MARISON FINVEST PVT. LTD., MUMBAI V. ACIT., RANGE-6(3), MUMBAI

ITA 6160/MUM/2011

• Counselvise Citation: 616019914 RSA 2011
• Duration Of Justice: 3 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 01-06-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 06-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR YOGESH KAMAT
• Assessee Lawyers: K K LALKAKA
• Keywords: Rectification of order; Deemed to accrue or arise in india; Difference of opinion; Capital receipt; Change of opinion
• Section: 234B; 115JB; 154

Judgement Text

1 , INCOME TAX APPELLATE TRIBUNAL,MUMBAI - B,BENCH , , BEFORE S/SH. JOGINDER S INGH,JUDICIAL M EMBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.61 60 /MUM/201 1 , / ASSESSMENT YEAR - 200 6 - 0 7 M/S. MARISON FINVEST PVT. LTD. KANMOOR HOUSE, 281/87 NARSI NATHA STREET, MASJID BUNDER MUMBAI - 400 009. PAN:AA ACK 1996 J VS ACIT, RANGE - 6(3) AAYAKAR BHAVAN MUMBAI - 400 0 20 . ( / APPELLANT ) ( / RESPONDENT ) /ASSESSEE BY :SHRI K.K. LALKAKA / REVENUE BY : DR. YOGESH KAMAT / DATE OF HEARING : 30 - 0 6 - 2015 / DATE OF PRONOUNCEMENT : 03 - 0 7 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DT.12.09 .2012 OF THE CIT(A) - 25, MUMBAI, THE ASSESSEE HAS RAISED FOLLOWING GROUND OF APPEAL : 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN UPHOLDING THE ORDER OF RECTIFICATION PASSED UNDER SECTION154 OF THE INCOME TAX ACT BY THE AO ON 6 TH OCTOBER 2009, SINCE THE DATE ON WHICH THE NOTICE FOR RECTIFICATI ON WAS ISSUED TO THE APPELLANT, THE LEGAL ISSUE ON THE BASIS ON WHICH THE RECTIFICATION WAS SOUGHT TO BE MADE, WAS DEBATABLE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT INTEREST LEVIED UNDER SE CTION 220(2) OF THE INCOME TAX ACT IS MANDATORY AND IS IN ACCORDANCE WITH LAW WITHOUT APPRECIATING THE FACT THAT NO INTIMATION UNDER SECTION143(1) OF THE ACT NOR ANY NOTICE OF DEMAND U/D.156 WAS SERVED ON THE APPELLANT FOR THE SAID ASSESSMENT YEAR . YOUR A PPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ONE OR MORE GROUNDS OF APPEAL AT THE TIME OF HEARING OF THE APPEAL PETITION. ADDITIONAL GROUND RAISED BY THE ASSESSEE READ AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) - 12 HA S ERRED IN UPHOLDING THE ORDER OF RECTIFICATION DATED 6 TH OCTOBER, 2009 PASSED BY THE AO UNDER SECTION 154 OF THE INCOME TAX ACT CONFIRMING, ON A CHANGE OF OPINION, LEVY OF INTEREST UNDER SECTION 234B AND 234C OF THE ACT IN CASE OF ASSESSMENT COMPLETED UND ER SECTION 115JB OF THE ACT EVENTHOUGH THE LEGAL ISSUE ON WHICH RECTIFICATION WAS SOUGHT TO BE MADE WAS HIGHLY DEBATABLE ONE ON THE DATE OF PASSING THE RECTIFICATION ORDER IN VIEW OF THE FACT THERE WAS CONFLICT OF OPINION OF DIFFERENT HIGH COURTS ON THE SA ID DATE AND THAT ON THE BASIS OF DECISION OF THE SUPREME COURT IN MEPCO COURT LIMITED VS. CIT (319 ITR 208), A 6 160MFPL (06 - 07) 2 SUBSEQUENT DECISION OF THE SUPREME COURT DID NOT OBLITERATE THE CONFLICT OF OPINION EXISTING ON THE DATE OF PASSING OF THE RECTIFICATION ORDER. AT THE TIME OF HEARING BEFORE US THE AR STATED THAT THE ADDITIONAL GROUND WAS ONLY EXTENSION OF GROUND NO.1 . 2. EFFECTIVE GROUND OF APPEAL PERTAINS TO UPHOLDING THE ORDER OF RECTIFICATION PASSED BY THE ASSESSING OFFICER(AO)ON 06.10.2009.IN THIS CASE,REGULA R ASSESSMENT WAS PASSED U/S.143(3)OF THE ACT ON 26.12.2008 CHARGING INTERESTS U/S.234B AND 234C OF THE ACT AT RS.6.51 LAKHS AND 1.90 LAKHS RESPECTIVELY.THE ASSESSEE CHALLENGED THE ORDER OF LEVYING INTERESTS BY FILING A RECTIFICATION APPLICATION BEFORE THE AO.IT WAS ARGUED THAT THE WHERE TAX LIABILITY HAS ARISEN ON THE BASIS OF DEEMED INCOME AND NOT UNDER NORMAL PROVISIONS OF ACT,NO INTEREST WAS CHARGEABLE U/S.234 OF THE ACT.THE ASSESSEE RELIED UPON THE DECISION OF KWALITY BISCUITS(243ITR519).THE AO VIDE HIS ORDER DATED 04.03.2009 DELETED THE INTERESTS LEVIED U/S.234 B AND 234C OF THE ACT. SUBSEQUENTLY,VIDE HIS ORDER DATED 06.10.2010 THE AO HELD THAT THE DECISION OF (SUPRA) WAS APPLICABLE TO THE CASES WHERE ASSESSMENT WAS PASSED U/S.115JA,THAT ASSESSMENT IN CASE OF THE ASSESSEE WAS PASSED U/S.115JB OF THE ACT,THAT DELETING THE INTERESTS ON 04.03.2009 WAS A MISTAKE APPARENT FROM RECORD.HE PASSED THE SECOND RECTIFICATION ORDER LEVYING INTERESTS U/S.234 AS WELL AS LEVYING PENALTY U/S.220(2)OF THE ACT,AMOUNTING TO RS.1.38 LAKHS. 3. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).BEFORE HIM, IT WAS CONTENDED THAT THERE WAS NO PROVISION IN THE ACT TO RE - RECTIFY THE ORDER PASSED U/S.154 OF THE ACT,THAT D ECISION OF (SUPRA)WAS APPLICABLE TO 115JB MATTER ALSO,THAT THAT NO DEMAND NOTICE U/S.156 OF THE ACT WAS ISSUE TO THE ASSESSEE BEFORE LEVYING PENALTY U/S.220(2) OF THE ACT. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE ,THE FAA HELD THAT THE ACT DID NOT CURTAIL THE POWERS OF THE AO TO RECTIFY THE MISTAKES,THAT THE ONLY LIMITATION APPLICABLE WAS THE TIME LIMIT,THAT THE AO HAD HELD THAT THERE WAS A MISTAKE APPARENT FROM RECORD IN THE EARLIER ORDER, THAT HE HAD ACCORDINGLY RECTIFIED THE ORDER AS PER THE PRO VISIONS OF THE ACT, THAT THE ACTION OF THE AO COULD NOT BE HELD TO BE WRONG, THAT THE HONBLE SUPREME COURT IN THE CASE OF ROLTA INDIA LTD. ( 330 ITR 470) HAD HELD THAT I NTEREST U/S. 234B AND 234C WOULD BE PAYABLE ON FAILURE TO PAY THE ADVANCE TAX IN RESPECT OF THE TAX PAYABLE U/S. 115JA/115JB, THAT THE DEBATE REGARDING THE QUESTION UNDER CONSIDERATION HAD BEEN SETTLED BY THE ORDER OF THE HONBLE APEX COURT, THAT NON LEVY OF INTEREST WAS TO BE CONSIDERED AS THE MISTAKE APPARENT FROM RECORD. HE FINALLY UPHELD THE ORDER OF THE AO. 4. DURING THE COURSE OF HEARING BEFORE US, THE AUTHORISED REPRESENTATIVE ( AR ) CONTENDED THAT IF ANY ISSUE WAS DEBATABLE AT TIME OF PASSING OF THE ORDER THEN ORDER U/S. PASSED U/S. 154 WAS INVALID . HE RELIED ON THE CASE OF P K BHARDWA J ( 279 ITR 326) , M EP CO INDUSTRIES (319 ITR 2 08 ) AND THAMPY MODERN SPINNING MILLS LTD. (341 ITR 229), THAT HONBLE CALCUTTA HIGH COURT HAD PRONOUNCED THE DECISION IN THE CASE OF KWALITY BISCUITS LTD. ON 30.11.1999, WHEREAS THE H ONBLE S UPREME C OURT SETTLED TH E ISSUE IN JANUARY 2011. DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE FAA. 5 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT IN THE ORIGINAL ASS ESSMEN T O RDER THE AO HAD LEVIED INTERESTS U/S.234B AND 234C OF THE ACT, THE A SSESSEE FILED AN APPLICATION U/S. 154 TO DELETE THE INT EREST LEVIED ON THE BASIS OF THE JUDGMENT OF KWALITY 6 160MFPL (06 - 07) 3 BISCUITS LIMITED (SUPRA), THAT THE AO ALLOWED THE APPLICATION FILED BY THE ASSESSEE AND DELETED THE INTERESTS, THAT LATER ON THE AO PASSED ONE MORE ORDER U/S. 154 AND LEVIED INTERESTS . WE FIND THAT ON THE DATE OF PASSING THE ORIGINAL 154 ORDER AND THE SUBSEQUENT RECTIFICATION ORDER THE ISSUE OF LEV Y ING OF INT EREST S U/S. 234 OF THE ACT WAS ALIVE I.E. THE ISSUE WAS DEBATABLE ,AS T HERE W AS NO UNANIMITY OF OPINION AMONG THE H ONBLE HIGH COURTS . IN OUR OPI NION, RECTIFICATION ORDER CANNOT BE PASSED ABOUT AN ISSUE WHICH IS DEBATABLE AT THE TIME OF PASSING ORDER U/S. 154 OF THE ACT , EVEN THOUGH THE ISSUE MAY BE DECIDED FINALLY LATER ON.THE CRUC IAL POINT IS THE DATE ON WHICH THE RECTIFICATION ORDER IS PASSED. HERE , WE WOULD LIKE TO REFER TO THE CASE OF MAFCO INDUS TRIES LTD. ( 319 ITR 208) DECIDED BY THE HONBLE APEX COURT. THE FACTS OF THE CASE AND THE DECISION ARE REPRODUCED HERE: THE ASSESSEE, W HICH WAS ENGAGED IN THE BUSINESS OF MANUFACTURE OF POTASSIUM CHLORATE, RECEIVED POWER SUBSIDY FOR TWO YEARS, WHICH IT INITIALLY OFFERED AS A REVENUE RECEIPT IN ITS RETURNS OF INCOME. IN PETITIONS FILED FOR REVISION UNDER SECTION 264 OF THE INCOME - TAX ACT, 1961, THE ASSESSEE PLEADED THAT THE SUBSIDY WAS A CAPITAL RECEIPT, AND FOLLOWING A DECISION OF THE SUPREME COURT THE COMMISSIONER ALLOWED THE REVISION APPLICATIONS. THEREAFTER, THE SUPREME COURT DECIDED IN SAHNEYS CASE [1 997] 228 ITR 253 THAT INCENTIVE SUBSIDY ADMISSIBLE TO THE ASSESSEE IN THAT CASE WAS A REVENUE RECEIPT AND TAXABLE UNDER SECTION 28. FOLLOWING THAT DECISION THE COMMISSIONER PASSED AN ORDER OF RECTIFICATION UNDER SECTION 154 ON THE SOLE GROUND THAT THE POWE R TARIFF SUBSIDY GIVEN TO THE ASSESSEE WAS ADMISSIBLE ONLY AFTER COMMENCEMENT OF PRODUCTION. ON A WRIT PETITION, THE HIGH COURT HELD THAT THE DEPARTMENT WAS ENTITLED TO INVOKE SECTION 154 THE RIGHT TO RECTIFY MISTAKES UNDER SECTION 154 COULD NOT BE INVOK ED IN A CASE OF MERE CHANGE OF OPINION. A RECTIFIABLE MISTAKE WAS A MISTAKE WHICH WAS OBVIOUS AND NOT SOMETHING WHICH HAD TO BE ESTABLISHED BY A LONG DRAWN PROCESS OF REASONING OR WHERE TWO OPINIONS WERE POSSIBLE. A DECISION ON A DEBATABLE POINT OF LAW COU LD NOT BE TREATED AS A MISTAKE APPARENT FROM THE RECORD. RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT OF THE H ONBLE APEX COURT , WE DECIDE GROUND NO.1 IN FAVOUR OF THE ASSESSEE . THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS EXTENSION OF GROUND NO.1 AS STA TED BY THE AR. THE SAME STANDS ALLOWED FOR STATISTICAL PURPOSES. 6 . GROUND NO.2 IS ABOUT INTEREST LEVIED U/S. 220. DURING THE APPELLATE PROCEEDINGS THE FAA HELD THAT THE INTEREST UNDER THE IMPUGNED SECTION W A S LEVIED WHEN THE ASSESSEE WOULD NOT PAY TAX PAYA BLE, THAT IT WAS A MANDATORY SECTION TO BE FOLLOWED BY THE AO WITHOUT ANY DISCRETION. IN SHORT THE FAA DISMISSED THE GROUND TAKEN BY THE ASSESSEE . 7. BEFORE US, THE AR STATED THAT THE AO HAD NOT SERVED DEMAND NOTICE U/S. 156 OF THE ACT NOR AN INTIMATION U/S . 143 WAS ISSUED. HE REFERRED TO THE PAGE NUMBER 36 AND 37 OF THE PAPER BOOK. DR SUPPORTED THE ORDER OF THE FAA. 8. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL BEFORE US WE FIND THAT THE FAA HAS NOT GIVEN ANY FINDING ABOUT SERVICE OF NOTICE OF DEMAND, THOUGH A SPECIFIC GROUND OF APPEAL WAS TAKEN UP BY THE ASSESSEE . THEREFORE IN THE INTEREST OF JUSTICE WE ARE OF THE OPINION THAT THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE FAA TO DECIDE THE ISSUE OF LEVY OF INTER E ST U/S.220(2) OF THE A CT AFTER HEARING THE ASSESSEE.GROUND NO.2 IS ALLOWED IN FAVOUR OF THE ASSESSEE , IN PART. 6 160MFPL (06 - 07) 4 AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD JULY,2015. 3 , 2015 SD/ - SD/ - ( / JOGINDERSINGH) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 03 .07.2015 . . . JV . SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.