- (1.) This appeal under section 260A of the Income-tax Act, 1961 is at the instance of an assessee and is directed against an order dated 16-12-2005 passed by the Income-tax Appellate Tribunal, "D" Bench, Kolkata, in Income-tax Appeal being ITA No. 108/Kol./2005 for the assessment year 2001-02 and thereby allowing the appeal preferred by the revenue and setting aside the order passed by the CIT(A). Being dissatisfied, the assessee has come up with the present appeal.
(2.) The facts giving rise to filing of this appeal may be summed up thus: (a) The assessee carries on business, inter alia, of manufacturing toiletries and medicines. (b) As the assessee did not have any taxable income according to the normal computation provisions of the Income-tax Act for the assessment year 2001-02, the assessee had no liability under section 115JB of the Act as the assessee was entitled to deduct a total amount of Rs. 26.51 crore withdrawn from the revaluation reserve and credited to the profit and loss account in computing the book profit. After such deduction, the assessee was left with a book loss of Rs. 5.87 crore and in such circumstances, the assessee had no liability to pay any advance tax under section 208 of the Act for the assessment year 2001-02. (c) The Chartered Accountants of the assessee in their report in form No. 29B computing the book profit under section 115JB for the assessment year 2001-02 stated that the assessee was not liable to tax under section 115JB and such report along with its return for the assessment year 2001-02 was filed on October 31, 2001. According to the said return, the assessee did not have any taxable income either according to the normal computation provisions or under section 115JB. (d) By the Finance Act, 2001, section 115JB was amended with retrospective effect from April 1, 2001. In view of the aforesaid retrospective amendment, the assessee was not in a position to deduct the sum of Rs. 26.51 crore withdrawn from the revaluation reserve. In such circumstances, the assessee recomputed the book profit under section 115JB for the assessment year 2001-02 on the basis that the said sum of Rs. 26.51 crore credited to the profit and loss account was not deductible. On such basis, the assessee worked out the amount of tax payable at Rs. 1,55,62,511 and paid the same on August 31, 2002. (e) Subsequently, the assessee was advised that as the amendment had been made with retrospective effect, the only alternative available to the assessee was to challenge the legality and/or validity of the same by filing a writ-application. The assessee was advised that the income-tax authority could not adjudicate upon the legality and/or validity of the retrospective amendment and as such, the assessee was advised to file a revised return for the assessment year 2001-02 on the basis of the retrospectively amended section 115JB without prejudice to its rights to challenge the legality and/or validity thereof. (f) Accordingly, the assessee obtained from its Chartered Accountants a revised report in form No. 29B on the basis of the amended section in supersession of the previous report and filed a revised return on March 31, 2003 on the basis that the sum of Rs. 26.51 crore credited to the profit and loss account was not deductible in computing the book profit. According to the said revised return, the book profit amounted to Rs. 20,63,65,711 entailed a tax liability of Rs. 1,74,89,494. (g) After taking into consideration the tax deducted at source of Rs. 19,26,983 and the sum of Rs. 1,55,62,511 paid on August 31, 2002, the assessee was not required to make any further payment. (h) On March 31, 2004, the Assessing Officer passed an order under section 143(3)/115JB for the assessment year 2001-02. The Assessing Officer computed the tax liability under section 115JB at the same figure as shown in the assessee's revised return. However, the Assessing Officer charged interest under section 234B of Rs. 44,00,937 and interest under section 234C of Rs. 11,78,960 since the assessee did not pay any advance tax with reference to the liability for tax under the retrospective amended section 115JB. (i) Being dissatisfied, the assessee preferred an appeal before the Commissioner of Income-tax who by an order dated October 11, 2004 allowed the same. The Commissioner of Income-tax (Appeals) held that since the amended provision did not exist in the statute during the relevant previous year, namely, the Financial Year 2000-01, the assessee's contention that it had no liability under section 208 to pay advance tax was well-founded. The CIT(A) held that since the interest under sections 234B and 234C was chargeable only where the assessee was liable to pay advance tax, the assessee could not be said to have been in default. (j) Being dissatisfied, the Assessing Officer preferred an appeal before the Income-tax Appellate Tribunal and by the order impugned herein, the said Tribunal allowed the appeal holding that the appellant was liable to pay interest under sections 234B and 234C. (k) Hence this appeal under section 260A of the Act.
(3.) A Division Bench of this Court at the time of admission of this appeal formulated the following substantial questions of law for determination: (a) Whether on a true and proper interpretation of the relevant provisions of Income-tax Act, 1961, the provisions relating to payment of advance tax are applicable in a case where the book profit is deemed to be the total income under section 115JB. (b) Whether and in any event, on a true and proper interpretation of the relevant provisions of the Income-tax Act, 1961, the provisions of sections 234B and 234C are attracted in a case where there was no liability to pay any advance tax under section 208 on any of the due dates for payment of the advance tax instalments and there is retrospective amendment of the law long after the close of the financial year imposing liability for tax. (c) Whether the Tribunal was justified in law in upholding the levy of interest of Rs. 44,00,937 under section 234B and Rs. 11,78,960 under section 234C even though the appellant became liable to pay tax under section 115JB by virtue of a retrospective amendment made long after the due dates for payment of the advance tax instalments.;