ACIT, Hyderabad V. M/s Janakirama Enterprises Ltd, Hyderabad

ITA 348/HYD/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1358 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2009
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: 2002-2003
• Appeal Filed On: 11-03-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NAGENDRA PRASADDR
• Assessee Lawyers: K C DEVADAS
• Keywords: Business income; Retrospective amendment; Reasonable cause; TDS; Set aside
• Section: 234B; 143(1); 208; 6; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.347, 348 & 349 /HYD/2009 : ASST. YEA R: 2001-2002 ACIT, CIRCLE 2 (1), HYDERABAD VS M/S JANAKIRAMA ENTERPRISES, HYDERABAD. ( PANAAACJ5217H) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI NAGENDRA PRASAD,DR RESPONDENT BY : SHRI K.C. DEVADAS, CA O R D E R PER CHANDRA POOJARI , ACCOUNTANT MEMBER: THESE THREE APPEALS BY REVENUE ARE DIRECTED AGAINST T HE COMMON ORDER PASSED BY THE CIT(A) III, HYDERABAD DATED 9.1.2009 RELATING TO ASSESSMENT YEARS 2001-02, 2002-03 AND 2003-0 4. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS: 1. THE ORDER OF THE CIT(A) IS ERRONEOUS IN LAW AND IN TH E FACTS AND CIRCUMSTANCES OF THE CASE IN ALLOWING THE ASSESSEES APPEAL. 2. IN THE PRESENT CASE, ASSESSMENTS IN RESPECT OF ASSESSMENT YEARS 2001-02 TO 2003-04 WERE MADE FOR THE FIRST TIME U/S 1 47. SO, THEREFORE, EXPLANATION 2 TO SEC.234B(1) APPLIES IN THI S CASE. SO THE INTEREST U/S 234B IS CHARGEABLE FROM1ST APRIL OF THE AY TO THE DATE OF COMPLETION OF ASSESSMENT. 3. THE DECISION OF SPECIAL BENCH OF DELHI ITAT 95 ITD 269 IN THE CASE OF MOTOROLA INC. IS THAT NO INTEREST IS CHARGEABLE U/S 2 34B ON THE 2 INCOME WHICH IS LIABLE FOR TDS DEDUCTION. THAT DECISION IS NOT RELEVANT TO THE FACTS OF THIS CASE. 4. RESJUDICATA DOES NOT APPLY TO THE INCOME TAX PROCEEDIN GS AND EACH ASSESSMENT YEAR IS SEPARATE. LEVY OF INTEREST U/S 234B IS MANDATORY AND THERE IS NO PROVISION IN THE SECTION WHICH ENTAILS THAT FOR A REASONABLE CAUSE, THE 234B INTEREST IS NOT LE VIABLE. 5. 234B INTEREST IS NOT PENAL IN NATURE BUT IS COMPENSATORY . SO, WHEN THE INCOME IS HELD TO BE CHARGEABLE UNDER HOUSE PROPERTY, THE FOLLOWING CONSEQUENCE OF PAYMENT OF TAX AND INTERE ST FOLLOWS ON THAT INCOME. 3. AS THE ISSUE FOR CONSIDERATION IN ALL THESE APPEALS IS W ITH REGARD TO LEVY OF INTEREST U/S 234B OF THE INCOME TAX ACT, 1961 (THE ACT) AND THE GROUNDS OF APPEAL BEING COMMON IN ALL THESE APPEALS, TH EY ARE HEARD TOGETHER FOR DISPOSAL BY THIS COMMON ORDER, FOR THE SAK E OF CONVENIENCE. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY RECEIVED RENTAL INCOME FROM BUILDING AND INFRASTRUCTUR E HIRE CHARGES. THE SAME WERE OFFERED TO TAX UNDER THE HEAD BUSINESS INCOM E. THE ASSESSING OFFICER ASSESSED THE RENTAL INCOME FROM BUILDING UN DER THE HEAD INCOME FROM PROPERTY AND INFRASTRUCTURE HIRE CHARGES UNDER THE HEAD INCOME FROM OTHER SOURCES. HE ALSO LEVIED INTEREST U/S 2 34B WITH REFERENCE TO THE ASSESSED INCOME. THE ASSESSMENT WAS CONFIRME D BY THE CIT(A) VIDE HIS ORDER DATED 9.4.2007. IN FURTHER AP PEAL, THE HONBLE TRIBUNAL VIDE ITS ORDER DATED 25.7.2008 UPHELD THE ST AND OF THE ASSESSING OFFICER FOR ASSESSING THE AFORESAID INCOME AS ABOVE. HOWEVE R, THE ISSUE RELATING TO CHARGE OF INTEREST U/S 234B WAS SET ASIDE TO THE ASSESSING OFFICER WITH A DIRECTION TO DECIDE IT AFRESH AFTER GIVI NG REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 3 5. DURING THE CONSEQUENTIAL PROCEEDINGS, THE ASSESSEE EXP LAINED TO THE ASSESSING OFFICER THAT IT DENIED ITS LIABILITY TO THE LEVY OF INTEREST U/S 234B FOR THE REASON THAT ON THE DUE DATES TO PAY THE ADVANCE TAX, THE ASSESSEE HAD RELIED ON THE PAST APPELLATE ORDERS IN FAVOU R OF THE ASSESSEE. THE SUBSEQUENT ACT OF REOPENING THE ASSESSMENT WAS N OT AND COULD NOT BE ANTICIPATED ON THE DUE DATES FOR PAYING A DVANCE TAX IN THE RESPECTIVE ASSESSMENT YEARS. THIS EXPLANATION WAS REJECTED B Y THE ASSESSING OFFICER STATING THAT INTEREST U/S 234B WAS TO BE CA LCULATED AND PAYABLE ON THE ASSESSED TAX. HOWEVER, THE ASSESSING OFFICER IN THE CONSEQUENTIAL ORDER DT.6-7-2007, FOR ASSESSMENT YEAR 2002 -03 CHARGED INTEREST U/S 234B OF THE ACT. ON APPEAL TO THE LEARNE D CIT(A) , HE RELIED ON THE ORDER OF THE TRIBUNAL SPECIAL BENCH IN THE CASE OF MOTOROLA INC. V. DCIT ( 95 ITD 269 (SB)(DEL), WHEREIN, IT WAS HELD TH AT SEC.234B IS ATTRACTED ONLY WHERE ADVANCE-TAX IS NOT PAID DESPITE AN OBLIGATION TO PAY. BUT, THERE IS NO OBLIGATION. THE STEPS INVOLVED FOR D ETERMINING THE LIABILITY TO PAY ADVANCE-TAX ARE OUTLINED IN SEC.209. UNDER SEC.209(1)(D), THE TAX ESTIMATED TO BE PAYABLE ON THE CURRENT INCOME SHALL BE REDUCED BY THE AMOUNT OF TAX WHICH WOULD BE DEDUCTIBLE OR COLLECTIBLE AT SOURCE DURING THE PREVIOUS YEAR UNDER ANY PROVISION OF THE A CT. EVEN IF THE ASSESSEE IS ANSWERABLE IN RESPECT OF THE INCOME (WHICH IS IN D ISPUTE IN THE APPEAL) IT IS ENTITLED NOT TO PAY THE ADVANCE-TAX BECAUSE THE TAX IS DEDUCTIBLE BY THE PAYER, THOUGH NOT ACTUALLY DEDUCTE D BY HIM. IF TAX IS NOT SO DEDUCTED, THE DEPARTMENT IS ENTITLED TO TREAT T HE PAYER AS IN DEFAULT U/S 201(1). THE DEPARTMENT IS ALSO ENTITLED T O RECOVER INTEREST FROM HIM U/S 201(1A). THEREFORE, THE DEPARTMENT CAN NOT SEEK TO RECOVER THE INTEREST FROM THE ASSESSEE AND ENJOY A DOUBLE ADVANT AGE. THE INTEREST IS ESSENTIALLY COMPENSATORY IN NATURE AND NO DOU BLE ADVANTAGE CAN BE PERMITTED. THUS, PLACING RELIANCE ON THE ABOVE DECISION OF THE TRIBUNAL, THE LEARNED CIT(A) WAS OF THE OPINION THA T SINCE THE ASSESSEE 4 HAS PREPAID THE TAXES THROUGH TDS AND ADVANCE TAX MOR E THAN 90% OF TOTAL TAX HE HAD DELETED THE LEVY OF INTEREST U/S 234 B OF THE ACT. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 5.1 WE HAVE HEARD BOTH SIDES AND PERUSED THE MATERIAL ON RECORD. THE LEARNED COUNSEL FOR THE ASSESSEE STRONGLY PLACED RELIANCE ON THE ORDER OF THE LEARNED CIT(A) AND ALSO ON THE ORDER OF THE TRI BUNAL SUPRA IN MOTOROLA CASE, THE JUDGEMENT OF THE HONOURABLE MADRAS H IGH COURT IN THE CASE OF CIT V. REVATI EQUIPMENT LTD. 298 ITR 67 (MAD) AND ALSO ON THE FOLLOWING ORDERS OF THE TRIBUNAL. 1. ROYAL JORDANIAN AIRLINES V. DCIT (INTERNATIONAL T AXATION) 119 TTJ 145 (DEL), WHEREIN IT WAS HELD THAT AS REGARDS CHARGING OF INTEREST U/S 234B, IT IS SEEN THAT THE ASSESSEE HAD ALL ALONG BEEN CLAIMING I MMUNITY FROM CHARGEABILITY TO TAX ON THE BASIS OF IT BEING A SOVEREI GN. THIS VIEW OF THE ASSESSEE WAS FOUND ACCEPTABLE BY THE TRIBUNAL TILL IT WAS R EVERSED BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE ORDER DT.31-8-20 05. HOWEVER, PRIOR TO THIS ORDER, THE DECISIONS OF THE TRIBUNAL WERE IN FA VOUR OF THE ASSESSEE. ACCORDINGLY, TILL THE DATE RETURNS WERE FILED, THE ASSESSE E WAS UNDER BONA FIDE BELIEF THAT ITS INCOME IS NOT CHARGEABLE TO TAX IN INDIA. THE ASSESSEE WAS THEREFORE, NOT REQUIRED TO ESTIMATE HIS INCOME OR P AY ANY ADVANCE TAX. WE, THEREFORE, HOLD THAT IN SUCH A SITUATION, SE C.234B CANNOT BE INVOKED. WE, THEREFORE, DELETE THE INTEREST CHARGED U/S 234B OF THE ACT. 5.2 FURTHER, THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE TRIBUNAL IN THE CASE OF BHPE KENHILL JOINT VENTURE V. ADIT 23 SOT 209 (DEL), WHEREIN, IT WAS HELD THAT WHEN THE ENTIRE INCO ME OF THE ASSESSEE COMPANY WAS SUBJECTED TO DEDUCTION OF TAX AT SOURCE U/S 19 5, THERE WAS NO LIABILITY TO PAY ADVANCE TAX. HENCE, NO INTEREST CA N BE CHARGED U/S 234B EVEN THOUGH NO TAX WAS ACTUALLY DEDUCTED AT SOURCE BY THE PAYER. 5 HE ALSO RELIED ON THE ORDER OF THE TRIBUNAL SPECIAL BE NCH IN THE CASE OF SUMIT BHATTACHARYA V. ACIT (MUM) 112 ITD 1 (SB) (MUM ). 6. WE HAVE GIVEN OUR CAREFUL THOUGHT TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND PERUSED THE MATERIALS TO WHICH OUR ATTEN TION WAS INVITED. IT WOULD BE APPROPRIATE TO RECORD SOME OF THE APPLICAB LE PROVISIONS OF THE ACT. SEC.207 AS SUBSTITUTED WITH EFFECT FROM 1.4.1988 LAYS DOWN THAT TAX SHALL BE PAYABLE IN ADVANCE DURING ANY FINANCIAL YEAR IN ACCORDANCE WITH THE PROVISIONS OF S.208 TO 219 OF THE IT ACT IN RESPECT OF TOTAL INCOME OF THE ASSESSEE WHICH WOULD BE CHARGEABLE TO TAX FOR ASSESSMENT YEAR IMMEDIATELY FOLLOWING THAT FINANCIAL YEAR. SUCH INCOM E ON WHICH ADVANCE TAX IS PAYABLE IS TO BE CALLED AS CURRENT INCOME. SE C.208 WAS AMENDED DURING FINANCIAL YEAR 1996-97 AND IS APPLICABLE FROM 1.10.1996. THIS SECTION LAYS DOWN THE CONDITIONS OF LIABILITY TO PAY ADV ANCE TAX. ADVANCE TAX SHALL BE PAYABLE DURING THE FINANCIAL YEAR IN EV ERY CASE WHERE THE AMOUNT OF SUCH TAX PAYABLE BY THE ASSESSEE DURING THAT Y EAR IS COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE CHAPTER IS RS.1,5 00/- OR MORE AS PER THE AMENDED PROVISION I.E. FINANCE ACT (NO.1) 1996 W.E.F. 1.10.1996 THE THRESHOLD LIMIT WAS RAISED TO RS.5,000 BY THE FINAN CE ACT (NO.2) 1996. IN THE PRESENT CASE, THE ASSESSEE IS ASSESSED TO TAX AND IS REQUIRED TO COMPLY WITH THE REQUIREMENT OF SEC.209 OF THE ACT. 7. SEC.210 PROVIDES FOR PAYMENT OF ADVANCE TAX BY THE ASSESSEE ON HIS OWN ACCORD OR AT THE INSTANCE OF THE ASSESSING OFFICER. SUB.SEC. (1) LAYS DOWN THAT EVERY PERSON WHO IS LIABLE TO PAY ADVAN CE TAX U/S 208 SHALL SUO MOTU COMPUTE ADVANCE TAX PAYABLE ON HIS CURREN T INCOME AND PAY THE SAME IN INSTALLMENTS AS SPECIFIED IN SECTION 211. THERE IS NO NEED TO FILE ANY STATEMENT OR ESTIMATE OF ADVANCE TAX PAYABLE, AS WAS REQUIRED BEFORE AMENDMENT BY THE ACT OF 1987. SUB SECTION (2) TO 6 SECTION 210 ALLOWS AN ASSESSEE TO SUBSEQUENTLY REVISE THE ADV ANCE TAX PAYABLE IN THE REMAINING INSTALLMENTS IN ACCORDANCE WIT H REVISED ESTIMATE OF HIS CURRENT INCOME WITHOUT ANY REQUIREMENT OF FILI NG THE REVISED ESTIMATE. SUB SECTION 3 EMPOWERS OF THE ASSESSING OFFICER TO PASS AN ORDER REQUIRING AN ASSESSEE WHO HAS ALREADY BEEN ASSESSED T O INCOME TAX, BUT HAS NOT PAID ANY ADVANCE TAX IN THE MANNER LAID DOWN IN SECTION 209. SUCH AN ORDER MUST BE PASSED DURING THE FINANCIAL YEAR BUT NOT LATER THAN THE LAST DATE OF FEBRUARY. SUB.SECTION 4 EMPOWERS THE ASSESSING OFFICER TO PASS THE REVISE ORDER FOR PAYMENT OF A DVANCE TAX BY THE ASSESSEE, SUBSEQUENTLY TO PASSING OF ORIGINAL ORDER, BUT BEFORE THE FIRST DAY OF MARCH. SUB.SECTION 5 ENABLES THE ASSESSEE TO PAY LESS AMOUNT OF ADVANCE TAX THAN WHAT WAS DEMANDED UNDER SUB SECTION 3 OR 4 IF THE ADVANCE TAX PAYABLE ON HIS CURRENT INCOME WOUL D BE LESS THAN THE AMOUNT DEMANDED BY THE ASSESSING OFFICER. SUB SECTION 6 CORRESPONDINGLY REQUIRES THE ASSESSEE TO ESTIMATE HIS CURRENT INCOME WHERE THE AMOUNT OF ADVANCE TAX PAYABLE ON CURRENT IN COME IS LIKELY TO BE HIGHER THAN THE ADVANCE TAX DEMANDED BY THE ASSESSING OFFICER UNDER SUB SECTION 3 OR 4 OR INTIMATED BY HIM UNDER SUB SECTION 5. 8. SECTION 209 OF THE ACT, AFTER AMENDMENT BY THE AME NDING ACT 1987 LAYS DOWN THE METHOD OF COMPUTING ADVANCE TAX PAYABLE DURING A FINANCIAL YEAR. A) WHERE THE CALCULATION IS MADE BY THE ASSESSEE FOR PAYING T HE ADVANCE TAX, EITHER OF HIS OWN ACCORD OR ON THE BASIS OF THE ESTIMATE OF HIS CURRENT INCOME AFTER THE ASSESSEE IS SERVED W ITH A NOTICE BY THE ASSESSING OFFICER U/S 210 (3) OR (4) FOR PAY MENT OF ADVANCE TAX, INCOME TAX ON THE CURRENT INCOME SHALL BE CA LCULATED AT THE RATES IN FORCE IN THAT FINANCIAL YEAR. 7 B) WHERE CALCULATION IS MADE BY THE FOR MAKING AN ORDER U/S 210(3) REQUIRING THE SEE TO PAY ADVANCE TAX, HE SHALL ADOPT T HE TOTAL INCOME ASSESSED BY WAY OF REGULAR ASSESSMENT OF THE LATEST PREVIOUS YEAR OR THE TOTAL INCOME RETURNED BY THE ASSE SSEE FOR ANY SUB SEQUENT PREVIOUS YEAR, WHICHEVER IS HIGHER, AND CALCUL ATE INCOME TAX THEREON AT THE RATES IN FORCE IN THAT FINAN CIAL YEAR. C) WHERE CALCULATION IS MADE BY THE ASSESSING OFFICER FOR MAKI NG AN AMENDED ORDER U/S 210(4) ON THE BASIS OF A RETURN FIE\ LED OR A REGULAR ASSESSMENT COMPLETED SUBSEQUENTLY FOR A PREVIOUS YE AR LATER THAN THAT ADOPTED IN AN ORDER U/S 210(3), INCO ME TAX SHALL BE CALCULATED ON THE TOTAL INCOME DECLARED IN SUCH SUBSEQUEN T RETURN OR TOTAL INCOME DETERMINED IN SUCH SUBSEQUENT REGULAR ASSESSMENT, AS THE CASE MAY BE, AT THE RATES IN FORCE IN THAT FINAN CIAL YEAR. D) THE INCOME TAX CALCULATED UNDER ANY OF THE ABOVE CLAU SES SHALL, IN EACH CASE, BE REDUCED BY THE AMOUNT OF INCOME TAX WHICH WOULD BE DEDUCTIBLE AT SOURCE UNDER ANY TAX WHICH WOULD BE DEDU CTIBLE AT SOURCE UNDER ANY PROVISIONS OF THE ACT ON ANY INCOME WHICH HAS BEEN INCLUDED IN THE CURRENT/TOTAL INCOME DETERMINED U NDER ANY OF THE ABOVE CLAUSE. S.234B(1) INSERTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987 W.E.F. 1.4.1989, WHICH PROVIDES FOR THE LIABILITY TO PAY INTEREST, READS AS UNDER: 234B (1) SUBJECT TO THE OTHER PROVISIONS OF THIS SECTION , WHERE, IN ANY FINANCIAL YEAR, AN ASSESSEE WHO IS LIABLE TO PAY ADVANCE TAX U/S 208 HAS FAILED TO PAY SUCH TAX OR, WHERE THE ADVANCE TAX P AID BY SUCH ASSESSEE UNDER THE PROVISIONS OF SECTION 210 IS LESS THAN NINE TY PERCENT OF THE ASSESSED TAX, THE ASSESSEE SHALL BE LIABLE TO PAY SIMPLE INTEREST AT THE RATE OF TWO PERCENT FOR EVERY MONTH O R PART OF A MONTH 8 COMPRISED IN THE PERIOD FROM THE 1 ST DAY OF APRIL NEXT FOLLOWING SUCH FINANCIAL YEAR TO THE DATE OF DETERMINATION OF TOTA L INCOME UNDER S/SEC. (1) OF SECTION 143 AND WHERE A REGULAR ASSESSMENT IS MADE, TO THE DATE OF SUCH REGULAR ASSESSMENT, ON AN AMOUNT EQUAL TO T HE ASSESSED TAX OR, AS THE CASE MAY BE , ON THE AMOUNT BY WHICH TH E ADVANCE TAX PAID AS AFORESAID FALLS SHORT OF THE ASSESSED TAX. 9. THE VERY HEADING OF SECTION 234B REFERRED TO ABO VE SHALL SHOW THAT THIS SECTION IS MEANT FOR CHARGING OF INTEREST FOR D EFAULT IN PAYMENT OF ADVANCE TAX. FURTHER, LANGUAGE USED BY T HE LEGISLATURE IN BRING THIS PROVISION IS ALSO SIGNIFICANT. FIRST PART OF T HE SECTION PROVIDES AN ASSESSEE WHO IS LIABLE TO PAY ADVANCE TAX U /S 208 HAS FAILED TO PAY SUCH TAX OR. AT THE VERY OUTSET, IT IS TO BE ASCERTAINED AS TO WHETHER THE ASSESSEE WAS LIABLE TO PAY ADVANCE TAX O R NOT. IN THE INSTANT CASE ASSESSEE IS ASSESSED TO TAX IN EARLIER YEAR AND F OR THE CURRENT ASSESSMENT YEAR, THE ASSESSEES TOTAL TAX LIABILITY O N THE ASSESSED INCOME IS MORE THAN RS.5,000 AND THE ASSESSEE IS UNDE R OBLIGATION TO PAY ADVANCE TAX. 10. THE IMPORTANT ASPECTS THAT EMERGE FROM THE PROVISIONS REFERRED TO ABOVE, IN SO FAR AS THEY ARE RELEVANT TO THE ISSUE BEFORE US, CAN BE SUCCINCTLY CULLED OUT AS UNDER:- A) ADVANCE TAX IS PAYABLE BY AN ASSESSEE DURING ANY FINANCIA L YEAR IN RESPECT OF HIS TOTAL INCOME WHICH WOULD BE CHARGEABLE TO TAX IN THE RELEVANT ASSESSMENT YEAR. B) THE LIABILITY TO PAY ADVANCE TAX ARISES IN THE CONTEXT OF THE CURRENT INCOME OF THE ASSESSEE WHICH WOULD BE CHARGEABLE TO TAX FOR THE ASSESSMENT YEAR IMMEDIATELY FOLLOWING THE RELEV ANT FINANCIAL YEAR, IF THE TAX PAYABLE IS RS. 5000 OR MOR E. 9 C) IF A PERSON IS LIABLE TO PAY ADVANCE TAX, HE SHALL SUO M OTU COMPUTE THE ADVANCE TAX PAYABLE ON HIS CURRENT INCOME. D) IF AN ASSESSEE WHO HAD EARLIER BEEN ASSESSED TO INCOME TAX, HAS NOT VOLUNTARILY PAID THE ADVANCE TAX DURING THE RELE VANT FINANCIAL YEAR, THE ASSESSING OFFICER CAN PASS AN ORDER REQUIRING HIM TO PAY ADVANCE TAX AND FOR THIS PURPOSE, THE TOTAL INCOME ASSESSED BY WAY OF REGULAR ASSESSMENT OF THE LATEST PREVIOUS YEAR OR THE TOTAL INCOME RETURNED BY THE ASSESSEE FOR ANY SUBSEQUENT PREVIOU S YEAR, WHICHEVER IS HIGHER, IT TO BE ADOPTED. E) IF AN ASSESSEE WHO IS LIABLE TO PAY ADVANCE TAX HA FAILED TO PAY SUCH TAX, HE WILL BE LIABLE TO PAY INTEREST AT THE PR ESCRIBED RATE. 11. FROM THE ABOVE, IT IS EVIDENT THAT PROVISIONS OF SECTION 234 B ARE MANDATORY. LEGISLATURE HAS MADE IT CLEAR THAT PROVISIO NS OF SECTION 234B ARE QUITE DIFFERENT FROM PROVISIONS OF SECTIONS 215 AND 217 IN WHICH DISCRETIONARY POWERS WERE PROVIDED TO THE AUTHORITIES U NDER THE ACT TO CHARGE OR NOT TO CHARGE THE INTEREST. IF ANY PROVISION OF THIS STATUTE IS MANDATORY, THEN IT CANNOT ENTERTAIN ANY EXPLANATION FROM EITHER SIDE BUT THE PROVISION HAS ANY BONA FIDE EXPLANATION OF THE A SSESSEE, THE ASSESSING OFFICER HAS NO DISCRETIONARY POWERS. . SEC.234B DI RECTLY DEALS WITH THE PAYMENT OF INTEREST FOR DEFAULTS IN PAYMENT OF ADVANCE TAX AND IT FASTENS LIABILITY TO PAY INTEREST ON THE BASIS OF LIABIL ITY TO PAY ADVANCE TAX U/S 208 OF THE ACT AND FAILURE TO PAY SUCH TAX OR WHER E THE ADVANCE TAX PAID BY THE ASSESSEE UNDER THE PROVISIONS OF SEC.210 IS LE SS THAN THE PRESCRIBED PERCENTAGE OF THE ASSESSED TAX. IN THE PRESENT CASE, THE ASSESSEE DOES NOT DISPUTE THAT THERE IS REQUIREMENT TO PAY ADVANCE TAX. ON THE OTHER HAND, THE CLAIM IS THAT THE ASSESSEE WAS UNDE R A BONA FIDE BELIEF NOT TO PAY ADVANCE TAX. ANYHOW, THERE IS A SH ORTFALL IN PAYMENT OF ADVANCE TAX ON THE DUE DATES AS PRESCRIBED U/S 211 OF TH E ACT. THE 10 PLEA OF THE ASSESSEE THAT ON ACCOUNT OF BONA FIDE BELIEF , HE CANNOT FORESEE THE ADDITIONAL LIABILITY OF TAX ON ACCOUNT OF ASSESSING OFFICER TREATING THE INCOME UNDER A DIFFERENT HEAD THAN DECLA RED BY THE ASSESSEE AND COULD NOT PAY THE ADVANCE TAX, CANNOT BE ENTERTAIN ED AND THE SAME HAS TO BE OVERLOOKED BECAUSE THIS SITUATION IS NOT EXPRESSL Y PROVIDED U/S 234B. IF WE ENTERTAIN SUCH EXPLANATION OF THE ASSESSEE, THEN IT WILL AMOUNT TO ADDING NEW PROVISION TO SECTION 234B AND WH ICH ARE IMPLIEDLY EXCLUDED BY THE LEGISLATURE IN ITS SYSTEM AND IT AMOUNTS TO CHANGING THE MANDATORY PROVISIONS OF S.234B TO DISCRETIONARY, WHICH IS NOT PERMISSIBLE IN LAW. NOW COMES TO THE LATER PART OF S.234B, IT PR OVIDES THAT IF ASSESSEE WHO IS LIABLE TO PAY ADVANCE TAX HAS FAILED TO P AY SUCH TAX OR WHERE ADVANCE TAX PAID BY THE ASSESSEE IS LESS THAN NINETY PERCENT OF THE ASSESSED TAX, THE ASSESSEE SHALL BE LIABLE TO PAY INTEREST AT THE PRESCRIBED RATE FOR EVERY MONTH OR PART THEREOF. THE LANGUAGE USED BY THE LEGISLATURE IS THAT ASSESSEE SHALL BE LIABLE TO PAY SIMPL E INTEREST THE WORD SHALL IS SIGNIFICANT AND TO ASCERTAIN THE VERY IN TENTION OF THE LEGISLATURE WE HAVE TO LOOK INTO THE CLAUSE BY WHICH TH E LEGISLATURE HAS BROUGHT SECTION 234B TO THE STATUTE THROUGH DIRECT TAX LAWS (AMENDMENT) ACT, 1987. IN THIS CONNECTION THE RELEVAN T CLAUSE OF INSERTING SECTION 234B IS REPRODUCED WHICH IS APPEARING AT 168 ITR (STAT.) 343. SECTION 234B INCORPORATES THE EXISTING PRO VISIONS OF SECTION 215 AND SECTION 217 WITH THE DIFFERENCE THAT THE NEW PROVISIONS MAKE THE CHARGING OF INTEREST MANDATORY. THE EXISTING PROVISIO NS PROVIDE FOR WAIVER OR REDUCTION OF INTEREST UNDER RULE PRESCRIBED I N THIS REGARD. THE NEW SECTION DOES NOT HAVE ANY SUCH PROVISION. 12. THE INTEREST U/S 234B IS NOT PENAL IN NATURE BUT ALSO IS COMPENSATORY AND THE SAME IS LEVIABLE BECAUSE ASSESSEE UTILIZ ED THE PUBLIC MONEY AND PAYMENT OF INTEREST IS FOR UTILIZATIO N OF PUBLIC MONEY 11 AND SECTION 234B IS MANDATORY IN NATURE. FURTHER, IF THE ASSESSEE HAS HARDSHIP ON ACCOUNT OF THIS MANDATORY PROVISION OF SECTIO N 234B, THE ASSESSEE CAN AVAIL OF THE BENEFIT OF CBDT CIRCULAR NO.F. NO.400/234/95- IT(B), DATED 23.5.1996 BY WHICH IT AUTHORIZED THE CH IEF COMMISSIONER/DIRECTOR GENERAL (INVESTIGATION) TO WAIVE PENALTY IN CERTAIN CASES. SECTION 234B IS MANDATORY. HENCE, THE CBDT ISSUED THIS NOTIFICATION TO WAIVE INTEREST IN SPECIFIED CIRCUMSTANCES. FROM THE ABOVE, ONE CAN DRAW THE CONCLUSION THAT THE INTEREST U/S 234B I S MANDATORY AND IT GIVES NO ROOM TO THE ASSESSING OFFICER TO ENTERTAIN AN Y EXPLANATION OFFERED BY THE ASSESSEE FOR NON-PAYMENT OF ADVANCE TAX. FURTHER, THE FINANCE ACT, 2001 WHEREIN NEW EXPLANATION WAS INSERTED WITH RETROSPECTIVE EFFECT FROM 1-4-1989 WHICH LAYS DOWN THAT IN SEC.234B ASSESSED INCOME MEANS THE TAX ON TOTAL INCOME DETERMINED U/S 143(1) OR ON REGULAR ASSESSMENT AS REDUCED BY THE TDS AMOUNT. THIS AMENDMENT HAS STATUTORILY SUPERSEDED THE DECISION OF THE SUPREME COURT IN THE CASE OF RANCHI CLUB LTD V. CIT 217 ITR 72 WHER EIN IT IS HELD THAT INTEREST U/S 234B IS LEVIABLE ON THE TAX ON TOTAL INCOM E AS DECLARED IN THE RETURN AND NOT ON INCOME DETERMINED BY THE ASSESSING OFF ICER. IN VIEW OF THE AMENDMENT WITH RETROSPECTIVE EFFECT ALSO THE ASSESSEE I S LIABLE TO PAY 234B INTEREST ON THE ASSESSED INCOME. IN THE LIGHT OF TH E ABOVE DISCUSSION, IT IS CLEAR THAT THE FOLLOWING DEFAULT ATTR ACTS INTEREST U/S 234B OF THE ACT:- A. FAILURE TO PAY ADVANCE TAX DURING THE FINANCIAL YEAR WHICH THE ASSESSEE IS LIABLE TO PAY U/S 208 OF THE INCOME TAX ACT; AND B. PAYMENT OF ADVANCE TAX U/S 210 OF THE INCOME TAX ACT B Y AN ASSESSEE WHICH IS LESS THAN 90 PER CENT OF THE ASSESSED TAX. 12 IN THE PRESENT CASE, WE HAVE GONE THROUGH THE PAYMENT OF ADVANCE TAX AND TDS, WHICH IS AS FOLLOWS: --------------------------------------------------- --------------------------- AY TOTAL TAX PAYABLE TDS ADVANCE TAX BALANCE PAYABLE % OF TAX PAID (RS.) (RS. ) (RS.) (RS.) (1) (2) (3) (4) (5) (6) --------------------------------------------------- --------------------------------------------------- --- 2001-02 1,26,72,603 79,95,775 8,00,00 0 38,76,828 69.41 2002-03 1,24,51,913 80,67,881 10,00,0 00 33,84,032 72.82 2003-04 1,50,21,667 90,86,665 25,00 ,000 34,35,002 77.13 --------------------------------------------------- -------------------------- AS SEEN FROM THE ABOVE TABLE, PAYMENT OF ADVANCE TAX B Y THE ASSESSEE IS LESS THAN 90% OF ASSESSED TAX. AS SUCH, THE ASSESSEE IS FASTENED WITH THE LIABILITY OF PAYMENT OF SEC.234B INTEREST. THERE IS NO MERIT IN THE ARGUMENT OF THE ASSESSEES COUNSEL THAT ASSESSEE IS NOT LIABLE FOR PAYMENT OF ADVANCE TAX. FURTHER, THE LEARNED CIT (A) OBSERVED THAT THE ASSESSEE HAS PAID THE TAX MORE THAN 90% OF ASSESSED WHICH IS CO NTRARY TO THE RECORDS. FURTHER, THE ASSESSEE IS NOT ABLE TO DEM ONSTRATE BEFORE US THAT ENTIRE AMOUNT OF INCOME IS SUBJECT TO DEDUCTION OF TAX AT SOURCE AND IF IT IS NOT ACTUALLY DEDUCTED BY THE PAYER BECAUSE OF N O FAULT ON THE PART OF THE ASSESSEE, BUT ON THE FAILURE ON THE PART OF PAYE R. IN OTHER WORDS, IF THE ENTIRE INCOME OF THE ASSESSEE IS SUCH FROM WHICH TAX WAS DEDUCTIBLE 13 AT SOURCE, THOUGH NOT ACTUALLY DEDUCTED, THEN ASSESSEE CANNO T BE HELD TO HAVE COMMITTED DEFAULT IN PAYING THE ADVANCE TAX AND CONSEQUENTLY, THEN COULD BE NO LIABILITY TO PAY INTEREST U/S 234B. BUT I N THE PRESENT CASE, THE SITUATION IS DIFFERENT. THE FACT SHOWS THAT ASSESSEE RETURN ED THE INCOME UNDER THE HEAD OF BUSINESS INCOME WHICH WAS LATER TREATED BY THE ASSESSING OFFICER UNDER THE HEAD INCOME FROM HOUSE PROPER TY WHICH RESULTED IN INCREASE IN ASSESSED TAX THAN TAX OFFERED BY THE ASSESSEE. FURTHER, JUDGEMENT OF THE APEX COURT IN THE CASE OF CI T V. ANJUM M.H.GHASWALA AND OTHERS 252 ITR 1 (SC), THE ASSESSING OFFI CER AFTER THE AMENDMENT AND INTRODUCTION OF NEW SECTION, DOES NOT HAV E ANY DISCRETION TO WAIVE OR REDUCE THE INTEREST CHARGEABLE UNDER THE N EW PROVISIONS OF SEC.234B. FURTHER, THE PROVISIONS OF SEC.234B AND SEC.201 A RE TWO DIFFERENT PROVISIONS AND MUTUALLY EXCLUSIVE AND ONE SE CTION CANNOT OVERRIDE THE PROVISIONS OF THE OTHER. FURTHER, THERE CAN BE NO DISPUTE ABOUT THE PROPOSITION THAT IN INCOME TAX MATTERS WHICH ARE GOVERNED BY AN ALL INDIA STATUTE, WHERE THERE IS DECISION OF A COUR T IN INTERPRETING A STATUTORY PROVISION, IT WOULD BE A WISE JUDICIAL POLICY AND PRACTICE NOT TO TAKE A DIFFERENT VIEW. HOWEVER, THIS IS NOT AN ABSOLUT E PROPOSITION AND THERE ARE CERTAIN WELL KNOWN EXCEPTIONS TO IT. IN CASES WHERE A DECISION IS SUB SILENTO, PER INCURIAM, OBITER DICTA OR BASED ON A CONCESSION OR TAKES A VIEW WHICH IT IS IMPOSSIBLE TO ARRIVE AT OR THERE IS A NOTHER VIEW IN THE FIELD OR THERE IS A SUBSEQUENT AMENDMENT TO THE STATUT E, OR REVERSAL, OR IMPLIED OVERRULING BY HIGHER FORUM OR SOME SUCH OR SIMI LAR INFIRMITY IS MANIFESTLY PERCEIVABLE IN THE DECISION, A DIFFERENT VIE W CAN BE TAKEN BY THE COURT. HENCE, IN THE LIGHT OF THE LEGISLATIVE SCHEM E CONSIDERED HEREIN ABOVE, DESPITE THE HIGHEST ESTEEM AND RESPECT, WE ARE UN ABLE TO AGREE WITH A THE ARGUMENT ADVANCED BY THE LEARNED COUNSEL FO R THE ASSESSEE WITH REFERENCE TO VARIOUS CITATIONS RELIED UPON BY HIM. 14 13. IN THE RESULT, APPEALS FILED BY THE REVENUE ARE A LLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON: 20 -1 1-2009 SD/- SD/- N.R.S. GANESAN CHANDRA POOJARI JUDICIAL MEMBER ACCOUNTANT MEMBER DT/- 20 TH NOVEMBER, 2009. *VNR COPY FORWARDED TO: 1. M/S JANAKIRAMA ENTERPRISES LTD., 15-9-469, MAHABUBG UNJ ROAD, HYDERABAD. 2. ACIT CIRCLE 2(1), HYDERABAD 3. CIT(A)-III HYDERABAD. 4. CIT, AP, HYDERABAD. 5. THE D.R., ITAT, HYDERABAD.