2011 (10) TMI 278 - HC - Income Tax

Interest under 234A and 234B - Income disclosed under VDIS - Assessee challenged levy of interest in the absence of issue of intimation under 143(1) - Held -levy of interest under 234A and 234B when return of income is filed beyond due date is automatic. Even if the Assessing officer does not issue notice under section 148 within the time prescribed and subsequent issue of such notice as provided under the law would result in the assessees deemed to have defaulted. In otherwords assessees is deemed to have defaulted. Thus decided against assessee.

Summary

Issues Involved:
1. Correctness of interest calculation under Section 234A and 234B.
2. Tribunal's jurisdiction to decide debatable issues under Section 154.

Detailed Analysis:

Issue 1: Correctness of Interest Calculation under Section 234A and 234B

The Revenue challenged the Tribunal's decision regarding the calculation of interest under Sections 234A and 234B. The Tribunal had held that interest under Section 234A should be calculated from the date of filing the return pursuant to the notice under Section 148, and not as per Section 139. The Tribunal also opined that interest under Section 234B should only be levied if an intimation under Section 143(1)(a) had been issued within the prescribed time.

The Court examined the relevant provisions, including Section 234A(1), which mandates interest for late filing of returns, and Explanation 3 to Section 234A, which treats an assessment under Section 147 as a regular assessment. Similarly, Section 234B imposes interest for defaults in payment of advance tax, with Explanation 2 treating an assessment under Section 147 as a regular assessment for interest calculation purposes.

The Court concluded that the levy of interest under Sections 234A and 234B is automatic when the return is filed beyond the due date. The filing of a return under Section 148 does not alter this obligation. The Court emphasized that the interest calculation should commence from the due date of filing the return under Section 139, not from the date of filing the return under Section 148.

Issue 2: Tribunal's Jurisdiction to Decide Debatable Issues under Section 154

The Revenue argued that the Tribunal erred in deciding debatable issues under Section 154, which is meant for rectifying mistakes apparent from the record. The Tribunal had entertained the assessees' application under Section 154, seeking deletion of interest levied under Sections 234A and 234B.

The Court noted that Section 154 is not intended for resolving debatable issues. The Tribunal's decision to consider the application under Section 154 and decide on the interest calculation was beyond its jurisdiction, as the matter involved complex legal interpretations rather than a clear, apparent mistake.

Conclusion:

The Court allowed the appeal, answering the substantial questions of law in favor of the Revenue. It held that the Tribunal erred in its interpretation of interest calculation under Sections 234A and 234B and in entertaining the application under Section 154 for a debatable issue. The interest should be calculated from the due date of filing the return under Section 139, and the Tribunal should not have adjudicated the matter under Section 154.