B. INDIRA RANI VS COMMISSIONER OF INCOMETAX
2000 P T D 2761
[237 I T R 20]
[Kerala High Court (India)]
Before P. V Naryanan Nambiar, J
B. INDIRA RANI
Versus
COMMISSIONER OF INCOME TAX and others
Original Petition No. 8361 of 1991-U decided on /01/.
thDecember 1998.
Income-tax--
---- Recovery of tax---Notice of demand---Assessment making an addition of a particular amount on ground that it represented cash credits---Addition set aside by Tribunal with a direction to A.O. to re-examine genuineness of credit---Order of rectification deleting addition---Notice of demand issued on basis of rectified assessment order--Assessment order had not been set aside in its entirety---Recovery of tax and interest on the basis of notice of demand was valid---Indian Income Tax Act, 1961, Ss.156 & 220---Constitution of India; Art.226.
A notice of demand remains valid and effective to the extent that the tax is finally determined to be due and payable by the assessee and in case of reduction, so in the case of a remand, the -enforceability of the notice of demand is qualified by and subject to the fresh determination of the liability. The provisions contained in section 3 of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964, make this clear. It has been provided that where. Government dues are reduced in appeal or other proceedings, it shall not be necessary for the taxing authority to serve upon the assessee a fresh notice of demand and any notice of payment served upon the assessee before the disposal of the appeal or proceedings may be continued in relation to the amount so reduced from the stage at which such proceedings stood immediately before such disposal.
The Income-tax Officer completed the assessment of the assessee for the assessment year 1984-85 under section 143(3) of the. Income Tax Act, 1961, on a total income of Rs.17,32,260 which included an addition of Rs.50,000 being unexplained cash credit. The Commissioner of Income-tax (Appeals) confirmed the addition but the Tribunal set aside the addition of Rs.50,000 with a direction to the Assessing Officer to re-examine the genuineness of the cash credit after affording a reasonable opportunity to the assessee. On April 24, 1989, the Assistant Commissioner of Income-tax passed an order under section 154 of the Act in which it was held that the credit of Rs.50,000 was genuine and thus, the total income was re-determined to be Rs.16,82,260. He also issued a notice of demand on the same date. The assessee filed a petition under section 264 with a prayer to the Commissioner of Income-tax to give a direction to charge interest under section 220(2) of the Act only from the date on which the demand fell due on the basis of the notice of demand, but the same was rejected. On a writ petition against the orders:
Held, that the original assessment order and demand had not been wiped out or cancelled. The assessment order was not even set aside, it was, set aside only on the specific point regarding the addition of Rs.50,000. Therefore, it was clear that there was only a partial setting aside of the assessment order. The notice of demand was valid.
Brooke Bond & Co. Ltd. v. CIT (1986) 162 ITR 37 (SC); CIT v. Chittoor Electric Supply Corporation (1995) 212 ITR 404 (SC); New Woodlands v. CIT (1982) 138 ITR 795 (Ker.) and Ramanathan Chettiar (K. V. AL. M.) v. CIT (1973) 88 ITR 169 (SC) ref.
C. Kochunni Nair for Petitioner.
P. K. R. Menon and N. R. K. Nair for Respondent.
JUDGMENT
The petitioner is an assessee to income-tax on the file of the second respondent. She filed her return of income for the assessment year 1984-85 on July 19, 1985, before the third respondent declaring the net income at Rs.13,43,720 of which Rs.12,66,969 represented the income disclosed under section 273A of the income-tax Act, 1961 (hereinafter referred to as "the Act"), within 15 days from the date of search and seizure conducted in the petitioner's business and residential premises on March 5, 1985.
The third respondent completed the assessment for the year 1984-85 under section 143(3) of the Act on March, 31, 1986, on a total income of Rs.17,32,260 or making an addition of Rs.50,009 being unexplained cash credit. The third, respondent served EJth.P-1 assessment order and demand notice, dated March-31, 1986, on the petitioner. On appeal before the Commissioner of Income-tax (Appeals), the addition of Rs.50,000 was confirmed as per txh. P-2 order. 'The petitioner then preferred a., second appeal before The Income-tax Appellate Tribunal which as per Exh.P-3 order, dated July 6, 1988, set aside the addition of As.50, 000 with a direction to the Assessing Officer to re-examine the genuineness of the cash credit after affording a reasonable opportunity to the petitioner. Thereafter, the fourth respondent issued Exh.P-4 letter to the petitioner stating that the total tax payable by her, after keeping in abeyance the proportionate tax, interest, etc., on Rs.50,000, is Rs.14,56,755 and the net tax to be paid was worked out to Rs.3,63,349 after giving provisions for adjustment of refund due to the petitioner. These figures include a sum of Rs.2,40,897 being interest under section 220(2) of the Act.
On April 24, 1089, the second respondent Assistant Commissioner of Income-tax, passed Exh.P-5 order under section 154 of the Act in which it was held that the credit of Rs.50,000 was genuine and thus, -the total income was re-determined to be Rs.16,82,260. He also issued Exh.P-5(A) notice of the demand on the same date. On receipt of Exh.P-5(A) notice, the petitioner filed Exh:P-6 petition under section 264 of the Act before the first respondent with a prayer to give direction to the second respondent to charge interest under section 220(2) of the Act only from the date on which the demand fell due on the basis of Exh.P-5(A), but the same was rejected as per Exh.P-7, dated February 21, 1991.,Hence, the petitioner has approached this Court challenging Exh. P-5(A) demand notice and Exh.P-7 order of the first respondent and prays for quashing the same.
It is the case of the petitioner that the Income-tax Appellate Tribunal set aside the additional amount of Rs.50,000 with a direction to the Assessing Officer to re-examine the genuineness of the cash credit and so interest is leviable only from the date of Exh.P-5, i.e., April 24, 1989, the date on which order under section 154 of the Act was passed. It is her further case that Exh.P-1 assessment order was set aside by the Income-tax Appellate Tribunal and so interest should not have been demanded from March 31, 1986. According to her, the Assessing Officer overlooked the fact that Exh.P-1 assessment order was get aside by the Income-tax Appellate Tribunal and the only assessment, which will govern the case is Exh.P-5.
Counsel for the petitioner contended that the Income-tax Act does not, envisage two assessments, but only one and hence the only assessment as far as the petitioner is concerned is Exh. P-5. He thus, developed his argument on the basis of section 4 of the Act that income-tax shall be charged only for an assessment year in respect of the total income of the previous year. Piece meal assessment is not permitted under the Act, adds counsel. He placed reliance on the decisions reported in K. V. AL. M. Ramanathan Chettiar v. CIT (1973) 88 ITR 169 (SC); Brooke Bond & Co. Ltd. v. CIT (1986) 162 ITR 373 (SC) and CIT v. Chittoor Electric Supply Corporation (1995) 212 ITR 404 (SC).
On the other hand, counsel for the Revenue argued that the Income -tax Appellate Tribunal has not set aside the entire order of the assessment, but only directed reconsideration of the amount of Rs.50,000 added to the income. Counsel also placed reliance on the decisions reported in new Woodlands v. CIT (1982) 138 ITR 795 (Ken.); CIT v. Chittoor Electric Supply Corporation (1995) 212 ITR 404 (SC) and also section 3 of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964.
On going through Exh.P-3 order of the income-tax Appellate Tribunal, it is seen that the appeal was not fully allowed and only the challenge against the additional amount of Rs.50,000 was set aside. The operative portion of Exh.P-3 order is that "the appeal will be treated as partly allowed". In the circumstances, it cannot be said that the effect of Exh.P-1 assessment order was wiped out by the order of the Tribunal. Exh.P-5 order was passed giving effect to the order of the Income-tax Appellate Tribunal. It is seen from Exh.P-3 order that the original assessment order and demand have not been wiped out or cancelled by virtue of the said order. The assessment order was tot even set aside, it was set aside only on the specific point regarding the addition of Rs.50,000. Therefore, it is clear that there is, only a partial setting aside of the assessment order.
In the decision reported in New Woodlands v. CIT (1982) 138 ITR 795 (Ken.), it is held that the notice of demand remains valid and effective to the extent that the tax is finally determined to be due and payable by the assessee, and in case of reduction, so in the case of a. remand, the enforceability of the notice of demand is qualified by and subject to the fresh determination of the liability. This principle is upheld by the Supreme Court in the decision reported in, CIT v. Chittoor Electic Supply Corporation. (1995) 212 ITR 404.
The provisions contained in section 3 of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964, also support the case of the Revenue in which it is stated that where Government dues are reduced in appeal or proceedings, it shall not be necessary for the taxing authority to serve upon the assessee a fresh notice of demand and any notice of payment served upon the assessee before the disposal of the appeal or proceedings may be continued in relation to the amount so reduced, from the stage at which such proceedings stood immediately before such disposal.
From what is stated above, it is clear that there is nothing wrong in Exhs.P-5(A) and P-7. The first respondent has considered the point raised by the petitioner in Exh.P-7 order and the reasoning adopted by him is justifiable on the facts of the case. Hence, no interference is called for by this Court against Exh.P-5(A) demand notice and Exh.P-7 order.
In the result, the original petition is only to be dismissed and I do so.
M.B.A./1/FCOrder accordingly.