Bombay H.C : The assessee being a notified person under the Special Court (Trial of Offences relating to Transactions in Securities) Act,1992 is not liable to pay interest u/s.234 A, 234 B and 234 C

High Court Of Bombay

CIT, Central – II vs. Cascade Holdings (P.) Ltd.

Section : 234A, 234B And 234C

Assessment year : 2004-05

S. C. Dharmadhikari And G.S. Kulkarni, JJ.

IT Appeal Nos. 3365 & 3371 Of 2010

April 1, 2014

JUDGMENT

1. These appeal challenge the order passed by the Income Tax Appellate Tribunal dated 6.11.2009 in Income Tax Appeals No.6421 and 6422/Mum/2008. The Assessment year is 2004-05. The Appeals raise substantial questions of law are as under:—

“6.1 Whether, on the facts and in the circumstances of the case, the Tribunal, in law, was right in holding that the assessee being a notified person under the Special Court (Trial of Offences relating to Transactions in Securities) Act,1992 is not liable to pay interest u/s.234 A, 234 B and 234 C of the Income Tax Act, 1961 ignoring the legal sanctity of Law that the interest chargeable under these sections is not only consequential but is mandatory in nature?

6.2. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was right in holding that interest under section 234 A, 234 B and 234 C is not chargeable in the assessee’s case being notified person under Special Court (Trial of offences relating to Transactions in Securities) Act, 1992 without appreciating that the said Act has not ruled that the provisions of sections 234A, 234B and 234C are not applicable to the notified persons or they are exempted from the liability of payment of interest under these sections of Income Tax Act,1961 ?”

2. The submission of Mr.Toprani, learned Counsel appearing on behalf of the respondent- assessee is that the only issue involved in this appeal is not covered by the Judgment of the Division Bench of this Court rendered on 7.3.2012 in Income Tax Appeal no.3334 of 2010 (CIT. v. Divine Holdings (P.)Ltd. [2012] 209 Taxman 467/21 taxmann.com 538 (Bom.). This Judgment is relied upon by Mr.Malhotra and he submits that the point is covered by the same in favour of the Revenue. Mr.Malhotra submits that both the questions be answered in favour of the Revenue and the Tribunal’s order be set aside. It is submitted by Shri.Toprani that the Division Bench rendering the judgment in “Divine Holdings (P.) Ltd.” (supra) has failed to consider several judgments of Hon’ble Supreme Court and the orders of this Court taking a view that when the assets and properties of the assessee like respondent are attached by operation of Statute, then, liability to pay tax will not arise. There is nothing by which the assessee can be said to be in default enabling the Department to levy interest on the assessee. It is submitted that the properties being statutorily attached and permission to deal with the same was sought from the Special Court but the same was rejected, that the respondent was prevented from discharging the liability, if any, to pay the advance tax. Thus, this is a case where an act of the Court has caused prejudice to the respondent. These aspects were not noticed leave alone considered and dealt with in the judgment of “Divine Holdings (P.) Ltd.” (supra).

3. We are unable accept any of these contentions for the simple reason that a detailed judgment has been delivered by the Division Bench of this Court in the case “Divine Holdings (P.) Ltd.”(supra). The substantial questions of law viz. Question nos.(1) and (2) which are framed in the judgment of the Division Bench are identical to the present Appeal.

4. The Division Bench on detailed analysis of the legal provisions came to a conclusion that the questions of law framed by it are required to be answered by holding that the Tribunal has erred in taking a view that the assessee being a notified person under the Special Court (Trial of Offences relating to Transaction in Securities) Act,1992 is not liable to pay interest under Section 234A, 234B and 234C of the Income Tax Act,1961. Thus, the interest is chargeable and merely because the assets and properties are attached, does not mean that the liability to pay interest will not arise.

5. Once such is the binding judgment of a co-ordinate Bench, then, we cannot ignore it on a spacious plea that the Division Bench did not consider the arguments of the nature canvassed before us by Mr.Toprani. Equally, some aspects of the controversy were not noticed in detail including judgments and orders of the Supreme Court and this Court on the point, is the submission which will not enable us to ignore the binding judgment. We have seen the order passed by the Hon’ble Supreme Court, a copy of which has been annexed in the compilation (Exh.G) page 177 and 178. This is an order passed in Civil Appeal no.7572 of 1999 CIT v. Custodian with Civil Appeal no.1175 of 2002 dated 13.2.2002. That is an order passed which does not decide any controversy much less concerning the legal provisions, namely, Sections 234A to 234C of the Income Tax Act,1961. The order, a copy of which has been annexed as (Exh.T) page 390-391, at best can be said to be an order applying to a specific assessee which was unable to comply with the requirement of pre-deposit of the amount demanded and interest thereon. The Judgment in the case of “CIT v. Emilio Ruiz Berdejo [2010] 320 ITR 190/186 Taxman 390 (Bom.) also will not assist the Assessee before us. That is distinguishable on facts.

6. Such orders do not enable us to brush aside the binding judgment of the Division Bench in the case Divine Holdings (P.) Ltd. (supra). We can ignore a binding judgment only if it is Per incuriam. In the case of Central Board of Dawoodi Bohra Community v. State of Maharashtra AIR 2005 SC 752 at page 755, the Hon’ble Supreme Court has held as under:—

“Per incuriam means a decision rendered by ignorance of a previous binding decision such as a decision of its own or of a Court of co-ordinate or higher jurisdiction or in ignorance of the terms of a statute or of a rule having the force of law. The ruling making a specific reference to an earlier binding precedent may or may not be correct but cannot be said to be per incuriam.”

Equally in another judgment of Hon’ble Supreme Court in the case of “Director of Settlements A.P. v. M.R.Apparao “AIR 2002 SC 1598”, it is held by the Hon’ble Supreme Court that merely because certain aspects were not considered or that relevant provisions were not brought to the notice of the Court, is not enough to ignore and brush aside a binding precedent. It is clear that the judgment in the case of “Divine Holdings (P.) Ltd.” (supra) is binding on us. The judicial discipline, therefore, requires that we follow it even if the respondent – assessee may term the same as erroneous. The remedy of correcting a erroneous judgment and order is to file an appeal challenging it and, then, convince the Appeal Court in exercise of such appellate power to quash or reverse such judgment. So long as the judgment holds the field, it will not be possible for us to ignore and brush aside the same, more so when the judgment in the case of “Divine Holdings (P.) Ltd.” (supra) decides identical controversy and deals with the same question of law.

7. For the aforesaid reasons, we are of the opinion that the controversy in two appeals is covered by the judgment in the case of “Divine Holdings (P.) Ltd.” (supra). The appeals are, therefore, allowed accordingly. The judgment and order of the Tribunal is quashed and set aside.

[Citation : 365 ITR 84]