2007 (1) TMI 295 - AT - Income Tax

Summary

Issues Involved:
1. Levy of interest u/s 234B as a debatable point of law.
2. Computation of interest u/s 234B(3) for the period from 27-12-2000 to 27-3-2002.
3. Mistake apparent from the record in the computation of interest u/s 234B.
4. Rectification of mistake in quantifying the correct amount of interest u/s 234B.
5. Applicability of the Supreme Court judgment in Volkar Bros. case.
6. Non-adjudication of Ground No. 2 by CIT(A).

Summary:

Issue 1: Levy of interest u/s 234B as a debatable point of law
The CIT(A) held that the levy of interest u/s 234B in this case is a debatable point of law and thus outside the purview of section 154. Consequently, the order u/s 154 dated 10-9-2003 by the Assessing Officer (AO) was cancelled as bad in law.

Issue 2: Computation of interest u/s 234B(3) for the period from 27-12-2000 to 27-3-2002
The CIT(A) found that the AO levied interest u/s 234B(3) for the period from 27-12-2000 to 27-3-2002 and then interpreted the provisions of section 234B(1) to levy interest from 1-4-1998 to 27-3-2002. This was considered outside the purview of section 154 as there were two possible views regarding the chargeability of interest under sections 234B(1) and 234B(3).

Issue 3: Mistake apparent from the record in the computation of interest u/s 234B
The AO computed interest u/s 234B(3) for Rs. 9,26,612 for the period January 2001 to 27-3-2002. However, section 234B(3) mandates interest from the date of determination of total income u/s 143(1) to the date of reassessment u/s 147. The AO included the portion of interest leviable u/s 234B(1) which was mistakenly left out, in accordance with section 234B.

Issue 4: Rectification of mistake in quantifying the correct amount of interest u/s 234B
The CIT(A) held that the AO's action in rectifying the mistake in quantifying the correct amount of interest u/s 234B was beyond the scope of section 154. The AO had quantified the correct amount of interest u/s 234B for the period 1-4-1998 to 27-3-2002 amounting to Rs. 20,11,892 through the order u/s 154 dated 10-9-2003.

Issue 5: Applicability of the Supreme Court judgment in Volkar Bros. case
The CIT(A) held that the AO's action was not in accordance with the Supreme Court judgment in Volkar Bros. case, which stated that a mistake apparent from the record must be obvious and patent, not something requiring a long drawn process of reasoning.

Issue 6: Non-adjudication of Ground No. 2 by CIT(A)
The CIT(A) did not adjudicate upon Ground No. 2 as Ground No. 1 had already been allowed.

Tribunal's Decision:
The Tribunal held that the AO was justified in including the interest originally charged u/s 234B(1) in the computation sheet forming part of the reassessment order u/s 143(3)/148. The Tribunal also held that the AO was not justified in charging interest u/s 234B(3) from 1-4-1998 to 27-3-2002. The AO was directed to modify the order u/s 154 to include the interest originally charged u/s 234B(1) and to charge incremental interest u/s 234B(3) for the period from the date of determination of total income u/s 143(1) to the date of reassessment u/s 143(3)/147. The appeal filed by the Department was allowed in terms of these directions.