2011 (3) TMI 1106 - HC - Income Tax

Assessment - disallowing the claim against the interest income assessed under the head other sources - AO issued the notice under Section 143(2) - additional tax u/s 143(1)(a) levied - avoiding the tax liability - levy of interest under Section 201(1A) - Held that - If the loss declared by an assessee had been reduced by reason of adjustments made under Sub-section (1)(a) the provisions of sub-section (1A) would apply mandatorily at the rate indicated therein and thus there was no mistake in imposition of the additional tax. No substance in the contention of Dr. Pal that the additional penalty under sub-section (1A) bore the imprint of a penalty and no penalty could be levied because no opportunity of hearing was given to his client. The decision of the Supreme Court in the case of CIT Vs. Hindustan Electro Graphites Ltd. 2000 (3) TMI 2 - SUPREME Court relied upon by Dr. Pal was not only explained but its correctness was also doubted by a larger Bench of the Supreme Court in the case of Assistant Commissioner of Income-tax Vs. J.K. Synthetics Ltd. reported 2001 (2) TMI 17 - SUPREME Court . Dr. Pal s further contention that the levy of interest under Section 201 (1A) which has been imposed in the intimation issued under Section 143(1)(a) should be set aside has no justification in the aforesaid contention as the said provision is also mandatory when all the conditions mentioned therein is fulfilled.

Issues Involved:
1. Jurisdiction of the Assessing Officer to issue intimation under Section 143(1)(a) after issuing notice under Section 143(2).
2. Disallowance of interest claim and its debatable nature under Section 143(1)(a).
3. Imposition of additional tax under Section 143(1A) and its nature as a penalty.
4. Levy of interest under Section 201(1A) in the intimation issued under Section 143(1)(a).

Issue-wise Detailed Analysis:

I) Jurisdiction of the Assessing Officer to issue intimation under Section 143(1)(a) after issuing notice under Section 143(2):
The appellant contended that the Assessing Officer had no jurisdiction to issue the intimation on the same day as the notice under Section 143(2). The court examined the order sheet and found that the intimation under Section 143(1)(a) was issued first, followed by the notice under Section 143(2). The court held that if the Assessing Officer noticed a prima facie mistake apparent on the face of the return, he was vested with the jurisdiction to pass the necessary order under Section 143(1)(a). The subsequent issuance of the notice under Section 143(2) for regular assessment was not prohibited by law. Thus, the court found no substance in the appellant's contention regarding the jurisdiction of the Assessing Officer.

II) Disallowance of interest claim and its debatable nature under Section 143(1)(a):
The appellant argued that the disallowance of Rs.1,46,37,744/- against the interest income assessed under the head 'other sources' was a debatable issue requiring investigation of facts, and thus, such adjustments should not have been made under the proviso to Section 143(1)(a). The court did not specifically address this argument in detail but upheld the Assessing Officer's actions, implying that the adjustments made were within the permissible scope of Section 143(1)(a).

III) Imposition of additional tax under Section 143(1A) and its nature as a penalty:
The appellant contended that the imposition of additional tax under Section 143(1A) was akin to a penalty and should not have been levied without giving the assessee an opportunity of being heard. The court referred to the provisions of Section 143(1A) and concluded that the additional tax was mandatory when the conditions specified were met. The court also referenced the Supreme Court's decision in the case of Assistant Commissioner of Income-tax Vs. J.K. Synthetics Ltd., which doubted the correctness of an earlier decision in CIT Vs. Hindustan Electro Graphites Ltd. The court found no merit in the argument that the additional tax bore the imprint of a penalty and upheld its imposition.

IV) Levy of interest under Section 201(1A) in the intimation issued under Section 143(1)(a):
The appellant argued against the levy of interest under Section 201(1A) imposed in the intimation issued under Section 143(1)(a). The court found that the provision was mandatory when the conditions mentioned therein were fulfilled. Therefore, the court upheld the levy of interest under Section 201(1A).

Conclusion:
The appeal was dismissed, with the court answering the first three questions in the negative and the fourth in the affirmative, all against the assessee. The court found no substance in any of the appellant's contentions and upheld the actions of the Assessing Officer and the Tribunal. No order as to costs was made.

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