Shri.M.Seetharam , Mangalore V. The Assistant Commissioner of Inome Tax Circle-2(1), Mangalore

ITA 505/BANG/2018

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 9762 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 22-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SIDDAPPAJI R N BENGALURU
• Assessee Lawyers: A RAVISH RAO
• Keywords: Business income
• Section: 44AD; 234B; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI A.K. GARODIA , ACCOUNTANT MEMBER I TA NO. 505/BANG/2018 ASSESSMENT YEAR : 2014 - 15 SHRI M. SEETHARAM, J.V. SON & CO., HAMPANKATTA, MANGALURU 575 001. PAN: AKTPS 4036K VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 2(1), MANGALURU. APPELLANT RESPONDENT APPELLANT BY : SHRI A. RAVISH RAO, CA RE SPONDENT BY : SHRI SIDDAPPAJI, R.N., ADDL. CIT(DR)(ITAT), BENGALURU. DATE OF H EARING : 03 .0 9 .201 8 DATE OF PRONOUNCEMENT : 24 .09.2018 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE OR DER OF THE CIT(APPEALS), MANGALURU DATED 12.01.2018 OF RELATIN G TO ASSESSMENT YEAR 2014-15. 2. THE ASSESSEE IS AN INDIVIDUAL. HE FILED A RETUR N OF INCOME FOR AY 2014-15 ON 30.9.2015 DECLARING TOTAL INCOME OF RS.3 ,85,45,600 AFTER DEDUCTIONS UNDER CHAPTER VIA OF THE INCOME TAX ACT, 1961 (THE ACT) [TOTAL INCOME DECLARED RS.3,86,45,600 RS.1,00,000 BEING DEDUCTION UNDER CHAPTER VIA OF THE ACT]. THE TOTAL INCOME DECLARED BY THE ASSESSEE COMPRISED OF THE FOLLOWING HEADS:- ITA NO. 505/BANG/2018 PAGE 2 OF 6 INCOME FROM HOUSE PROPERTY RS. 5,26,399 INCOME FROM BUSINESS RS. 52,457 (UNDER SEC.44AD OF THE ACT) CAPITAL GAIN RS.3,76,86,131 INCOME FROM OTHER SOURCES RS. 3,80,615 RS.3,86,45,602 3. AN INTIMATION U/S.143(1) OF THE ACT WAS ISSUED D ATED 13.8.2016 ACCEPTING THE INCOME DECLARED BY THE ASSESSEE. THE AO LEVIED INTEREST U/S.234B AND 234C OF THE ACT AT RS.17,24,686 AND RS .3,11,807 RESPECTIVELY. 4. THE ASSESSEE WAS AGGRIEVED BY THE LEVY OF INTERE ST U/S.234B AND 234C OF THE ACT AND HE THEREFORE FILED AN APPLICATI ON U/S.154 OF THE ACT, FOR RECTIFICATION OF THE INTIMATION U/S143(1) OF THE AC T DATED 13.8.2016. THE PLEA OF THE ASSESSEE IN THE SAID APPLICATION WAS THAT HE WAS A SENIOR CITIZEN AND HAD DECLARED INCOME U/S.44AD OF THE ACT. AS PER PR OVISIONS OF SEC.44AD(4) OF THE ACT PROVISIONS OF CHAPTER XVIIC WITH REGARD TO PAYMENT OF ADVANCE TAX ARE NOT APPLICABLE TO HIM. ACCORDIN G TO SEC.234B AND 234C OF THE ACT, LEVY OF INTEREST IS PERMISSIBLE ONLY WH ERE THERE IS AN OBLIGATION TO PAY ADVANCE TAX UNDER CHAPTER XVIIC OF THE ACT AND THERE IS FAILURE TO PAY ADVANCE TAX. SINCE THE PROVISIONS OF PAYMENT OF AD VANCE TAX ARE NOT APPLICABLE TO THE ASSESSEE, THERE CANNOT BE ANY LEV Y OF INTEREST U/S.234B AND 234C OF THE ACT. 5. THE AO HOWEVER DISMISSED THE APPLICATION U/S.154 OF THE ACT FOR THE FOLLOWING REASONS:- 2. THE CONTENTION OF THE ASSESSEE HAS BEEN EXAMINE D. IT IS SEEN THAT THE PROVISIONS OF CHAPTER ARE NOT APPLICA BLE TO CERTAIN ASSESSES WHO ARE DOING ELIGIBLE BUSINESS AS SPECIFI ED U/S 44AD. AS PER SUBSECTION, (4) OF SECTION 44AD THE PROVISIO NS ARE NOT APPLICABLE TO AN ELIGIBLE ASSESSEE IN SO FAR AS THE Y RELATE TO THE ELIGIBLE BUSINESS. RELEVANT EXTRACTS AS UNDER: ITA NO. 505/BANG/2018 PAGE 3 OF 6 44AD(4): THE PROVISIONS OF CHAPTER XVIIC SHALL NOT APPLY TO AN ELIGIBLE ASSESSEE IN SO FAR AS THEY RELATE TO THE ELIGIBLE BUSINESS. (EMPHASIS SUPPLIED) IN THIS CASE, THE ASSESSEE HAS DECLARED INCOME FROM CAPITAL GAINS AMOUNTING TO RS.3,76,86,131/- AND ACCORDINGLY, THE SAME IS NOT EXEMPT FROM THE PROVISIONS OF CHAPTER XVIIC. FURTHE R, THE ASSESSEE BEING A SENIOR CITIZEN ALSO DOES NOT ENTAI L ANY EXEMPTION U/S 207(2) OF THE INCOME TAX ACT, 1961 AS THE INCOME RELATES TO CAPITAL GAINS AND THE ASSESSEE IS HAVING INCOME FROM BUSINESS. 3. THE CONTENTION OF THE ASSESSEE THAT THE PROVISIO NS OF CHAPTER XVIIC WHICH MANDATE PAYMENT OF ADVANCE TAX ARE NOT APPLICABLE, IS THEREFORE, NOT CORRECT. THE ASSESSEE HAS DECLARED INCOME FROM CAPITAL GAINS AND DECLARED THE SAME AS BEING ACCRUED / RECEIVED DURING THE SECOND QUARTER OF THE PREVIOUS YEAR (BEFORE SEPTEMBER, 2014) AND ACCORDINGLY, OUGHT TO HAVE PAID ADVANCE TAX ON THE SAME. 4. THE RECTIFICATION APPLICATION U/S 154 IS THEREFO RE LIABLE TO BE REJECTED AS WITHOUT ANY MERIT. 6. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) CONF IRMED THE ORDER OF THE AO WITH THE FOLLOWING OBSERVATIONS: 5.7 THE SECTION 44AD AND 207 ARE INDEPENDENT PROVI SIONS. THE LANGUAGE OF THE SECTIONS IS CLEAR AND UNAMBIGUO US. AS PER THE 44AD PROVISIONS, THE APPELLANT IS NOT LIABLE TO PAY ADVANCE TAX ON THE INCOME FROM THE ELIGIBLE BUSINESS, WHICH IN THIS CASE IS ONLY RS.52,457/-. SECTION 44AD(4) DOES NOT EXCLUDE THE APPLICABILITY OF CHAPTER XVIIC PROVISIONS ALTOGETHE R IN THE CASE OF ELIGIBLE ASSESSEE. 5.8 TO FALL UNDER THE PROVISIONS OF SECTION 207(2), ONE HAS TO FULFILL BOTH THE CONDITIONS: (I) SR. CITIZEN AND (II) NOT HAVE ANY INCOME UNDER THE HEAD PROFITS & GAINS OF BUSINESS OR PROFESSION. ITA NO. 505/BANG/2018 PAGE 4 OF 6 IT IS UNDISPUTED THAT THE APPELLANT IS A SR. CITIZE N. THE APPELLANT HAS BUSINESS INCOME OF RS.52,457/- U/S 44AD. IT IS ALSO UNDISPUTED THAT THE INCOME U/S.44AD ALSO FALLS UNDE R BUSINESS INCOME. HENCE, THE APPELLANT DOES NOT FULFILL THE T WIN CONDITIONS. BY VIRTUE OF 44AD PROVISIONS, THE ASSESSEE NEED NOT PAY ADVANCE TAX TO THE EXTENT OF ELIGIBLE BUSINESS INCOME OF RS . 52,457/- ONLY. 5.9 THERE IS NO MERIT IN THE SUBMISSIONS OF THE APP ELLANT. IN VIEW OF THE ABOVE DISCUSSION, THE GROUNDS ARE REJEC TED. 7. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE THE TRIBUNAL. WE HAVE HEARD THE RIVAL CONTE NTIONS. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED SUBMISSIONS MAD E BEFORE THE LOWER AUTHORITIES. THE LEARNED DR RELIED ON THE ORDER OF THE CIT(A). 8. THE LEVY OF INTEREST U/S. 234B & 234C OF THE ACT IS DEPENDENT ON THE LIABILITY TO PAY ADVANCE TAX U/S. 209 AND 210 OF TH E ACT WHICH ARE APPEARING IN CHAPTER XVIIC OF THE ACT (SECTIONS 207 TO 219 OF THE ACT). 9. IT IS CLEAR FROM A READING OF SECTION 44AD(1) OF THE ACT THAT IT OVERRIDES THE OTHER PROVISIONS OF THE ACT. IN PART ICULAR, SECTION 44AD(4) OF THE ACT MAKES IT VERY CLEAR THAT PROVISIONS OF CHAP TER XVIIC ARE NOT APPLICABLE WHEN INCOME IS DECLARED BY AN ASSESSEE U /S. 44AD OF THE ACT. THEREFORE, TO THE EXTENT OF RS.52,457 WHICH IS INCO ME FROM BUSINESS DECLARED BY THE ASSESSEE U/S. 44AD OF THE ACT, THER E CANNOT BE LEVY OF INTEREST U/S. 234B & 234C OF THE ACT. THIS IS BECA USE SECTION 44AD(4) EXCLUDES APPLICABILITY OF CHAPTER XVIIC OF THE ACT IN SO FAR AS THEY RELATE TO ELIGIBLE BUSINESS. TO THIS EXTENT, THE ASSESSEE I S ENTITLED TO PARTIAL RELIEF. THEREFORE, LEVY OF INTEREST U/S. 234B & 234C ON ASS ESSED INCOME EXCLUDING INCOME DECLARED U/S. 44AD HAS TO BE UPHELD. 10. THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSE E WAS THAT U/S. 207(2) OF THE ACT, THE ASSESSEE BEING A SENIOR CITI ZEN IS NOT LIABLE TO PAY ITA NO. 505/BANG/2018 PAGE 5 OF 6 ADVANCE TAX. THIS ARGUMENT OF THE ASSESSEE WAS RIG HTLY HELD TO BE NOT ACCEPTABLE BY THE CIT(APPEALS). FOR APPLICABILITY OF SECTION 207(2) OF THE ACT, TWO CONDITIONS HAVE TO BE CUMULATIVELY SATISFI ED VIZ., (I) THE ASSESSEE MUST BE A SENIOR CITIZEN, AND (II) HE MUST NOT HAVE INCOME UNDER THE HEAD INCOME FROM BUSINESS. THE FACT THAT INCOME FROM BU SINESS IS COMPUTED U/S. 44AD OF THE ACT WILL NOT TAKE THE CASE OF THE ASSESSEE OUT OF THE AMBIT OF SECTION 207(2)(A) OF THE ACT. SINCE THE ASSESSE E HAS INCOME UNDER THE HEAD INCOME FROM BUSINESS, THE ASSESSEE CANNOT SE EK RECOURSE TO THE PROVISIONS OF SECTION 207(2) OF THE ACT. ONCE THE PROVISIONS OF SECTION 208 ARE APPLICABLE, THEN WHAT BECOMES RELEVANT IS THE E STIMATE OF INCOME AND WHEN SUCH ESTIMATE FALLS SHORT OF ASSESSED INCOME, THE ASSESSEE IS LIABLE TO PAY INTEREST U/S. 234B & 234C OF THE ACT. 11. FOR THE REASONS GIVEN ABOVE, WE PARTLY ALLOW TH E APPEAL OF THE ASSESSEE. PRONOUNCED IN THE OPEN COURT ON THIS 24 TH DAY OF SEPTEMBER, 2018. SD/- SD/- ( A.K. GARODIA ) ( N.V. VASUDEVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 24 TH SEPTEMBER, 2018. / D ESAI S MURTHY / ITA NO. 505/BANG/2018 PAGE 6 OF 6 COPY TO: 1. THE APP ELL ANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.