ACIT, CHENNAI V. M/s. TVS Finance & Services Limited, CHENNAI

ITA 2122/CHNY/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81291 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 02-12-2014
• Assessment Year: 1995-1996
• Appeal Filed On: 06-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Recovery proceedings; Depreciation
• Section: 143(3); 246

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . , ! # $ , % & BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO. 2122/MDS/2013 ( / ASSESSMENT YEAR: 1995-96) THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-III(2), NEW BLOCK 4 TH FLOOR, 121, MG ROAD, CHENNAI-600 034. VS M/S. TVS FINANCE & SERVICES LTD. (FORMERLY KNOWN AS HARITA FINANCE LTD & KNOWN AS TVS LAKSHMI CREDIT LTD.) 29, HADDOWS ROAD, CHENNAI-600 006. PAN: AAACH6041B ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. A.V.SREEKANTH, JCIT /RESPONDENT BY : MR. R.VIJAYARAGHAVAN, ADVOCATE / DATE OF HEARING : 2 ND DECEMBER, 2014 /DATE OF PRONOUNCEMENT : 5 TH DECEMBER, 2014 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX, (APPEALS)-III, CHEN NAI DATED 27.09.2013 FOR THE ASSESSMENT YEAR 1995-96. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 2.1 THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO CHARGE INTEREST U/S 220(2) WI TH EFFECT FROM THE DATE OF ORDER PASSED U/S 143(3) R.W.S.251 AS AGAINST THE DATE OF ORIGINAL ASST. ORDER U/S 143(3). 2.2. THE LEARNED CIT(A) FAILED TO NOTE AS PER THE PROVISIONS OF THE IT ACT, CHARGING OF INTEREST U/S 220(2) 2 ITA NO.2122/MDS/2013 IS NOT APPEALABLE. THE CIT(A) OUGHT TO HAVE CONSIDERED THE DECISION OF ANZ GRINDLAYS BANK PLC VS. CIT (CAL) 241 ITR :269, WHEREIN IT WAS HELD THA T INTEREST LEVIED U/S 220(2) IS NOT APPEALABLE SINCE SEC. 246 DOES NOT PROVIDE FOR APPEAL AGAINST ORDER U/S 220(2) AND IT IS NOT A PART OF ASSESSMENT ORDER ALSO. 2.3. THE LEARNED CIT(A) OUGHT TO HAVE NOTED THAT THE DECISION OF SUPREME COURT IN VIKRANT TYRES LTD [CAS E RELIED ON BY THE CIT (A)] APPLIES ONLY IF ASSESSEE INITIALLY PAID TAX AS PER THE DEMAND NOTICE WHICH W AS LATER ON REFUNDED WHILE GIVING EFFECT TO THE ORDER OF CIT(A) AND WHICH AGAIN GOT REVIVED WITH THE ORDER OF ITAT WHEREAS IN THE INSTANT CASE, THE ASSESSEE HAD NOT PAID ANY TAX AND HENCE THE FACTS ARE DISTINGUISHABLE. 2.4. THE CIT(A) OUGHT TO HAVE CONSIDERED THE FOLLOW ING DECISIONS WHEREIN IT WAS HELD THAT THOUGH ADDITION MADE BY ASSESSING OFFICER WAS DELETED BY CIT(A), IT WAS RESTORED BY THE ORDER OF ITAT - THE EFFECT O F THE ORDER OF TRIBUNAL IS THAT THE EARLIER NOTICE OF DEMAND STOOD REVIVED AND BECAME LEGAL, VALID AND ENFORCEABLE - IN VIEW OF SEC. 3 OF TAXATION LAWS (CONTINUATION AND VALIDATION OF RECOVERY PROCEEDINGS) ACT, 1964, THE ORIGINAL NOTICE OF DEMAND CONTINUED TO BE VALID AND OPERATIVE - IN THE ABSENCE OF PAYMENT OF ENTIRE DEMAND, INTEREST U/S 220(2) TO BE LEVIED FROM THE DATE OF ORIGINAL ORDER. SUPER SPINNING MILLS LTD V. CIT & ANR (MAD) 244 ITR 814 K.VENUGOPALAN NAMBIAR V. CIT (KER) 231 ITR 607 GIRNAR INVESTMENT LTD V. CIT (DEL) 340 ITR 529 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND TH AT 3 ITA NO.2122/MDS/2013 OF THE ASSESSING OFFICER RESTORED. 3. BRIEF FACTS ARE THAT ASSESSEE IS A NON-BANKING FINANCE COMPANY (NBFC) ENGAGED IN THE BUSINESS OF HIRE PURCHASE AND LEASING ACTIVITIES AND GOVERNE D BY THE NORMS OF RESERVE BANK OF INDIA. ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 1995-96 ON 29.11.1995 ADMITTING A LOSS OF ` 89,71,834/-, AFTER CLAIMING 100% DEPRECIATION ON 12 ASSETS WHICH IT LEASED TO VARIOUS PARTIES. THE ASSESSING OFFICER COMPLETED THE ORIGINAL ASSESSMENT UNDER SECTION 143 ( 3) OF THE ACT, DETERMINING ASSESSED INCOME AT ` 1,78,78,120/- ON 23.01.1998 AFTER DISALLOWING THE APPELLANT'S CLAIM OF 100% DEPRECIATION. THE ASSESSE FILED AN APPEAL AGAINST THE ORDER OF THE ASSESSING OFFICER BEFORE T HE COMMISSIONER OF INCOME TAX (APPEALS) AND THE COMMISSIONER VIDE DATED 11.10.1999, SET ASIDE THE ASSESSMENT ORDER, DIRECTING THE ASSESSING OFFICER TO MAKE FRESH ASSESSMENT AFTER MAKING DETAILED EXAMINATION OF THE DOCUMENTS FILED AND ALSO BY 4 ITA NO.2122/MDS/2013 GIVING AN OPPORTUNITY, OF BEING HEARD TO THE ASSESSEE. THE SET ASIDE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) R.W.S 251 OF THE ACT, ON 28.03.2002 AND THE ASSESSING OFFICER UPHELD THE DISALLOWANCES MADE IN THE ORIGINAL ASSESSMENT DATED 23.01.1998. AGAIN, THE ASSESSEE FILED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) AGAINST THE ORDER OF ASSESSING OFFICER UNDER SECTION 143(3) RWS 251 DATED 28.03.2002. THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE ORDER DATED 06.07.2012, DIRECTED THE ASSESSING OFFICER T O EXCLUDE THE PRINCIPAL PORTION OF THE LEASE RENTALS FROM THE TAXABLE INCOME WHILE DISALLOWING THE DEPRECIATION CLAIMED BY THE APPELLANT. THE ASSESSING OFFICER PASSED THE ORDER DATED 03.12.2012, GIVING EFFECT TO THE ABOVE SAID ORDER OF THE CIT (A) AND CHARGED INTEREST UNDER SECTION 220(2) OF THE ACT FROM THE DATE OF ORIGINAL ORDER VIZ. 23.01.1998. 5 ITA NO.2122/MDS/2013 4. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT INTERE ST UNDER SECTION 220(2) OF THE ACT SHALL BE CHARGED FR OM THE ORIGINAL ASSESSMENT ORDER I.E. ASSESSMENT ORDER DAT ED 23.1.1998, BUT NOT FROM THE ASSESSMENT ORDER DATED 28.03.2002. 5. COUNSEL FOR THE ASSESSEE RELYING ON THE CIRCULAR NO. 334 DATED 3.4.1982 OF THE CBDT SUBMITS THAT WHEN ASSESS MENT ORDER IS CANCELLED OR SET ASIDE BY THE APPELLATE AU THORITY AND IF THAT SETTING ASIDE IS FINAL, INTEREST UNDER SEC TION 220(2) CANNOT BE CHARGED PURSUANT TO THE ORIGINAL DEMAND N OTICE. HE SUBMITS THAT EVEN WHEN THE ASSESSMENT IS REFRAME D INTEREST IS LEVIABLE ONLY FROM THE DATE OF FRESH AS SESSMENT ORDER AND NOT ORIGINAL ASSESSMENT ORDER. COUNSEL S UBMITS THAT IN THIS CASE ORIGINAL ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER ON 23.01.1998 DISALLOWING ASSESSE ES CLAIM FOR 100% DEPRECIATION ON THE ASSETS LEASED TO VARIOUS PARTIES WAS SET ASIDE BY THE COMMISSIONER OF INCOME TAX (APPEALS) BY ORDER DATED 11.10.1999 AND NO FURTHER APPEAL WAS PREFERRED BY THE REVENUE AGAINST THIS ORDER. C OUNSEL SUBMITS THAT SET ASIDE ASSESSMENT WAS COMPLETED ON 23.08.2002 ONCE AGAIN DISALLOWING THE DEPRECIATION ON 6 ITA NO.2122/MDS/2013 LEASED ASSETS. THE ASSESSEE PREFERRED FURTHER APPEA L AND THE COMMISSIONER OF INCOME TAX (APPEALS) BY ORDER DATED 6.7.2012 DIRECTED THE ASSESSING OFFICER TO EXCLUDE THE PRINCIPAL PORTION OF LEASE RENTAL FROM THE TAXABLE INCOME WHILE DISALLOWING DEPRECIATION CLAIMED BY THE ASSESSE. T HEREFORE, COUNSEL SUBMITS THAT THE SET ASIDE ASSESSMENT BECAM E FINAL AS NO FURTHER APPEAL WAS PREFERRED BY THE REVENUE A ND INTEREST UNDER SECTION 220(2) SHALL NOT BE LEVIED FROM THE DATE PURSUANT TO ORIGINAL ASSESSMENT ORDER BUT IT HAS TO BE PURSUANT TO THE SET ASIDE ASSESSMENT ORDER IN VIEW OF THE CLAUSE 2(I) OF CBDT CIRCULAR NO.334 DATED 3.4.1982. 6. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND THE CIRCULAR OF THE BOARD. THE CBDT ISSUED CIR CULAR NO.334 DATED 3.4.1982 EXPLAINING THE CIRCUMSTANCES REGARDING LEVY OF INTEREST UNDER SECTION 220(2) WH EN THE ORIGINAL ASSESSMENT IS SET ASIDE. CLAUSE 2 OF THE C IRCULAR READS AS UNDER:- 2. THESE ISSUES WERE COMPREHENSIVELY EXAMINED IN CONSULTATION WITH THE MINISTRY OF LAW A ND THE BOARD HAS BEEN ADVISED : (I) WHERE AN ASSESSMENT ORDER IS CANCELLED U/S. 146 OR CANCELLED/SET ASIDE BY AN APPELLATE / REVISIONAL AUTHORITY AND THE CANCELLATION/SETTING ASIDE BECOME S FINAL (I.E., IT IS NOT VARIED AS A RESULT OF FURTHE R APPEALS/ 7 ITA NO.2122/MDS/2013 REVISIONS), NO INTEREST UNDER S. 220(2) CAN BE CHAR GED PURSUANT TO THE ORIGINAL DEMAND NOTICE. THE NECESSARY COROLLARY OF THIS POSITION WILL BE THAT E VEN WHEN THE ASSESSMENT IS REFRAMED, INTEREST CAN BE CHARGED ONLY AFTER THE EXPIRY OF 35 DAYS FROM THE D ATE OF SERVICE OF DEMAND NOTICE PURSUANT TO SUCH FRESH ASSESSMENT ORDER. (II) WHERE THE ASSESSMENT MADE ORIGINALLY BY THE IT O IS EITHER VARIED OR EVEN SET ASIDE BY ONE APPELLATE AUTHORITY BUT, ON FURTHER APPEAL, THE ORIGINAL ORDE R OF THE ITO IS RESTORED EITHER IN PART OR WHOLLY, THE INTEREST PAYABLE UNDER S. 220(2) WILL BE COMPUTED WITH REFERENCE TO THE DUE DATE RECKONED FROM THE ORIGINAL DEEMED NOTICE AND WITH REFERENCE TO THE TA X FINALLY DETERMINED. THE FACT THAT DURING AN INTERVE NING PERIOD, THERE WAS NO TAX PAYABLE BY THE ASSESSEE UNDER ANY OPERATIVE ORDER WOULD MAKE NO DIFFERENCE TO THIS POSITION. 7. ON READING OF THE CLAUSE 2(1) OF THE ABOVE CIRCU LAR, IT IS CLEAR THAT WHEN THE ASSESSMENT ORDER IS CANCELLED O R SET ASIDE BY APPELLATE AUTHORITY AND IF SUCH ORDER IS FINAL, NO INTEREST UNDER SECTION 220(2) CAN BE CHARGED PURSUA NT TO THE ORIGINAL DEMAND NOTICE. IT IS FURTHER CLARIFIED THA T EVEN WHEN THE ASSESSMENT IS REFRAMED IN SUCH CIRCUMSTANCES I NTEREST CAN BE CHARGED ONLY AFTER EXPIRY OF 35 DAYS FROM TH E DATE OF SERVICE OF DEMAND NOTICE PURSUANT TO SUCH FRESH ASS ESSMENT ORDER. IN THIS CASE, ORIGINAL ASSESSMENT ORDER FRAM ED ON 23.1.1998 HAS BEEN SET ASIDE BY THE COMMISSIONER OF INCOME TAX (APPEALS). THE REVENUE DID NOT PREFER FU RTHER APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INC OME TAX (APPEALS) IN SETTING ASIDE THE ASSESSMENT. PURSUANT TO THE 8 ITA NO.2122/MDS/2013 COMMISSIONER OF INCOME TAX (APPEALS)S ORDER FRESH ASSESSMENT WAS FRAMED ON 20.08.2002 BY THE ASSESSIN G OFFICER. IN SUCH CIRCUMSTANCES, IN VIEW OF THE INS TRUCTIONS AND CLARIFICATIONS ISSUED BY THE CBDT, INTEREST CA N BE LEVIED ONLY IN PURSUANT TO THE ASSESSMENT ORDER FRAMED ON 28.3.2002 AND NOT PURSUANT TO THE ORDER PASSED ON 23.01.1998. THUS, WE UPHOLD THE ORDER OF THE COMM ISSIONER OF INCOME TAX (APPEALS) IN DIRECTING THE ASSESSING OFFICER TO LEVY INTEREST UNDER SECTION 220(2) PURSUANT TO THE ORDER PASSED UNDER SECTION 143(3) READ WITH SECTION 251 O F THE ACT DATED 28.03.2002 AND REJECT THE GROUNDS RAISED BY T HE REVENUE. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY , THE 5 TH DAY OF DECEMBER, 2014 AT CHENNAI. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDRA PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED, 5 TH DECEMBER, 2014 SOMU 9 ITA NO.2122/MDS/2013 12 32 /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .