High Court Of Karnataka
Shriram Chits (Bangalore) Ltd. vs. JCIT
Section 154, 234B
Asst. Year 1998-99
K.L. Manjunath & Mrs. B.V. Nagarathna, JJ.
IT Appeal No. 236 of 2004
15th February, 2010
Counsel Appeared :
G. Sarangan with Kashimath Kalmath, for the Appellant : K.V. Aravind for M.V. Seshachala, for the Respondent
JUDGMENT
K.L. Manjunath, J. :
We have heard the learned counsel for the parties.
2. The assessee has filed this appeal under s. 260A of the IT Act, 1961 being aggrieved by the concurrent findings of the order passed by the AO which has been confirmed by the CIT(A) and further affirmed by the Tribunal, Bangalore, in ITA No. 218/Bang/2002, dt. 28th Jan., 2004.
2. The facts leading to this case are as hereunder : The appellant company is a leading chit fund company. The dispute is in regard to the asst. yr. 1998-99. The assessee filed its return of income for the asst. yr. 1998-99 on 19th Nov., 1998 declaring an amount of Rs. 28,77,633. The return was processed under s. 143(1) of the Act and ordered for refund of Rs. 19,52,528 (including interest of Rs. 1,61,168) and the amount was adjusted towards the arrears of tax payable by the assessee for the earlier assessment years. A notice under s. 143(2) was issued. After hearing, an order was passed directing the assessee to pay the balance of Rs. 74,56,355. This order was passed on 29th Jan., 2001.
3. Subsequently, a notice under s. 154 was issued to the assessee by the Jt. CIT on the ground that the order of assessment passed on 29th Jan., 2001 has to be rectified on the ground that the interest payable under s. 234B had not been levied while passing the order of assessment. An order under s. 154 of the IT Act was passed as per Annex. B dt. 28th June, 2001. According to the AO, the order of assessment was completed under s. 143(3) of the IT Act for the asst. yr. 1998-99 and he had not charged the interest payable under s. 234 relying upon the judgment of the Hon’ble apex Court in CIT vs. Ranchi Club Ltd. (2000) 164 CTR (SC) 200 and that the order of rectification was required to be passed by him in view of the subsequent retrospective amendment of s. 234B by the Finance Act, 2001. Accordingly an order was passed calling upon the assessee to pay a sum of Rs.1,06,48,211. Being aggrieved by the order of rectification, the assessee filed an appeal before the CIT(A), Bangalore. The CIT(A) after hearing the parties dismissed the appeal by confirming the order of rectification by his order dt. 12th Nov., 2001. While dismissing the appeal, the CIT(A) relied upon the judgment of this Court in Mysore Cements Ltd. vs. Dy. CCT passed in Writ Petn. Nos. 16891 to 16895 of 1993 [reported at (1994) 116 CTR (Kar) 284— Ed.]. Being aggrieved by the concurrent findings, the assessee filed an appeal before the Tribunal, Bangalore Bench, which appeal also came to be dismissed relying upon the judgment in Mysore Cements Ltd. vs. Dy. CCT (supra). Being aggrieved by these orders, the present appeal is filed.
4. The appeal was admitted on 30th Sept., 2004 to consider the following substantial question of law :
“Whether the Tribunal was right in holding that the order of rectification passed under s. 154 of the Act for the asst. yr. 1998-99 levying interest for the first time under s. 234B is valid ?”
5. Mr. G. Sarangan, learned senior counsel appearing for Mr. Ramamurthy submits that all the authorities did not consider that the judgment in Mysore Cements Ltd. vs. Dy. CCT (supra), has no application to the facts of this case. According to him, the Hon’ble Supreme Court in CIT vs. Max India Ltd. (2007) 213 CTR (SC) 266 : (2007) 295 ITR 282 (SC) has taken a view at the relevant point of time when two views were possible, if the AO has taken one view, but on account of subsequent amendment, the view cannot be held to be invalid and the same has to be held as valid. Relying upon this judgment, he submits that the judgment relied upon by the CIT(A) as well as the Tribunal was not rendered under the provisions of the IT Act but under the provisions of the Karnataka Sales- tax Act. According to him, considering the background of this case, the said judgment has no application to the facts of this case. Therefore, he requests this Court to consider the question of law raised in the light of the judgment of the apex Court in CIT vs. Max India Ltd. (supra).
6. Per contra, Mr. Aravind, the learned counsel appearing for the Revenue submits that the order passed under s. 154 of the IT Act was just and proper. The levy of interest under s. 234B is mandatory and AO had left out to levy interest under s. 234B. To rectify the mistake committed by the officer, it was always open for him to pass an order of rectification. Therefore, he requests the Court to dismiss the appeal and he mainly relied upon the amendment brought into s. 234B retrospectively.
7. Having heard the counsel for the parties, what is to be considered by us in this appeal is whether the order of assessment passed by the AO at the first instance was passed relying upon the judgment of the Supreme Court. If he has passed the order of assessment based on the judgment of Supreme Court, is it open for an AO to rectify the order relying upon the subsequent amendment to the provisions of s. 234B ?
8. It is not in dispute, the order of assessment was passed by the AO, as per Annex. A dt. 29th Jan., 2001. The provision of s. 234B of the IT Act was got amended with retrospective effect under the Finance Act, 2001, w.e.f. 1st April, 1989. From reading the order of assessment dt. 29th Jan., 2001 and the Finance Act, 2001, dt 1st June, 2001, it is clear that as on the date of passing the order of assessment this amendment was not there. By reading the order of rectification passed under s. 154 of the Act, the Jt. CIT has categorically stated that while passing the order of assessment for the asst. yr. 1998-99, following the judgment of the Hon’ble Supreme Court in Ranchi Club Ltd. (supra) he had not levied interest under s. 234. But he has reopened the case based on the amendment of s. 234B by Finance Act, 2001. From reading of the order passed under s. 154, it is clear to us that while passing an order of assessment, the AO had not committed any error. He was justified in following the judgment of the apex Court in Ranchi Club Ltd. (supra). When the order of assessment has been completed, the short question that arises for our consideration is that in view of the subsequent amendment to s. 234B, is it open for him to reopen the assessment. According to us, in view of the judgment of the apex Court in CIT vs. Max India Ltd. (supra), it was not possible for the AO to reopen the case since the AO had rightly passed the order relying upon the judgment of Ranchi Club case (supra) while passing the order of assessment. Just because there is a subsequent amendment, AO cannot reopen the file. Respectively, following the case in CIT vs. Max India Ltd. (supra), the question of law is answered in favour of the assessee and against the Revenue.
Accordingly, this appeal is allowed. The order passed by the AO under s. 154B dt. 28th June, 2001 as per Annex. B which has been confirmed by the CIT(A) as per Annex. C dt. 12th Nov., 2001 and further affirmed by the Tribunal, Bangalore Bench as per Annex. D dt. 28th Jan., 2004 are hereby set aside.
[Citation : 325 ITR 219]
