Shantilal C. Rathod, Mumbai vs Assessee

Shri Shantilal C. Rathod A C I T 25(3) 73, Crystal "A" New Link Road Vs. C-11 Road No. 308, 3rd Floor Dahanukar Wadi, Kandivali (W) Bandra Kurla Complex Mumbai 400067 Bandra (E), Mumbai 400051 PAN - AAAPR9695N Appellant Respondent

Appellant by: Shri Lakshminarayanan & Shri Vinay Sinha Respondent by: Shri Vijay Kumar Boara

Date of Hearing: 29.01.2015 Date of Pronouncement: 29.01.2015

ORDER

Per D. Manmohan, V.P.

This appeal by the assessee is directed against the order passed by the CIT(A)-35, Mumbai and it pertains to A.Y. 1987-88.

2. Assessment was originally completed on a total income of Rs.4,78,883/-. The assessee was deriving share of profit from firms which are engaged in dealership business. A search was conducted in the premises of the assessee in 1988 wherein a document referred to as "Red Book" was found and seized. The book covered three assessment years 1986-87, 1987-88 and 1988-89. Consequent to the search the assessee disclosed a total sum of Rs.21,42,260/-. The AO added the same in the three assessment years in 144 proceedings. At this stage the assessee preferred an appeal before the CIT(A) stating that the same should not be assessed in the hands of the assessee but in the hands of the firm. In the light of the averment the learned CIT(A) directed the AO to examine as to whether the disclosed amounts were to be assessed in the hands of the firm or in the hands of the assessee. Fresh assessment order was passed, which was also challenged and finally the Settlement Commission passed 2 ITA No. 5770/Mum/2014 Shri Shantilal C. Rathod

an order on 09.06.2010 wherein the total income was determined as under: -

AY 1986-87 Rs.2,79,723/- AY 1987-88 Rs.2,92,614/- AY 1988-89 Rs.2,.74,880/-

3. In the meantime the TRO sought to collect the taxes by adjusting the amounts refundable. He also levied interest under section 220(2) of the Act. According to the assessee there is no specific direction by the Settlement Commission to charge interest under section 220(2) and hence the AO erred in charging interest. In the 154 order passed by the AO it was clarified that the Settlement Commission did not pass any specific order with regard to non-charging of interest under section 220(2) of the Act and therefore rejected the rectification petition. On an appeal filed by the assessee against the said order the learned CIT(A) confirmed the action of the AO and thus further appeal was filed before the Tribunal.

4. The Bench is concerned here with A.Y. 1987-88 only wherein interest was charged under section 220(2) of the Act. The learned counsel for the assessee adverted the attention of the Bench to the observations made in the order passed by the Settlement Commission, at page 28 and also Annexure-2, i.e. computation of total income, to submit that the case of the assessee was that interest is not payable as large amount of refund is due to the assessee from the Income Tax Department and the same was impliedly accepted since there is no specific direction to the AO, in the detailed computation of income assessable, with regard to charging of interest under section 220(2) of the Act. It is not in dispute that the taxes already paid by the assessee for earlier assessment years are in excess of the tax payable for those years and in fact it was adjusted against the tax payable in this year. The learned counsel for the assessee relied upon the decision of the Hon'ble Delhi High Court in the case of L.N. Gadodia & Sons (P) Ltd. 207 CTR 669 to submit that the AO has to strictly follow the order passed by the Settlement Commission and he is entitled to charge interest only if it is specifically mentioned in the order passed by the Settlement Commission. It was not open for the AO to charge interest 3 ITA No. 5770/Mum/2014 Shri Shantilal C. Rathod

under section 220(2) since it was not indicated in the Settlement Commission's order. The learned counsel for the assessee contended that even in the present case the assessee raised the plea before the Settlement Commission that interest is not chargeable and the same was noted by the Bench of the Settlement Commission and in the computation portion there was no specific indication with regard to charging of interest under section 220(2) of the Act and hence the AO was not justified in charging interest.

5. On the other hand, the learned D.R. submitted that in Annexure-2 the total income assessable was indicated with a further direction to include surcharge and interest, if any, after giving credit for taxes already paid, which implies that the AO is authorised to charge interest independently. He thus supported the order passed by the Tax Authorities.

6. I have carefully considered the rival submissions and perused the record. It is not in dispute that at page 28 of the order passed by the Settlement Commission the claim of the assessee with regard to the reasons for non-payment of tax was mentioned and it was also contended that interest is not chargeable as large amount of refund is due to the assessee from the Income Tax Department. The fact that large amount is due is not disputed even at this stage. It is also not in dispute that there is no direction by the Settlement Commission to charge interest under section 220(2) of the Act. In other words, the claim of the assessee, noticed at page 28 of the order passed by the Settlement Commission, was not rejected specifically. Thus it cannot be said that there is any specific direction to the Tax Authorities to charge interest under section 220(2) of the Act. Under identical circumstances the Hon'ble Delhi High Court, in the case cited supra, observed that in the absence of any specific direction by the Settlement Commission it was not open for the AO to charge interest under section 220(2) of the Act.

7. Having regard to the circumstances of the case I am of the view that interest was erroneously charged by the AO by incorrect appreciation of the order passed by the Settlement Commission. I, therefore, set aside the 4 ITA No. 5770/Mum/2014 Shri Shantilal C. Rathod

order passed by the CIT(A) and direct the AO not to charge interest under section 220(2) of the Act.

8. In the result, appeal filed by the assessee is allowed.

Order pronounced in the open court on 29th January, 2015.

Sd/-

(D. Manmohan) Vice President

Mumbai, Dated: 29th January, 2015

Copy to:

1. The Appellant

2. The Respondent

3. The CIT(A) - 35, Mumbai

4. The CIT- 25, Mumbai City

5. The DR, "SMC" Bench, ITAT, Mumbai

By Order

//True Copy// Assistant Registrar ITAT, Mumbai Benches, Mumbai n.p.