2009 (12) TMI 542 - HC - Income Tax

Interest under section 234B(3) - assessee a banking company filed a loss return -reassessment resulted into a positive assessment - interest for non-payment of advance tax - Held that - omission of the officer to levy interest under section 234B(3) in the first reassessment completed under section 147 which could have been rectified under section 154 does not bar the officer from levying interest under the very same provision when the assessment was again revised a second time under section 147 - differential amount on which interest could be demanded under section 234B(3) is actually on the total short fall in advance tax payable with reference to the revised assessment completed under section 147 of the Act - Appeal is dismissed

Summary

Issues:
1. Justification of sustaining demand of interest under section 234B(3) of the Income-tax Act for income escaping assessment completed under section 147 a second time for the assessment year 1999-2000.

Analysis:
The appellant, a banking company, filed a loss return for the assessment year 1999-2000. The Assessing Officer granted a refund initially but later reopened the assessment, resulting in income escaping assessment under section 147, assessing a net income of over Rs. 16 crores. Subsequently, the assessment was revised again, increasing the income to around Rs. 44 crores, with interest under section 234B(3) levied for non-payment of advance tax. The appellant contended that interest under section 234B(3) cannot be levied without being levied under section 234B(1) in the first revision of assessment under section 147. However, the respondent argued that interest under section 234B is mandatory and can be levied in any proceeding, citing a Supreme Court decision. The court examined the provisions of section 234B and concluded that interest under section 234B(3) could be levied even in reassessment under section 147, irrespective of whether interest was levied in the original assessment. The court held that interest under section 234B(3) is on the differential amount of short-fall of advance tax with reference to the original assessment, and thus, the omission to levy interest in the first revision does not bar its levy in subsequent revisions.

The court further deliberated on whether the omission to levy interest under section 234B(3) in the first revision of assessment would prevent its levy in a second revision for the same assessment year under section 147. The court emphasized that interest under section 234B(3) is for the increase in short-fall of advance tax with reference to the original assessment, and it can be levied in all reassessments completed under section 147. Therefore, the omission in the first reassessment does not preclude the officer from levying interest in subsequent revisions. The court dismissed the appeal, upholding the Tribunal's decision to confirm the levy of interest under section 234B(3) in the second revision of assessment under section 147.