Kerala H.C : Law u/d 234D introduced in the middle of the assessment year i.e 01/06/2003, is applicable from that date only

High Court Of Kerala

South India Corporation Ltd. VS. ACIT

Assessment Year : 2002-03

Section : 234D, 254

Dr. Manjula Chellur, Cj. And A.M. Shaffique, J.

IT Appeal No. 143 Of 2011

October 3, 2013


Dr. Manjula Chellur, CJ. – Heard learned senior counsel appearing for the appellant. We have gone through the order impugned in this appeal.

2. The relevant assessment year before us is 2002-03. Subsequent to the filing of the return of income, a notice under section 148 of the Income-tax Act, 1961 (for short the Act), came to be issued and an order of assessment came to be made under section 143(3) read with section 147 of the Act on January 16, 2006. Subsequently, another order came to be made on May 11, 2006, reducing the quantum of tax payable. Again, in the light of the order of the first appellate authority, the Commissioner of Income-tax (Appeals), the tax payable was enhanced on March 10, 2008. By another notice under section 147 of the Act dated March 21, 2008, the assessment came to be reopened. The assessee-appellant filed a return of income afresh in response to the notice under section 147 of the Act declaring the income which was originally returned as Rs. 6,20,79,546. The total income assessed by the authority came to Rs. 11,40,49,670. The Commissioner of Income-tax (Appeals) partly allowed the claim of the appellant-assessee. However, not being satisfied with this concession, the assessee approached the Appellate Tribunal.

3. The Appellate Tribunal allowed the appeal filed by the appellant and dismissed the appeal filed by the Revenue. Subsequently, it is not in dispute that based on the judgment of this court in I. T. A. No. 1692 of 2009 dated January 15, 2010 in the case of CIT v. Kerala Chemicals & Proteins Ltd. [2010] 323 ITR 584/[2011] 9 295 (Ker), an application, seeking rectification of the earlier order on the ground that the judgment of the High Court which was already pronounced on the date of disposal of the appeal by the Tribunal was not brought to the notice of the Tribunal, was filed. The Appellate Tribunal, after referring to various factors, by order dated April 29, 2011, allowed the rectification application recalling its earlier order and dismissed the appeal filed by the appellant-assessee. Aggrieved by the same, the present appeal is filed.

4. According to learned senior counsel appearing for the appellant-assessee, two points have to be taken into consideration to appreciate the stand of the appellant in the present appeal.

5. The first point is, the facts in the present case are totally different from the facts that existed in KCPL’s case which was the basis for the rectification order of the Tribunal. Therefore, there was no justification placing reliance on KCPL’s case by the Tribunal. The second point was, if at all there was erroneous order on the part of the Tribunal by way of rectification, it could not have been sought to be rectified and, therefore, the procedure adopted in passing the order dated April 29, 2011, is erroneous.

6. Coming to the first point, learned senior counsel arguing for the appellant-assessee took us through a portion of paragraph 2 of the Division Bench judgment of this court which reads as under (page 586) :

“. . . the assessee is not liable to pay interest at all, even though the assessee did not contest its liability for interest from June 1, 2003, onwards levied in the regular assessment passed under section 143(3) of the Act.”

7. According to the appellant’s counsel, concession was given by the assessee in the case before the Division Bench. In other words, consent was given in the above case and no such consent is found so far as the present case. Therefore, there was no justification on facts to apply the principle laid down in the Division Bench judgment of this court.

8. No doubt, the computation of interest in accordance with the provisions under section 234D may be with reference to the date of application of the provisions under the Act. But no other factual issue including consent given by the assessee to abide by the provisions of section 234D would bind any authority to apply the provisions of section 234D. So far as the operative date of the commencement of the provisions, that is, effective date from which the interest could be levied on the assessee, irrespective of the concession or consent of the assessee in the light of the provisions, having regard to the scope of the provision, the authorities concerned have to proceed with the assessment including levy of the interest, if any. No doubt, the assessment year in the present case is 2002-03 and section 234D of the Act became operative with effect from June 1, 2003, as it came to be introduced by the Finance Act, 2003.

9. The Division Bench of this court in the case of Kerala Chemical & Proteins Ltd. (supra) clearly held that the introduction of section 234D provision on interest was not with reference to any particular assessment year and it was introduced in the middle of the assessment year, that is, with effect from June 1, 2003. Therefore, irrespective of the year of assessment, the interest to be levied under section 234D has to be only with effect from June 1, 2003, even if the assessment year referred to was prior to June 1, 2003.

10. In that view of the matter, we are of the opinion, so far as the case of the appellant-assessee, the Tribunal ought to have taken into consideration the operative date as June 1, 2003.

11. Then coming to the second question whether the procedure adopted by the Department seeking rectification of the order, it is not in dispute that the Department did not place on record the judgment of a Division Bench of this court in Kerala Chemicals & Proteins Ltd. (supra), though such judgment was in existence by January 15, 2010, and the matter before the Tribunal came to be disposed of in February, 2010. The apex court, while considering the scope of jurisdiction of the Tribunal and rectification of mistakes in Asstt. CIT v. Saurashtra Kutch Stock Exchange Ltd. [2008] 305 ITR 227/173 Taxman 322 (SC) had an occasion to analyse what all could be taken as mistake apparent on the face of the record as contemplated under section 254(2) of the Act which reads as under :

“254. Orders of Appellate Tribunal.—. . .(2) The Appellate Tribunal may, at any time within four years from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the Assessing Officer :

Provided that an amendment which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this sub-section unless the Appellate Tribunal has given notice to the assessee of its intention to do so and has allowed the assessee a reasonable opportunity of being heard :

Provided further that any application filed by the assessee in this sub-section on or after the 1st day of October, 1998, shall be accompanied by a fee of fifty rupees.”

12. The facts are ; after the Appellate Tribunal rendered its decision on appeal, a miscellaneous application was filed by the assessee under section 254(2) of the Income-tax Act stating that a decision of the jurisdictional High Court was not brought to the notice of the Tribunal. Their Lordships held that such fact also can be taken into the ambit of mistake apparent on the face of record which required rectification.

13. In the present case, though the decision of the Division Bench of this court was very much in force as on the date of disposal of the appeal before the Tribunal, it was not brought to the notice of the Tribunal but later on an application came to be filed on October 14, 2010.

14. In the light of the above discussion and reasoning, we are of the opinion, none of the points raised by learned senior counsel appearing for the appellant-assessee are sustainable and accordingly the appeal is dismissed in favour of the Revenue.

[Citation : 360 ITR 39]

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