$~R20
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA 457/2005
Date of decision: 16th November, 2017
M/S TELEVISTA ELECTRONICS LTD. ..... Appellant
Through : Mr. Satyen Sethi, Mr.Arta Trana
Panda, Ms.Gargi Sethee, Advocates.
versus
DY. COMMISSIONER OF INCOME TAX ..... Respondent
Through : Mr. Asheesh Jain, Senior Standing
counsel for Income Tax Department
with Mr.Shahrukh Ejaz, Advocate.
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MS. JUSTICE PRATHIBA M. SINGH
SANJIV KHANNA, J. (Oral)
This appeal by the assessee-M/s Televista Electronics Limited relates
to assessment year 1989-90 and arises from the order dated 31st May, 2004
passed in ITA No. 3888/Del./1999.
2. The appeal was admitted for hearing vide order dated 11th July, 2005
which also frames a substantial question of law. For completeness, we
would reproduce the relevant portion of the order dated 11th July, 2005,
which reads as under:
"The Assessing Officer's order revised the assessment
order for the year 1989-90 and directed that demand
raised for the said year shall be deemed to have been
raised at the time of the making of the original
assessment order in regard to which a demand notice
had also been served upon the assessee. The Assessing
Officer had on that basis directed that interest under
Section 220(2) was chargeable on the amount
ITA 457/2005 Page 1 of 8
demanded under Section 156. The following
substantial question of law is in that backdrop
formulated for determination:
"Whether the Tribunal was, in the facts and
circumstances of the case, right in holding that no
appeal lies against the said order under Section 246A
(1)(c) of the Income Tax Act, 1961 ?"
3. Initially, we wanted to reframe the question of law to decide the
question of chargeability of interest under Section 220(2) of the Income Tax
Act, 1961(`Act' for short) on merits. However, in the factual matrix noticed
below, we have refrained and have not reframed the question of law, as it is
unclear whether interest under Sections 215 and 217 of the Act was
chargeable and could be charged.
4. The Return declaring income of Rs.12,05,070/- for the Assessment
Year 1989-90 was filed by the appellant-assessee on 29th December, 1989.
The assessee had not claimed set off of the brought forward losses for earlier
years in the Return of income, though it appears that the assessee had
brought forward losses for the Assessment Years 1987-88 and 1988-89 as
per assessments made.
5. These brought forward losses were duly accounted while passing the
assessment order under Section 143 (3) of the Act on 14th February, 1992 as
income for the assessment year 1988-89 under the normal provisions was
assessed as nil. The assessing officer, thereupon, invoked provisions of
Section 115J of the Act relating to book profits and income of the assessee
under the said Section was assessed at Rs.11,26,990/-.
6. Issue of disallowance of Sales Tax amounting to Rs. 32,71,862/- u/s
43B of the Act, which had become subject matter of the assessment order
ITA 457/2005 Page 2 of 8
for the assessment year 1987-88, was remanded to Assessing Officer for
reconsideration in the light of the judgement of the Supreme Court in Allied
Motors (P) Ltd. v. CIT, (1997) 224 ITR 677(SC). The Assessing Officer
applied the said judgement and as Sales tax amounting to Rs. 32,71,862/-
was paid within the time, he allowed the said expenditure. Consequently, the
Assessing Officer reworked the income for assessment year 1988-89 and an
order u/s 154 of the Act was passed reducing the loss for assessment year
1988-89 to Rs. 2,47,077/-.
7. Assessment order for the assessment year 1989-90 was also made
subject matter of order under section 154 of the Act as brought forward
losses for assessment year 1988-89 had got reduced. Some relief had also
been granted to the assessee by the Commissioner (Appeals). Consequently,
the assessing officer passed the rectification order under section 154 of the
Act dated 30th November, 1998 for the assessment year 1989-90, assessing
income under the normal provisions at Rs. 19,27,199/-. Section 115J of the
Act was therefore not attracted. The assessee has not disputed the
computation of income made vide the order dated 30th November, 1998
under Section 154 of the Act passed by the Assessing Officer.
8. This order under Section 154 of the Act dated 30th November, 1998
on the question of interest u/s 220(2) had directed:
"Since the asstt. Order of A Y. 89-90 has been revised
in consequence of the decision of the ITAT in A Y. 87-
88, therefore, demand raised in A Y. 89-90 shall be
deemed raised at the time of original assessment order
for which demand notice was served at the time of
regular assessment order. In view of above facts
interest u/s 220(2) is chargeable on the demand of Rs.
ITA 457/2005 Page 3 of 8
5,57,061/-created by this order".
9. Consequent to the aforesaid directions in the order under Section 154
of the Act, Computation Sheet in ITNS - 150 was prepared. The tax payable
on the income of Rs.19,27,199/-, including the surcharge, was
Rs.11,12,958/-. The assessee had paid advance tax of Rs.6,50,877/-. There
was a short fall of Rs.4,62,081/-. The order records that the assessee would
be liable to pay interest under Section 220(2) from 4th March, 1992 to 30th
November, 1998 for a period of 81 months amounting to Rs.6,26,755/-.
Accordingly, the total demand payable pursuant to the order u/s 154 was
computed.
10. We may, for clarity, record that the computation sheet states that the
interest earlier allowed under Section 244 (1A) of the Act of Rs.94,980/-
shall stand withdrawn. On this, however, there is no controversy or issue
before us.
11. The assessee thereafter preferred an appeal specifically challenging
the direction to charge interest u/s 220(2) in the order under Section 154 of
the Act. It was submitted that interest was not leviable and reliance was
placed on some legal pronouncements.
12. The Commissioner of Income Tax (Appeals) allowed the appeal
recording that interest under Section 220 (2) of the Act was chargeable only
when there was non-payment pursuant to notice u/s 156 of the Act. Interest
u/s 220(2) would not be chargeable from the date of the original assessment
order.
13. Revenue preferred an appeal before the Tribunal which, as noticed
above, has been allowed, inter alia, observing that the first appeal by the
ITA 457/2005 Page 4 of 8
appellant-assessee under Section 246(1)(c) of the Act challenging levy of
interest under Section 220(2) of the Act was not maintainable before the
Commissioner of Income Tax (Appeals). The decisions relied upon by the
assessee were distinguished on the ground that they relate to levy of interest
under Sections 215 and 217 of the Act.
14. In our opinion, in the present case, the appeal would be maintainable
under clause (c) to Section 246(1) of the Act. The said provision, as
applicable to the case of the assessee in the relevant year when the appeal
was preferred, reads as under:
Appealable orders.
246. (1) Subject to the provisions of sub-section
(2), any assessee aggrieved by any of the following
orders of an Assessing Officer (other than the Deputy
Commissioner) may appeal to the Deputy
Commissioner (Appeals) [before the 1st day of June,
2000] against such order-
XXXXXX
(c) an order under section 154 or section 155
having the effect of enhancing the assessment or
reducing a refund or an order refusing to allow the
claim made by the assessee under either of the said
sections.
(emphasis supplied)
15. The order under Section 154 of the Act had the effect of enhancing
the assessment. Such orders are appealable on all aspects decided and
adjudicated. The order under Section 154 of the Act had also specifically
dealt with and examined the question of interest u/s 220(2) of the Act and
the date from which the interest was chargeable. The direction to charge
interest was specifically given in the order under Section 154 of the Act. The
ITA 457/2005 Page 5 of 8
claim and contention of the appellant assessee to the contrary was rejected
and disallowed. The assessing officer had refused to accept the contention
made by the assessee that interest would not be chargeable under Section
220(2) of the Act, until and unless there was non-payment pursuant to the
order passed. This is a peculiar case wherein the question of levy of interest
under Section 220(2) of the Act, which is payable on non payment, was
decided, levied and imposed in the order under Section 154 of the Act. In
the present case, there was a specific direction and finding in the order
passed under Section 154 in respect of charging interest under Section
220(2) of the Act. Consequently, the direction for payment of interest which
was contested by the appellant-assessee would be appealable under clause
(c) of Section 246 (1) of the Act.
16. We are aware of the decisions in Associated Stone Industries (Kotah)
Ltd. Vs. CIT [1971] 224 ITR 560 (SC), Central Provinces Manganese Ore.
Co. Ltd. Vs. CIT [1986] 160 ITR 961 (SC), Commissioner of Income-Tax
Vs. M/s. Mahabir Prashad & Sons (1980) 125 ITR 165 (Del), which draw a
distinction between cases where the assessee denies his liability to pay
interest; and where quantum of interest is in dispute or where waiver and
reduction is prayed. In the latter cases appeal is not maintainable, whereas
in the former set of cases where the assessee claims that he is not liable to
pay interest at all, appeal would be maintainable and the plea as to non
liability to pay interest may be raised while disputing the assessment in
appeal. However, more appropriate and direct on the point is the decision of
the Bombay High Court in British Bank of India Vs. Commissioner
Income-Tax [2004] 266 ITR 269 (Bom.), wherein reference was made to
ITA 457/2005 Page 6 of 8
Section 246 (1) (f) which was pari materia to the clause applicable and it
was held as under:
"7. However, we find merit in the argument advanced
on behalf of the assessee that appeal was maintainable
under section 246(1)(f). For the sake of convenience,
we reproduce hereinbelow section 246(1)(f) which
reads as follows:--
"Subject to the provisions of sub-section (2), any
assessee aggrieved by any of the orders of ITO may
appeal against such order under section 144 (sic. 154)
or section 155 having the effect of enhancing the
assessment or reducing the refund or refusing to allow
the claim made by the assessee under either section
154 or section 155."
8. In the case of Empire Industries
Ltd. v. Commissioner of Income-Tax reported in 193
ITR page 295, the assessee had paid advance tax of Rs.
24.47 lacs on regular assessment being completed
under section 143(3). The AO raised the demand under
section 156 of the Act of Rs. 7.27 lacs including
interest of Rs. 56,000/-. By Order dated 27-6-1974, the
Appellate Authority allowed the appeal partly. While
giving effect to the Appellate Order, the ITO
determined the amount refundable to the assessee at
Rs. 9.46 lacs. The amount was refunded but interest
thereon under section 214 of the Act was not paid.
Being aggrieved, the assessee filed an appeal before
the Appellate Authority and claimed that the ITO ought
to have granted interest under section 214. The
Appellate Authority and the Tribunal held that the
appeal was not competent. On reference, it was held by
the Bombay High Court that Income Tax Officer's
Order had been passed under section 154 and appeal
therefrom was competent under section 246(1)(f). This
Judgment, to the above extent, applies to the facts of
ITA 457/2005 Page 7 of 8
our case. In the present case also, the AO was
concerned with giving effect to the Order dated 31-12-
1986 passed by the Commissioner of Income-Tax
(Appeals) when he failed to grant interest under
section 214 and under section 244(1A). This is very
clear also from page 5 of the paper-book which refers
to Order of Assessing Officer dated 18-2-1987 giving
effect to the Order passed by the Appellate Authority
dated 31-12-1986. Hence, the second part of the above
issue is answered in favour of the assessee and against
the Department. We accordingly hold that the appeal
filed by the assessee with CJT (Appeals) being Appeal
No.CIT(A)/XXII/ARIII/D/227/87-88 was maintainable
under section 246(1)(f)."
17. The question of law is accordingly, answered in favour of appellant-
assessee and against the Revenue. We, however, clarify that we have not
examined the question of chargeability of interest under Section 220(2) of
the Act, or the date from which it would be payable as the said question
would be examined by the Tribunal.
18. We have not expressed any opinion on the contention raised by the
counsel for the Revenue that they would be entitled to raise the issue of levy
of interest under Sections 215 and 217 of the Act. If any such contention is
raised, the same would be examined by the Tribunal including the question
whether the Revenue can raise such a contention or not.
19. The appeal is disposed of in above terms with no order as to costs.
SANJIV KHANNA, J.
PRATHIBA M. SINGH, J.
NOVEMBER 16, 2017
j
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