(2001) 247 ITR 210 (Patna)

IN THE HIGH COURT OF PATNA

Smt Tej Kumari And Others vs Commissioner Of Income Tax And Others

Judgement

The judgment of the court was delivered by M Y EQBAL J---A Division Bench of this court took up two sets of writ petitions for analogous hearing, one set of writ petitions were filed by Uday Mistanna Bhandar and one Tej Kumari Devi being C W J C Nos 3287, 2732 and 2780 of 1995 (R) Another set of writ petitions were filed by Ranchi Club Ltd, being C W J C Nos 3494, 3527, 3609, 3562 and 3782 of 1995(R) The question raised in these writ petitions is with respect to chargeability of interest under sections 234A, 234B and 234C of the said Act A Division Bench of this court in the earlier writ petitions filed by Ranchi Club Ltd while interpreting the aforesaid sections of the Act, held that interest under these sections should not be charged on excess tax as per income determined under sections 143(3) and 144 of the Act and further held that interest under section 234A was leviable on the tax on the total income as declared in the return The said decision is Ranchi Club Ltd v CIT [ 1996] 217 ITR 72 (Patna) The correctness of that decision was doubted before the Division Bench by the Revenue Accordingly, the Division Bench in terms of the judgment dated July 2, 1996 (see [1996] 222 ITR 44), passed in C W J C Nos 3287, 2732 and 2780 of 1995 (R), referred the following question for consideration before this Full Bench "Whether interest under sections 234A and 234B read with Explanation 4 is liable to be charged on the returned income or assessed income" Before another Division Bench hearing C W J C Nos 2296, 1495, 1507 and 2144 of 1996(R), the question which came for consideration was with respect to chargeability of interest under section 139(8) and section 217 of the Act Learned counsel appearing for the assessee put reliance on the earlier decision is Uday Mistanna Bhandar and Complex v CIT [1996] 222 ITR 44 (Patna), in support of his contention that without any specific order to that effect in the assessment order, the Revenue cannot demand interest while learned counsel for the Revenue put reliance on the decision of CIT v Quality [1997] 224 ITR 77 (Patna) for the proposition that chargeability of interest flows from the statute inasmuch as section 139(8) of the Act creates a mandate to the effect that the assessee would be liable to pay interest without any adjudication by the assessing authority In view of the two decisions aforesaid taking conflicting views the cases were referred to the Full Bench Although, the Division Bench while referring the matter did not formulate a question but this Full Bench has to answer as to "whether in the absence of any specific order of the assessing authority interest could be charged and recovered from the assessee" On the first day of hearing before this Bench, learned counsel appearing for the petitioners and the Revenue informed this court that against the judgment passed in Ronchi Club Ltd's case [1996] 217 ITR 72 (Patna), the Revenue moved the Supreme Court being Civil Appeal No 10360 of 1996 and the same was likely to be taken up for hearing and the question involved in the said appeal before the Supreme Court is the same referred to this Bench On the adjourned day, learned counsel produced before us a copy of the order passed by the Supreme Court in the aforesaid appeal, which shows that after hearing counsel for the appellants, the Supreme Court found no merit in the appeals and the same were dismissed, vide judgment and order dated August 1, 2000 (CIT v Ranchi Club Ltd [2001] 247 ITR 209) As noticed above, two questions were considered by the Division Bench in Ranchi Club Ltd's case [1996] 217 ITR 72 Firstly, whether interest under sections 234A and 234B of the Act can be levied on the tax payable on the returned income or tax payable on the assessed income and, secondly, whether in the absence of any specific order of the assessing authority interest could be charged and recovered from the assessee The Division Bench firstly held that in the absence of any specific order of the assessing authority charging interest, no interest could be recovered from the assessee Secondly, it was held that interest is leviable on the tax in the total income as declared in the return and not on the income as determined by the assessing authority It is, therefore, clear that the question referred to this Bench was decided by the Division Bench of this court in the case of Ranchi Club Ltd [1996] 217 ITR 72 and the said judgment has been affirmed by the Supreme Court in Civil Appeal No 10360 of 1996 (see [2001] 247 ITR 209) Mr Moitra, learned counsel appearing on behalf of the assessee, submitted that in view of the dismissal of the appeal by the Supreme Court the view taken by the Division Bench of this court has been affirmed and there is no need for going any further in the matter since the issue has already been settled by the Supreme Court Mr Jhunjhunwala, learned counsel appearing for the Revenue, however, submitted that although the two questions referred before this Bench were decided by the Division Bench in Ranchi Club Ltd's case [1996] 217 ITR 72 and the civil appeal preferred against the said judgment before the Supreme Court was dismissed, but dismissal of the appeal in limine by the Supreme Court will not amount to affirming the law laid down by the Division Bench in Ranchi Club Ltd's case [1996] 217 ITR 72 Learned counsel submitted that summary rejection of the appeal without any specific order merely means that the Supreme Court was not inclined to interfere with the order of the High Court and nothing more than that It is, therefore, contended that this court should decide the correctness of the view taken by the Division Bench in Ranchi Club Ltd's case [1996] 217 ITR 72 First of all, we will take up the issue with regard to the binding effect of the order of dismissal of the civil appeal passed by the Supreme Court As noticed above, a Division Bench of this court in Ranchi Club Ltd's case [1996] 217 ITR 72 decided both the issues which are the subject matter of this reference and against the judgment of the Division Bench, the Revenue moved the Supreme Court The appeal being Civil Appeal No 10360 of 1996, was finally heard by three judges of the Supreme Court The Supreme Court after hearing the parties dismissed the appeal on August 1, 2000 (see [2001] 247 ITR 209), by passing the following order : "We have heard learned counsel for the appellants We find no merit in the appeals The civil appeals are dismissed No order as to costs" It is, therefore, noticed that it is not a case where a special leave petition was summarily dismissed by the Supreme Court rather the civil appeal was heard on the merits and thereafter it was dismissed holding that the appeal has no merit It is a well settled principle of law that when a special leave petition is summarily dismissed under article 136 of the Constitution, such dismissal does not lay down any law rather it shall be deemed that the Supreme Court has simply held that it is not a fit case where special leave petition should be granted The same principle will not apply in a case where a civil appeal is dismissed by the Supreme Court holding that the appeal has no merit In our, opinion, when once a civil appeal is dismissed after hearing the parties by the Supreme Court holding that the appeal has no merit then such order becomes one which attracts article 141 of the Constitution, which provides that the law declared by the Supreme Court shall be binding on all the courts within the territory of India Recently in the case of V M Salgaocar and Brothers Pvt Ltd v CIT [2000] 243 ITR 383, the Supreme Court considered the difference between dismissal of a special leave petition and civil appeal in limine Their Lordships observed : "Different considerations apply when a special leave petition under article 136 of the Constitution is simply dismissed by saying 'dismissed', and an appeal provided under article 133 is dismissed also with the words 'the appeal is dismissed' In the former case it has been laid down by this court that when a special leave petition is dismissed this court does not comment on the correctness or otherwise of the order from which leave to appeal is sought But what the court means is that it does not consider it to be a fit case for exercise of its jurisdiction under article 136 of the Constitution That certainly, could not be so when an appeal is dismissed though by a non-speaking order Here the doctrine of merger applies In that case, the Supreme Court upholds the decision of the High Court or of the Tribunal from which the appeal is provided under clause (3) of article 133 This doctrine of merger does not apply in the case of dismissal of a special leave petition under article 136 When an appeal is dismissed the order of the High Court is merged with that of the Supreme Court" Having regard to the law laid down by the Supreme Court quoted hereinabove, I am of the opinion that the questions referred to this Bench have been completely answered by the Division Bench of this court in Ranchi Club Ltd's case [1996] 217 ITR 72 and the same has been affirmed in civil appeal by the Supreme Court In that view of the matter, there is no question of going any further and taking a different view in the matter However, I may also like to examine the relevant provisions of the Income-tax Act Chapter XIV of the Act lays down the procedure for assessment Section 139 provides that every person whose total income during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall, on or before the due date, furnish a return of his income in the prescribed form and verified in the prescribed manner Section 140 prescribed the manner of filing of the return Section 140A is the provision with regard to self assessment Section 142 empowers the Assessing Officer to issue notice and to make an enquiry against any person who has made a return under section 139 of the Act Sub-section (3) of section 142 provides that the assessee shall be given an opportunity of being heard in respect of any material gathered on the basis of enquiry under this sub-section Section 143 speaks about the manner of assessment by the assessing authority For better appreciation, section 143 is reproduced hereinbelow : "143 (1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142,--- (i) if any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid, any tax paid on self-assessment and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of sub-section (2), an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under section 156 and all the provisions of this Act shall apply accordingly ; and (ii) if any refund is due on the basis of such return, it shall be granted to the assessee and an intimation to this effect shall be sent to the assessee : Provided that except as otherwise provided in this sub-section, the acknowledgment of the return shall be deemed to be intimation under this sub-section where either no sum is payable by the assessee or no refund is due to him : Provided further that no intimation under this sub-section shall be sent after the expiry of two years from the end of the assessment year in which the income was first assessable (2) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer shall, if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend his office or to produce, or cause to be produced there, any evidence on which the assessee may rely in support of the return : Provided that no notice under this sub-section shall be served on the assessee after the expiry of twelve months from the end of the month in which the return is furnished (3) On the day specified in the notice issued under sub-section (2), or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing officer shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessment (4) Where a regular assessment under sub-section (3) of this section or section 144 is made,--- (a) any tax or interest paid by the assessee under sub-section (1) shall be deemed to have been paid towards such regular assessment ; (b) if no refund is due on regular assessment or the amount refunded under sub-section (1) exceeds the amount refundable on regular assessment, the whole or the excess amount so refunded shall be deemed to be tax payable by the assessee and the provisions of this Act shall apply accordingly" From a bare perusal of the aforesaid provision, it is manifest that the assessment made under section 143 includes re-assessment as well An assessment made in pursuance of a notice under section 148 is a regular assessment under section 143 or section 144 Section 140A provides that any admitted tax paid in pursuance of this section shall be deemed to have been paid towards a regular assessment under section 143 or section 144 Accordingly, any assessment made for the first time by resort to section 147 would also be a regular assessment for the purpose of section 143 of the Act Section 144 of the Act lays down the provision for best judgment assessment It provides that if any person fails to make the return required under section 139 or fails to comply with all the terms of a notice issued under sub-section (1) of section 142 or fails to comply with the direction issued under sub-section (2A) of section 142, or if a person fails to comply with all the terms of the notice issued under sub-section (2) of section 143, the Assessing Officer shall make the assessment of the total income or loss to the best of his judgment after giving opportunity of hearing to the assessee and determine the sum payable by the assessee on the basis of such assessment Sections 234A and 234B lay down the provision with regard to interest chargeable in certain cases Section 234A provides that if the return of income for any assessment year is either not furnished or furnished after the due date, the assessee shall be liable to pay simple interest at the rate of 1 1/2 per cent for every month or part of a month comprised in the period It further provides that where the return is furnished after the due date or where no return has been furnished, ending on the date of completion of the assessment under section 144, the assessee shall be liable to pay simple interest on the amount of tax on the total income as determined under sub-section (1) of section 143 or on regular assessment as reduced by the advance tax, if any, paid or deducted or collected at source Similarly, section 234B lays down the provision for payment of interest for default in payment of advance tax From the reading of these provisions along with the Explanation it is clear that tax on the total income as determined under sub-section (1) of section 143 or on regular assessment shall be deemed to be tax on the total income as declared in the return for the purpose of computing the interest payable under section 140A of the Act It is also clear that the additional liability to pay interest arises only on account of delayed filing of return or non-filing of return and also on account of delayed payment or non-payment of advance tax At this stage, it is worth referring to the Departmental Circular No 549 (see [1990] 182 ITR (St) 1), dated October 31, 1989, in which several examples have been given for the guidance of the officers and the assessee for charging interest Example 1 of the circular calculates interest payable for late filing of return on the basis of the returned income The circular further adds that if the returned income is increased either as a result of adjustment made under the first proviso to section 143(1)(a) or as a result of regular assessment under section 143(3) so that the advance tax paid becomes less than 90 per cent of the tax on the total income determined under section 143(1)(a) or on regular assessment, interest under section 234B shall also become chargeable In such a situation, interest under section 234A will also be increased on the basis of the tax on total income determined under section 143(1)(a) or on regular assessment Explanation 4 to section 234A of the Act fully clarifies the position by explaining that the tax on the total income as determined under sub-section (1) of section 143 or on regular assessment shall be deemed to be the tax on total income as declared in the return for the purpose of computing the interest payable under section 140A of the Act Besides the above, applying the principle of law laid down by the Supreme Court in J K Synthetics Ltd v CTO [1994] 94 STC 422 ; AIR 1994 SC 2393, the question has to be answered in the same line as answered by the apex court In J K Synthetics Ltd's case the Supreme Court while considering a similar provision in the context of the Rajasthan Sales Tax Act, 1954, held as under : "14 Let us look at the question from a slightly different angle Section 7(1) enjoins on every dealer that he shall furnish prescribed returns for the prescribed period within the prescribed time to the assessing authority By the proviso the time can be extended by not more than fifteen days The requirement of section 7(1) is undoubtedly a statutory requirement The prescribed return must be accompanied by a receipt evidencing the deposit of full amount of 'tax due' in the State Government on the basis of the return That is the requirement of section 7(2) Section 7(2A), no doubt, permits payment of tax at shorter intervals but the ultimate requirement is deposit of the full amount of 'tax due' shown in the return When section 11B(a) uses the expressions 'tax payable under subsections (2) and (2A) of section 7', that must be understood in the context of the aforesaid expressions employed in the two sub-sections Therefore, the expression 'tax payable' under the said two sub-sections is the full amount of tax due and 'tax due' is that amount which becomes due exhypothesi on the turnover and taxable turnover 'shown in or based on the return' The word 'payable' is a descriptive word, which ordinarily means 'that which must be paid or is due, or may be paid' but its correct meaning can only be determined if the context in which it is used is kept in view, The word has been frequently understood to mean that which may, can or should be paid and is held equivalent to 'due' Therefore, the conjoint reading of sections 7(1), (2) and (2A) and 11B of the Act leaves no room for doubt that the expression 'tax payable' in section 11B can only mean the full amount of tax which becomes due under sub-sections (2) and (2A) of the Act when assessed on the basis of the information regarding turnover and taxable turnover furnished or shown in the return Therefore, so long as the assessee pays the tax which according to him is due on the basis of information supplied in the return filed by him, there would be no default on his part to meet his statutory obligation under section 7 of the Act, and, therefore, it would be difficult to hold that the 'tax payable' by him 'is not paid' to visit him with the liability to pay interest under clause (a) of section 11B It would be a different matter if the return is not approved by the authority but that is not the case here It is difficult on the plain language of the section to hold that the law envisages the assessee to predict the final assessment and expects him to pay the tax on that basis to avoid the liability to pay interest That would be asking him to do the near impossible" Having regard to the entire facts and circumstances of the case, the principle of law discussed hereinabove and after giving anxious consideration of the matter, I answer the reference as under : (i) The decision rendered by the Division Bench in Ranchi Club Ltd's case [1996] 217 ITR 72 (Patna) and having been affirmed by the Supreme Court in Civil Appeal No 10360 of 1996 (see [2001] 247 ITR 209), has correctly decided the issues which are the subject matter of this reference (ii) Interest under sections 234A and 234B is leviable on the tax on the total income as declared in the return and not on the income as assessed and determined by the assessing authority (iii) In the absence of any specific order of the assessing authority interest could not be charged and recovered from the assessee Let the records be sent back to the Division Bench for the disposal of the writ petitions accordingly