Applitech Solutions Ltd.,, Ahmedabad vs Assessee

ी एन0एस0 सैनी, लेखा सद य एवं ी कुल भारत, या%यक सद य के सम& BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER आयकर अपील सं./ ITA No. 2176/Ahd/2011 %नधा)रण वष)/Assessment Year: 2002-2003

Applitech Solution Ltd. DCIT (OSD), Range-1 503, Paritosh, Vs Ahmedabad. Nr. Darpan Academy Usmanpura,Ahmedabad.

PAN: AABCA 8332 P

अपीलाथ,/ (Appellant) -.यथ,/ (Respondent)

Assessee(s) by : Shri Anil Kshatriya Revenue by : Shri M.K. Singh, Sr.DR

सन ु वाई क तार ख/ Dateof Hearing : 27/03/2015 घोषणा क तार ख / Date of Pronouncement: 10 /04/2015

आदे श/O R D E R

PER N.S. SAINI, ACCOUNTANT MEMBER: This is an appeal filed by

the assessee against the order of the Commissioner of Income-Tax (Appeals)-VI, Ahmedabad dated 17.6.2011.

2. The Grounds no.1 and 5 of the appeal of the assessee are general in nature, and hence require no adjudication by us.

3. The ground no.2 of the appeal reads as under:

"2. In law and on facts as well as in the circumstances of the case of the appellant, the learned Commissioner of Income-tax (Appeals) has erred in holding that the appellant's claim that there is double disallowance to the extent of Rs.5,71,882/- is incorrect, in total disregard to the facts stated in para 1 of the Statement of Facts. The Honourable Tribunal may be pleased to ITA No.2176/Ahd/2011 2

remove the double addition for Rs.5,71,882/- on account of Provident Fund contribution."

4. The AR of the assessee submitted that in the return of income filed for the Asstt.Year 2002-03, the assessee made disallowance of Rs.18,88,427/- on account of employer's contribution towards provident fund, and Rs.17,21,934/- being employees' contribution towards PF, and thus made an aggregate disallowance of Rs.36,10,361/-. The assessment was completed on 30.11.2007 under section 143(3) of the Act and no disallowance on account of contribution towards PF by the assessee was made.

5. Thereafter, the AO issued notice under section 148 of the Act. In the re-assessment framed on 30.11.2007 under section 143(3) r.w.s. 147 of the Act, the AO made disallowance of Rs.36,10,361/- on account of contribution to PF.

6. He further submitted that assessee preferred appeal before the CIT(A) who deleted Rs.18,88,427/- being employees' contribution towards PF vide order dated 31.8.2010 and sustained addition of Rs.17,21,934/- being employees' contribution to PF, and simultaneously directed the AO to remove double disallowance of Rs.34,43,865/- voluntarily added by the assessee in its return of income. He pointed out that in para.2.4 of the order, the CIT(A) has observed as under:

"As regards ground no 4, appellant claimed that it had already disallowed Rs.34,43,868/- in original return filed but Assessing Officer again made disallowance resulting in double disallowance. This is a matter of verification. Assessing Officer is directed to verify the issue and remove any double disallowance if any."

7. However, he submitted that the AO passed order dtd.20.10.2010 giving effect to the order of the CIT(A) dated 31.8.2010 and allowed relief of Rs.18,88,427/- only to the assessee.

ITA No.2176/Ahd/2011 3 8. The assessee had simultaneously filed appeal to the Tribunal against the addition of Rs.17,21,934/- and the Tribunal order dated 26.11.2010 passed in ITA No.2856/Ahd/2010 allowed relief of Rs.11,50,052/- on account of employee's contribution to PF. The AO allowed relief of Rs.11,50,052/- while giving appeal effect to the order of the Tribunal vide his order dated 28.2.2011. In the meantime, the assessee had filed application under section 154 of the Act on 3.12.2010 requesting the AO to rectify his appeal effect order dated 20.10.2010 for allowing relief of Rs.34,43,868/- and to delete corresponding interest under section 234A, 234B and 234D of the Act. However, the AO rejected the rectification application of the assessee vide order passed under section 154 dated 28.2.2011. He submitted that aggrieved by the said order of the AO the assessee is in appeal before the Tribunal, the assessee is in appeal before the Tribunal, as excess disallowance to the extent of Rs.5,71,882/- for employees' contribution to PF.

9. DR merely relied on the order of the AO.

10. We have heard rival submissions and perused the orders of the lower authorities and material available on record. In the instant case, the CIT(A) vide its order dated 31.8.2010 passed in appeal no.CIT(A)- VI/ACIT(OSD)/R-1/215/07-08 had deleted the disallowance of Rs.18,88,427/- out of total disallowance of Rs.36,10,361/- and has further held in respect of ground no.4 of the appeal of the assessee, as under:

"2.4 As regards ground no.4 appellant claimed that it had already disallowed Rs.34,43,868/- in original return filed but AO again made disallowance resulting in double disallowance. This is a matter of verification. AO is directed to verify the issue and remove any double disallowance if any."

ITA No.2176/Ahd/2011 4 11. The AO gave effect of the aforesaid order of the CIT(A) vide order dated 20.10.2010. A perusal of the said order shows that though the AO deleted disallowance of Rs.18,88,427/- but his order is silent in respect of direction of the CIT(A) to verify the fact whether there was double addition to the extent of Rs.34,43,868/-, and if found to be correct, then the delete the disallowance of Rs.34,43,868/-. Thus, such a non-speaking order passed by the AO while giving effect to the order of the CIT(A) is bad in law, and unsustainable. We, therefore, set aside the orders of the orders of the lower authorities on this issue and remit back the matter to the file of the AO with the same directions as given by the CIT(A) vide its order dated 31.8.2010 quoted above in the order. The AO is directed to pass a speaking order on this issue after proper verification and after allowing reasonable opportunity of hearing to the assessee. Thus, this ground of appeal is allowed for statistical purpose.

12. The ground no.3 of the assessee's appeal reads as under:

"3. In law and on facts as well as in the circumstances of the case of the appellant, the learned Commissioner of Income-tax (Appeals) has erred in upholding interest charged under section 234A of the Act, without considering the facts in para 3 of the Statement of Facts, when no such interest is chargeable. The impugned interest under section 234A being bad in law, the same may be deleted."

13. The AR of the assessee submitted before us that since the original return was filed by due date on 26.11.2002, the interest was not charged while processing the return under section 143(1) on 10.10.2003 nor in the order under section 143(3) r.w.s. 147 dated 30.11.2007. Therefore, charging of such interest in the appeal effect order was wholly unwarranted. The AO declined to rectify the mistake, and the CIT(A) has agreed with the view of the AO without appreciating the facts properly. Therefore, the impugned interest charged under section 234A deserves to be deleted.

ITA No.2176/Ahd/2011 5 14. We have heard rival submissions and perused the orders of the lower authorities and material available on record. The contention of the assessee is that since no interest was charged in the original order dated 30.11.2007 passed under section 143(3) r.w.s. section 147, the AO erred in charging interest under section 234A vide order dated 20.10.2010 passed to grant effect to the order of the CIT(A), wherein no direction was issued by the CIT(A) for charging fresh interest under section 234A of the Act. We find that in order under section 143(3) r.w.s. section 147 dated 30.11.2007, the AO inter alia ordered for charging interest under section 234A of the Act. Thus, the assessee was not correct in submitting that no interest under section 234A was originally levied by the AO, and the same was only levied for the first time in the order which was passed to grant effect to the order of the CIT(A). We, therefore, do not find any force in the ground of appeal, and accordingly, the same is dismissed.

15. The ground of no.4 of the appeal reads as under:

"4. In law and on facts as well as in the circumstances of the case of the appellant, the learned Commissioner of Income-tax (Appeals) has erred in upholding that there is no mistake in charging interest under section 234B of the Act, without considering the facts stated in para 4 of the Statement of Facts. The Honourable Tribunal may be pleased to delete the impugned interest under section 234B of the Act."

16. AR of the assessee submitted before us that on a perusal of the records, it will be seen that in the original order passed under section 143(3) on 23.3.2005, no interest under section 234B was charged, since the return filed by the assessee was at a loss of Rs.1,13,54,740/- and TDS paid was Rs.14,10,993/-.

17. Further, the Tribunal in the appeal of the assessee had set aside the matter before the CIT(A) for adjudication afresh. The AO has observed that order passed under section 143(3) of the Act is based on the assessment order for the Asstt.Year 2000-01. He submitted that ITA No.2176/Ahd/2011 6

this order also has been set aside by the Tribunal and the de novo order was being agitated before the Tribunal in the second round. Therefore, for the same reasoning, the order under section 143(3) for the year under appeal cannot be said to have been reached finality. However, the AO has recorded observations towards end of the order regarding interest charged under section 234B mechanically without application of mind and such observation is non-est in law. The CIT(A) has not considered the contention of the assessee through detailed statement of facts and has dismissed the ground of the appeal.

18. In the alternative, it is the submission of the assessee the AO passed appeal effect order charging interest under section 234B till the date of such appeal effect order. The AR relied on the decision of the Hon'ble Delhi High Court in the case of Freightship Consultants (P) Ltd. vs. ITO (2008) 110 ITD 377 (Del) held that the interest under section 234B could be charged only upto the date of original assessment and not upto the date on which appeal effect is given.

19. We have heard rival submissions and perused the orders of the lower authorities and material available on record. In the instant case, the AO has charged interest under section 234B of the Act till the date of passing order giving effect to the order of the Tribunal passed on 28.2.2011. The contention of the assessee is that the interest under section 234B cannot be charged as the order was set aside by the Tribunal and de novo order was being agitated before the Tribunal in the second round, and this order under section 143(3) have not reached finality. Further, the AO also observed at the end of the order regarding interest charged under section 234B mechanically without application of mind, and hence such observation is non est in law. The alternate submission of the AR is that, in any case, interest under section 234B can be charged only upto the date of original assessment order and not upto the date on which the appeal effect is given. As regards the first ITA No.2176/Ahd/2011 7

contention of the assessee is that as the appeal was filed before the Tribunal, therefore, the order under section 143(3) has not become final, we are of considered opinion that till such order is varied by the Tribunal, the order of the CIT(A) is final. If the order of the CIT(A) is varied in appeal by the Tribunal, then the interest under section 234B shall be charged after giving appeal effect to the order of the Tribunal, but the interest will be charged upto the date of original order. This view of ours find support from the order of Delhi Bench of the Tribunal in the case of Freightship Consultants P. Ltd. Vs. ITO, 300 ITR (AT) 96 (Delhi) wherein it was held that it is mandatory for the AO to charge interest under section 234B of the Act and after the decision of the Tribunal, he was duty bound to increase or reduce the same as per the order of the Tribunal, the interest which he had charged while passing the assessment order and upto the date of the assessment order and not upto the date of the order passed by him in consequence of the order passed by the Tribunal. The order passed by the AO under section 254/154 of the Act charging interest under section 234B of the Act upto the date of the orders passed by him in consequence of the order of the Tribunal was against the provisions of the law. We, therefore, set aside the order of the lower authorities and direct the AO to charge interest under section 234B of the Act after giving effect to the order of the Tribunal till the date of the order of the original assessment. Thus, this ground of appeal of the assessee is partly allowed.

20. In the result, the appeal of the assessee is partly allowed.

Order pronounced in the Court on Friday, the 10th April, 2015 at Ahmedabad.

Sd/- Sd/-

(KUL BHARAT) ( N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER

Ahmedabad; Dated 10 /04/2015