ORDER
Per S.C Tiwari, AM.
All these three appeals pertain to assessment year 1991-92. Appeal in ITA 5351 /Bom./95 has been filed by the assessee on 26-5-1995 against the order of the learned CIT(A) XXV Bombay dated 23-3-1995 in the case of the assessee in relation to the assessment order under section 143(3) for assessment year 1991-92. Appeal in ITA No. 5639/Bom./95 has been filed by the revenue on 5-6-1995 against the same order. The appeal in ITA No. 4241/Mum./97 has been filed by the assessee on 18-6-1997 against the order of the learned CIT(A) XXV Mumbai dated 31-3-1997 in the case of the assessee in relation to the order under section 155, read with section 154 for assessment year 1991-92.
2. Facts of the case leading to the main dispute in these appeals, briefly, are that the assessee filed the return of income for assessment year 1991-92 declaring total income at Rs. 16,62,730 on 31-12-1991. This return was signed and verified by one Shri Balasubramaniam Iyer, who was the Secretary of the Company. The assessing officer addressed a letter to the assessee on 9-10-1992 as to why the aforesaid return should not be treated as an invalid return because the return of income was required to be signed and verified by a Director of the Company or its Managing Director. The assessee thereupon filed another return on 15-10-1992. The assessing officer informed the assessee by his letter dated 16-10-1992 that the earlier return filed on 31-12-1991 was invalid return and the return filed on 15-10-1992 alone was to be treated as the original return of income. The assessee disputed this finding on the grounds that the provisions of sections 139(9) and 292B of the Act saved the return of income as originally filed. The learned assessing officer held that the provisions of section 139(9) had enumerated the defects for which opportunity was required to be given for removal. The provisions of section 140 were different. in short the assessing officer held that if the return was not signed and verified by the proper person it could be considered to be a return at all. Consequently, the assessing officer levied interest under section 234A for late filing of the return of income. Next the assessing-officer noted that in the return of income filed on 15-10-1992 the assessee had claimed an exemption of Rs. 2,04,99,060 under section 47(v) on sale of capital assets to the holding company-M/s. Great Eastern Shipping Ltd., which had owned the 100 per cent shares of the assessee-company. In March 1992, the assessee-company had issued 6,50,000 shares to various persons which resulted in reducing the holding of M/s. Great Eastern shipping Co. Ltd. from 100 per cent to 43 per cent. Therefore, the exemption of Rs. 2,04,99,060 being gain on sale of capital assets was required to be withdrawn in accordance with the provisions of section 47A of the Act. When this point was raised by the learned assessing officer during the course of assessment proceedings the assessee admitted that provisions of section 47A certainly came into the play but the correct procedure was to grant the assessee first an exemption under section 47(v) in the assessment order under section 143(3) and then withdraw the same by way of rectification order under section 155(7B). The learned assessing officer did not accept this argument. The fact of desubsidiarisation was found out by the department after making independent inquiry on its own. He also noted that there was an interim stay granted by the Hon’ble Bombay High Court against the notice under section 155(7B). The learned assessing officer noted that the desubsidiarisation had already taken place on 27-3-1992 at the time when the original return of income was filed on 15-10-1992. Hence the facts were within the knowledge of the assessee company at the time of filing the return of income and it was obligatory on the part of the assessee company to withdraw the exemption under section 47(v) in view of the provisions of section 47A. The assessing officer therefore brought to tax the amount of long-term capital gain of Rs. 2,04,99,060 and allowed the assessee deduction under section 48(2) at the rate of 30 per cent and assessed the balance amount of Rs. 1,43,49,342..
3. During the course of appeal before the learned CIT(A) the assessee argued that the assessing officer was not justified in treating the earlier return filed on 31-12-1991 as invalid return after ignoring the provisions of section 139(9) and section 292. The judgments in CIT v. Dr. Krishan Lal Goyal (1984) 148 ITR 283 (P&H) and CAIT v. Keshav Chandra Mandal (1950) 18 ITR 569 (SC) relied upon by the assessing officer did not have any application to the facts of the case because while those judgments were delivered the provisions of sections 139(9) and 292B were not available. The assessee also relied upon some observations in the book “Law and practice of Income-tax” by Kanga and Palkhivala and argued that the absence of proper signature or proper varification was a curable defect. Reliance was also placed on the decision of ITAT Bombay in 49 TTJ 67 (Bom) (sic). These were machinery provisions and were therefore not required to be considered as strictly as the charging provisions. Reliance was placed on the judgments in 129 ITR 535 (SC) (sic) and 198 ITR 510 (Cal) (sic) in this respect. Reference was also made to the fact that the assessee had filed a writ petition against the notice issued by the learned assessing officer under section 155(7B) read with section 143(1)(a) and the Hon’ble High Court had granted interim stay.
4. The assessee also argued before the learned CIT(A) that earlier the assessee company was 100 per cent subsidiary of the holding company and this situation had prevailed until the close of the previous year relevant to the assessment year 1991-92. Subsequently, the holding company had sold certain shares and diluted their shareholding from 100 per cent to 43 per cent. The assessee admitted that the exemption was required to be withdrawn on this count and argued that the correct procedure was that the assessing officer should first allow exemption under section 47(v) and then withdraw the same by the rectification order under section 155(7B). The financial year in which the transaction had taken place the relationship between the holding company and the assessee company as 100 per cent subsidiary remained the same. If any different interpretation was given that would render the provisions of section 155(7B) redundant. The assessee also objected to levy of interest under section 234A and argued that there was no default committed by the assessee and the return filed on 31-12-1991 should be taken to be a valid return filed within the due date. Accordingly no interest was leviable under section 234A. The assessee also disputed levy of interest under section 234B. The assessee argued that interest was not at all chargeable and referred to the decision of Hon’ble Supreme Court in Central Provinces Manganese Ore Co Ltd. v. CIT (1986) 160 ITR 961 (SC). The assessee had committed no default in respect of payment of advance tax. At the time when advance tax installments were due the assessee was under no obligation to pay any advance tax relating to long-term capital gains. The provisions of section 47A came into play much later. Moreover, this income could not be treated as “Current income” under section. 207. The assessee also argued that in equity no interest could be charged owing to loss of an exemption which was a subsequent event. The assessee also argued that the provisions of section 234B was unconstitutional.
5. The learned CIT(A) noticed that after amendment with effect from 1-4-1976 the provisions of section 140(c) had laid down that in the case of a company the return of income had to be signed and verified by the Managing Director or by a Director of the Company in the unavoidable circumstances of the Managing Director not being able to sign and verify the return of income. The learned CIT(A) therefore held that the return of income filed on 31-12-1991 was not a valid return. She noted that the assessee had also not explained any circumstances as to why the return of income was not signed in accordance with section 140(c). If the return filed on 31-12-1991 had been taken into account, the assessee could himself argue that the assessment order made thereupon was null and void. The learned CIT(A) also did not see force in the contentions of the assessee based on the provisions of section 139(9). She held that the provisions of section 139(9) came into play only if the defect was covered by clauses(a) to (f) of Explanation to section 139(9). As the assessee’s case was not covered by any of these clauses it was not a case of a defective return but of an invalid return. The learned CIT(A) also considered the provisions of section 292B. She held that the provisions of section 292B applied, inter alia, to a mistake, defect, or omission. The return which was invalid in terms of sections 139(9) and 140(c) could not be treated as a valid return by applying the provisions of section 292B. The learned CIT(A) therefore held that the return filed on 31-12-1991 was an invalid return and the return filed on 15-10-1992 had been rightly treated as original return of income.
6. On the issue of procedure to be followed for withdrawing the exemption under section 47(v) the learned CIT(A) found that there was no dispute that during the financial year 1990-91 the assessee company was entitled to exemption under section 47(v) being 100 per cent subsidiary of the holding company M/s. Great Eastern Shipping Co. Ltd. The dilution of the shareholding took place on 27-3-1992 withdrawal of capital gain exemption was, therefore, covered under the deeming provisions of section 47A. The effect was that capital gains were exempt in the hands of the assessee under section 47(v) but such capital gains are deemed to be chargeable in respect of the previous year in which such transfer took place. In such a situation the provisions of section 155(7B) necessarily came into operation. The learned CIT(A) therefore held that the assessee was first entitled to exemption under section 47(v) of the Act and thereafter by virtue of the provisions of section 47A in order to give effect to the same an order under section 155(7B) was required to be passed. The provision of law pertaining to rectification of assessment could come into operation only when an earlier order/proceeding had already taken place. The learned CIT(A) therefore deleted the amount of capital gain assessed by the learned assessing officer. She held that the assessing officer could take consequent action to bring to tax the impugned amount under the provisions of section 47A read with section 155(7B). Aggrieved by this order both the assessee as well as the department are in appeal before us.
7. Consequent to the aforesaid order of the learned CIT(A) the learned assessing officer addressed to the assessee a letter dated 12-9-1995 seeking to withdraw the exemption under section 47(v) by passing a rectification order under section 155(7B). In response the assessee referred to its writ petition 112 of 1993 and 1621 of 1994 and requested the assessing officer to keep the notice of rectification under section 155(7B) in abeyance. The learned assessing officer noted that the dispute in the writ petition was relating to the notice issued under section 155(7B) before the assessment was made. In the proceedings before the learned CIT(A) the appellant had himself reiterated that their only objection was towards the procedure applied. Further any delay in amendment of the assessment order would also cause hardship to the assessee in a manner that interest under sections 234B and 234C would keep mounting. The learned assessing officer accordingly made order under section 155(7B) withdrawing exemption under section 47(v) and assessing the amount of Rs. 1,43,49,342.
8. The assessee filed appeal before the learned CIT(A) against the order of the learned assessing officer under section 155(7B) as above mentioned. In the grounds of appeal taken the assessee objected only to the levy of interest under section 234B. First he -denied its liability to be charged interest under section 234B. Without prejudice, the assessee claimed that the amount of interest under section 234B as levied at Rs. 50,35,921 was not correct and the amount under section 234B could not exceed Rs. 41,96,600. The learned CIT(A) admitted the appeal filed by the assessee because the assessee was denying total liability of interest under section 234B. For that purpose he followed the judgment of Hon’ble Supreme Court in Central Provinces Manganese Ore Co. Ltd.’s case (supra). The learned CIT(A) did not accept the contention of the assessee that the assessing officer had not granted opportunity to the assessee before levy of interest under section 234B. He pointed out that the learned CIT(A) had already in her order dated 23-3-1995 held that consequential action may be taken in regard to interest under section 234B. Coming on merits the learned CIT(A) held that the arguments of the assessee based on provisions of sections 208 and 209, though attractive on the first blush, did not have merit because the provisions of section 234B were very clear. He distinguished the decision of the Tribunal in the case of Asstt. CIT v. Jindal Irrigation Systems Ltd. (1996) 56 ITD 164 (Hyd). He pointed out that in that decision the Tribunal was dealing with a situation pertaining to interest under section 234C and not levy of interest under section 234B. He referred to the provisions of section 234B(4) which provided for levy of interest if the amount on which interest was payable bad been increased or reduced as a result of an order under section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub-section (4) of section 2451). The learned CIT(A) held that the levy of interest was mandatory and it was so because the interest under section 234B was nothing but a compensatory payment for the tax amount/refund amount withheld by the assessee. It was not a penalty. The learned CIT(A) also placed reliance on the decision of ITAT in Kailash Associates v. Dy. CIT (1994) 50 ITD 431 (Asr). As to the dispute raised by the assessee to the quantum of interest under section 234B the learned CIT(A) noted that the assessing officer had not given working of his computation and he therefore directed the assessing officer to verify the assessee’s contention regarding the quantum of interest under section 234B. Still aggrieved by this order the assessee is in appeal before us.
9. Shri M.M. Golvala the learned counsel for the assessee argued the assessee’s appeal against the order of the learned CIT(A) dated 23-3-1995 first. In this appeal the ground of appeal No.1 is general. The ground of appeal Nos. 2 to 4 are directed against the, order of the learned CIT(A) that the return of income filed by the assessee on 31-12-1991 was an invalid return. The learned counsel argued that in past the Secretary of a Company was eligible to sign the return of income. The provisions of section 140(c) were later on amended and it was prescribed that the return of income should be signed by the Managing Director or in the absence of Managing Director by any Director of the Company. The mistake committed was corrected by the assessee as soon as the defect was pointed out. The return which was filed on 15-10-1992 was identical in all respects to the return earlier filed on 31-12-1991. He argued that the provisions of section 139(9) should be read as machinery provisions applicable to all bona fide defects in a return of income. The learned counsel also argued that the provisions of section 292B also applied because the return of income as filed earlier was in substance and effect in conformity with or according to the intent and purpose of the Act. In support of these contentions the learned counsel placed reliance on the judgments of Hon’ble Kerala High Court in CIT v. Masoneilan India Ltd. (2000) 242 ITR 569 (Ker) and Vanaja Textiles Ltd. v. CIT (2001) 249 ITR 374 (Ker). Further he placed reliance on the judgment of Hon’ble Madras High Court in DIT v. Spic Educational Foundation (2003) 257 ITR 46 (Mad) and also on Tribunal decisions in B.F. Goodrich Co. v. Dy. CIT (1996) 57 ITD 309 (Cal), M.P. State Agro Industries Development Corpn. Ltd. v. Asstt. CIT (1995) 53 TTJ (Ind.) 262. Vijay Trading Co. v. ITO (1985) 13 ITD 526 (Nag.) and IAC v. Punjab United Pesticides & Chemicals Ltd (1989) 31 ITD 535 (Chd.). The learned counsel argued that the case law relied upon by the assessing officer was not applicable because those judgments had been rendered when the provisions of sections 139(9) and 292B were not on the statute.
10. Ground of appeal No. 5 in assessee’s Appeal No. 5351/Bom./95 is that the learned assessing officer levied interest under section 234A without allowing the assessee opportunity of being heard. Moreover on the facts and circumstances of the case no interest under section 234A could be levied. The learned counsel argued that even if it was held that the return of income filed by the assessee on 15-10-1992 above was the only valid return the facts that the assessee had filed return of income on 31-12-1991 identical to the subsequent return of income on 15-10-1992 with the difference of the signatory alone could not be ignored. Therefore interest under section 234A was not leviable at all because there was no delay in filing the return of income which was filed on 31-12-1991.
11. Ground of appeal No. 6 is directed against the order of the learned CIT(A) that interest under section 234B may be charged. The learned counsel argued that as per the order of the learned CIT(A) the effect to the provisions of section 47A could not be given in the assessment order under secti6n 143(3) and a subsequent order under section 155(7B) was required to be made. Hence the directions of the learned CIT(A) related to the income to be assessed in consequence of her order. He argued that under the provisions of section 234B it was necessary that there was a liability to pay advance tax under section 208 and the assessee had failed to pay such tax or where the advance tax was paid by the assessee under section 210 the tax was less than 90 per cent of the assessed tax. The assessee had paid correct tax based on its “current income” as computed under the provisions of section 209. He also pointed out that in the case of the assessee no notice under section 210 was given. In support of these contentions the learned counsel placed reliance on the judgments in CIT v. Sedco Forax International Drilling Co. Ltd. (2003) 264 ITR 320 (Uttaranchal); CIT v. Smt. Premlata Jalani (2003) 264 ITR 744 (Raj.) and Dr. (Mrs.) Devinder Kaur Sekhaon v. Asstt. CIT (1998) 67 ITD 407 (Chd.). The learned counsel also argued that in compliance to the provisions of law no tax payer could be expected to do the impossible. He referred to the Tribunal decision in Asstt. CIT v. Jindal Irrigation Systems Ltd. (1996) 56 ITD 164 (Hyd) and Haryana Warehousing Corpn. v. Dy. CIT (2000) 75 ITD 155 (Del) (TM) and also Supreme Court judgment in Life Insurance Corpn. of India v. CIT (1996) 219 ITR 410 (SC). As during the previous year relevant to assessment year 1991-92 the exemption under section 47(v) was completely available to the assessee and the assessee could not have anticipated future event resulting into withdrawal of exemption under section 47(v).
12. The learned Departmental Representative referred to the book of Chaturvedi and Pithisaria “Income-tax Law” Fifth edition, Vol. 3 at page 4662 and argued that something which is invalid has to be incurable as well. As to the provisions of section 139(9) the situation attracting those provisions had been clearly spelt out within the provision itself. Hence section 139(9) did not embrace every defect and illegality in a return of income. It operated only in certain specified situations. He argued that clauses (a) to (f) of Explanation were not illustrative but exhaustive. He also placed reliance on the judgments in Keshav Chandra Mandal’s case (supra) and Khial Das & Sons v. CIT (1997) 225 ITR 960 (MP) and National Insurance Co. Ltd. v. CIT (1995) 213 ITR 862 (Cal). He referred to the judgment in Electrical Instrument Co. v. CIT (2001) 250 ITR 734 (Del) and argued that even the subsequent action by the assessing officer such as issue of notice etc. did not validate something which was altogether invalid. The learned Departmental Representative argued that the reliance placed by the assessee’s counsel on the provisions of section 292B were uncalled for because the provisions of section 139(9) had overriding effect over the provisions of section 292B. In support of this contention he referred to the commentary (supra) at page 4662.
13. As to the contentions of the learned counsel of the assessee in relation to the interest under section 234B the learned Departmental Representative pointed out that the entire case law relied upon by the assessee was in relation to the provisions of interest which were penal in nature. Interest under section 234B was not of penal character, it was only compensatory. The learned Departmental Representative placed heavy reliance on the decision of the Tribunal in Harsha Bhogle v. Assessing Officer (2003) 86 ITD 714 (Mum) and quoted extensively. The learned Departmental Representative also placed heavy reliance on the judgment of Hon’ble Supreme Court in CIT v. M.H. Anjum Ghaswala (2001) 252 ITR 12 (SC) and argued that once it was held that the levy of interest under section 234B was mandatory, the entire debate in this appeal was unnecessary.
14. In the rejoinder the learned counsel for the assessee argued that there was exhaustive discussion in the decision of the Tribunal in B.F. Goodrich Co.’s case (supra) on various aspects relied upon by the learned Departmental Representative. As to the reliance placed by the learned Departmental Representative on the judgment in the case of National Insurance Co. Ltd. (supra) the learned counsel for the assessee argued that this judgment had also been taken notice of by Calcutta Tribunal in the decision in B.F. Goodrich Co.’s case (supra). The case of the assessee was on the strong footing inasmuch as the defect was cured as soon it was pointed out. In the case before the Tribunal (supra) the defect was not cured even after opportunity having been given. As to the reliance placed by the learned Departmental Representative on the decision of the Tribunal in Harsha Bhogle’s case (supra) the learned counsel argued that the facts in that case were different. The issue was whether the assessing officer was required to pass a specific order. As to the reliance placed by the learned Departmental Representative on the judgment of Hon’ble Supreme Court in M.H. Anjum Ghaswalas case (supra) the learned Counsel argued that in that judgment the Supreme Court did not decide the question as to whether interest under section 234B has to be levied even if the shortfall occurred in the circumstances beyond the control of the assessee. In the case of the assessee, during the previous year it could not be anticipated that in future the provisions of section 47A would be attracted. The law cannot be expected to oblige the assessee to do the impossible. These aspects of the matter were not before the Hon’ble Supreme Court and cannot be said to have been decided by their judgment in M.H. Anjum Ghaswalas case (supra). The learned counsel argued that a judgment has to be treated to be the authority only for what it actually decides and it would not be proper to pick a word or a sentence from the judgment divorced from the context of question under consideration and treat it to be complete law declared by Supreme Court. In support of this contention he placed reliance on the judgment of Hon’ble Supreme Court in the case of CIT v. Sun Engg. Works (P) Ltd. (1992) 198 ITR 297 (SC) and in the case of Life Insurance Corpn. of India’s case (supra).
15. While arguing the revenue’s appeal in ITA No. 5639/Bom./95 the learned Departmental Representative strongly disputed the order of the learned CIT(A) dated 23-3-1995 inasmuch as she held that the assessing officer ought to have allowed the assessee exemption under section 47(v) and thereafter only proceed to rectify the assessment order under section 155(7B). The learned Departmental Representative argued that the stand taken by the learned CIT(A) was illogical. Both the assessee when he filed the return of income and the assessing officer when he made the assessment were aware of the fact that the provisions of section 47A had been attracted and, therefore, the assessee was not entitled to claim any exemption under section 47(v). In spite of this fact the assessee claimed deduction under section 47(v). The provisions of section 140(c) had been amended with effect from 1-4-1976 and the assessee could not have remained under erroneous impression that the Secretary of the Company could sign the return of income. It was only when the assessing officer noticed, the Director of the Company had to step in. Be that as it may after having known that in law the exemption under section 47(v) was not available the assessee was not entitled to claim such exemption atleast in the return of income filed on 15-10-1992, which was the only proper return. The assessing officer was therefore correct in applying the provisions of section 47A straightaway because the facts were known and undisputed. The argument that as at the end of the previous year i.e., on 31-3-1991 the assessee company was 100 per cent subsidiary does not displace the fact that exemption under section 47(v) was subject to and required to be read with the provisions of section 47A. The assessee company had ceased to be the subsidiary of Great Eastern Shipping Co. in March 1992 and, therefore, there was no question of exemption under section 47(v) in the return of income filed on 15-10-1992. It was for the assessee himself to withdraw the claim. An order under section 155 is a part of an assessment order under section 143(3) only. The learned CIT(A) therefore erred in directing that first different assessment order under section 143(3) should be made and thereafter an order under section 155(7B) should be made.
16. In his reply the learned AR of the assessee argued that the assessee company filed the return on 31-12-1991 and at that time the assessee company was 100 per cent subsidiary of Great Eastern Shipping Co. Subsequent return was filed merely to validate the original return of income because by mistake the same had been signed by the Secretary of the Company instead of the Managing Director. The assessee had to furnish the return of income as per the position prevailing during the previous year under assessment. The learned counsel argued that the provisions of section 47A did not cast a duty upon the assessee to revise its return of income. For that purpose the law had provided the machinery provisions of section 155(7B) and that alone could be pressed into service.
17. While arguing the assessee’s Appeal in ITA 4241/M/97 the learned counsel for the assessee vehemently disputed the levy of interest under section 234B. He argued that the provisions of section 234B could be applied only when there was a default as mentioned in section 234B i.e., failure on the part of the assessee to pay such tax as the assessee was liable to pay under section 208 or where the advance tax had been paid by the assessee under section 2 10 the advance tax paid was less than 90 per cent of the assessed tax. In the case of the assessee no notice under section 210 was issued and, therefore, if the assessee paid tax on “current income” within the meaning of section 209, there was no failure on the part of the assessee so as to give occasion for levy of interest under section 234B. The learned counsel argued that the assessee could not be expected to do the impossible. In short in this appeal also the contentions of the learned counsel of the assessee as well as the learned Departmental Representative have been the same as already noted by us under the assessee’s Appeal in ITA No. 5351/Bom./95 and for the sake of brevity the same are not being repeated here.
18. We have carefully considered the rival submissions. We shall first take up the assessee’s appeal in ITA No. 5351/Bom./95. Ground of appeal No. 1 is general. Ground of appeal Nos. 2 to 4 are directed against the finding of the learned CIT(A) that the return of income filed by the assessee on 31-12-1991 is an invalid return and the assessee may be treated to have filed the return of income on 15-10-1992 only. In this regard the learned AR of the assessee has heavily placed reliance on the provisions of sections 139(9) and 292B. He has argued that where the return is signed by a wrong person it is a curable defect and does not result into return of income being ab initio void. He has also sought to distinguish the judgments relied upon by the learned Departmental Representative on the grounds of the provisions of sections 139(9) and 292B. 1n support of the contentions in this regard the learned counsel for the assessee has placed reliance before us on two judgments of Kerala High Court and one judgment of Madras High Court. As to the judgment of Hon’ble Kerala High Court reported in Masoneilan India Ltd.’s case (supra) it has been held that if the return of a Company is not signed by a person mentioned in section 140 it is a defect curable under section 292B. The judgment of Hon’ble Kerala High Court in Vanaja Textiles Ltd.’s case (supra) is however on different facts. In that case the assessee filed a return of income and subsequent survey conducted by the department showed that the return of income was false. The assessee filed another return on the ground that the earlier return had been signed by Executive Director and not by the Managing Director or the Director of the Company. Hon’ble Kerala High Court held that it was clear that the subsequent return filed by the assessee was not a voluntary return after finding out the bona fide mistake committed by it. Thus, in the judgment in Vanaja Textiles Ltd.’s case (supra) the Hon’ble High Court have examined the question of the voluntary nature of the subsequent return of income. As to the judgment of Hon’ble Madras High Court in Spic Educational Foundation’s case (supra) the issue involved was the assessee, a charitable trust, not furnishing the Audit Report. The provisions of section 140(c) are not in picture in that judgment. We therefore find that the assistance sought by the assessee from the judgment of Hon’ble Madras High Court is remote. As against these High Court judgments the learned Departmental Representative has relied upon a number of judgments. The first judgment relied upon is the judgment of Hon’ble Supreme Court in the case of Keshav Chandra Mandal (supra). In that case the return of income was not filed by individual himself but his agent. The Hon’ble Supreme Court held that in the absence of Statutory permission to sign by writing the name of the principal, the return could not be held to have been signed by the principal. The learned counsel has sought to distinguish this judgment on the ground that when the judgment was delivered the provisions of section 139(9) and 292B were not on the statute. The second judgment relied upon by the learned Departmental Representative in Electrical Instrument Co. Ltd.’s case (supra). In that case the return was not signed at all. Hon’ble Delhi High Court held that such return of income was an invalid return. We do not find this judgment also as covering the controversy before us. The third judgment relied upon by the learned Departmental Representative in Khial Das & Son’s case (supra). There also the return of income had been filed unsigned and unverified. The next judgment relied upon by the learned Departmental Representative in National Insurance Co. Ltd. case (supra). On perusal of the judgment we find that the judgment goes a long way to support the contention of the learned Departmental Representative. However, we find that this judgment of Hon’ble Calcutta High Court has been considered and distinguished by ITAT Calcutta in its decision in B.F. Goodrich Co. case (supra). We also find that the contentions of the assessee are supported by other Tribunal decisions in Vijay Trading Co.’s case (supra), M.P. State Agro Industries Development Corpn. Ltd.’s case (supra) and Punjab United Pesticides & Chemicals Ltd.’s case (supra). We therefore find that the issue is such on which more than one view is possible. However the preponderance of judicial opinion is more in the favour of the assessee. Hence respectfully following the judgment of Hon’ble Kerala High Court in Masoneilan (India) Ltd.’s case (supra) and the decisions of the Tribunal in Vijay Trading Co.’s case (supra), M.P. State Agro Indutries Development Corpn. Ltd.’s case (supra), Punjab United Pesticides & Chemicals Ltd’s case (supra) and B.F. Goodrich & Co.’s case (supra) we decide this issue in favour of the assessee and against the revenue. The order of the learned CIT(A) is reversed on this point and the assessing officer is directed to treat the assessee as having filed a defective return of income on 31-12-1991 which was cured on 15-10-1992.
19. Ground of appeal No. 5 in the assessee’s appeal is that the learned CIT(A) erred in confirming the levy of interest under section 234A. As we have already held that the assessee should be treated to have filed the return of income on 31-12-1991 we direct that interest under section 234A, if any, may be computed with reference to the date of filing of return of income on 31-12-1991 only.
20. Ground of appeal No. 6 in the assessee’s appeal is that the learned CIT(A) erred in not deleting interest levied under section 234B. The same ground has been taken by the assessee in its Appeal No. 4241/Mum./97 against the order of the learned CIT(A) dated 31-3-1997 in relation to the order under section 155(7B). The revenue also has in its appeal in ITA No. 5639/Bom./95 against the order of the learned CIT(A) dated 23-3-1995 disputed the order of the learned C1T(A) directing the assessing officer to allow the assessee exemption under section 47(v) in the assessment order under section 143(3) and thereafter pass an order under section 155(7B) by virtue of section 47A. We find that the dispute essentially stems from the central point as to whether or not the assessee should be subjected to interest under section 234B. There is no dispute between the parties that in view of the issue of shares by the assessee company in the month of March 1992, the assessee is not entitled to deduction under section 47(v). The assessee has argued that in the assessment order under section 143(3) the assessee should be allowed deduction under section 47(v) and thereafter a rectification under section 155(7B) may be made. In the assessee’s Appeal No. 4241/Bom./97 against the order under section 155(7B) made by the assessing officer the assessee has not disputed the rectification under section 155(7B) and the only dispute is levy of interest under section 234B. It is thus seen that in essence the dispute pertains to levy of interest under section 234B otherwise whether the exemption under section 47(v) is withdrawn in the regular assessment under section 143(3) or by way of an order under section 155(7B) does not make any difference. In our view the question as to whether the assessee’s exemption under section 47(v) should have been refused in the regular assessment under section 143(3) or not stands decided by the judgment of Hon’ble Madhya Pradesh High Court in the case of CIT v. Smt. Mamta Tiwari (1988) 171 ITR 59 (MP). In that case the Hon’ble Madhya Pradesh High Court held that an order under section 155 is part of the proceedings for assessment under section 143(3) of the Act. As a matter of fact the provisions of section 155(7B) stipulate that the assessing officer may “recompute the total income of the transferor company for the relevant previous year and make the necessary amendment”. Thus, the effect of the order under section 155 is nothing but amendment of the assessment order under section 143(3) earlier made. It would therefore follow that what an assessing officer can do by an order under section 155(7B), he is always empowered to do the same thing in an assessment order under section 143(3) if the facts and circumstances of the case so warrant. In the case of Mamta Tiwari (supra) the penalty proceedings under section 273 were initiated in the course of rectification proceedings under section 155. It was held that the initiation of penalty proceedings was validly made. Hon’ble Madhya Pradesh High Court followed that judgment again in the case of CIT v. Premkumar Sethia (1987) 171 ITR 66 (MP). As pointed out by us this dispute as to whether the exemption should be allowed in the regular assessment first and then withdrawn in an order of rectification under section 155(7B) is academic because the main issue is whether or not the assessee is liable to levy of interest under section 234B and that aspect including the quantum of interest under section 234B remains unaffected in both situations. However, since this dispute has arisen before us we are of the view that it would be illogical to hold that the assessing officer should first make an assessment order and then make an amendment of that assessment order. We therefore hold that the learned CIT(A) erred in directing the assessing officer to do so.
21. We shall now come to the main question as to the levy of interest under section 234B. In various appeals the assessee has denied its liability to be assessed to amount of interest under section 234B and having regard to the assessee’s total denial of liability, the appellate authorities have rightly considered the plea following the ratio of Hon’ble Supreme Court in Central Provinces Manganese Ore Co. Ltd’s case (supra). In this connection first and foremost contention of the assessee is that the assessee had paid correct tax based on its current income as computed under the provisions of section 209 and, therefore, interest under section 234B was not leviable. The contention of the assessee is based on the assumption that as of during the previous year i.e., financial year 1990-91 the assessee was entitled to deduction under section 47(v) and that the assessee lost deduction only in the month of March 1992. Therefore the assessee had paid correct taxes within the meaning of section 209/210. The assessee has sought support from the judgment of Hon’ble Uttaranchal High Court in Sedco Forex International Drilling Co. Ltd.’s case (supra). The assessee has also relied upon the judgment of Hon’ble Rajasthan High Court in Smt. Premlata Jalanis case (supra) and the decision of ITAT Chandigarh in Dr. (Mrs.) Devinder Kaur Sekhon’s case (supra). Of these we find that the judgment of Hon’ble Rajasthan High Court is not of much assistance to the assessee because that judgment has been rendered in the context of section 234C and not section 234B. We are making this distinction because section 234C relates to shortfall in the payment of instalments of advance tax during the previous year whereas the provisions of section 234B are on a different situation i.e., where the advance tax paid by the assessee falls short of 90 per cent of the assessed tax. Assessed tax, in any case has to be an event subsequent to the expiry of time available to the assessee for making payments of advance tax. We therefore find that the judgment of Hon’ble Rajasthan High Court in the case of Smt. Premlata Jalani (supra) is not of much assistance to the assessee. The learned Departmental Representative on the other hand has placed considerable reliance on the judgment of Hon’ble Supreme Court in the case of Anjum M.H. Ghaswala (supra) and the decision of ITAT Mumbai in Harsha Bhogle’s case (supra). The learned Departmental Representative has pointed out that though the judgment by Hon’ble Uttaranchal High Court in Sedco Forex International Drilling Co. Ltd’s case (supra) has been delivered at later point of time than the judgment of Hon’ble Supreme Court in the case of Anjum M.H. Ghaswala (supra), the judgment of Hon’ble Supreme Court had not been cited before the Hon’ble Uttaranchal High Court. The learned AR of the assessee has argued that the judgment of Hon’ble Supreme Court in the case of Anjum M.H. Ghaswala (supra) has not been rightly relied upon because that judgment does not embrace the point at issue. On consideration. of the matter we are of the view that the learned Departmental Representative has rightly relied upon the judgment of Hon’ble Supreme Court in the case of Anjum M.H. Ghaswala (supra). In that case the controversy was whether or not the Settlement Commission has jurisdiction to reduce or waive the interest chargeable under sections 234A, 234B and 234C of the Act. The Hon’ble Supreme Court, inter alia, observed as under:
“It is also to be noted that wherever the Act contemplated power of waiver or reduction of interest to be entrusted with any particular authority in any particular situation, it has done so like in section 220(2A) of the Act. It is also worthwhile to note that the Act wherever it contemplated that there should be no levy of interest, it has clearly made provision for the same as could be seen from section 158BF which mandates that no interest under the provisions of section 234A, 234B or 234C shall be levied or imposed upon the assessee in respect of the undisclosed income determined in the block assessment.
If the scheme of levy of interest is thus to be analysed on the anvil of the provisions referred to hereinabove, it shows that the interest contemplated under sections 234A, 234B and 234C is mandatory in nature and the power of waiver or reduction having not been expressly conferred on the Commission, the same indicates that so far as the payment of statutory interest is concerned, the same is outside the purview of the settlement contemplated in Chapter XIXA of the Act.”
The learned counsel for the assessee has argued that the aforesaid judgment does not cover the issue as to if the assessee correctly paid advance tax under the provisions of section 209, interest under section 234B is leviable or not. There are two aspects of the matter. First aspect is whether the assessee has correctly paid advance tax. Secondly, whether on account of mandatory nature of section 234B the interest is to be levied in any event. As to the first aspect it is not in dispute that the assessee paid advance tax on the basis that exemption under section 47(v) was available. The provisions of section 47(v) as also the provisions of sections 47A and 155(7B) were all on statute book when the assessee worked out its advance tax liability. The assessee was aware that if at any time before the expiry of period of eight years the parent company ceased to hold the whole of the share capital of the subsidiary company, the assessee would be disentitled to exemption under section 47(v). The exemption availed of by the assessee was not a blanket exemption but a conditional exemption. This aspect is required to be kept in view while considering the view of Uttaranchal High Court in Sedco Forex International Drilling Co. Ltd.’s case (supra) relied upon by the assessee. In that case there were conflicting decisions on the interpretation of the contracts regarding on period and off period salary. Ultimately the Legislature stepped in to clarify the position by the Finance Act of 1999. During the assessment year 1992-93 the position was not clear and while bona fide dispute was pending the assessee had to estimate his current income. In the case before us the legal position was quite clear and no two views were possible. In other words the assessee calculated its advance tax liability after availing of exemption under section 47(v) bearing the risk of non-availability of exemption under the provisions of section 47A. Coming to the second aspect, the Hon’ble Supreme Court have in the case of Anjum M.H. Ghaswala (supra) held that the Settlement Commission had no jurisdiction to waive or reduce the statutory interest under section 234B which was mandatory. In other words the Hon’ble Supreme Court have held that no discretion could be exercised in the matter of levy of interest under section 234B i.e., the merit of the reasons resulting into shortfall leading to levy of interest under section 234B could not be taken into consideration. In our opinion, what is true of Settlement Commission must be true of Income Tax Appellate Tribunal as well. The judgment of Hon’ble Supreme Court in the case of Anjum M.H. Ghaswala forbids us from going into the question as to whether the deficiency as envisaged under section 234B emanated from a reasonable cause or even circumstances beyond the control of the assessee. We are emboldened in taking this view from the fact that the interest levied under section 234B is compensatory and not penal. This position clearly emerges from the judgments in Dr. S. Reddappa v. UOI (1998) 232 ITR 62 (Kar), A.M. Sainalabdeen Musaliar v. UOI (2000) 242 ITR 400 (Ker), Tuticorin Vegetable Marketing Co. (P) Ltd. v. ITO (2000) 243 ITR 202 (Mad), Raj Kumar Singhal v. UOI (2002) 255 ITR 561 (P&H) etc. We therefore see considerable merit in the view taken by the learned CIT(A) in the order dated 31-3-1997 that interest under section 234B was chargeable as a compensation for the tax amount withheld by the assessee from payment to the Government. It was not a penalty. We are also of the view that in that order the learned CIT(A) has correctly noticed that there being an express mention of section 155 in section 234B(4) if the tax liability increases or reduces in any of the situation envisaged in section 155 the interest shall be increased or reduced accordingly.
22. Before parting we may also point out that provisions of section 234B apply in two situations. First situation is where an assessee liable to pay advance tax under section 208, fails to pay such tax. The second situation is that where the advance tax paid by an assessee under section 210 read with section 209 is less than 90 per cent of the assessed tax. The assessee’s case falls in the second category. We do not see merit in the contention of the assessee that no notice under section 210 was served upon it because the provisions of section 210(1) cast obligation on every person liable to pay advance tax to pay the same on his own accord calculated in the manner laid down in section 209.
23. In view of the discussion in the foregoing paragraphs we hold that the assessing officer was justified while making order under section 143(3) to estimate capital gain under the provisions of section 47A. He was also justified in levying interest under section 234B.
24. In the result, we allow revenue’s appeal in ITA 5639/Bom./95 while the assessee’s appeal in ITA 5351/Bom./95 is only partly allowed. The assessee’s appeal in ITA No. 4241/Mum./97 is dismissed.