2005 (5) TMI 547 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of interest under sections 234A, 234B, and 234C by the Commissioner of Income-tax (Appeals).
2. The mandatory nature of interest under sections 234A, 234B, and 234C and its retrospective effect.

Issue-Wise Detailed Analysis:

1. Deletion of Interest under Sections 234A, 234B, and 234C by the Commissioner of Income-tax (Appeals):

The Revenue contended that the Commissioner of Income-tax (Appeals) [CIT(A)] erred in deleting the interest charged under sections 234A, 234B, and 234C by the Assessing Officer (AO). The CIT(A) had observed that there was no specific mention in the assessment order about charging interest and no working of interest charged under various sections in the Demand Notice (DN). The CIT(A) relied on the decision of the Hon'ble Supreme Court in CIT v. Ranchi Club Ltd. [2001] 247 ITR 2091 and the Hon'ble Patna High Court in Smt. Tej Kumari v. CIT [2001] 247 ITR 210 (FB), holding that interest cannot be charged and recovered merely on the strength of DN if not specifically mentioned in the assessment order.

2. The Mandatory Nature of Interest under Sections 234A, 234B, and 234C and Its Retrospective Effect:

The Revenue argued that charging interest under sections 234A, 234B, and 234C is mandatory, citing the Hon'ble Supreme Court's decision in CIT v. Anjum M.H. Ghaswala [2001] 252 ITR 1. This decision clarified that interest under these sections is mandatory and does not require specific mention in the assessment order. The Tribunal noted that the decision in Anjum M.H. Ghaswala was delivered by a Constitution Bench of five judges, making it authoritative. The Tribunal emphasized that the interest under sections 234A, 234B, and 234C is mandatory and must be charged if the default exists, regardless of whether it is mentioned in the assessment order.

The Tribunal further discussed the legislative intent behind sections 234A, 234B, and 234C, noting that the use of the word "shall" indicates mandatory imposition of interest. The Tribunal referenced various judicial decisions, including the Hon'ble Supreme Court's rulings in Hindustan Bulk Carriers [2003] 259 ITR 449 and Sant Ram Mangat Ram Jewellers [2003] 264 ITR 564, which affirmed the mandatory nature of these interests.

The Tribunal also addressed the issue of rectification under section 154, stating that if the AO omits to charge interest, it can be corrected through rectification. The Tribunal cited several cases where rectification was upheld, such as AOP of Sanjaybhai R. Patel v. Asstt. CIT [2004] 267 ITR 129 (Guj.) and Andrew Nettikkadan v. Asstt. CIT [2004] 266 ITR 708 (Ker.).

Conclusion:

The Tribunal concluded that interest under sections 234A, 234B, and 234C is mandatory and should be charged if the default exists. The CIT(A) erred in deleting the interest without verifying the defaults. The Tribunal set aside the case to the file of CIT(A) to verify the facts about defaults and rectify the error by quantifying the interest chargeable under these sections. The appeal of the Revenue was allowed for statistical purposes.