2013 (5) TMI 15 - AT - Income Tax

Rectification of orders - as per assessee AO of recomputing interest u/s 234B at Rs.6,72,07,276 as against Rs.6,59,46,319 charged per order dated 28th March, 2008 passed under section 143(3) i.e. completed assessment - whether the interest payable under section 234B which has to be first adjusted against the payment made under section 140A has to be calculated with respect to total income as declared in the return or total income determined in the regular assessment? - Held that - In view of the provisions of section 140A r.w.s. 234B, the interest that could have been charged/ adjusted as part of interest under section 234B will have to be calculated on the returned income but not on the basis of assessed income. AO, who originally completed the assessment, has correctly calculated as per the provisions of section, whereas the present AO wrongly interpreted the provisions in the order under section 154. This issue was elaborately discussed in ACIT vs. M/s C.C. Chokshi & Co (2010 (5) TMI 698 - ITAT MUMBAI) wherein held that the interest payable under section 234B for the purpose of adjustment against the tax paid under section 140A has to be computed with respect to assessed tax determined on the basis of total income declared in the return. but only for the limited purpose of adjustment of payment made u/s. 140A against interest payable under section 234B while making computation of interest payable by the assessee which has to be computed with respect to the total income determined in regular assessment as per the definition of assessed tax given in section 234B. Thus the orders of AO under section 154 and the CIT (A) are bad in law. The order under section 143(3) originally passed by AO has correctly worked out the interest under section 234B which has to be upheld. Therefore order u/s 154 passed by AO canceled - Assessee s grounds are allowed.

Issues Involved:

1. Legality of the rectification order under section 154.
2. Correctness of recomputation of interest under section 234B by the Assessing Officer (AO).

Issue-wise Detailed Analysis:

1. Legality of the Rectification Order under Section 154:

The first issue raised by the assessee was the legality of the rectification order passed by the AO under section 154. The assessee contended that the issue involved was not a rectification matter as it required elaborate discussion, debate, and could have more than one opinion. The CIT (A) confirmed the action of the AO, leading to the appeal.

The facts leading to the rectification were that the AO had originally completed the assessment under section 143(3) on 28th March 2008, calculating tax payable along with interest under various sections. A notice under section 154 was issued on 6th January 2009 proposing to rectify the order by enhancing the interest charged under section 234B. The assessee requested the AO to provide the computation details, but the AO passed the order under section 154 without granting any opportunity to the assessee.

The Tribunal found that the AO had wrongly interpreted the provisions in the order under section 154. The Tribunal referred to the provisions of section 234B and section 140A, concluding that the interest should have been calculated on the returned income and not on the assessed income. This interpretation was supported by a previous decision in the case of ACIT vs. M/s C.C. Chokshi & Co.

2. Correctness of Recomputation of Interest under Section 234B:

The second issue was the correctness of the recomputation of interest under section 234B by the AO. The AO had originally computed interest under section 234B as Rs.6,59,46,319, but later recomputed it as Rs.6,72,07,276 in the rectification order under section 154.

The assessee argued that the AO had added the entire interest chargeable under section 234B up to January 2008 and reduced the self-assessment tax (SA Tax) paid on 21st January 2008, resulting in an incorrect computation. The CIT (A) rejected the assessee's contentions, stating that the provisions of section 234B required interest to be computed based on the assessed tax, and the payment of SA Tax could not be credited for computing interest under section 234B.

The Tribunal, however, disagreed with the CIT (A) and AO's interpretation. It held that the interest under section 234B should be calculated on the returned income for the purpose of section 140A and not on the assessed income. The Tribunal referred to the decision in the case of ACIT vs. M/s C.C. Chokshi & Co., which clarified that the interest payable under section 234B for the purpose of section 140A should be computed on the returned income. The Tribunal concluded that the original computation by the AO in the order under section 143(3) was correct and the rectification order under section 154 was bad in law.

Conclusion:

The Tribunal allowed the appeal filed by the assessee, holding that the rectification order under section 154 and the recomputation of interest under section 234B by the AO were incorrect. The original order under section 143(3) was upheld, and the rectification order under section 154 was cancelled.

← Previous Next →