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Shri Shantilal C. Rathod 73, Crystal A New Link Road Dahanukar Wadi, Kandivali (W) Mumbai 400067 Bandra (E), Vs. A C I T 25(3) C-11 Road No. 308, 3rd Floor Bandra Kurla Complex Mumbai 400051
January, 30th 2015
               IN THE INCOME TAX APPELLATE TRIBUNAL
                         "SMC" Bench, Mumbai

                Before Shri D. Manmohan, Vice President

                         ITA No. 5770/Mum/2014
                        (Assessment Year: 1987-88)

     Shri Shantilal C. Rathod              A C I T 25(3)
     73, Crystal "A" New Link Road     Vs. C-11 Road No. 308, 3rd Floor
     Dahanukar Wadi, Kandivali (W)         Bandra Kurla Complex
     Mumbai 400067                         Bandra (E), Mumbai 400051
     PAN ­ AAAPR9695N
                 Appellant                          Respondent

                    Appellant by:      Shri Lakshminarayanan &
                                       Shri Vinay Sinha
                    Respondent by:     Shri Vijay Kumar Boara

                    Date of Hearing:           29.01.2015
                    Date of Pronouncement:     29.01.2015

                                ORDER

Per D. Manmohan, V.P.

      This appeal by the assessee is directed against the order passed by
the CIT(A)-35, Mumbai and it pertains to A.Y. 1987-88.




2.     Assessment   was   originally   completed   on   a   total   income   of
Rs.4,78,883/-. The assessee was deriving share of profit from firms which
are engaged in dealership business. A search was conducted in the
premises of the assessee in 1988 wherein a document referred to as "Red
Book" was found and seized. The book covered three assessment years
1986-87, 1987-88 and 1988-89. Consequent to the search the assessee
disclosed a total sum of Rs.21,42,260/-. The AO added the same in the
three assessment years in 144 proceedings. At this stage the assessee
preferred an appeal before the CIT(A) stating that the same should not be
assessed in the hands of the assessee but in the hands of the firm. In the
light of the averment the learned CIT(A) directed the AO to examine as to
whether the disclosed amounts were to be assessed in the hands of the
firm or in the hands of the assessee. Fresh assessment order was passed,
which was also challenged and finally the Settlement Commission passed
                                     2                     ITA No. 5770/Mum/2014
                                                        Shri Shantilal C. Rathod

an order on 09.06.2010 wherein the total income was determined as
under: -

      AY 1986-87         Rs.2,79,723/-
      AY 1987-88         Rs.2,92,614/-
      AY 1988-89         Rs.2,.74,880/-

3.    In the meantime the TRO sought to collect the taxes by adjusting the
amounts refundable. He also levied interest under section 220(2) of the
Act. According to the assessee there is no specific direction by the
Settlement Commission to charge interest under section 220(2) and hence
the AO erred in charging interest. In the 154 order passed by the AO it was
clarified that the Settlement Commission did not pass any specific order
with regard to non-charging of interest under section 220(2) of the Act and
therefore rejected the rectification petition. On an appeal filed by the
assessee against the said order the learned CIT(A) confirmed the action of
the AO and thus further appeal was filed before the Tribunal.

4.    The Bench is concerned here with A.Y. 1987-88 only wherein
interest was charged under section 220(2) of the Act. The learned counsel
for the assessee adverted the attention of the Bench to the observations
made in the order passed by the Settlement Commission, at page 28 and
also Annexure-2, i.e. computation of total income, to submit that the case
of the assessee was that interest is not payable as large amount of refund
is due to the assessee from the Income Tax Department and the same
was impliedly accepted since there is no specific direction to the AO, in
the detailed computation of income assessable, with regard to charging of
interest under section 220(2) of the Act. It is not in dispute that the taxes
already paid by the assessee for earlier assessment years are in excess of
the tax payable for those years and in fact it was adjusted against the tax
payable in this year. The learned counsel for the assessee relied upon the
decision of the Hon'ble Delhi High Court in the case of L.N. Gadodia &
Sons (P) Ltd. 207 CTR 669 to submit that the AO has to strictly follow the
order passed by the Settlement Commission and he is entitled to charge
interest only if it is specifically mentioned in the order passed by the
Settlement Commission. It was not open for the AO to charge interest
                                       3                     ITA No. 5770/Mum/2014
                                                          Shri Shantilal C. Rathod

under section 220(2) since it was not indicated in the Settlement
Commission's order. The learned counsel for the assessee contended that
even in the present case the assessee raised the plea before the
Settlement Commission that interest is not chargeable and the same was
noted by the Bench of the             Settlement Commission and in the
computation portion there was no specific indication with regard to
charging of interest under section 220(2) of the Act and hence the AO was
not justified in charging interest.

5.    On the other hand, the learned D.R. submitted that in Annexure-2
the total income assessable was indicated with a further direction to
include surcharge and interest, if any, after giving credit for taxes already
paid, which implies that the AO is authorised to charge interest
independently. He thus supported the order passed by the Tax
Authorities.

6.    I have carefully considered the rival submissions and perused the
record. It is not in dispute that at page 28 of the order passed by the
Settlement Commission the claim of the assessee with regard to the
reasons for non-payment of tax was mentioned and it was also contended
that interest is not chargeable as large amount of refund is due to the
assessee from the Income Tax Department. The fact that large amount is
due is not disputed even at this stage. It is also not in dispute that there is
no direction by the Settlement Commission to charge interest under
section 220(2) of the Act. In other words, the claim of the assessee, noticed
at page 28 of the order passed by the Settlement Commission, was not
rejected specifically. Thus it cannot be said that there is any specific
direction to the Tax Authorities to charge interest under section 220(2) of
the Act. Under identical circumstances the Hon'ble Delhi High Court, in
the case cited supra, observed that in the absence of any specific direction
by the Settlement Commission it was not open for the AO to charge
interest under section 220(2) of the Act.

7.    Having regard to the circumstances of the case I am of the view that
interest was erroneously charged by the AO by incorrect appreciation of
the order passed by the Settlement Commission. I, therefore, set aside the
                                          4                     ITA No. 5770/Mum/2014
                                                             Shri Shantilal C. Rathod
{Ad}
order passed by the CIT(A) and direct the AO not to charge interest under
section 220(2) of the Act.

8.        In the result, appeal filed by the assessee is allowed.

Order pronounced in the open court on 29th January, 2015.

                                                            Sd/-
                                                      (D. Manmohan)
                                                       Vice President

Mumbai, Dated: 29th January, 2015

Copy to:

     1.   The   Appellant
     2.   The   Respondent
     3.   The   CIT(A) ­ 35, Mumbai
     4.   The   CIT­ 25, Mumbai City
     5.   The   DR, "SMC" Bench, ITAT, Mumbai

                                                          By Order

//True Copy//
                                                      Assistant Registrar
                                              ITAT, Mumbai Benches, Mumbai
n.p.

 
 
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