MUCHHALA N.V., MUMBAI V. A.C.I.T.-21(1), MUMBAI

ITA 2591/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5092 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 24-10-2013
• Assessment Year: 2001-2002
• Appeal Filed On: 17-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHWA NI SINHA
• Keywords: Recovery proceedings
• Section: 143(3); 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NOS. 2591 & 2592/MUM/2012 ASSESSMENT YEARS: 2000-01 & 2001-02 M/S. MUCHHALA N.V. 20, SHANKAR DARSHAN, BHAGAT SINGH ROAD VILE PARLE (WEST) MUMBAI- 400 056 PAN :AAAFM 7529 E VS. ACIT-21(1), C-10, ROOM NO. 601, BKC, BANDRA (EAST) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI KIRAN MEHTA RESPONDENT BY : SHRI ASHWANI SINHA DATE OF HEARING : 24.10.2013 DATE OF PRONOUNCEMENT : 20.11.2013 O R D E R PER DR. S.T.M. PAVALAN, JM: THESE APPEALS FILED BY THE ASSESSEE ARE DIRECTED A GAINST THE COMMON ORDER OF THE LD.CIT(A) -32, MUMBAI DATED 23.02.2012 FOR THE AYS 2000-01 & 2001-02. SINCE IDENTICAL ISSUES ARE INVOLVED IN BOT H THE APPEALS, THE SAME ARE DISPOSED OFF BY THIS COMMON ORDER. 2. IN BOTH THE APPEALS, THE ASSESSEE HAS AGITATED T HE ACTION OF THE LD.CIT(A) CONFIRMING THE LEVY OF INTEREST OF RS.32,38,208/- A ND RS.9,63,857/- RESPECTIVELY FOR THE A.YS. 2000-01 & 2001-02 BY INVOKING SECTION 220(2) OF THE INCOME TAX ACT. 3. BRIEFLY STATED, THE ASSESSEE, A FIRM ENGAGED IN THE BUSINESS OF EXPORT OF TEXTILE GARMENT IN RESPECT WHICH AN ASSESSMENT WAS FRAMED U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT IN WHICH THE AO VIDE ORDE RS DATED 23.02.2004 AND 03.02.2004 ASSESSED THE INCOME OF THE ASSESSEE AT R S.1,61,86,253/- AND ITA NOS. 2591 & 2592/MUM/2012 M/S. MUCHHALA N.V. ASSESSMENT YEARS: 2000-01 & 2001-02 2 RS.2,83,81,380/- RESPECTIVELY FOR THE A.YS. 2000-01 AND 2001-02. CONSEQUENT UPON THE ASSESSMENT AND THE DEMAND RAISED THEREON, THE ASSESSEE MADE THE PAYMENT OF TAX AMOUNTING TO RS.1,36,10,940/- AND RS .44,07,814/- FOR BOTH THE YEARS AND THEREAFTER FILED THE APPEALS BEFORE THE L D.CIT(A) AGAINST THE ASSESSMENT ORDERS AND THE SAME WERE DISMISSED BY TH E CONSOLIDATE ORDER OF THE LD.CIT(A) DATED 06.09.2004. IN THE SECOND APPEAL, T HE ITAT, VIDE ORDER DATED 14.06.2006, RESTORED THE MATTER TO THE AO TO CONSID ER AFRESH IN THE LIGHTS OF THE AMENDMENTS MADE TO SECTION 80HHC BY FINANCE ACT (NO .2), 2005. IN THE ORDER GIVING EFFECT TO THE DIRECTION OF THE ITAT, THE AO VIDE ORDER DATED 03.12.2007 AGAIN ASSESSED THE INCOME AND ARRIVED THE TAXABLE I NCOME AS ORIGINALLY ASSESSED. ON APPEAL AGAINST THE SAID ORDER, THE LD.CIT(A) VID E CONSOLIDATED ORDERS DATED 25.08.2009 ALLOWED THE ASSESSEES APPEAL. WHILE GI VING EFFECT TO THE ORDER OF THE LD.CIT(A) DATED 25.08.2009, THE AO VIDE ORDER D ATED 11.09.2009 REFUNDED THE ASSESSEE RS.83,30,767/- AND RS.44,07,814/- BEIN G THE TAX PAID ON ORIGINAL ASSESSMENT FOR THE RESPECTIVE AYS. AGAIN, IN THE SE COND APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD.CIT(A), THE ITA T VIDE ORDER DATED 04.11.2010 SET ASIDE THE ORDER OF THE LD.CIT(A) AND DIRECTED THE AO TO RECONSIDER THE CLAIM U/S 89HHC IN VIEW OF THE DECIS ION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF KALPATARU COLOR CHEMICALS . IN THE FRESH ASSESSMENT MADE VIDE ORDER DATED 31.10.2011, THE AO ASSESSED T HE INCOME OF THE ASSESSEE AT RS.1,61,86,250/- AND RS.2,83,81,380/- FOR THE AS SESSMENT YEARS 2000-01 AND 2001-02. IN A FURTHER APPEAL, THE LD.CIT(A) VIDE CO NSOLIDATED ORDER DATED 23.02.2012 BY RELYING ON THE SC DECISION IN TOPMAN S CASE DIRECTED THAT THE PROFITS AS MAY ARISE ON SALE OF DEPB WOULD BE CONSI DERED U/S 28(IIID) AND THE FACE VALUE OF DEPB WOULD FALL UNDER CONSIDERATION U /S 28(IIIB). WHILE DOING SO, THE LD.CIT(A) CONFIRMED THE LEVY OF INTEREST U/S 22 0 OF THE ACT. AGGRIEVED BY THE IMPUGNED ORDER, THE ASSESSEE IS IN APPEAL BEFORE US . 4. BEFORE US, THE LD.AR OF THE ASSESSEE HAS STATED THAT THE ASSESSEE CANNOT BE SAID TO BE IN DEFAULT TILL 30 DAYS AFTER 31.10.2 011. AS ON 31.10.2011, THE LEARNED AO HAS RAISED THE DEMAND FOR THE FIRST TIME AFTER THE SECOND ORDER OF HON. ITAT. TILL 31.10.2011 THE ASSESEE IS NOT REQUI RED TO PAY ANY DEMAND ITA NOS. 2591 & 2592/MUM/2012 M/S. MUCHHALA N.V. ASSESSMENT YEARS: 2000-01 & 2001-02 3 WHATEVER AS THE TAX ON ASSESSMENT HAS ALREADY BEEN PAID AND INTEREST BEING WAIVED AND THERE HAS NO DEMAND IN THE INTERIM PERIO D. THUS, NO INTEREST U/S 220(2) OR OTHERWISE CAN BE LEVIED FOR ANY PERIOD PR IOR TO 30 DAYS AFTER 31.10.2011. THE LD.AR HAS FURTHER SUBMITTED THAT N O INTEREST U/S 220(2) CAN BE LEVIED OR DEMANDED VIDE ORDER AND DEMAND NOTICE DAT ED 31.10.2011 IN THAT AS ON 21.10.2011 THE ASSESSEE HAS NOT BEEN AT ALL IN D EFAULT U/S 220 INASMUCH AS THERE HAS BEEN NO DEMAND PAYABLE TILL 31.10.2011. T HUS, LEVY OF INTEREST U/S 220(2) VIDE ORDER DATED 31.10.2011 IS PATENTLY INCO RRECT ILLEGAL AND HENCE NOT TENABLE. INTEREST, U/S 220(2), IF AT ALL, CAN BE LE VIED ONLY ON THE FINAL DEMAND ASSESSED PURSUANT TO THE ORDER OF HONBLE HIGH COUR T AND THAT TOO FROM THE PERIOD 30 DAYS AFTER 31.10.2011 TILL THE DATE OF PA YMENT AND NOT FOR ANY EARLIER PERIOD. ON THE OTHER HAND, THE LD.DR HAS RELIED ON THE ORDER OF THE LD.CIT(A) AND AO TO SUBSTANTIATE THE CASE OF THE REVENUE. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. IT IS PERTINENT TO MENTION THAT A BARE READING OF SECTION 220 CLEARLY INDICATES THAT IF THE ASSESSEE DOES NOT PAY THE AMOUNT DEMANDED UNDER A NOTICE ISSUED UNDER SECTION 156 WITHIN THE TIME STIPULATED UNDER SUB-SE CTION (1), THE SAID ASSESSEE IS LIABLE TO PAY SIMPLE INTEREST AT ONE AND ONE-HALF P ERCENT FOR EVERY MONTH OR PART OF A MONTH COMPRISED IN THE PERIOD COMMENCING FROM THE DAY IMMEDIATELY FOLLOWING THE END OF THE PERIOD IN SUB-SECTION (1) AND ENDING WITH THE DAY ON WHICH THE AMOUNT IS PAID AND, THEREFORE, THE CONDIT ION PRECEDENT UNDER THIS SECTION IS THAT THERE SHOULD BE A DEMAND NOTICE AND THERE SHOULD BE A DEFAULT TO PAY THE AMOUNT SO DEMANDED WITHIN THE TIME STIPULAT ED IN THE SAID NOTICE. APPLYING THIS SECTION TO THE FACTS OF THE CASE, IT IS SEEN THAT IMMEDIATELY AFTER THE ASSESSMENT HAS BEEN MADE FOR THE RELEVANT YEARS, DE MAND NOTICES HAVE BEEN ISSUED UNDER SECTION 156(1) AND ADMITTEDLY THE ASSE SSEE SATISFIED THE SAID DEMANDS AND NOTHING HAS BEEN DUE PURSUANT TO THE SA ID DEMAND NOTICES. HOWEVER, AFTER THE DECISION OF THE APPELLATE AUTHOR ITY WHICH HAS GONE IN FAVOUR OF THE ASSESSEE, THE REVENUE HAS REFUNDED THE AMOUN T DUE AS PER THE SAID ORDER OF THE AUTHORITY. ITA NOS. 2591 & 2592/MUM/2012 M/S. MUCHHALA N.V. ASSESSMENT YEARS: 2000-01 & 2001-02 4 THEREAFTER, WHEN THE MATTER HAS BEEN TAKEN UP BY TH E REVENUE IN THE APPEALS, ULTIMATELY THE ASSESSEE HAS LOST THE CASE AND AS OF NOW FRESH ASSESSMENT MADE BY THE AO VIDE ORDER DATED 31.10.2011 IN RESPECT OF WHICH ONLY THE REVENUE CAN RAISE THE DEMAND FOR THE PAYMENT OF TAX AND ONLY WH EN THIS DEMAND IS NOT MET BY THE ASSESSEE, THE ASSESSEE WOULD BE IN DEFAULT A ND LIABLE TO PAY THE INTEREST U/S 220. CONSIDERING THE FACTS IN TOTO, WE ARE OF T HE CONSIDERED OPINION THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED IN ITS FAV OUR BY THE DECISION OF THE APEX COURT IN THE CASE OF VIKRANT TYRES LTD. VS FITO 247 ITR 821 (SC) , THE HEAD NOTES OF THE SAID DECISION READS AS UNDER: SECTION 220 OF THE INCOME TAX ACT, 1961, READ WIT H SECTION 3 OF THE TAXATION LAWS (CONTINUATION AND VALIDATION OF RECOV ERY PROCEEDINGS) ACT, 1964- COLLECTION AND RECOVERY OF TAX-WHEN TAX PAYAB LE AND WHEN ASSESSEE DEEMED IN DEFAULT-ASSESSMENT YEARS 1977-78 AND 1978-79- ASSESSEE PAID TAX DEMANDED PURSUANT TO ASSESSMENT-F IRST APPELLATE AUTHORITY ALLOWED APPEALS AND TAX PAID CAME TO BE R EFUNDED-TRIBUNAL DISMISSED REVENUES APPEAL-HOWEVER, HIGH COURT UPHE LD ASSESSMENT ORDER AND FRESH DEMAND NOTICE WAS ISSUED-ASSESSEE C OMPLIED WITH DEMAND-DEPARTMENT INVOKED SECTION 220(2) AND DEMAND ED INTEREST FOR PERIOD COMMENCING WITH REFUND OF TAX CONSEQUENT UPO N FIRST APPELLATE ORDER TILL TAXES WERE FINALLY PAID AFTER DISPOSAL O F REFERENCE-WHETHER ASSESSEE COULD BE SAID TO BE IN DEFAULT SO AS TO BE LIABLE TO PAY INTEREST UNDER SECTION 220(2)-HELD, NO- WHETHER SECTION 3 OF THE TAXATION LAWS, 1964 COULD BE RELIED UPON TO CONSTRUE AUTHORITY OF REVENUE TO DEMAND INTEREST UNDER SECTION 220(2)-HELD, NO. WE, BY FOLLOWING THE AFOREMENTIONED DECISION, ARE O F THE CONSIDERED OPINION THAT SECTION 220(2) CANNOT BE INVOKED TO DEMAND ANY INTE REST FROM THE ASSESSEE FOR THE ASSESSMENT YEARS IN QUESTION. THE GROUNDS RAISE D IN THE APPEALS THEREFORE, STAND ALLOWED AND THE IMPUGNED ORDER OF THE LD.CIT( A) IS SET ASIDE. RESULTANTLY, THE DEMANDS MADE BY THE REVENUE U/S 220(2) FOR THE PAYMENT OF INTEREST OF TAX DUE FOR THE AYS 2000-01 AND 2001-02 STAND QUASHED. 6. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF NOVEMBER, 2013. SD/- SD/- (SANJAY ARORA) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 20.11.2013. *SRIVASTAVA ITA NOS. 2591 & 2592/MUM/2012 M/S. MUCHHALA N.V. ASSESSMENT YEARS: 2000-01 & 2001-02 5 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR B BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.