Lalitha Developers, Bangalore V. DCIT, Bangalore

ITA 770/BANG/2011

• Counselvise Citation: 77021114 RSA 2011
• Duration Of Justice: 1 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 09-10-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 29-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A SUNDAR RAJAN
• Assessee Lawyers: NAGIN KHINCHA
• Keywords: Business income
• Section: 143(3); 132; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH C BEFORE SMT. P MADHAVI DEVI, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.7 70/BANG/2011 (ASST. YEAR - 2008-09) M/S LALITHA DEVELOPERS, NO.44-45, LEO COMPLEX, 2 ND FLOOR, RESIDENCY ROAD CROSS, B ANGALORE-560 025. . APPELLANT PAN AACFL0493L. VS. THE DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1(2), BANGALORE. . RESPONDENT APPELLANT BY : SHRI NAGIN KHINCHA, C.A RESPONDENT BY : SHRI A SUNDAR RAJAN, JCIT DATE OF HEARING : 09-10-2012 DATE OF PRONOUNCEMENT : 19-10-2012 O R D E R PER P MADHAVI DEVI, JUDICIAL MEMBER : THIS APPEAL IS FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2008-09. THE APPEAL IS DIRECTED AGAINST TH E ORDER OF THE ITA NO.770/B/11 2 COMMISSIONER OF INCOME-TAX - (APPEALS) I AT BANGALO RE DATED 12.08.2011. THE APPEAL ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME-TAX ACT, 1961. 2. IN THIS APPEAL, THE ONLY GRIEVANCE OF THE ASSESS EE IS AGAINST THE LEVY OF INTEREST U/S 234C OF THE INCOME-TAX ACT BY THE AO IN RESPECT OF ASSESSEES INCOME THAT HAS ACCRUED TO THE ASSESS EE ON 24.3.2008 ONLY. THE LEVY OF INTEREST U/S 234C WAS CONFIRMED BY THE CIT(A). 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E WHICH IS IN THE BUSINESS OF REAL ESTATE DEVELOPMENT HAD FILED ITS R ETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09. THERE WAS A SEARCH AC TION U/S 132 OF THE INCOME-TAX ACT ON 28.2.2008 IN THE CASE OF M/S ITTI NA GROUP TO WHICH THE ASSESSEE GROUP BELONGS. THEREAFTER, THE ASSESS EE FILED ITS RETURN OF INCOME ON 30.9.2008 DECLARING AN INCOME OF RS.19,77 ,66,240/- WHICH WAS ACCEPTED BY THE ASSESSING OFFICER AND THE ASSES SING OFFICER CHARGED INTEREST U/S 234C OF RS.24,87,169/- ON THE RETURNED INCOME. 4. AGGRIEVED, THE ASSESSEE MADE AN APPLICATION U/S 154 OF THE INCOME-TAX ACT STATING THAT THE INCOME OF RS.19,77, 66,240/- WAS EARNED ON 24.3.2008 AND, THEREFORE, INTEREST U/S 234C CANNOT BE ITA NO.770/B/11 3 CHARGED AND IT IS A MISTAKE APPARENT FROM RECORD, W HICH NEEDS RECTIFICATION. THE ASSESSING OFFICER PASSED THE OR DER U/S 154 OF THE INCOME-TAX ACT, BUT DID NOT DEAL WITH THE ISSUE OF INTEREST U/S 234C OF THE INCOME-TAX ACT. 5. AGGRIEVED, THE ASSESSEE PREFERRED AN APPLICATION BEFORE THE CIT(A) REITERATING THE SUBMISSIONS MADE BY THE ASSE SSEE BEFORE THE AO IN THE PROCEEDINGS U/S 154. THE CIT(A) HOWEVER CONSIDERED THE FIRST PROVISO TO SEC. 234C(1) OF THE INCOME-TAX ACT AND HELD THAT THE ONLY EXEMPTIONS TO APPLICATION OF PROVISION OF SEC. 234C IS TO THE CAPITAL GAINS OR WINNINGS FROM LOTTERIES ETC. BUT A S THE ASSESSEE HAS OFFERED THE INCOME UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OF PROFESSION, THE FIRST PROVISO OF SUB SEC. (1) OF 2 34C IS NOT APPLICABLE AND THE AO HAS CORRECTLY WORKED OUT INTEREST U/S 23 4C OF THE ACT. HE ACCORDINGLY UPHELD THE LEVY OF INTEREST OF RS.24,87 ,169/- U/S 234C OF THE ACT. 6. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 7. THE LEARNED COUNSEL FOR THE ASSESSEE WHILE REITE RATING THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW HAS P LACED RELIANCE ITA NO.770/B/11 4 UPON THE DECISIONS OF THE TRIBUNAL IN THE CASE OF J INDAL IRRIGATION SYSTEMS, 56 ITD 164, WHEREIN IT HAS BEEN HELD THAT THE INTEREST U/S 234C CANNOT BE LEVIED IF THE INCOME IS EARNED AT TH E FAG END OF FINANCIAL YEAR. 8. THE LEARNED DR HOWEVER SUPPORTED THE ORDERS OF T HE CIT(A). 9. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDE RED THEIR RIVAL CONTENTIONS, WE FIND THAT THE ONLY ISSUE BEFORE US IS WHETHER THE INTEREST U/S 234C OF THE INCOME-TAX ACT CAN BE LEVI ED WHERE THE ENTIRE BUSINESS INCOME EARNED AND OFFERED BY THE ASSESSEE IS AT THE FAG END OF THE FINANCIAL YEAR. IT IS THE CONTENTION OF THE ASSESSEE THAT THE ASSESSEE HAS EARNED THE BUSINESS INCOME ONLY ON 24. 3.2008 AS STATED BY IT IN ITS RETURN OF INCOME AND THE REVENUE HAS N OT EXAMINED THE SAID STATEMENT. THE ADVANCE TAX IS TO BE PAID BY T HE ASSESSEE U/S 206 OF THE INCOME-TAX ACT. HOWEVER, IT DENOTES THAT TH E ASSESSEE SHOULD HAVE EARNED SUCH INCOME ON WHICH AN ADVANCE TAX IS TO BE PAYABLE BY THE ASSESSEE. THE ASSESSEE CANNOT BE EXPECTED TO E XPECT OR IMAGINE THE INCOME IT IS LIKELY TO EARN BY THE END OF THE Y EAR AND PAY ADVANCE TAX FOR THE RELEVANT PERIOD MUCH IN ADVANCE. WE FI ND THAT IN THE CASE OF JINDAL IRRIGATION SYSTEM LTD., (CITED SUPRA) TH E ASSESSEE HAD EARNED ITA NO.770/B/11 5 INCOME AFTER THE DUE DATE OF SECOND INSTALLMENT WHI CH HAS RESULTED IN PROFIT AND LIABLE TO TAX AND THE TRIBUNAL HAS HELD THAT WHEN THE ASSESSEE HAS NOT YET STARTED EARNING INCOME, HE CAN NOT BE EXPECTED TO ESTIMATE ADVANCE TAX LIABILITY AND, THEREFORE THERE WAS NO DEFAULT IN PAYMENT OF ADVANCE TAX. FOR THE SAKE OF CLARITY THE RELEVANT PORTION IS REPRODUCED HEREUNDER: IT WAS A UNIQUE CASE WHERE THE AO ACCUSED THE ASSESSEE OF DEFAULT IN A DUTY WHICH POSSIBLY IT COU LD NOT HAVE PERFORMED, AND WHERE THE PRINCIPLE OF LEX NON COGIT AD IMPOSSIBILLIA WAS FULLY APPLICABLE. THE LIABILITY TO PAY ADVANCE TAX ON THE INCOME CHARGEABLE TO TAX IN AN ASSESSMENT YEAR IS NOT ABSO LUTE ON THAT INCOME BUT IS MADE DEPENDENT ON THE ESTIMAT E TO BE MADE BY THE ASSSESSEE. AN ESTIMATE IS NOT A GUE SS OR PREDICTION, IT HAS TO BE BASED ON MATERIAL AVAILABL E ON THE RECORD AND THE FACTS AND CIRCUMSTANCES PREVAILING O N THE STIPULATED DUE DATE. WHEN THE LAW CREATES ANY DEFA ULT ON HIS PART, AND THERE IS NO REMEDY FOR HIM, THE LAW W ILL IN GENERAL EXCUSE HIM. WHEN THE OBLIGATION IS ONE IMP LIED BY LAW, IMPOSSIBILITY OF PERFORMANCE IS A GOOD EXCU SE. ITA NO.770/B/11 6 IN THE INSTANT CASE, IT WAS JUST IMPOSSIBLE FOR THE ASSESSEE TO ANTICIPATE SUCH A SPURT IN THE SALE S AND CONSEQUENTLY THE RESULTANT INCOME WHEN THE ASSESSEE HAD NOT YET STARTED EARNING INCOME, THE LAW COULD NOT E XPECT IT TO ESTIMATE THE ADVANCE LIABILITY AND PAY TAX. NO INTEREST COULD, THEREFORE, BE LEVIED ON THE FACTS AND CIRCUM STANCES OF THE INSTANT CASE. THE ORDER OF THE CIT(A) DELET ING THE INTEREST LEVIED WAS, THEREFORE, UPHELD, DISMISSING THE APPEAL OF THE REVENUE. 10. SIMILARLY, IN THE CASE BEFORE US, THE ASSESSEE HAS CLAIMED TO HAVE EARNED THE BUSINESS INCOME ONLY AT THE FAG END OF THE FINANCIAL YEAR BY THE DELIVERY OF POSSESSION OF THE PROPERTY AND THAT THIS DELIVERY OF POSSESSION IS AS PER THE AGREEMENT BETW EEN THE ASSESSEE AND THE DEVELOPER. IN OUR OPINION THE DECISION OF THE TRIBUNAL IN THE CASE OF JINDAL IRRIGATION SYSTEMS (CITED SUPRA) IS VERY MUCH APPLICABLE TO THE FACTS OF THE CASE BEFORE US. HOWE VER, THE CLAIM OF THE ASSESSEE THAT THE INCOME HAS ACCRUED TO THE ASSESSE E ON 28.3.2008 HAS NOT BEEN EXAMINED BY THE AUTHORITIES BELOW. IN VIE W OF THE SAME, WE DEEM IT FIT AND PROPER TO REMAND THE ISSUE TO THE F ILE OF THE AO WITH A DIRECTION TO EXAMINE THE CLAIM OF THE ASSESEE AND I F IT IS FOUND THAT THE INCOME HAS IN FACT ACCRUED TO THE ASSESSEE ON 24.3. 2008, THEN NO INTEREST U/S 234C SHALL BE CHARGED. ITA NO.770/B/11 7 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH OCT, 2012. SD/- SD/- (JASON P BOAZ) (MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER VMS. BANGALORE DATED : 19/10/2012 COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER SR. PRIVATE SECRETA RY, ITAT, BANGALORE.