Case Law Details

Case Name : Dy. Commissioner of Income-tax Vs. The United Western Bank Ltd. (ITAT Pune)
Appeal Number : ITA No. 1436/PN/07
Date of Judgement/Order : 08/12/2011
Related Assessment Year : 1996-97
Courts : All ITAT (4270) ITAT Pune (128)

DCIT Vs. The United Western Bank Ltd.  (ITAT Pune) –  Section 234D of the Act provides for charging of interest on excess refund granted to the assessee. Section 234D has been inserted by the Finance Act, 2003 with effect from 1.6.2003. Consequently, it is made out by the assessee that the same is applicable only from the assessment year 2004-05 on wards and not in the earlier assessment years and, therefore, no interest under section 234D could be levied for the instant assessment year. The assessment year before us is 1996-97, which is prior to the assessment year 2004-05.

The Honourable Delhi High Court in the case of Jacabs Civil Incorporated (supra) has affirmed the decision of the Special Bench of the Tribunal in the case of ITO v. Ekta Promoters Pvt. Ltd. 305 ITR (AT) 1 (Del) to the effect that section 234D of the Act was applicable only from the assessment year 2004-05 on wards and not in the earlier assessment years and, as a result thereof, we are inclined to affirm the order of the Commissioner of Income-tax (Appeals) holding that in the present case no interest under section 234D could be levied for the instant assessment year. Consequently, the order of the Commissioner of Income-tax (Appeals) is affirmed on this limited aspect without going into merit of other points made out by the Commissioner of Income-tax (Appeals).

INCOME TAX APPELLATE TRIBUNAL, PUNE

ITA No. 1436/PN/07- (Asst. Year: 1996-97)

Dy. Commissioner of Income-tax

Vs.

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The United Western Bank Ltd.

Date of Pronouncement : 08.12.2011

ORDER

PER G.S. PANNU, AM

This appeal by the Revenue arises out of the order of the Commissioner of Income-tax (Appeals)-II, Pune dated 10.07.2007 which, in turn, has arisen from an order dated 16.1.2007 passed by the Assessing Officer under section 154 of the Income-tax Act, 1961 (in short “the Act”) pertaining to the assessment year 1996-97.

2. This appeal was earlier dismissed by the Tribunal vide its order dated 17.9.12009 for want of clearance from the Committee on Disputes. Subsequently, the Honourable Bombay High Court vide its order in Income-tax Appeal No. 2634 of 2010 dated 12.7.2011 has set aside the order of the Tribunal and has held that the clearance from the COD is not mandatory, following the judgement of the Honourable Apex Court in the case of Electronics Corporation of India Ltd. V. Union of India 51 DTR 193. As a result, thereof, the captioned proceedings have been listed for hearing.

3. Although Revenue has raised multiple Grounds of appeal, but essentially the grievance of the Revenue is against the action of the Commissioner of Income-tax (Appeals) in deleting the interest of Rs. 27,56,821/- levied on the assessee following the provisions of section 234D of the Act.

4. In brief, the factual background giving rise to the impugned dispute can be summarised as follows. By a letter dated 18.12.2006, it was pointed out by the assessee that a refund of Rs. 6,78,32,796/- was received by it on 1.4.2006 in consequence of the order of the Tribunal, Pune Bench, in ITA No 205/PN/99 dated 20.4.2005. The assessee noticed a mistake in the above refund insofar as the refund was granted by the Assessing Officer as if the relief was given by the Tribunal in respect of the additions made under section 143(3) of the Act while in fact the decision of the Tribunal was to the effect of reduction/withdrawal of additional tax levied under section 143(1A) of the Act. According to the assessee, as the issue before the Tribunal was regarding the scope of section 143(1A), the order giving effect to the order of the Tribunal passed by the Assessing Officer was incorrect. The Assessing Officer discussed the entire history of the case in the order under section 154 of the Act and came to a conclusion that there was a mistake apparent from record insofar as the refund of Rs. 6,78,32,796/- was incorrectly given. The assessing  Officer, therefore, proceeded to rectify the mistake, but at the same time, charged the assessee with interest of Rs. 27,56,821/- under section 234D of the Act from 1.4.2006 to 18.12.2006, i.e. till the date of passing the order under section 154 of the Act. Subsequently, the assessee moved an application dated 5.1.2006 against the order under section 154 passed by the Assessing Officer stating that interest under section 234D levied by the Assessing Officer was not tenable. The Assessing Officer, however, rejected the said application. Against the same, assessee went in appeal before the Commissioner of Income-tax (Appeals), who directed deletion of the interest under section 234D of the Act levied by the Assessing Officer. Against the order of the Commissioner of Income-tax (Appeals), Revenue is in appeal before us.

5. Before us, the learned representative for the Respondent adverted to a preliminary issue relating to the applicability of section 234D for the instant assessment year and submitted that the same has been adjudicated in favour of the assessee by the Hon’ble Delhi High Court in the case of Director of Income-tax v. Jacabs Civil Incorporated 330 ITR 578 (Del). It is sought to be made out that apart from other Grounds, one of the reasons for deletion by the Commissioner of Income-tax (Appeals) of the interest charged by the assessing Officer under section 234D is the proposition that the provisions of section 234D were not applicable for the instant assessment year, and the  same has been since upheld by the Hon’ble Delhi High Court in the case of Jacabs Civil Incorporated (supra). On this proposition, the learned CIT-Departmental Representative, appearing for the Revenue, has not brought any contrary decision to our notice, although on other aspects of the matter the action of the Assessing Officer is sought to be defended.

6. Having heard the rival submissions on the short point relating to the applicability of section 234D of the Act in the instant assessment year, we proceed to dispose of the appeal as follows. Section 234D of the Act provides for charging of interest on excess refund granted to the assessee. Section 234D has been inserted by the Finance Act, 2003 with effect from 1.6.2003. Consequently, it is made out by the assessee that the same is applicable only from the assessment year 2004-05 on wards and not in the earlier assessment years and, therefore, no interest under section 234D could be levied for the instant assessment year. The assessment year before us is 1996-97, which is prior to the assessment year 2004-05. The Honourable Delhi High Court in the case of Jacabs Civil Incorporated (supra) has affirmed the decision of the Special Bench of the Tribunal in the case of ITO v. Ekta Promoters Pvt. Ltd. 305 ITR (AT) 1 (Del) to the effect that section 234D of the Act was applicable only from the assessment year 2004-05 on wards and not in the earlier assessment years and, as a result thereof, we are inclined to affirm the order of the Commissioner of Income-tax (Appeals) holding that in the present case no interest under section 234D could be levied for the instant assessment year. Consequently, the order of the Commissioner of Income-tax (Appeals) is affirmed on this limited aspect without going into merit of other points made out by the Commissioner of Income-tax (Appeals).

7. In the result, the appeal of the Revenue is dismissed. Decision pronounced in the open Court on the 8th Day of December, 2011.

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0 responses to “Section 234D of the Act applicable only from the assessment year 2004-05 onwards and not for the earlier assessment years”

  1. vswami says:

    On the first blush, the viewpoint put forth in the published article cited in the comments is noted to have been conceded and sought to be given effect in the recent Budget ; see the proposed clarificatory Explanation under section 234 D vide clause 85 of the Bill..

    Cross refer. the Post under > “S. 234D applies to proceeding completed on or after 1st June,2003
    Posted: 16 Mar 2012 08:39 PM PDT”

  2. vswami says:

    In the reported case, as also the Bombay HC case referred to in ‘Related Posts’,  the other connected  issue namely,- whether irrespective of the assessment year, the provision can have application  to a case where the refund was granted on or after the cut-off date of June 1, 2003, – is not seen to have been gone into; possibly, the reason is that, on the given facts and circumstances, there was no need to do so.
     According to a view, however, the Revenue may have a case to press for applying section 234 D even for the assessment year 2002-03 provided refund was granted after the cut-off date. Also for the assessment year 2003-04, as according to the very scheme of things, refund could conceivably have been issued not before but only after that date. This aspect of the matter may be found to have been discussed at length , with particular reference to the case of  Sigma Aldrich Foreign Holding Co. ( (2007) 104 ITD 95 (Bang)), in the article published in (2008) 173 TAXMAN 80.It may be of interest to know whether in that case the matter was taken up further, and if so, its final outcome.

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