Gautam Vinod Daftary, Mumbai vs Assessee

Gautam Vinod Daftary, Vs. Dy. Commissioner of Income 11, Sneh Sadan, 3rd Floor, Tax, Central Circle-3(1), Churchgate, Mumbai. Mumbai - 400 020 PAN: AABPD 0878N

(Appellant) (Respondent)

Assessee by : Shri Sanjiv M Shah, A.R. Revenue by : Shri Vijay Kumar Bora, D.R.

Date of Hearing : 11.05.2015 Date of Pronouncement : 29.07.2015

ORDER

Per Sanjay Garg, Judicial Member:

The present appeal has been preferred by the assessee against the order of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] dated 12.09.2013.

2. The assessee has taken the following grounds of appeal:

"I. In the circumstances and facts of my case, the Ld. Commissioner of Income Tax(Appeals) has erred in :-

a. confirming charging of interest u/s 234C at Rs. 4,51,054/- instead of the duly chargeable interest u/s 234C at Rs.1,20,855/- by erroneously relying on the proviso to section 234C and erroneous interpretation of law.

b. confirming levy of interest u/s 234A at Rs.6,09,775/- which is not chargeable in point of law & payable since the tax due as per the returned income has been fully paid prior to the due date of 2 ITA No.7220/M/2013 Gautam Vinod Daftary

furnishing the return of income and which levy is contrary to the direction of the CIT(A) order dated 03-11-2011. Reliance oil point of law is placed in the case of Dr. Prannoy Roy v/s CIT 254 ITR 755.

C. consequently in charging interest u/s 234B at Rs. 5,02,164/- instead of the duly chargeable interest u/s 234B at Rs. 4,87,820/-.

d. wrongly interpreting the law on the provision of section 234C & 234A.

e. not correctly considering the calculation of interest u/s. 234C &234A.

2. The Appellant crave leave to add, delete or substantiate any grounds of appeal at the time of hearing."

3. The brief facts of the case are that the assessee had filed return of income for the assessment year 2007-08 on 18-3-2008. Order u/s. 143(1) was passed on 02-12-2008. The assessee filed appeal against the said order on the issue of levying of interest u/s 234A at Rs.6,09,775/-, u/s 234B at Rs.6,05,834/- and u/s 234C at Rs.4,57,055/-.

The Ld. CIT(A) allowed the appeal vide his order dated 3.11.2011 as amended/rectified u/s 154 of the I.T. Act vide order dated 9.3.2012, holding that the interest u/s. 234A was not chargeable if the entire taxes along with the interest up to the date of the payment of taxes has been paid-by the assessee before the due date of filing of the return; following the Supreme Court decision in case of CIT v/s. Prannoy Roy 309 ITR 23 1 (SC), he directed the Assessing Officer (hereinafter referred to as the AO) not to charge the interest u/s 234A after verification of the facts whether all the tax on returned income has been paid by the assessee before the filing of the return. In relation to the issue of levy of interest u/s 234B and 234C, the Ld. CIT(A) directed the AO to modify the charging of interest in accordance with provisions of law.

3 ITA No.7220/M/2013 Gautam Vinod Daftary

4. Thereafter, the AO passed order dated 16/04/2012 giving effect to the order of the CIT(A) and thereby charging interest u/s. 234A, stating that the assessee had short paid the taxes before the due date of the filing the return. The AO also computed and charged interest u/s. 234B and 234C of the Act. Against the said order giving effect to CIT(A) order, the assessee again filed appeal before the CIT(A).

5. The contention of the assessee with regard to the levy of interest of Rs.4,51,056/- u/s. 234C has been that the interest should be charged only at Rs.1,20,855/-. That the long term capital gain had accrued to the assessee on 28/03/2007 i.e. after 15/3/2007 when the date of payment of last, instalment of advance tax had expired. Since the assessee had not paid advance tax on or before 31/3/2007 in respect of capital gain accrued, the assessee was liable to pay interest u/s. 234C for only a period of one month from 16/3/2007 to 31/3/2007. The subsequent liability to interest after 01/04/2007 has been covered by the provisions of section 234B. The interest u/s. 234C for the period of one month as works out to Rs.1,20,855/- has been duly considered and reflected in the return of income and computation of income. Reliance was placed by the assessee on the decision of the Rajasthan High Court in the case of "CIT v. Smt. Prernlata Jalani" 264 ITR 744 (Raj). It was further submitted that the capital gain income was received by the assessee by actual realisation only on 05/04/2007 and the same was credited in the bank account of the assessee on the said date. In view of the above, it was submitted to charge interest for default after 15/3/2007 i.e. for one month at Rs. 1,24,903/- instead of Rs.4,51,055/- as worked out by the AO. The assessee further submitted that consequent upon recalculation of interest chargeable u/s. 234C and deletion of interest charged u/s. 234A, the AO be directed to rework interest u/s. 234B. It was submitted that since the tax payable included interest u/s. 234B and 234C 4 ITA No.7220/M/2013 Gautam Vinod Daftary

up to 31/7/2007 which had been fully paid by self assessment tax and in fact the assessee had paid excess self assessment tax resulting into refund due to the assessee.

The Ld. CIT(A) however agreed with the view of the AO that the benefit of proviso to section 234 C is available to an assessee, only if the assessee pays the taxes arising out of capital gains as part of the remaining instalments on or before 31st March of the financial year. Thus the assessee, in the case in hand, should have paid full taxes by way of advance tax on or before 31/3/2007, if the interest u/s.234C ought not to be charged/charged concessionally. However, in this case, the assessee had not complied with this requirement. A sum of Rs. 1,30,50,000/- had been paid subsequently by way of Self Assessment tax on 31/07/2007 i.e. after a lapse of 4 months from the end of the financial year. He therefore held that the AO rightly levied the interest u/s. 234C as per the provisions of the law. He also upheld the levy of interest u/s 234B observing that as per the computation there was a shortfall of Rs. 84,378/- in the payment of taxes as on 31/07/2007 i.e. on the last date of filing of the return. The Ld. CIT(A) also upheld the findings of the AO to the effect that Interest u/s. 234A is not charged only in the event of assessee having paid full taxes before the due date of return of income. However in the case in hand there was a shortfall in the payment of tax on the due date of filing of the return. He therefore held that the levy of interest u/s. 234A was mandatory. He rejected the contention of the assessee that all the interest was duly paid on the due date of filing of return i.e. on 31/7/2007. Aggrieved by the order of the Ld. CIT(A), the assessee has come in appeal before us.

6. We have heard the rival contentions of the Ld. representatives of the parties. The assessee had received Long term capital gains on 28.03.2007. The contention of the Ld. AR has been that interest u/s 234C should have been 5 ITA No.7220/M/2013 Gautam Vinod Daftary

computed only for a period of one month from 16.03.2007 to 31 .03.2007, because the liability for tax has accrued after the date for payment of third instalment i.e. after 15.03.2007.

The AO however, has worked out the interest for all the three quarters because in his considered view the benefit as per the proviso to Sec. 234C(1)(b) was not available to the assessee as the payment of such long term capital gain that had accrued on 28.03.2007 was not paid by 31.03.2007. The Ld. AR on the other hand has relied upon the decision of the Hon'ble Rajasthan High in the case of 'CIT V/s Smt. Premlata Jalani' (2003) 264 ITR 744 (Raj) in relation to the issue of computation of interest u/s 234C wherein it has been held that liability to pay tax by way of advance tax in case of capital gains arises only after the transaction has taken place. The ld. AR has further relied on the decision of the Hon'ble Gujarat High Court in the case of Bharat B. Shah v. ITO (2013) 31 Taxman.com 34 (Gujarat) in relation to the issue of levy of interest u/s 234A wherein it has been held that interest can only be charged on the shortfall and not on the entire amount of assessed tax. The Ld. A.R. has further brought our attention to the decision of the Ld. CIT(A)-5 in the case of brother of the assessee namely 'Sh. Bharat Vinod Daftary', wherein, the said ld. CIT(A) in relation to identical income of capital gains under similar circumstances has allowed the appeal vide his order dated 17.9.2013 in appeal No. IT-50/12-13 has allowed the claim of the brother of the assessee observing as under:

"The assessee has also relied onto the decision of the Hon'ble High Court of Rajasthan in the case of CIT V/s Smt. Premlata Jalani (2003) 264 ITR 744 (RAJ) wherein it has been held that liability to pay tax by way of advance tax in r/o transactions resulting in capital gains arises only after the transaction has taken place and that prior to that date there is no liability to advance tax on income rising as capital gains I have considered the issue and taken note of the computation made by the AO as well as that submitted by the assessee. In view of the said decision, interest u/s 234C will have to be worked out only for a month and not for 6 ITA No.7220/M/2013 Gautam Vinod Daftary

all the three quarters as has been done by the AO. Accordingly, the AO is directed to re-compute the interest chargeable u/s 234C keeping in view the said decision of the High Court in the case of Smt. Premlata Jalani (supra). The assessee has computed the interest at Rs. 1,32,5671-. Apparently, the computation given by the assessee appears to be correct. Nevertheless, the AO may verify and charge it accordingly.

4.2 As regards to the interest chargeable u/s 234B, it is noted that the AO has computed the amount at Rs. 5,42,106/- whereas as per the computation given by the assessee this amount should be Rs. 5,02,813/-. What I find that this difference has been on account of the increased liability of interest u/s 234C which was worked by the AO at Rs. 4,66,459/- instead of the amount of Rs. 1,32,567/- as contended by the assessee. The issue as regards to the interest u/s 234C has already been decided by me in above para 4.1. After that interest u/s 234C is revised, the interest u/s 234B Wll have to be modified. The AO accordingly is directed to re-compute the interest u/s 234B also.

4.3 As regards to the interest chargeable u/s 234A, the assessee has relied onto the decision of the Honble Supreme Court in the case of CIT V/s Pranoy Roy (2009) 309 ITR 231 (SC) and submitted that AO ought to have taken the self assessment tax paid before the due date of filing of return. The AO is accordingly directed to re- compute the interest u/s 234A as per the decision of Honble Supreme Court in the said case only on the difference amount between tax assessed and amount which assessee had paid before the due date. As per the assessee no such difference remains, if interest u/s 234C is computed in accordance with the decision of the Honble High Court in the case of Smt. Premilata Jatani (supra). Apparently, assessee's this claim appears to be correct. The AO may however verify the same and re-compute the interest u/s 234A, if any.

5. For statistical purposes, the appeal is treated as allowed."

7. After considering the rival contentions and going through the case laws, we agree with the above findings of the Ld. CIT(A)- 5 in the case of the brother of the assessee namely ' Sh. Bharat Vinod Daftary'. Moreover in the identical set of facts, there should not be divergent and contrary decisions relating to the same issue. The AO is accordingly directed to compute the interest u/s 234 C, 234B following the decision of the Rajasthan High Court (supra) and u/s 234A in the light of the decision of the Hon'ble Supreme Court in the case of 'CIT V/s Pranoy Roy' (supra) and taking into consideration the decision of the Hon'ble Gujarat high Court in the case 'Bharat B. Shah' 7 ITA No.7220/M/2013 Gautam Vinod Daftary

(Supra) and in the line of the order dated 17.09.2013 of the Ld. CIT(A)-5 (supra).

8. In the result, the appeal of the assessee is hereby allowed for statistical purposes.

Order pronounced in the open court on 29.07.2015.

Sd/- Sd/- (R.C. Sharma) (Sanjay Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai, Dated: 29.07.2015. * Kishore, Sr. P.S.

Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR Concerned Bench //True Copy// [

By Order

Dy/Asstt. Registrar, ITAT, Mumbai.