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From the Courts »
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Shakti Bhog Foods Limited Vs. Deputy Commissioner Of Income Tax & Anr.
October, 04th 2016
$~10
*      IN THE HIGH COURT OF DELHI AT NEW DELHI
%                                                 DECIDED ON: 21.09.2016

+                         W.P. (C) 2569/2015
SHAKTI BHOG FOODS LIMITED                        ..... Appellants
                 Through: Mr. Ajay Vohra, Sr. Advocate with Mr.
                 Vaibhav Kulkarni, Advocates.

                    Versus

DEPUTY COMMISSIONER OF INCOME TAX & ANR. ..... Respondents
                 Through: Mr. Rahul Chaudhary, Sr. Standing
                 Counsel.

CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MS. JUSTICE DEEPA SHARMA
S.RAVINDRA BHAT, J.
1.     The petitioner seeks quashing of the notice dated 12.03.2015 issued
under section 226(3) of the Income-tax Act, 1961(,,the Act) and a further
direction to the respondent Income tax authorities (hereafter "the revenue")
to vacate the orders issued by it- for attaching its bank accounts.

2.     The Petitioner is an unlisted public limited company incorporated
under the Companies Act, 1956, engaged amongst others, in the integrated
business of purchasing, transporting, storing, processing, handling of food
grains (i.e. rice and wheat) and thereafter selling the same in the domestic
and overseas market. For assessment year 2013-14, it filed return of income
on 31.03.2014 declaring total income of `289,61,04,740. On the said
income, total tax and interest payable in accordance with the provisions of




W.P.(C)2569/2015                                                       Page 1
the Act worked out to `113,60,91,737/-. Against this, the Petitioner claimed
credit of prepaid taxes amounting to `27,63,84,333/-. Since the Petitioner
was facing liquidity crunch at that point of time, the Petitioner, therefore, in
the return of income showed `85,97,07,400/- as balance tax payable. The
Petitioner also paid `65 Crores on different dates in April 2014 thereby
leaving the balance of tax along with interest payable at `20,97,07,400/-.
The Petitioner received notice dated 29.10.2014 issued by the Respondent
under section 139(9) of the Act. By that notice, the revenues position was
that non-payment of tax and interest, as shown in the return of income,
constituted ,,defect under Explanation (aa) to the proviso of section 139(9)
of the Act. The Petitioner was therefore, required to rectify the defect within
the specified period, failing which the return of income was to be treated as
invalid return. As the defect was not rectified, the revenue issued a letter
dated 03.11.2014 declaring the return of income filed by the Petitioner for
the assessment year 2013-14 as invalid return under section 139(9) of the
Act. The petitioner, on 26.12.2014 through a letter to the revenue, contended
that the defect of non-payment of tax and interest was not rectified due to
the financial crisis faced by it.

3.     After declaring the above return of income as invalid return, the
revenue invoking coercive action for recovery of the tax and interest shown
in the above invalid return of income, issued impugned notice dated
12.03.2015 under section 226(3) of the Act, thereby attaching various bank
accounts of the Petitioner maintained by the respondent bank, without any
prior or even any subsequent notice to it.

4.     Mr. Ajay Vohra, learned senior counsel for the petitioner, argues that




W.P.(C)2569/2015                                                          Page 2
once the return of income has been treated as invalid, then, the said return of
income would become non est, thereby, ousting all the officers of the
revenue from taking cognizance whatsoever, of the information furnished in
the said return of income. Reliance is placed upon Section 139 (9)
particularly the non-obstante clause to contend that in case an assessee fails
to rectify the defect in the return of income within the stipulated time period,
then, overriding all other provisions of the Act, the said return of income
shall be treated as invalid return of income and it would be deemed that no
return of income has been filed by the assessee. In other words, the
provisions of the Act would then apply as if the assessee has not furnished
any return of income. It is next contended that liability to pay self-
assessment tax under Section 140A arises only on the basis of the return of
income furnished, inter-alia, under section 139 of the Act. In other words,
existence of valid return of income under section 139 is sine-qua-non to
fasten liability for payment of self-assessment tax under section 140A of the
Act.

5.     The petitioner argues that since the return of income filed by it was
treated as invalid by the revenue, the tax and interest shown as payable in
the said invalid return of income would become nugatory and would be of
no consequence. Further, submitted senior counsel that presently, no valid
demand of tax and interest has been raised by the revenue upon the
petitioner inasmuch as neither any notice has been issued under Section 156
nor any intimation under Section 143(1) of the Act or any order, much less
any assessment order. Consequently, since no self-assessment tax or
assessed tax is due against the petitioner, the revenue is not clothed with the




W.P.(C)2569/2015                                                          Page 3
jurisdiction to recover any amount on that aspect. Mr. Vohra relies on K.
Nagesh v Asst. Commissioner of Income Tax 2015 (376) ITR 473 (Kant) for
saying that the amounts paid as advance tax are in fact refundable, because
of Section 139 (9) read with Section 240A. Reliance is also placed on
Telengana State Beverage Corporation Ltd v Union of India 2015 60
Taxmann.com 236. Mr. Vohra further states that after filing of the present
petition, on 14.03.2015, the assessee filed a belated return, claiming total
income of `139.60 crores, on which after adjusting amounts paid, a refund
of over `21 crores was claimed. Later, during pendency of the present
proceedings, search proceedings took place in the petitioners premises, after
which it received notice under Section 153A. In response, it filed its returns
for the block period, including the assessment years in question in this case,
whereby it claimed refund of `30.17 crores after claiming deduction under
Chapter VI A of the Act. In these circumstances, the revenue has no
authority to retain the amounts or insist upon the continuation of the
attachment orders.




6.     The revenue argues that it is an admitted position, that for Assessment
year 2013-14, Petitioner filed its return of income on 31.03.2014 declaring
an income of `289,61,04,740/-. On the said income, total tax and interest
payable then was `l13,60,91,737/-. Hence it is clear and evident that the
total admitted tax and interest liability payable at that point of time
amounted to `113,60,91,737/-. After adjusting pre-paid taxes amounting to
`27,63,84,333/-, the balance amount payable was `85,97,07,400/-.
Thereafter the petitioner paid `65 crores only on different dates in April
2014. Yet, the balance of admitted tax and interest payable amounts to more




W.P.(C)2569/2015                                                         Page 4
than `24 crores. It is highlighted that by virtue of Section 140A (3) there is
no manner of doubt that the Petitioner is an assessee in default and therefore,
all the resultant consequences are attracted and apply to it under the
provisions of the Act. The revenue relies on the judgment of the Supreme
Court in Commissioner of Income Tax v Shelly Products 2003 261 ITR 367
(SC).

Analysis and findings

7.      There is no dispute that when the petitioner filed its return, it admitted
tax liability. Though the return was initially without the full tax amount, it
claims that after filing returns it deposited `65 crores. There was yet a
shortfall of about `24 crores; since this shortfall was not made good- not
because the assessee disclaimed liability, but rather because of its financial
constraint, the assessing officer declared the return invalid. When the
revenue has sought to take coercive measures, the assessee petitioner
contends that because of the declaration of the AO under Section 139 (9),
the amounts paid or deposited by it, are refundable and that the return was in
effect a nullity; consequently the revenue has no authority to claim the
amounts that it does. It relies on Section 139 (9), 140A and Section 240 of
the Income Tax Act.

8.      Section 139 (9) reads as follows:

               "(9) Where the Assessing Officer considers that the return of
               income furnished by the assessee is defective, he may intimate
               the defect to the assessee and give him an opportunity to rectify
               the defect within a period of fifteen days from the date of such
               intimation or within such further period which, on an




W.P.(C)2569/2015                                                            Page 5
               application made in this behalf, the Assessing Officer may, in
               his discretion, allow; and if the defect is not rectified within the
               said period of fifteen days or, as the case may be, the further
               period so allowed, then, notwithstanding anything contained in
               any other provision of this Act, the return shall be treated as an
               invalid return and the provisions of this Act shall apply as if the
               assessee had failed to furnish the return:

               Provided that where the assessee rectifies the defect after the
               expiry of the said period of fifteen days or the further period
               allowed, but before the assessment is made, the Assessing
               Officer may condone the delay and treat the return as a valid
               return.

               Explanation.--For the purposes of this sub-section, a return of
               income shall be regarded as defective unless all the following
               conditions are fulfilled, namely :--
               16
                 (a) the annexures, statements and columns in the return of
               income relating to computation of income chargeable under
               each head of income, computation of gross total income and
               total income have been duly filled in;
               17
                [(aa) the tax together with interest, if any, payable in
               accordance with the provisions of section 140A, has been paid
               on or before the date of furnishing of the return;]
               17a
                 (b) the return is accompanied by a statement showing the
               computation of the tax payable on the basis of the return;

               (bb) 17a the return is accompanied by the report of the audit
               referred to in section 44AB, or, where the report has been
               furnished prior to the furnishing of the return, by a copy of such
               report together with proof of furnishing the report;

               (c) the return is accompanied by proof of--




W.P.(C)2569/2015                                                             Page 6
               (i) the tax, if any, claimed to have been deducted or collected at
               source and the advance tax and tax on self-assessment, if any,
               claimed to have been paid :

               Provided that where the return is not accompanied by proof of
               the tax, if any, claimed to have been deducted or collected at
               source, the return of income shall not be regarded as defective
               if--

               (a) a certificate for tax deducted or collected was not furnished
               under section 203 or section 206C to the person furnishing his
               return of income;

               (b) such certificate is produced within a period of two years
               specified under sub-section (14) of section 155;

               (ii) the amount of compulsory deposit, if any, claimed to have
               been made under the Compulsory Deposit Scheme (Income-tax
               Payers) Act, 1974 (38 of 1974)"

Section 140A reads as follows:

       "140A. (1) Where any tax is payable on the basis of any return
       required to be furnished under section 115WD or section 115WH or
       section 139 or section 142 or section 148 or section 153A or, as the
       case may be, section 158BC, after taking into account,--

        (i) the amount of tax, if any, already paid under any provision of this
       Act;

        (ii) any tax deducted or collected at source;

       (iii) any relief of tax or deduction of tax claimed under section 90 or
       section 91 on account of tax paid in a country outside India;

       (iv) any relief of tax claimed under section 90A on account of tax paid
       in any specified territory outside India referred to in that section; and




W.P.(C)2569/2015                                                           Page 7
       (v) any tax credit claimed to be set off in accordance with the
       provisions of section 115JAA or section 115JD,

       The assessee shall be liable to pay such tax together with interest
       payable under any provision of this Act for any delay in furnishing the
       return or any default or delay in payment of advance tax, before
       furnishing the return and the return shall be accompanied by proof of
       payment of such tax and interest33.

       Explanation. - Where the amount paid by the assessee under this sub-
       section falls short of the aggregate of the tax and interest as
       aforesaid, the amount so paid shall first be adjusted towards the
       interest payable as aforesaid and the balance, if any, shall be
       adjusted towards the tax payable.

       (1A) For the purposes of sub-section (1), interest payable,--

       (i) undersection 234A shall be computed on the amount of the tax on
       the total income as declared in the return as reduced by the amount
       of,--

       (a) advance tax, if any, paid;

       (b) any tax deducted or collected at source;

       (c) any relief of tax or deduction of tax claimed under section 90 or
       section 91 on account of tax paid in a country outside India;

       (d) any relief of tax claimed under section 90A on account of tax paid
       in any specified territory outside India referred to in that section; and

       (e) any tax credit claimed to be set off in accordance with the
       provisions of section 115JAA or section 115JD;

       (ii) undersection 115WK shall be computed on the amount of tax on
       the value of the fringe benefits as declared in the return as reduced by
       the advance tax, paid, if any.




W.P.(C)2569/2015                                                          Page 8
       (1B) For the purposes of sub-section (1), interest payable under
       section 234B shall be computed on an amount equal to the assessed
       tax or, as the case may be, on the amount by which the advance tax
       paid falls short of the assessed tax.

       Explanation.--For the purposes of this sub-section, "assessed tax"
       means the tax on the total income as declared in the return as reduced
       by the amount of,--

         (i) tax deducted or collected at source, in accordance with the
       provisions of Chapter XVII, on any income which is subject to such
       deduction or collection and which is taken into account in computing
       such total income;

        (ii) any relief of tax or deduction of tax claimed under section 90 or
       section 91 on account of tax paid in a country outside India;

       (iii) any relief of tax claimed under section 90A on account of tax paid
       in any specified territory outside India referred to in that section; and

       (iv) any tax credit claimed to be set off in accordance with the
       provisions of section 115JAA or section 115JD.

       (2) After a regular assessment under section 115WE or section
       115WF or section 143 or section 144 or an assessment under section
       153A or section 158BC has been made, any amount paid under sub-
       section (1) shall be deemed to have been paid towards such regular
       assessment or assessment, as the case may be.

       (3) If any assessee fails to pay the whole or any part of such tax or
       interest or both in accordance with the provisions of sub-section (1),
       he shall, without prejudice to any other consequences which he may
       incur, be deemed to be an assessee in default in respect of the tax or
       interest or both remaining unpaid, and all the provisions of this Act
       shall apply accordingly.

       (4) The provisions of this section as they stood immediately before




W.P.(C)2569/2015                                                          Page 9
       their amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of
       1988), shall apply to and in relation to any assessment for the
       assessment year commencing on the 1st day of April, 1988, or any
       earlier assessment year and references in this section to the other
       provisions of this Act shall be construed as references to those
       provisions as for the time being in force and applicable to the relevant
       assessment year."

Section 240 reads as follows:

       "Refund on appeal, etc.

       240. Where, as a result of any order passed in appeal or other
       proceeding under this Act, refund of any amount becomes due to the
       assessee, the Assessing Officer shall, except as otherwise provided in
       this Act, refund the amount to the assessee without his having to make
       any claim in that behalf:

       Provided that where, by the order aforesaid,--

       (a) an assessment is set aside or cancelled and an order of fresh
       assessment is directed to be made, the refund, if any, shall become
       due only on the making of such fresh assessment;

       (b) the assessment is annulled, the refund shall become due only of
       the amount, if any, of the tax paid in excess of the tax chargeable on
       the total income returned by the assessee."




9.     In Shelly Enterprises (supra), discussing a full bench judgment of the
Gujarat High Court, the Supreme Court observed that an assessee upon
filing return under section 139 and payment of tax under section 140A by
self- assessment, claiming allowance of the advance tax in the tax payable
according to him admits the liability that has arisen under the Act to pay the
tax on the total income as is computed by the assessee and duly quantified in
the return. The court rejected the assessees contention that upon




W.P.(C)2569/2015                                                         Page 10
invalidation of the return, such admitted liability should be refunded, as a
"startling contention".

The Supreme Court upheld the view that liability to pay tax arises because
of Section 4 (1) which does not depend on an assessment order, but upon the
rate or rates applicable for a given assessment year. The liability to pay tax
arises on the total income on the publication of rates; such tax is to be
computed by the assessee in accordance with the provisions of the Act. By
the process of self-assessment, the assessee is required to pay tax on the
basis of his return and such tax is treated as assessed tax. Therefore, until it
is disturbed by any further regular assessment, it remains as tax levied and
collected in accordance with law. The Gujarat Full Bench had ruled:

       "We are, therefore, of the view that, on failure of a regular assessment
       being made within the time prescribed or in the event of annulment of
       the assessment order pursuant to which any further demand is
       required to be made under section 156, no consequence of refund of
       the entire tax collected according to the total income shown in the
       returns filed by the assessee can ensue and such tax which is collected
       on the basis of the return filed by the assessee remains a valid and
       legal recovery in accordance with the provisions of the said Act and
       there is no question of any violation of Article 265 of the Constitution
       of India in respect of the tax so recovered on the basis of the total
       income shown by the assessee in his return."

10.    The Gujarat High Court had also said that Section 240 as it stood
prior to the addition of the proviso, the entire amount of tax properly
chargeable under the Act was required to be refunded; therefore, the
provision contained in clause (b) of the proviso to section 240 clarified what
was always implicit, namely, was to refund the amount which exceeded the




W.P.(C)2569/2015                                                         Page 11
tax which was properly chargeable under the Act. The Supreme Court
observed as follows:

       "In the cases in hand the question is only with regard to the ref und of
       tax paid by way of advance tax or self-assessment tax which was paid
       by the assessees themselves admitting their liability to pay such tax.
       The asseessees do not contend that the tax of which refund is claimed
       was not chargeable or payable, but claim refund on the sole ground
       of the failure of the authorities to pass an order of assessment.

       Having considered the authorities on the subject, we find ourselves in
       agreement with the view of the Gujarat High Court in Saurashtra
       Cement and Chemical Industries Ltd. (supra). The question that falls
       for our consideration in these appeals is whether on the failure or
       inability of the authorities to frame a regular assessment after the
       earlier assessment is set aside or nullified, the tax deposited by an
       assessee by way of advance tax or self assessment tax, or tax deducted
       at source is liable to be refunded to the assessee, since its retention by
       the revenue would result in breach of Article 265 of the Constitution
       which prohibits the levy or collection of any tax except by authority of
       law. The revenue does not dispute the position that if an assessment is
       framed, which is later nullified in appeal or revision or other
       proceedings, any amount paid by way of income tax pursuant to the
       order of assessment, over and above the advance tax and self-
       assessment tax is undoubtedly refundable under Section 240 of the
       Act. The only dispute is with regard to the refund of the advance tax
       and self-assessment tax which is paid by the assessee on his own
       assessment of his liability and is based on the return of income filed
       by him. According to the revenue, the tax so paid represents the
       admitted liability of the assessee, and failure or inability to frame
       another assessment after the earlier assessment is set aside or
       nullified in appropriate proceedings, does not entitle the assessee to
       claim refund because to this extent the assessee has admitted his
       liability to pay tax in accordance with law. The tax liability is




W.P.(C)2569/2015                                                          Page 12
       computed on the basis of the relevant Finance Act laying down the
       rate or rates at which the tax is payable and provides for other
       matters relevant to the computation of tax. Thus the tax is required to
       be paid in advance by the assessee, even before assessment is made,
       and he himself is required to compute his liability having regard to
       the rates and exemptions applicable. Thus, both the levy and
       collection of tax is in accordance with law.

       We find considerable force in the submission of the revenue and it
       must be upheld. We have earlier noticed the scheme of the Act.
       Section 4 of the Act creates the charge and provides inter alia for
       payment of tax in advance or deduction of tax at source. The Act
       provides for the manner in which advance tax is to be paid and
       penalises any assessee who makes a default or delays payment
       thereof. Similarly the deduction of tax at source is also provided for in
       the Act and failure to comply with the provisions attracts the penal
       provisions against the person responsible for making the payment. It
       is, therefore, quite apparent that the Act itself provides for payment of
       tax in this manner by the assessee. The Act also enjoins upon the
       assessee the duty to file a return of income disclosing his true income.
       On the basis of the income so disclosed, the assessee is required to
       make a self-assessment and to compute the tax payable on such
       income and to pay the same in the manner provided by the Act. Thus
       the filing of return and the payment of tax thereon computed at the
       prescribed rates amounts to an admission of tax liability which the
       assessee admits to have incurred in accordance with the provisions of
       the Finance Act and the Income Tax Act. Both the quantum of tax
       payable and its mode of recovery are authorized by law. The liability
       to pay income tax chargeable under section 4 (1) of the Act thus, does
       not depend on the assessment being made. As soon as the Finance Act
       prescribes the rate or rates for any assessment year, the liability to
       pay the tax arises. The assessee is himself required to compute his
       total income and pay the income tax thereon which involves a process
       of self-assessment. Since all this is done under authority of law, there




W.P.(C)2569/2015                                                         Page 13
       is no scope for contending that Article 265 is violated.

       What then is the effect of the failure to make an order of assessment
       after the earlier assessment made is set aside or nullified in
       appropriate proceedings? If the assessing authority cannot make a
       fresh assessment in accordance with the provisions of the Act it
       amounts to deemed acceptance of the return of income furnished by
       the assessee. In such a case the assessing authority is denuded of its
       authority to verify the correctness and completeness of the return,
       which authority it has while framing a regular assessment. It must
       accept the return as furnished and shall not in any event raise a
       demand for payment of further taxes. Accepting the income as
       disclosed in the return of income furnished by the assessee, it must
       refund to the assessee any tax paid in excess of the liability incurred
       by him on the basis of income disclosed. Even if the tax paid is found
       to be less than that payable, no further demand can be made for
       recovery of the balance amount since a fresh assessment is barred. In
       other words, the tax paid by the assessee must be accepted as it is,
       and in the event of the tax paid being in excess of the tax liability duly
       computed on the basis of return furnished and the rates applicable,
       the excess shall be refunded to the assessee, since its retention may
       offend Article 265 of the Constitution.

       We cannot lose sight of the fact that the failure or inability of the
       revenue to frame a fresh assessment should not place the assessee in a
       more disadvantageous position than in what he would have been if a
       fresh assessment was made. In a case where an assessee chooses to
       deposit by way of abundant caution advance tax or self- assessment
       tax which is in excess of his liability on the basis of return furnished
       or there is any arithmetical error or inaccuracy, it is open to him to
       claim refund of the excess tax paid in the course of assessment
       proceeding. He can certainly make such a claim also before the
       concerned authority calculating the refund. Similarly, if he has by
       mistake or inadvertence or on account of ignorance, included in his




W.P.(C)2569/2015                                                          Page 14
       income any amount which is exempted from payment of income-tax,
       or is not income within the contemplation of law, he may likewise
       bring this to the notice of the assessing authority, which if satisfied,
       may grant him relief and refund the tax paid in excess, if any. Such
       matters can be brought to the notice of the concerned authority in a
       case when refund is due and payable, and the authority concerned, on
       being satisfied, shall grant appropriate relief. In cases governed by
       section 240 of the Act, an obligation is cast upon the revenue to
       refund the amount to the assessee without his having to make any
       claim in that behalf. In appropriate cases therefore, it is open to the
       assessee to bring facts to the notice of the concerned authority on the
       basis of the return furnished, which may have a bearing on the
       quantum of the refund, such as those the assessee could have urged
       under Section 237 of the Act. The concerned authority, for the limited
       purpose of calculating the amount to be refunded under section 240 of
       the Act, may take all such facts into consideration and calculate the
       amount to be refunded. So viewed, an assessee will not be placed in a
       more disadvantages position than what he would have been, had an
       assessment been made in accordance with law."

11.    This court is of opinion that the reliance on the Karnataka High Court
ruling in K. Nagesh (supra) is inapt. That court, with respect, appears to
have overlooked the salient aspect underscored by the Supreme Court, i.e.,
the levy of tax is under Section 4 (1); the rates may vary. Likewise, filing of
return, self assessment tax, advance tax, etc. and provisions which flesh out
the mechanisms under the Act for collection cannot be construed literally.
Even Section 240 presupposes an order, leading to refund. Now, it is moot
whether the nullification on ground of non-compliance due- not due to
denial of liability - but other reasons, automatically leads to a situation
contended by the assesseee. Facially, the contention is insubstantial, because
Section 139, even while obliging the officer to a course of action, i.e.,




W.P.(C)2569/2015                                                         Page 15
declaring the return invalid, also says significantly that "and the provisions
of this Act shall apply as if the assessee had failed to furnish the return."
Furthermore, as clarified by the Supreme Court, Section 240 itself is
premised upon some authority of the revenue officials to decide whether the
entire amount deposited, or part of it, or none at all, is to be refunded.

12.    Besides the above conclusion, this court is also of the view that the
assessment is at large, given that the search resulted in a notice to the
assessee under Section 153A. No doubt, it has claimed refund; yet those
issues are to be adjudicated. Therefore, its claim cannot succeed.

13.    In the light of the above conclusions, the writ petition is without
merit. It is therefore, dismissed. No costs.


                                                        S. RAVINDRA BHAT
                                                             (JUDGE)


                                                         DEEPA SHARMA
                                                            (JUDGE)
SEPTEMBER 21, 2016




W.P.(C)2569/2015                                                             Page 16

 
 
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