Ram Bahadur Khurania, Kaithal V. Tax Recovery Officer, Karnal

ITSSA 1/DEL/2018

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 3750 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 20 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 25-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: misc
• Appeal Filed On: 05-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AGAINST DATED PASSED
• Keywords: Recovery proceedings
• Section: 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : F , NEW DELHI BEFORE SH. AMIT SHUKLA, JUDICIAL M EMBER AND SH. O.P. KANT, ACCOUNTANT MEMBER IT (SS) A NO . 01 /DE L/ 2018 BLOCK PERIOD : 01.04.1987 TO 06.06.1997 SH. RAM BAHADUR KHURANIA, C/O - PERMIL GOEL, ADVOCATE, AMBALA ROAD, KAITHAL VS. TAX RECOVERY OFFICER, TRO, KERNAL, HARYANA PAN : ADEPB8073H ( APPELLANT ) (RESPONDENT) ORDER PER O.P. KANT , A. M. : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 08.012.2017 PASSED BY THE LEARNED COMMISSIONER OF INCOME - TAX, KA RNAL [IN SHORT THE CIT(A) ] FOR THE BLOCK PERIOD 01.04.1987 TO 06.06.1997 CHALLENGING THE INTEREST LEVIED UNDER SECTION 220(2) OF THE INCOME - TAX A CT, 1961 (FOR SHORT THE ACT ) BY THE ASSESSING OFFICER. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE REPRODUCED AS UNDER: APPELLANT BY SH. PERMIL KUMAR GOYAL, ADV. RESPONDENT BY NONE DATE OF HEARING 17.05.2018 DATE OF PRONOUNCEMENT 25.05.2018 2 IT(SS)A NO. 01/DEL/2018 1) THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN NOT FOLLOWING DIRECTIONS PROPERLY CONTAINED IN ITAT ORDER DATED 08.08.2017, IT(SS)A NO.38/DEL/2014 ON FOLLOWING POINTS: I) . CIT( A) ERRED IN NOT PASSING SPEAKING ORDER, AS TO THE DATE FROM WHICH THE INTEREST IS TO BE CHARGED U/S 220(2) [BEFORE AMENDMENT W.E.F. 01/10/2014. II ) CIT(A) ERRED IN NOT PASSING SPEAKING ORDER ON CAN INTEREST U/S 220(2) BE CHARGED BY ISSUING NOTICE U/S 154 FOR PERIOD BETWEEN DEMAND ORIGINALLY MADE & FINALLY WORKED OUT, DUE TO ITAT ORDER. 2) CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF TRO, IN CHARGING INTEREST U/S 220(2) PERTAINING TO PERIOD 2009 - 2013 BY WRONGLY TAKING SHELTER OF AMENDMENT/I NSERTION IN SECTION 220(2) WHICH IS EFFECTIVE FROM 01/10/2014 3 . BRIEFLY STATED FACTS OF THE CASE ARE THAT IN THIS CASE THE DEMAND WAS RAISED FOR THE FIRST TIME IN THE YEAR 2004, HOWEVER, THE DEMAND WAS DELETED SUBSEQUENTLY. FURTHER, CONSEQUENT UPON THE ORDER OF THE TRIBUNAL, DELHI BENCH, DATED 24.04.2009 , A DEMAND ALONG WITH THE INTEREST OF RS.4,97, 5 90/ - WAS RAISED. 3. BEFORE THE LD. CIT(A), THE ASSESSEE CONTESTED THAT THE INTEREST UNDER SECTION 220(2) OF THE ACT IS LEVIABLE FROM THE FRESH DEMAND CREATED CONSEQUENT TO THE ORDER OF THE TRIBUNAL DATED 07.11.2008 AND NOT FROM THE YEAR 2004 WHEN THE DEMAND WAS RAISED FOR THE FIRST TIME. THE LEARNED CIT(A) REJECTED THE CONTENTIONS RELYING ON THE PROVISO TO SECTION 220(2) OF THE AC T. 4. BEFORE US, AN APPLICATION FOR ADJOURNMENT WAS FILED BY THE LD. DR, WHERE AS THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS SUFFERING FROM CANCER AND BEING AT THE ADVANCED STAGE, HE MAY NOT BE ABLE TO APPEAR ON THE NEXT DATE. 3 IT(SS)A NO. 01/DEL/2018 5. ON MERIT OF THE CASE, LEARNED COUNSEL FOR THE ASSESSEE ARGUED THAT THE PROVISO RELIED UPON BY THE LEARNED CIT(A) IS EFFECTIVE FROM 01.10.2014 AND THUS NOT APPLICABLE IN THE INSTANT CASE. THEREFORE, THE INTEREST CHARGED BY THE ASSESSING OFFICER MAY BE DELETED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT IN THIS CASE, THE REVENUE HAS FILED APPLICATION FOR HEARING THE MATTER ON PRIORITY BASIS AND ACCORDING LY, IT WAS FIXED FOR HEARING ON 17.05.2018. IN VIEW OF THE MEDICAL CONDITION CITED BY THE LEARNED COUNSE L AND EARLY HEARING REQUEST OF THE REVENUE , WE REJECTED THE ADJOURNMENT APPLICATION FILED BY THE LEARNED DR AND HEARD THE MATTER EX PARTE QUA THE DEPARTMENT . 7. IN BRIEF, THE ISSUE IS REGARDING CALCULATION OF INTEREST UNDER SECTION 220(2) OF THE ACT. THE CONTENTION OF THE ASSESSEE IS THAT THE DEMAND WHICH WAS RAISED ORIGINALLY IN THE YEAR 2004 WAS DELETED SUBSEQUENTLY. THE DEMAND WAS AGAIN RAISED BY GIVING EFFECT TO THE ORDER OF THE TRIBUNAL DATED 07.11.2008. THEREFORE, ACCORDING TO THE ASSESSEE, INTEREST UNDER SECTION 220(2) OF THE ACT SHOULD BE LEVIED FROM THE DATE OF GIVING EFFECT TO THE ORDER OF THE ITAT AND NOT FROM THE DATE OF RAISING THE ORIGINAL DEMAND I.E. ON 09.11.2004. THE FINDING OF THE LEARNED CIT(A) ON THE ISSUE IN DISPUTE ARE REPRODUCED AS UNDER: 3.3 FINDINGS: - A PERUSAL OF FACTS OF THE CASE NECESSITATES ADJUDICATION ON TWO ISSUES. 1. THE DATE FROM WHICH INTEREST IS LEVIABLE. 4 IT(SS)A NO. 01/DEL/2018 2. INTEREST TO BE CHAR GEABLE ON FRACTION OF MONTH BASIS OR NOT. AS FAR AS POINT NO. L IS CONCERNED, IT IS SEEN THAT A FRESH DEMAND WAS CREATED IN 2009 AFTER IMPLEMENTING THE HON'BLE ITAT'S ORDER. THE PROVISO TO SECTION 220(2) REPRODUCED BELOW READS AS UNDER: 'PROVIDED FURTHER THAT WHERE AS A RESULT OF AN ORDER UNDER SECTIONS SPECIFIED IN THE FIRST PROVISO , THE AMOUNT ON WHICH INTEREST WAS PAYABLE UNDER THIS SECTION HAD BEEN REDUCED AND SUBSEQUENTLY AS A RESULT OF AN ORDER UNDER SAID SECTIONS OR SECTION 263, THE AMOUNT ON WHICH INTEREST WAS PAYABLE UNDER THIS SECTION IS INCREASED, THE ASSESSEE SHALL BE LIABLE TO PAY INTEREST UNDER SUB SECTION (2) FROM THE DAY IMMEDIATELY FOLLOWING THE END OF THE PERIOD MENTIONED IN THE FIRST NOTICE OF DEMAND, REFERRED TO IN SUB SECTION ( 1) AND ENDING WITH THE DAY ON WHICH THE AMOUNT IS PAID:'; (B) IN THE SECOND PROVISO, FOR THE WORDS 'PROVIDED FURTHER', THE WORD 'PROVIDED ALSO' SHALL BE SUBSTITUTED.' FROM A PLAIN READING OF THE ABOVE, IT IS SEEN THAT THE INTEREST IS CALCULABLE FROM THE FIRST DATE OF DEMAND WHICH IS CRUCIAL TO THE CASE AND IN THIS CASE IT WAS 2004. HENCE, THE APPELLANT'S CONTENTION TO ACCEPT 2009 AS THE OPERATING YEAR FOR CALCULATING INTEREST IS NOT ACCEPTED. THEREFORE, THE INTEREST HAS TO BE CALCULATED FROM 2004. THIS G ROUND OF APPEAL IS NOT ACCEPTED. 7. WE NOTE THAT THE LEARNED CIT(A) HAS RELIED ON THE PROVISO TO SECTION 220(2) OF THE ACT WHICH HAS BEEN INSERTED BY THE FINANCE (2) ACT, 2014 W.E.F. 01. 10. 2014 , WHEREAS THE PERIOD INVOLVED IN THE CASE OF THE ASSESSEE IS MUCH PRIOR TO THE DATE FROM WHICH THIS PROVISO HAS BEEN MADE EFFECTIVE. WE FIND THAT IN THE CASE OF INCOME TAX OFFICER VS. A.V. THOMAS & CO. (1986) 160 ITR 818 5 IT(SS)A NO. 01/DEL/2018 (KERELA) ALSO, IN THE SIMILAR CIRCUMSTANCES, THE INTEREST UNDER SECTION 220(2) WAS DELETED. IN THE SAID CASE ALSO, THE TAX WAS PAID AS PER THE ASSESSMENT FOR ASSESSMENT YEAR 1976 - 77, WAS REFUNDED TO THE ASSESSEE ON 30.11.1977 AS THE RESULT OF THE APPELLATE ORDER OF THE AAC. ON FURTHER APPEAL, THE TRIBUNAL REVERSED THE AAC S ORDER AND RESTORED TH E ORDER OF THE INCOME TAX OFFICER , AS A RESULT OF WHICH, THE AMOUNT ALREADY REFUNDED BECAME PAY ABLE. A FRESH DEMAND NOTICE WAS ISSUED WHERE UNDER THE DEMAND WAS PAID BY 22.06.1980. THE INCOME TAX OFFICER CHARGED THE INTEREST UNDER SECTION 220(2) FOR THE PER IOD FROM 30.11.1977 TO 22.06.1980. IT WAS HELD BY THE HON BLE COURT THAT THE ASSESSEE S LIABILITY TO PAY THE INTEREST UNDER SECTION 220(2) AROSE ONLY ON 22.06.1980 AND, THEREFORE, NO INTEREST WAS CHARGEABLE FOR THE PERIOD FROM 30.11.1977 TO 22.06.1980. THE RELEVANT FINDING OF THE HON BLE HIGH COURT IS REPRODUCED AS UNDER: 10 . THE COUNSEL FOR THE DEPARTMENT RELIED ON THE TAXATION LAWS (CONTINUATION AND VALIDATION OF RECOVERY PROCEEDINGS) ACT, 1964 (ACT 11 OF 1964), THE COUNSEL PARTICULARLY RELIES ON SECTION 3 OF ACT 11 OF 1964. HE CONTENDS THAT THE ORIGINAL NOTICE UNDER SECTION 156 OF THE ACT SURVIVES BY VIRTUE OF SECTION 3 OF ACT 11 OF 1964 . HE ALSO REFERRED US TO THE DECISION IN 110 V. SEGHU BUCHIAH [1964] 52 ITR 538 (SC). IN THAT CASE, THE SUPREME COURT HELD THAT AS AND WHEN AN ASSESSMENT IS CHALLENGED AND THE OR DER OF ASSESSMENT IS SET ASIDE OR MODIFIED BY THE APPELLATE AUTHORITY, ALL CONSEQUENTIAL PROCEEDINGS PURSUANT TO THE ASSESSMENT ORDER ARE ALSO RENDERED INEFFECTIVE. SO, A NOTICE ISSUED UNDER SECTION 156 OF THE ACT PURSUANT TO AN ASSESSMENT ORDER WHICH WAS SET ASIDE SUBSEQUENTLY BY THE APPELLATE AUTHORITY WOULD NOT REMAIN IN FORCE AND THE DEPARTMENT HAS TO PROCEED AFRESH BY ISSUING A FRESH DEMAND NOTICE UNDER SECTION 156 OF THE ACT. THIS DECISION CAUSED GREAT DIFFICULTY FOR THE REVENUE AND IN ORDER TO TIDE OVER THE DIFFICULTY, THE SAID ACT, NAMELY, THE TAXATION LAWS (CONTINUATION AND VALIDATION OF RECOVERY PROCEEDINGS) ACT, WAS PASSED. SECTION 3 OF THE SAID ACT PROVIDED THAT IF THE ASSESSMENT ORDER IS SET ASIDE OR MODIFIED BY THE APPELLATE AUTHORITY AND, SUBSEQUENTLY, THE ORIGINAL ORDER IS RESTORED BY A SECOND APPELLATE AUTHORITY, THE ACTIONS TAKEN PURSUANT T O THE FIRST ORDER INCLUDING THE DEMAND NOTICE WILL SURVIVE AND A FRESH DEMAND 6 IT(SS)A NO. 01/DEL/2018 NOTICE IS UNNECESSARY. BASING ON THIS PROVISION, THE COUNSEL DEVELOPED HIS ARGUMENT BY URGING THAT SO LONG AS NO FRESH DEMAND NOTICE IS NOW REQUIRED UNDER LAW, THE ASSESSEE IS LI ABLE TO PAY INTEREST ON THE BASIS OF THE ORIGINAL NOTICE OF DEMAND. IT IS DIFFICULT TO ACCEPT THIS CONTENTION. PERHAPS, NO FRESH DEMAND NOTICE MAY BE NECESSARY AND THE ORIGINAL NOTICE UNDER SECTION 156 OF THE ACT MAY BE REVIVED. EVEN IF WE ACCEPT THAT THE ORIGINAL NOTICE IS REVIVED, IT HAS NO CONSEQUENCE. THE ASSESSEE HAS PAID THE AMOUNT DEMANDED AS PER THE ORIGINAL NOTICE. IN A CASE WHERE THE ASSESSEE HAS PAID THE DEMAND MADE IN THE ORIGINAL NOTICE, THERE IS NO LIABILITY ON THE PART OF THE ASSESSEE TO PAY INTEREST. SO EVEN IF WE TAKE THAT THE ORIGINAL NOTICE IS REVIVED, THE DEPARTMENT MAY NOT BE JUSTIFIED IN DEMANDING THE INTEREST FROM THE DATE OF THE ORIGINAL NOTICE. THE NON - COMPLIANCE OF THE ORIGINAL NOTI CE IS THE EVENT WHICH ATTRACTS PAYMENT OF INTEREST. IN THIS CASE, THERE IS NO NON - COMPLIANCE OF THE ORIGINAL NOTICE AND SO THE ASSESSEE IS NOT LIABLE TO PAY INTEREST. 11 . THE COUNSEL RELIED ON THE DECISION REPORTED IN A. K. HAJEE V. ITO [1983] 141 ITR 120 (KER). THE FACTS OF THIS CASE WERE SUBSTANTIALLY DIFFERENT FROM THE FACTS OF THE PRESENT CASE. THE CRUCIAL DIFFERENCE IS THAT IN A, K, HAJEE'S CASE [1983] 141 ITR 120 (KER), THERE WAS NO OCCASION FOR A REF UND OF TAX. THE ASSESSEE DID NOT PAY THE TAX AS DEMANDED UNDER SECTION 156 OF THE ACT. IN SUCH A CASE, THE DEPARTMENT IS FULLY JUSTIFIED IN MAKING THE DEMAND FOR PAYMENT OF INTEREST. THIS COURT RIGHTLY HEL D SO. 12 . THE COUNSEL FOR THE DEPARTMENT REFERRED US TO THE DECISION IN ORISSA CERAMIC SALES V. ITO [1984] 145 ITR 464. WE DO NOT THINK THAT THIS DECISION HAS GOT ANY RELEVANCE TO THE QUESTION TO BE DECID ED IN THIS CASE. THE OTHER DECISION RELIED ON BY THE COUNSEL FOR THE DEPARTMENT, VIZ., ITO V. GHANSHYAMDAS JATIA [1976] 105 ITR 693 (CAL), HELD THAT THE COMBINED EFFECT OF THE INCOME - TAX ACT , 1961, AND THE TAXATION LAWS (CONTINUATION AND VALIDATION OF RECOVERY PROCEEDINGS) ACT, 1964, IS THAT IN THE CASE OF AN ORDER OF THE APPELLATE AUTHORITY REDUCING WHOLLY THE DEMAND FORMING THE BASIS OF THE CERTIFICATE, T HE CERTIFICATE PROCEEDING SHALL BE KEPT IN ABEYANCE UNTIL SUCH ORDER BECOMES FINAL AND CONCLUSIVE. IT WAS FURTHER HELD THAT THERE IS NO QUESTION OF EXTINCTION OF THE DEMAND IN SUCH CASES. FURTHER, IT WAS HELD THAT SINCE THE ORIGINAL ORDER WAS RESTORED, NO FRESH NOTICE OF DEMAND IS NECESSARY IN VIEW OF SECTION 3(2) OF THE VALIDATING ACT. TRUE, PERHAPS THAT NO FRESH NOTICE IS REQUIRED IN THIS CASE. BUT A CONSEQUENTIAL ORDER IS NECESSARY AND THAT HAS BEEN IS SUED BY THE ASSESSING AUTHORITY WHICH IS EVIDENCED IN THIS CASE BY EXHIBIT P - 5. AS STATED EARLIER, ISSUE OF NOTICE ALONE WILL NOT ATTRACT THE LIABILITY TO PAY INTEREST. THE LIABILITY IS ATTRACTED ONLY IF THERE IS NON - COMPLIANCE OF THE DEMAND MADE IN THE NO TICE. IN THIS CASE, THERE IS NON - COMPLIANCE AND SO THE RATIO OF THE DECISION IN ITO V. GHANSHYAM ACTS JATIA [1976] 105 ITR 693 HAS NO APPLICATION. 7 IT(SS)A NO. 01/DEL/2018 8. THUS, RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HON BLE HIGH COURT, WE DIRECT THE ASSESSING OFFICER TO DELETE THE INTEREST CHARGED UNDER SECTION 220(2) OF THE ACT, SUBJECT TO THE VERIFICATION THAT THE ORIGINAL DEMAND NOTICE WAS DULY COMPLIED WITH BY THE ASSESSEE. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED D ECISION IS PRONOUN CED IN THE OPEN COURT ON 2 5 T H MAY , 201 8 . S D / - S D / - ( AMIT SHUKLA ) ( O.P. KANT ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 5 T H MAY , 201 8 . RK / - COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI