2010 (8) TMI 760 - AT - Income Tax

Summary

Issues involved: Appeal against order of CIT(A)-I, Ludhiana u/s 143(3) of the Income-tax Act for assessment year 1998-99. Grounds raised against charging of interest u/s 234B and 234C of the Act.

Charging of Interest u/s 234B and 234C:
The assessee filed a return declaring nil income with a deduction under section 80HHC of the Act. After a notice u/s 148, the assessment was completed at a total income of Rs. 13,04,907, allowing a deduction of Rs. 7,76,733 under section 80HHC. An addition of Rs. 8,88,376 was made under section 68, later deleted by CIT(A). The Tribunal upheld the reopening under section 147 but set aside the deduction computation under section 80HHC for fresh determination. The Assessing Officer recomputed the deduction at Rs. 16,65,150. The charging of interest u/s 234B and 234C was disputed by the assessee, claiming no obligation to pay advance tax due to the amended provisions. The CIT(A) held the assessee liable for interest under sections 234B and 234C.

The assessee argued that the deduction claimed under section 80HHC was in accordance with law and judicial precedents at the time of filing returns. As there was no taxable income estimated, the assessee contended that no interest should be charged under sections 234B and 234C. The Tribunal agreed, citing the provisions of section 208/209 that no advance tax liability arises when no taxable income is estimated. Referring to legal precedents, the Tribunal held that no interest should be charged under sections 234B and 234C in the present case. Consequently, the interest charged under these sections was deleted, and the appeal was partly allowed.