Interest under Section 115P for DDT shortfall not included in the order under Section 143(3) is not subject to revision under Section 263
Fact and issue of the case
This appeal filed by the assessee is against the revisionary order passed u/s. 263 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) by Ld. Pr. CIT, Kolkata-2 dated 30.03.2023 against assessment order by Income Tax Department, National e-Assessment Centre, Delhi u/s. 143(3) read with sections 143(3A) & 143(3B) of the Act dated 19.02.2021 for AY 2018-19.
Assessee has raised four grounds of appeal, all of which relate to assumption of jurisdiction by the Ld. Pr. CIT for invoking the revisionary proceeding u/s. 263 of the Act and passing the impugned order thereon. Grounds are not reproduced for the sake of brevity. 3. Brief facts of the case are that assessee filed its return of income on 06.10.2018, reporting total income at Rs.2,76,33,600/-. Ld. AO having taken note of details submitted in the course of assessment proceeding, completed the assessment u/s. 143(3) of the Act on 19.02.2021 at an assessed total income of Rs.5,52,64,107/-. Subsequently, Ld. Pr. CIT called for and examined the case records and formed a prima facie view that impugned assessment order passed u/s. 143(3) of the Act dated 19.02.2021 is erroneous insofar as it is prejudicial to the interest of the revenue. Accordingly, a notice u/s. 263 of the Act, dated 08.02.2023 was issued on the following two reasons, which are reproduced as under: “
On examination of the assessment records and Books of accounts for the year ended 31.03.2018, it is observed that you M/s Bijni Dooars Tea Company Limited have proposed dividend of Rs.90,00,000/- along with DOT of Rs. 7,32,875/- for the financial year 2017-18. From the Statement of particulars (Form 3CD) to Audit Report u/s 44AB. DOT of Rs. 7,32,875 for the distributed profit of Rs.90,00,000/- has been paid on 28.09.2017. From the Annual Tax Statement in Form 26AS, it revealed that the Tax on distributed profit of domestic companies (Mirror Head 106) Rs 7,32,875/- was deposited by the company on 28.09.2017. Since the date of declaration/distribution payment of Dividend (28.09.2017) falls in the F.Y. 2017-18, any DOT thereon would qualify for the AY 2018-19. But neither in the return for the A.Y. 201819 nor in the scrutiny assessment order thereof had such DOT been qualified. Further examination revealed that the amount DOT paid was shorter than that of payable amount. As short payment of DOT might be failure to pay such tax, it would therefore, attract penal interest u/s 115P which was also required to be quantified. Omission to quantify the actual amount of DDT and interest thereof resulted in short levy of DOT and interest.
It is further observed that loss, (after indexation) from sale of two investment viz.
(i) 11.40% Lakshmi Bilas Bank 2018 for Rs.1,09,500/- and
(ii) 10.75% IDBI Bank PERP 2024 Bonds for Rs 11,97,600/- had been taken in the calculation of LTCG and carried forward to the subsequent years. Again, the same losses for those investments, without Indexation, for Rs.1,09,500/-and Rs.11,97,600/- had also been taken into account in the calculation of STCG. Those losses accordingly decreased the quantum of STCG or an amount Rs.13,07,100/-. Since the loss had been taken in the calculation of LTCG, it would not be available m the calculation of STCG simultaneously. Such mistake led to understatement of STCG of Rs.13,07,100./- and which in turn led to short levy of revenue.
It is observed that the A.O. failed to consider the issues as discussed in paragraph 3.1 and 3.2 above while framing the assessment order which, prima facie, has rendered the assessment order dated 19.02.2021 passed u/s. 143(3) of the Act to be erroneous in so far as it is prejudicial to the interest of revenue.”
Observation of the court
Thus, appeal remedy available to the assessee in respect of DDT liability would fall under a different class of liabilities as mentioned in section 246A which can be challenged by the assessee by denying the liability under the Act. However, for demand raised on the assessee by undertaking regular assessment u/s 143(3) for assessing the total income, appeal would lie under the different clause as stated above. Therefore, there will be two different appeals for the demands raised under different sections of the Act.
On the second aspect for drawing analogy from the provisions relating to tax deduction at source, the said liability is fastened on the assessee separately, by the provisions contained in section 201(1)/(1A) after holding the assessee as ‘assessee in default’. A separate proceeding is undertaken on the assessee as a deductor for default in compliance with the TDS provisions and order is passed by holding the assessee as ‘assessee in default’ to fasten him with TDS liability. However, while making regular assessment for assessing total income of an assessee, failure/shortfall to deduct tax at source leads to a disallowance in the hands of the assessee while computing income under the head ‘profits and gains of business or profession’, forming part of the assessment order u/s. 143(3).
In the present case before us, it is pertinent to note that Chapter XIID contains a specific section 115Q which requires the assessee to be held as ‘assessee in default’ towards the DDT liability for the default committed by it u/s 115O and 115P. Further, provisions of section 115Q when kept in juxtaposition with sub-section (2) of section 115O, makes it clear that even if there is no income-tax payable by the domestic company on its total income then also tax on distributed profits shall be payable by it. This leads us to a gainful understanding that even in a situation where case of assessee is not selected for regular assessment u/s. 143(3) and where no income-tax is payable by the assessee on its total income, then also, assessee has to discharge its liability of tax on distributed profits, if it distributes profits. Thus, this clearly lays down that provisions relating to DDT liability contained under Chapter XIID are independent of the section relating to assessment of total income contained in section 143(3).
In absence of any regular assessment undertaken of a domestic company u/s. 143(3), if no income-tax is payable on its total income but if domestic company has distributed profits and there is a demand on its distributed profits u/s 115O and 115P, then, for recovery of the same, the assessee is to be held as ‘assessee in default’ which can happen only by passing an order to that effect is required by invoking the provisions of section 115Q.
For this DDT liability, after holding the assessee as an ‘assessee in default’, a notice of demand u/s. 156 pursuant to this order would make the assessee liable for the same and the provisions of collection and recovery of tax will follow, accordingly. If we go by the contentions made by the Ld. CIT, DR to accept that provisions relating to DDT liability forms part of the assessment of total income made u/s. 143(3), then, in our considered view, section 115Q is rendered otiose and would not have any occasion for its application.
Thus, in conclusion, it clearly appears from the scheme of the Act that an order of assessment passed u/s 143(3) is an assessment of total income of the assessee which is separate and distinct from any other order. DDT liability is distinct and separate from the liability to pay income-tax on the total income of an assessee which is created by charging section
Revision of an order u/s. 263 pre-supposes existence of an order. In view of the above discussion, levy of interest u/s. 115P and any liability of DDT u/s. 115O does not arise out of conduct of assessment proceedings and making an assessment of total income u/s. 143(3), therefore, Ld. Pr. CIT could not have invoked revisionary proceedings to direct the ld. AO for imposing DDT liability on the assessee in reference to assessment order passed u/s. 143(3). There is no separate order in existence, fastening the assessee with DDT liability by holding it as an ‘assessee in default’, contemplated u/s. 115Q. Thus, in absence of the same, in our view, Ld. Pr. CIT is not justified in invoking the revisionary proceeding u/s. 263 and passing an order thereon. Thus, even on this issue, we hold that passing of revisionary order u/s. 263 is not justifiable.
Accordingly, impugned order passed by Ld. Pr. CIT on both the issues is quashed. Grounds taken by the assessee on both the issues are allowed. 16. In the result, appeal of the assessee is allowed.
Order is pronounced in the open court on 20th October, 2023.
Read the full order from here
Bijni-Dooars-Tea-Company-Ltd.-Vs-PCIT-ITAT-Kolkata-2
