SUCH CASES WILL BE PAYABLE UNDER SEC TION 2348(1). HOWEVER, WHEN AN ORIGINAL ASSESSMENT COMPLETED UNDE R SECTION 143 IS REVISED EITHER UNDER SECTION 147 OR UNDER SECTION 1 53A, THEN INTEREST FOR NON-PAYMENT OR SHORT- PAYMENT OF ADVANCE TAX IS PAY ABLE ONLY FOR PERIOD MENTIONED IN SECTION 2348(3), WHICH PROVIDES FOR IN TEREST FROM THE DATE OF COMPLETION OF THE REGULAR ASSESSMENT UNDER SECTION 143 (1) TILL DATE OF COMPLETION OF REASSESSMENT OR RECOMPUTATION UNDER S ECTION 147 OR SECTION 153A. FOR THE PURPOSE OF LEVY OF INTEREST UNDER SEC TION 234B(3), IT IS IMMATERIAL WHETHER RECOMPUTATION OR REASSESSMENT UN DER SECTION 147 OR UNDER SECTION 153A IS MADE BY ACCEPTING THE REVISED RETURN FILED AND BY PROCESSING THE SAME UNDER SECTION 143(1) OR WHETHER REASSESSMENT IS MADE BY REJECTING SUCH RETURNS AND BY DETERMINING T HE INCOME. THE FACT THAT THE PROCEDURE FOR CALLING FOR RETURN AND ASSES SMENT AFTER SEARCH OR REQUISITION UNDER SECTION 153A IS THE SAME AS PROVI DED UNDER SECTION 139 DOES NOT MEAN THAT A REASSESSMENT COMPLETED UNDER T HE SAID PROVISION IS A REGULAR ASSESSMENT OR ORIGINAL ASSESSMENT. ON THE OTHER HAND, WHATEVER BE THE PROCEDURE ADOPTED FOR ASSESSING ESC APED INCOME OR UNDISCLOSED INCOME PURSUANT TO SEARCH OR REQUISITIO N, SUCH AN ASSESSMENT WILL ALWAYS BE A REASSESSMENT OR RECOMPUTATION UNDE R SECTION 153A, AND UNLESS IT IS A FIRST ASSESSMENT, THAT CAN BE TREATE D AS THE REGULAR ITA NOS. 1321, 1322 & 1323/HYD/2015 M/S. MBG COMMODITIES (P) LTD., (FORMERLY KNOWN AS M/S. MAHESWARI BROTHERS) :- 18 -: ASSESSMENT IN TERMS OF THE EXPLANATION (2) TO SECTI ON 234B(1), INTEREST CAN BE CHARGED ONLY UNDER SECTION 234B(3). IN THE INSTA NT CASE, THE ORIGINAL RETURNS WERE PROCESSED UNDER SECTION 143(1) AND THE PROCEEDINGS SO COMPLETED WERE ISSUED TO THE ASSESSEE. IT WAS ONLY THEREAFTER THAT THE DEPARTMENT CONDUCTED SEARCH AND MADE REVISED ASSESS MENT UNDER SECTION 153A, THOUGH BY ACCEPTING RETURN OF UNDISCL OSED INCOME FILED AND BY ISSUING PROCEEDINGS UNDER SECTION 143(1), READ W ITH SECTION 153A. THEREFORE, THE ASSESSMENTS UNDER SECTION 153A WERE REVISED ASSESSMENTS AND, SO MUCH SO, INTEREST COULD BE DEMANDED FOR THE PERIOD MENTIONED IN SECTION 234(B)(3) AS HELD BY THE TRIBUNAL. 15. THE PRINCIPLE LAID DOWN BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF TEXTILE DYE-CHEM CORPN. (SUPRA) A LSO SUPPORT THE ABOVE. INFACT, THERE WAS A FINDING THAT THE ASSESSM ENT MADE ON ASSESSEE WAS FOR THE FIRST TIME UNDER SECTION 147 AND ON THAT FACT THE HONBLE HIGH COURT HELD THAT INTEREST WAS LEVIABLE UN DER 234B(1). THUS, THE PROVISIONS OF THE ACT AND VARIOU S CASE LAW SUPPORT THE VIEW THAT WHERE INTIMATION U/S. 143(1) WAS I SSUED LEVYING INTEREST U/S 234B(1), THE SUBSEQUENT PROCEEDING S WILL ATTRACT ONLY 234B(3) ON THE ENHANCED INCOME/TAX WHEREAS INTEREST LEVIED ORIGINALLY U/S. 234B(1) WILL STAND AS SUCH. THUS, INTEREST U/S. 234B(1) IS TO BE LEVIED, FROM 1 ST APRIL FOLLOWING THE FINANCIAL YEAR TILL THE DATE OF PROCESSING U/S. 143(1) US 234B( 1) AND THEN ON ENHANCED INCOME/ENHANCED TAX U/S. 234B(3). VIEWED I N THIS PERSPECTIVE, THERE IS NO CONFLICT IN THE PROVISIONS OF THE ACT. 16. IN THIS CASE, THE DISPUTE IS WITH REFERENCE TO WHETH ER THE 143(1) ORDER PASSED EARLIER IS TO BE CONSIDERED A S AN ASSESSMENT? LD. CIT(A) WAS OF THE OPINION THAT 143(1) IS NOT AN ASSESSMENT AND IS ONLY AN INTIMATION. THIS VIEW CAN BE ACCEPTED IN THE CONTEXT OF RE-OPENING OF ASSESSMENT AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI STOCK BRO KERS PVT. LTD., [291 ITR 500] OR FOR ANY OTHER PROVISIONS ON A SSESSMENT. FOR THE PURPOSE OF LEVY OF INTEREST U/S. 234B WHERE IT IS VERY CLEARLY ITA NOS. 1321, 1322 & 1323/HYD/2015 M/S. MBG COMMODITIES (P) LTD., (FORMERLY KNOWN AS M/S. MAHESWARI BROTHERS) :- 19 -: MENTIONED THAT EVEN PROCESSING U/S. 143(1) IS ALSO TO BE CONSIDERED AS AN ASSESSMENT BY SPECIFICALLY MENTIONIN G IN THE SECTION THE PERIODS THEREIN THEN, FOR THE PURPOSE OF LEV Y OF INTEREST U/S. 234B(3), THE PERIOD IT WAS ALREADY CONSIDERED IN AN INTIMATION U/S. 143(1) IS TO BE EXCLUDED WHILE CALCULATING THE I NTEREST U/S. 234B(3). THE PROVISIONS OF SECTION 234B(3) ARE AS U NDER: SECTION 234B : 1.. . (3) WHERE, AS A RESULT OF AN ORDER OF REASSESSMENT OR RECOMPUTATION UNDER SECTION 147 (OR SECTION 153A), THE AMOUNT ON WHICH INTEREST WAS PAYABLE UNDER SUB-SECTION (1) IS INCREASED, THE ASSESSEE SHALL BE LIABLE TO PAY SIMPLE INTEREST AT THE RATE OF [ONE] PER CENT FOR EVERY MONTH OR PART OF A MONTH COMPRISED IN THE PERIOD COMMENCING ON THE DAY FOLLOWING [THE DATE OF DETERM INATION OF TOTAL INCOME UNDER SUB-SECTION (1) OF SECTION 14 3 [AND WHERE A REGULAR ASSESSMENT IS MADE AS IS REFERRED T O IN SUB- SECTION (1) FOLLOWING THE DATE OF SUCH REGULAR ASSE SSMENT]] AND ENDING ON THE DATE OF THE REASSESSMENT OR RECOM PUTATION UNDER SECTION 147 [OR SECTION 153A], ON THE AMOUNT BY WHICH THE TAX ON THE TOTAL INCOME DETERMINED ON THE BASIS OF THE REASSESSMENT OR RECOMPUTATION EXCEEDS THE TAX ON THE TOTAL INCOM E DETERMINED [UNDER SUB-SECTION (1) OF SECTION 143 OR] ON THE BA SIS OF THE REGULAR ASSESSMENT AFORESAID. ( EMPHASIS SUPPLIED) IN VIEW OF THE SPECIFIC EXCLUSION OF THE PERIOD CONS IDERED U/S. 234B(1), THE BALANCE OF THE PERIOD TILL THE COMPLETION O F ASSESSMENT U/S. 147/153A AS THE CASE MAY BE WAS ONLY BE CONSIDE RED FOR LEVY OF INTEREST U/S. 234B(3) ON THE ENHANCED AMOUNT OF TAX. 17. THE AMENDMENT BROUGHT OUT BY THE FINANCE ACT, 201 5 IN FACT MODIFIES THE THEN EXISTING PROVISIONS WHICH AR E APPLICABLE FOR THE IMPUGNED ASSESSMENT YEARS. IN FACT UNDER THE N EW SUB- SECTION (3), IT WAS PROVIDED THAT INTEREST WILL BE CALCUL ATED ON THE ENHANCED AMOUNT FROM THE PERIOD COMMENCING ON 1 ST APRIL NEXT FOLLOWING THE RELEVANT FINANCIAL YEAR FOR WHICH ADVA NCE TAX WAS PAYABLE AND ENDING ON THAT DATE OF THE RE-ASSESSMENT OR RE- ITA NOS. 1321, 1322 & 1323/HYD/2015 M/S. MBG COMMODITIES (P) LTD., (FORMERLY KNOWN AS M/S. MAHESWARI BROTHERS) :- 20 -: COMPUTATION U/S. 147/153A. THUS, WHERE IN A CASE INT EREST U/S. 234B(1) WAS LEVIED ON REGULAR ASSESSMENT U/S. 234B(1 ), ENHANCED INTEREST WAS PAYABLE FOR THE ENTIRE PERIOD AND NOT ON B ROKEN PERIOD AS IT WAS PROVIDED EARLIER. THIS IS THE SUBSTANCE OF THE AMENDMENT BROUGHT TO SUB-SECTION(3) BY THE FINANCE ACT, 2015. I N VIEW OF THIS, WE ARE OF THE OPINION THAT THE INTEREST U/S. 234B(1 ) IS TO BE CALCULATED ON THE ORIGINALLY ACCEPTED AMOUNT U/S. 143( 1) AS WAS DONE BY THE AO IN THE INTIMATIONS AND THE ENHANCED AMOU NT IS TO BE LEVIED FROM THE DATE OF INTIMATION TILL THE DATE OF CO NSEQUENTIAL ORDER PASSED U/S. 143(3) R.W.S. 153A R.W.S. 245D(4) IE ON 03-12- 2013. 18. WE ARE NOT SURE WHETHER THE AO IS CORRECT ABOUT THE LEVY OF INTEREST IN THE ORDERS U/S. 154, AS THE PERIOD AND CALCULATIONS WERE NOT PROVIDED FOR OUR EXAMINATION. IN FACT THERE IS REDUCTION OF DEMAND IN AYS 2005-06 AND 2009-10. IN V IEW OF THIS, WE, WHILE ALLOWING THE APPEALS OF ASSESSEE, DIRECT THE AO TO MODIFY THE INTEREST LEVIED AS PER THE PROVISIONS OF THE ACT. TH E APPEALS ARE CONSIDERED ALLOWED FOR STATISTICAL PURPOSES. 19. IN THE RESULT, ALL THE APPEALS ARE ALLOWED FOR S TATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JULY, 2016 SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMB ER HYDERABAD, DATED 15 TH JULY, 2016 TNMM ITA NOS. 1321, 1322 & 1323/HYD/2015 M/S. MBG COMMODITIES (P) LTD., (FORMERLY KNOWN AS M/S. MAHESWARI BROTHERS) :- 21 -: COPY TO : 1. M/S. MBG COMMODITIES (P) LTD., (FORMERLY KNOWN A S M/S. MAHESWARI BROTHERS), HYDERABAD. C/O. VENUGOPAL & CHENOY, CHARTERED ACCOUNTANTS, 4-1-889/16/2, TILAK ROAD, HYDERABAD. 2. THE DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRC LE-1(3), HYDERABAD. 3. CIT (APPEALS)-11, HYDERABAD. 4. THE PR. CIT(CENTRAL), HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.