The Kolkata Bench of Income Tax Appellate Tribunal (ITAT) has quashed the revision order holding that levy of interest under Section 115P of the Income Tax Act, 1961 and Dividend Distribution Tax (DDT) liability under Section 115O of the Income Tax Act would not arise out of the assessment order under Section 143(3) of the Income Tax Act.
Assessee, Bijni Dooars Tea Company Ltd filed its return of income, and AO having taken note of details submitted in the course of assessment proceeding, completed the assessment under Section 143(3) of the Income Tax Act. Subsequently, PCIT called for and examined the case records and formed a prima facie view that the impugned assessment order passed under Section 143(3) of the Income Tax Act was erroneous insofar as it was prejudicial to the interest of the revenue.
Here the issue was in respect of Dividend Distribution Tax (DDT) on proposed dividend which had not been quantified in the return filed by the assessee as well as in the assessment order passed by the AO. According to the PCIT, there was a short payment of DDT which attracted penal interest under Section 115P of the Income Tax Act which also was not quantified. Omission to quantify the actual amount of DDT and interest thereon resulted in short levy of DDT and interest, according to PCIT.
S. K. Tulsiyan, appeared on behalf of the assessee submitted that an order levying interest under Section 115P of the Income Tax Act was a separate and distinct order from the assessment order passed under Section 143(3) of the Income Tax Act, and in case of failure of interest payable for short payment of DDT, a separate order will have to be passed for charging interest under Section 115P of the Income Tax Act.
This was because the assessment order culminates in raising a demand of tax which was created by charging Section 4 of the Income Tax Act, whereas, Section 115P of the Income Tax Act, which comes under a separate Chapter altogether, would make an assessee liable to pay interest when there was a shortfall in payment of DDT.
He thus contended that under such circumstances, the impugned assessment order passed under Section 143(3) of the Income Tax Act could not be termed as erroneous in so far as was prejudicial to the interests of the revenue as Section 115-0 of the Income Tax Act was not a part of the said assessment order. Hence, in absence of such an order imposing interest for short payment of DDT, PCIT had no power to revise the assessment order passed under Section 143(3) of the Income Tax Act.
S. Datta, on behalf of the revenue submitted that there was no separate requirement of passing of order for DDT liability which forms part of the assessment order itself. Since AO failed to take cognizance of DDT liability on the assessee, PCIT had rightly invoked revisionary proceedings under Section 263 of the Income Tax Act.
The two-member Bench of Rajpal Yadav, Vice President and Shri Girish Agrawal, Accountant Member set aside the revision order observing that, “An assessment order passed u/s. 143(3) requires the AO to make an assessment of ‘total income or loss’ of the assessee which has to be assessed in reference to section 5. AO is required to look into the income received or deemed to be received or accrued or deemed to be accrued or arisen while determining total income of the assessee for making an assessment u/s 143(3). We also refer to section 156 which deals with notice of demand wherein any tax, interest, penalty, fine or any other sum, is payable in consequence of any order passed under the Act, AO shall serve on the assessee, a notice of demand in the prescribed form, specifying the sum so payable. Thus, there has to be an order passed under this Act for any sum which is payable by the assessee under the Act.”
The Bench quashed the revision order.
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