2014 (4) TMI 125 - HC - Income Tax

Disallowance of claim of initial capital - Held that - The AO has assessed the same based on the investment available and in the absence of any material to show that this was included in the initial capital, deduction was disallowed - This is a reasonable finding based on due appreciation of material and evidence available on record thus, there is no reason to interfere. Accrued interest on the re-pawned articles Held that - The claim has been rejected on the ground that re-pawning was done with various money lenders, and with regard to one of the money lender Shri Jagdish Prasad Sahu, his premises was also raided and amount recovered from him - Accrued interest for re-pawning with the money lender has been allowed and for the remaining amount the explanation has not been accepted on the ground that with regard to re-pawned articles there is nothing to show that the same was reinvested by the Assessee - This has been done based on the material available on record. Imposition of interest u/s 234 B and 234 C of the Act Held that - Payment of interest u/s 234 A, 234B and 234C is a mandatory, the assessing authority while passing the original assessment order or while reassessment or rectification order has to pass orders on payment of interest - even if in the order it is indicated that interest be paid in accordance with law, without specifying any particular provision, the benefit has to be given to the Revenue and since payment of interest is mandatory, the interest can be recovered - in the assessment order it is clearly held that interest be charged as per rules thus, there is no need for any interference in the order Decided against Assessee.

Summary

Issues:
Challenge to orders under Income Tax Act - Disallowance of exemption of capital, accrued interest on unexplained investment, accrued interest on re-pawned articles, imposition of interest under Section 234B and 234C.

Analysis:
The petitioner challenged orders related to disallowance of exemption of capital, accrued interest on unexplained investment, accrued interest on re-pawned articles, and imposition of interest under Section 234B and 234C. The Revisional Authority disallowed the exemption of Rs.1 Lacs claimed as initial capital, added accrued interest on unexplained investment, and accrued interest on re-pawned articles. The Revisional Authority also imposed interest under Section 234B and 234C. The petitioner contended that the assessment of accrued interest on re-pawned ornaments was unjustified and arbitrary. The Revisional Authority's decision was supported by the Revenue's counsel, stating it was proper and did not require interference.

Regarding the disallowance of Rs.1 Lacs as initial capital, the Revisional Authority found it reasonable as there was no evidence to support its inclusion in the initial capital. The decision was based on available material and evidence, deemed appropriate, and not interfered with. Concerning accrued interest on re-pawned articles, the claim was rejected due to insufficient explanation on reinvestment. The decision was based on available records and material, deemed justified, and not interfered with. The imposition of interest under Section 234B and 234C was challenged, arguing that interest cannot be levied without specific directions. Citing a judgment of the Himachal Pradesh High Court, it was contended that interest must be explicitly demanded. However, the High Court held that interest payment is mandatory, even if not explicitly specified, and can be recovered as per rules.

The High Court upheld the Revisional Authority's decisions, stating that the approach taken did not warrant interference under Article 226 and 227 of the Constitution. The petition was dismissed based on the reasoned view that the Revisional Authority's actions were reasonable and did not require intervention in the legal proceedings.