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2013 (1) TMI 113 - AT - Income TaxInterest u/s 234C - assessee is in the business of real estate development - search action u/s 132 - Held that - The assessee has claimed to have earned the business income only at the fag end of the financial year by the delivery of possession of the property and that this delivery of possession is as per the agreement between the assessee and the developer. The decision of the Tribunal in the case of Jindal Irrigation Systems (1995 (8) TMI 97 - ITAT HYDERABAD-A) is very much applicable to the facts of the case as the claim of the assessee that the income has accrued to the assessee on 28.3.2008 has not been examined by the authorities below - remand the issue to the file of the AO with a direction to examine the claim of the assesee and if it is found that the income has in fact accrued to the assessee on 24.3.2008, then no interest u/s 234C shall be charged.
Issues:
Levy of interest u/s 234C of the Income-tax Act on income earned at the end of the financial year. Analysis: The appeal before the Appellate Tribunal ITAT Bangalore involved the grievance of the assessee against the levy of interest u/s 234C of the Income-tax Act by the Assessing Officer (AO) in relation to the assessee's income earned on 24.3.2008. The assessee, engaged in real estate development, filed its return of income for the assessment year 2008-09 after a search action under section 132 of the Income-tax Act was conducted in the case of M/s Ittina Group, to which the assessee belonged. The Assessing Officer accepted the returned income of Rs.19,77,66,240/- but charged interest u/s 234C amounting to Rs.24,87,169/- on the said income. The assessee contended that the income was earned only on 24.3.2008 and therefore, interest u/s 234C should not be charged. The Assessing Officer, in response to an application u/s 154 of the Income-tax Act, did not address the issue of interest u/s 234C, leading the assessee to appeal the matter before the CIT(A). The CIT(A) considered the first proviso to sec. 234C(1) of the Income-tax Act and held that as the assessee had offered the income under the head 'profit and gains of business of profession', the exemption under the first proviso was not applicable, upholding the levy of interest u/s 234C. The assessee, dissatisfied with this decision, appealed before the ITAT Bangalore. The assessee's counsel cited a precedent where it was held that interest u/s 234C cannot be levied if income is earned at the end of the financial year, emphasizing that the assessee earned income only on 24.3.2008. The Departmental Representative supported the CIT(A)'s orders. Upon hearing both parties, the Tribunal deliberated on whether interest u/s 234C could be levied when the entire business income was earned at the end of the financial year. Referring to the precedent, the Tribunal noted that the assessee cannot be expected to estimate and pay advance tax for income earned at the fag end of the year. The Tribunal found the precedent applicable to the current case where the assessee claimed to have earned income only at the fag end of the financial year. However, since the claim regarding the accrual of income on 24.3.2008 was not examined by the lower authorities, the Tribunal remanded the issue to the AO for further examination. If it is established that the income indeed accrued on 24.3.2008, no interest u/s 234C shall be charged. Consequently, the appeal of the assessee was allowed for statistical purposes.
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