2003 (10) TMI 28 - HC - Income Tax

Assam Agricultural Income Tax Act, 1939 - assessing authority levied an interest of Rs. 2,32,623 in the assessment order dated September 7, 1996, and the same has been challenged in this writ petition stating that the interest levied is in violation of sub-clause (5) of section 20C of the Act (since repealed) - the provisions of sub-clause (5) of section 20C of the Act were more or less identical with section 234B of the Income-tax Act, therefore it is held that in the absence of any specific order regarding the interest levied in the impugned order is bad in law

Summary

Issues:
Challenge to interest levied under the Assam Agricultural Income-tax Act, 1939 for the assessment year 1987-88.

Analysis:
The petitioner, an assessee under the Assam Agricultural Income-tax Act, challenged the interest of Rs. 2,32,623 levied by the assessing authority for the assessment year 1987-88. The petitioner contended that the interest levied was in violation of sub-clause (5) of section 20C of the Act, which was applicable during the relevant period. The respondent-authorities did not file any affidavit-in-opposition. Both parties were represented by learned counsel.

The petitioner's counsel argued that the provisions of section 20C of the Act were akin to section 234B of the Income-tax Act, 1961, and required the Assessing Officer to pass a specific order detailing the grounds for levying interest, the period for which it was levied, and the applicable rate. Upon examining the assessment order, the court noted that it merely stated the amount of interest without providing reasons or specifying the period for which it was imposed.

Referring to a precedent, the court cited the case of Ranchi Club Ltd. v. CIT, where the Patna High Court ruled that interest under section 234B of the Income-tax Act, 1961, cannot be charged without a clear and specific order from the Assessing Officer. The matter was subsequently taken to the apex court, which declined to intervene. Drawing parallels between the provisions of sub-clause (5) of section 20C of the Act and section 234B of the Income-tax Act, the court concluded that the absence of a specific order regarding the levied interest rendered the impugned order legally flawed.

In light of the above analysis, the court allowed the civil rule, quashing the interest levied by the assessing authority. The judgment highlighted the importance of providing a clear and specific order when levying interest under the relevant tax legislation to ensure procedural compliance and legal validity.