2011 (2) TMI 45 - AT - Income Tax

Search and seizure - notices under section 154, on the assessees wherein it was proposed to levy interest under sections 234A, 234B and 234C of the Act on the ground that it was a mistake apparent from the record - method of computation of the interest is specifically provided in the sections 234A(3) and 234B(3) in the case of assessments under section 153A and section 234C - non-application of a specific provision being mistake apparent from record - Assessing Officer was invoked the provisions of section 154 for rectifying the mistake of the non-levy of interest under sections 234A, 234B and 234C of the Act in the original assessment Assessing Officer was right in invoking the provisions of section 154 for rectifying the mistake of the non-levy of interest under sections 234A, 234B and 234C of the Act in the original assessment. The computation of the interest under section 234A is to be done for every month or part of the month comprised in the period commencing on the day immediately following the expiry of the time allowed in the notice under section 153A. The interest under section 234B is to be computed on the amount by which the tax on the total income determined on the basis of the assessment under section 153A exceeds the tax on the total income determined under sub-section (1) of section 143 on the return filed in response to the notice issued under section 153A. In regard to the levy of interest under section 234C, there is no provision similar to section 234A(3) or section 234B(3) in the said section.

Summary

Issues Involved:
1. Levy of interest under sections 234A, 234B, and 234C.
2. Computation of interest under sections 234A, 234B, and 234C.
3. Application of section 154 for rectification of mistakes.

Detailed Analysis:

1. Levy of Interest under Sections 234A, 234B, and 234C:
The primary issue was whether the interest under sections 234A, 234B, and 234C of the Income-tax Act, 1961, was correctly levied. The assessees argued that the original assessment order did not levy interest, indicating that it was not applicable. The Tribunal noted that the levy of interest is compensatory, and the non-application of specific provisions of the Act constitutes a mistake apparent from the record. Therefore, the Assessing Officer (AO) was correct in invoking section 154 to rectify this mistake.

2. Computation of Interest under Sections 234A, 234B, and 234C:
The Tribunal examined the correct method for computing interest under sections 234A and 234B. According to section 234A(3), interest should be computed from the expiry of the time allowed in the notice under section 153A. Similarly, section 234B(3) specifies that interest is payable on the amount by which the tax on the total income determined on reassessment exceeds the tax determined under section 143(1). The Tribunal clarified that the return filed in response to a notice under section 153A should be treated as a return under section 139(1), and the computation of interest should reflect this.

The Tribunal also noted that the AO had incorrectly computed interest from the date of the original return under section 139(1) and did not give credit for taxes paid before the computation of interest. The Tribunal directed the AO to recompute the interest by giving credit for taxes paid and calculating interest only on the balance of the tax due.

3. Application of Section 154 for Rectification of Mistakes:
The Tribunal upheld the AO's decision to invoke section 154 for rectifying the non-levy of interest under sections 234A, 234B, and 234C. The Tribunal emphasized that non-application of specific provisions is a mistake apparent from the record, which is rectifiable under section 154. The Tribunal found that there can be no two views regarding the levy of interest under these sections, especially when the provisions explicitly provide for such levy.

Conclusion:
The Tribunal partly allowed the appeals of the assessees. It directed the AO to recompute the interest under sections 234A and 234B in accordance with the specified provisions and to give proper credit for taxes paid. The Tribunal upheld the AO's invocation of section 154 for rectifying the non-levy of interest, affirming that it was a mistake apparent from the record. The order was pronounced in court on 4-2-2011.