2013 (12) TMI 1306 - HC - Income Tax

Compulsory levy of interest under section 234B - Held that - Following CIT-II Kanpur versus M/s Deep Awadh Hotels P Ltd., Kanpur 2012 (5) TMI 320 - ALLAHABAD HIGH COURT - In the absence of any mention of charging of interest in the assessment order, interest cannot be charged by issuing a notice of demand - If the assessment order contained the imposition of interest, only then, a notice of demand of interest could be issued under section 156 of the Act - The expression shall used in the sections 234A, 234B, 234C cannot be construed as may - Prior to the Finance Act 1987, the corresponding sections pertaining to imposition of interest used the expression may . The change thus brought about by the Finance Act 1987 is indicative of the intention of the Legislature to make the collection of interest mandatory - The said expression shall has been used deliberately - Decided against Revenue.

Summary

Issues involved:
1. Dispute regarding compulsory levy of interest under section 234-B of the Income Tax Act.
2. Whether interest can be charged under sections 234-A, 234-B, and 234-C in the absence of a specific direction in the assessment order.

Comprehensive Analysis:
1. The High Court heard an appeal filed by the revenue against an order passed by the Income Tax Appellate Tribunal regarding the compulsory levy of interest under section 234-B of the Income Tax Act for the assessment year 1991-92. The Tribunal had accepted the assessee's contention that interest could not be charged as the Assessing Officer failed to mention it in the assessment order.
2. The revenue challenged the Tribunal's decision, arguing that charging interest under sections 234-A, 234-B, and 234-C is mandatory as per a Supreme Court judgment. The revenue contended that even the Settlement Commission could not waive the charging of interest.
3. The assessee, on the other hand, relied on a Division Bench judgment of the High Court, which held that interest cannot be charged unless specifically ordered in the assessment order. The assessee argued that the charging of interest under the mentioned sections is mandatory only if directed in the assessment order.
4. The High Court referred to the Supreme Court's decision in CIT Versus Anjum M.H Ghaswala, which emphasized the mandatory nature of interest under sections 234-A, 234-B, and 234-C. However, the High Court also considered its own Division Bench judgment, which stated that interest cannot be charged without a specific mention in the assessment order.
5. The High Court further cited various judgments from different High Courts supporting the view that interest can only be charged if directed in the assessment order. The Court concluded that in the absence of a specific mention of interest in the assessment order, the Tribunal's decision to delete the charge of interest was not erroneous.
6. Ultimately, the High Court dismissed the revenue's appeal, upholding the Tribunal's decision to not charge interest under sections 234-A, 234-B, and 234-C due to the absence of a direction in the assessment order. The Court emphasized that it is bound by its own Division Bench's decision, which was based on relevant Supreme Court judgments.