News Update

CBIC revises tariff value of edible oils, gold & silverFormer IPS officer Sanjiv Bhatt jailed for 20 yrs for planting drugs to frame lawyerCentre receives Rs 18.5 lakh crore tax revenue upto Feb monthUN says Households waste across world is now at least one billion meals a dayExpert Committee on developing GIFT IFSC as 'Global Finance and Accounting Hub' submits report to IFSCAIndia, China hold fresh dialogue for complete disengagement on Western borders: MEADefence Production issues notification for re-organisation of DGQAThakur says India is prepared for 2036 OlympicsCBDT substitutes Form in ITR-5EV Revolution: Lessons for India to learn from US and China!London court green-signals auction of luxury apartment of fugitive Nirav ModiGovt consults RBI; finalises borrowing plan for first half of FY 2024-25Gadkari says Farmers’ protest is politically-motivatedVP calls upon women entrepreneurs to be 'Vocal for Local'America offers USD 10 mn bounty for information on ‘Blackcat’ hackers after UnitedHealth gets hitI-T- The order of the ITSC can only be reopened in cases of fraud or misrepresentation: HC8 persons including Hezbollah militants killed in Israeli strike on LebanonMacron pillories EU-South Africa trade deal; calls it ‘really bad’ in BrazilThailand’s Lower House okays Bill to legitimise same-sex marriageYellen warns China against clean energy dumpingMilky Way’s central black hole - Twisted magnetic field observedCus - Assessee has not proved beyond reasonable doubt that goods in question imported under air way bills/bills of entry were in fact filed by him and hence the only natural corollary available to Revenue is confiscation of same: CESTATSmall investors help Trump Media’s valuation skyrocket to USD 13 billionJustice Ritu Raj Awasthi joins as Judicial member of Lokpal
 
I-T - Whether upon invalidation of return of income, liability admitted by assessee in earlier order should be refunded without proceeding for completion of assessment, if any - NO: HC

By TIOL News Service

NEW DELHI, SEPT 28, 2016 : THE issue is, Whether upon invalidation of the return of income filed by the assessee, liability admitted by assessee in earlier order should be refunded without proceeding for completion of assessment, if any. No is the answer.

Facts of the case

The assessee sought quashing of the notice issued u/s 226(3) and a further direction to the Income tax authorities to vacate the orders issued by it- for attaching its bank accounts. Assessee is an unlisted public limited company, 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 Rs. 289,61,04,740. On the said income, total tax and interest payable in accordance with the provisions of the Act worked out to Rs. 113,60,91,737/-. Against this, the Petitioner claimed credit of prepaid taxes amounting to Rs. 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 Rs. 85,97,07,400/- as balance tax payable. The Petitioner also paid Rs. 65 Crores on different dates in April 2014 thereby leaving the balance of tax along with interest payable at Rs. 20,97,07,400/-. The Petitioner received notice dated 29.10.2014 issued by the Respondent u/s 139(9) By that notice, the revenue's 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). 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). 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. 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), thereby attaching various bank accounts of the Petitioner maintained by the respondent bank, without any prior or even any subsequent notice to it.

Assessee had argued that 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 was 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.

Assessee further argued 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 u/s 156 nor any intimation u/s 143(1) 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 jurisdiction to recover any amount on that aspect. It was stated that after filing of the present petition, the assessee filed a belated return, claiming total income of Rs. 139.60 crores, on which after adjusting amounts paid, a refund of over Rs. 21 crores was claimed. Later, during pendency of the present proceedings, search proceedings took place in the petitioner's premises, after which it received notice u/s 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 Rs. 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.

The Counsel for the Revenue argued that it was an admitted position, that for AY 2013-14, assessee filed its return of income on 31.03.2014 declaring an income of Rs. 289,61,04,740/-. On the said income, total tax and interest payable then was Rs. l13,60,91,737/-. Hence it was clear and evident that the total admitted tax and interest liability payable at that point of time amounted to Rs. 113,60,91,737/-. After adjusting pre-paid taxes amounting to Rs. 27,63,84,333/-, the balance amount payable was Rs. 85,97,07,400/-. Thereafter the petitioner paid Rs. 65 crores only on different dates in April 2014. Yet, the balance of admitted tax and interest payable amounts to more than Rs. 24 crores. It was highlighted that by virtue of Section 140A (3) there was no manner of doubt that the Petitioner was an assessee in default and therefore, all the resultant consequences are attracted and apply to it under the provisions of the Act.

Held that,

++ 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 Rs. 65 crores. There was yet a shortfall of about Rs. 24 crores; since this shortfall was not made good- not because the assessee disclaimed liability, but rather because of its financial constraint, AO declared the return invalid. When the revenue has sought to take coercive measures, the assessee contends that because of the declaration of the AO u/s 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. In Shelly Enterprises, discussing a full bench judgment of the Gujarat HC, the SC observed that an assessee upon filing return u/s 139 and payment of tax u/s 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 invalidation of the return, such admitted liability should be refunded, as a "startling contention". The SC 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 AY. 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 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 u/s 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 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. The Gujarat HC 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 tax which was properly chargeable under the Act;

++ this court is of opinion that the reliance on the Karnataka HC ruling in K. Nagesh 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., 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. 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 u/s 153A. No doubt, it has claimed refund; yet those issues are to be adjudicated. Therefore, its claim cannot succeed. In the light of the above conclusions, the writ petition is without merit. It is therefore, dismissed.

(See 2016-TIOL-2297-HC-DEL-IT)


POST YOUR COMMENTS
   

AR not Afar by SK Rahman

TIOL Tube Latest

Shri Shailendra Kumar, Trustee, TIOL Trust, giving welcome speech at TIOL Awards 2023




Shri M C Joshi, Former Chairman, CBDT




Address by Shri Buggana Rajendranath, Hon'ble Finance Minister of Andhra Pradesh at TIOL Awards 2023