The Commissioner of Income Tax vs Hindustan Hotels Ltd. and The Income Tax Appellate Tribunal, Panaji Bench

B.P. Dharmadhikari, J.—The revenue is in appeal, challenging order of the Income Tax Appellate Tribunal, (ITAT) Panaji Bench dated 1.10.2001 holding that u/s 143(1)(a) of the Income Tax Act the Assessing Officer could not have levied interest u/s 234C in the mode and manner as in dispute between the parties before us. The ITAT observed that it could have been done in the same manner as computed by the assessee himself while working out tax or interest payable on self assessment u/s 140A

The assessment year concerned is 1996-1997 and the respondent assessee filed a return of income declaring total income of Rs. 6,83,78,520/-. In intimation u/s 143(1)(a), the Assessing Officer on 5.6.1997 levied interest u/s 234C amounting to Rs. 9,98,652/-. The assessee sought rectification and moved an application u/s 154 of the Act which came to be rejected and it was challenged before the Commissioner of Income Tax (Appeals) (CITA) by the assessee. The appellate authority found that the assessee sold the property on 19.6.1995 and, therefore, the order of Assessing Officer maintaining that the entire amount of tax payable in respect of capital gains became due on 15.9.1995 as per proviso (1) of Section 234C(b)(ii) was not proper. CITA appeals also observed that the said proviso was mitigating and if the assessee paid the entire capital gains as part of installment immediately following the date of transfer, he gets the benefit and otherwise interest u/s 234C(1) is chargeable in normal course. In view of this position, it held that rejection of Section 154 application by the Assessing Officer was unjustified. The Revenue then approached the ITAT in appeal and as already mentioned above, ITAT found that interest as charged by the Assessing Officer could not have been levied in intimation u/s 143(1)(a).

In this background, on 12.8.2002, this Court has admitted the appeal on following two questions :

(1) Whether on the fact and circumstances of the case the entire advance tax payable by the assessee on capital gains of Rs. 6.5 crores arising before 15.9.1995 became due on 15.9.1995 and the directions of the ITAt to pay capital gains in 3 installments is in violation of first proviso to Section 234C(1)(b)(ii) ?

(2) Whether the action of the assessee of deferring the payment of advance tax on the capital gains earned by it before 2nd installment due on 15th September, 1995, is in violation of 1st proviso to Section 234C(1)(b)(ii)? Advocate Rivonkar for Revenue has argued that ITAT has, in fact, upheld the order of CITA though challenge raised on merits before it has not been considered and the findings of CITA in appeal, therefore, operate as res judicata. Learned Counsel for the assessee has contended that present appeal is rendered infructuous because regular assessment order u/s 143(3) has been passed on 8.1.1999 and in it interest of Rs. 7,13,633/-has been levied u/s 234C. He further states that in an appeal preferred thereafter, CITA has brought down this interest to Rs. 2,93,906/-and that order of CITA has been maintained on 1.10.2001 by ITAT. He points out that this order of ITAT has been challenged by the Department in Tax Appeal No. 59/2002 and therein this quantum of interest is not in dispute at all. Advocate Rivonkar states that the issue in relation to said interest is very much raised in Tax Appeal No. 59/2002. However, we find that whether such issue is raised or not can be gone into in that appeal only and it is not relevant for adjudication of this appeal.

Perusal of questions formulated above clearly shows that the said questions do not really fall for consideration here. There is no direction by the ITAT to pay capital gains in 3 installments. Similarly, in view of application of mind by the ITAT, it is apparent that it has not considered the order of CITA on merits and has only found that u/s 143(1)(a), the course of action as adopted by the Assessing Officer was not open. This finding of ITAT, therefore, does not mean that order of CITA in appeal has been upheld on merits. Those observations only show that it was not necessary even for CITA to go into the merits of the controversy.

Second question, as formulated, again shows that even if the action of the assessee in not paying the advance tax on capital gains in full with the second installment due on 15.9.1995 is held to be in violation of first proviso to Section 234C(1)(b)(ii), & even if this question is answered against the assessee, it is apparent that as the impugned action has been initiated u/s 143(1)(a), the same is unsustainable.

As pointed out by learned Counsel for the respondent, after regular orders of assessment are passed u/s 143(3), the challenge before us is rendered infructuous. Our attention has been invited to a Division Bench judgment of Rajasthan High Court in Commissioner of Income Tax Vs. Smt. Premlata Jalani, . Our attention has been invited to the conditions and facts as noticed therein and the Hon''ble Division Bench has found that u/s 143(1), the Assessing Officer had no authority to make adjustment in relation to interest chargeable u/s 234C. In view of the findings reached above, it is not necessary for this Court to go into more details in this respect.

As Tax Appeal No. 59/2002 filed by Revenue challenging the order of ITAT u/s 143(3) proceedings is pending before this Court we clarify that order of CITA in the present matter does not, in any way, eclipse consideration of this issue, if it arises there. With this clarification, the present appeal is disposed of, with no order as to costs.