IMPORTANT POINT
Levy of interest under Section 234A of Income Tax Act, 1961 is statutory interest and mandatory and automatic.

JUDGMENT :

M.R. SHAH, J.

1. Feeling aggrieved and dissatisfied with the impugned common judgment and order dated 22.02.2016 passed by the High Court of Delhi at New Delhi in Income Tax Appeal Nos. 162/2002, 164/2002, 165/2002, 167/2002 & 168/2002, by which the High Court has allowed the said appeals preferred by the Revenue and has quashed and set aside the common order dated 08th January, 2002 passed by the Income Tax Appellate Tribunal, New Delhi (for short, ‘ITAT’) for Assessment Years 1987-88, 1988-89 and 1989-90 and restored the orders passed by the Assessing Officer, upheld by the Commissioner of Income Tax (Appeals) (for short, ‘CIT(A)), the respective assessees have preferred the present appeals.

Facts:

2. The facts leading to the present appeals in nutshell are as under:

The respective assessees, namely, Mansarovar Commercial Private Limited, Sovereign Commercial Private Limited, Swastik Commercial Private Limited, Trishul Commercial Private Limited and Pasupati Nath Commercial Private Limited were incorporated under the Registration of Companies (Sikkim) Act, 1961. Each of the assessee companies claim to be carrying on the business of commercial agents in cardamon and other agricultural products.

2.1 Sikkim became part of India in April, 1975. The Constitution (Thirty Sixth Amendment) Act, 1975 inserted Article 371-F into the Constitution of India, in terms of which not all the laws of India were extended to the new State of Sikkim. Under Article 371-F (k) all laws in force immediately before the appointed day, i.e., 26th April, 1975, in the territories comprising the State of Sikkim or any part thereof were to continue to be in force therein until amended or repealed by a competent legislature or other competent authority. The Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) was not made straightway applicable to the State of Sikkim. Till such extension of the Act to Sikkim by a notification issued under Article 371-F(n), income tax was to be charged and collected under the Sikkim State Income-tax Manual, 1948 (for short, ‘Sikkim Manual, 1948’). The recovery of tax was under the scheme of the Sikkim (Collection of Taxes and Prevention of Evasion of Payment of Taxes) Act, 1987.

2.2 By a notification No. S.O. 1028E dated 7th November, 1988 issued under Article 371-F(n) of the Constitution, the Act, the Wealth Tax Act, 1957 and the Gift Tax Act, 1958 were extended to the State of Sikkim. In terms of para 2 of the said notification, the Central Government appointed, by Notification S.O. 148E dated 23 rd February, 1989, the 1st of April, 1989 as the date on which the Act would come into force in the State of Sikkim in relation to the previous year relevant to the Assessment Year commencing on the 1st day of April, 1989. However subsequently, by virtue of Section 26 of the Finance Act, 1989 the Act was made applicable to the State of Sikkim from the previous year relevant to the Assessment Year commencing from 1st April, 1990, thereby extending the date of applicability of the Act by one year from the date specified in the notification dated 23rd February, 1989.

2.3 The case of the assessees was that each of them was a resident of Sikkim, carrying on business in Sikkim and not elsewhere and that till 31st March, 1990, each of them were governed by the Sikkim Manual, 1948 and not the Act. Therefore, the stand of the assessees was that the income earned by them till that date was income earned in Sikkim from the business conducted/done in Sikkim. On the other hand, the case of the Revenue was that the control and management of each of the assessee companies was wholly with their auditor, M/s Rattan Gupta & Co., Chartered Accountants, who had their offices in Karol Bagh, New Delhi and therefore, were companies’ resident in India in terms of Section 6(3) of the Act.

2.4 A search was conducted on 15th March, 1990 at the premises of M/s Rattan Gupta & Co., Chartered Accountant at Daryaganj, New Delhi and during the course of