2015 (8) TMI 621 - SC - Income Tax

Interest under Section 234B - no direction had actually been given in the assessment order for payment of interest - Held that - It will be seen that under the provisions of Section 234B, the moment an assessee who is liable to pay advance tax has failed to pay such tax or where the advance tax paid by such an assessee is less than 90 per cent of the assessed tax, the assessee becomes liable to pay simple interest at the rate of one per cent for every month or part of the month. The facts of the present case are squarely covered by the decision contained in Kalyankumar Ray s case 1991 (8) TMI 291 - SUPREME COURT inasmuch as it is undisputed that Form I.T.N.S.150 contained a calculation of interest payable on the tax assessed. This being the case, it is clear that as per the said judgment, this Form must be treated as part of the assessment order in the wider sense in which the expression has to be understood in the context of Section 143, which is referred to in Explanation 1 to Section 234B. - Decided in favour of revenue.

Summary

Issues:
- Interpretation of Section 234B of the Income Tax Act regarding the automatic levy of interest for default in payment of advance tax.
- Whether the Form I.T.N.S. 150, containing the calculation of interest payable on tax assessed, should be considered part of the assessment order.
- Application of previous judgments in similar cases to the present scenario.

Analysis:
The Supreme Court judgment addressed a narrow question raised by the Revenue regarding the automatic levy of interest under Section 234B of the Income Tax Act. The assessment order in question did not explicitly direct the payment of interest, leading to a series of appeals and decisions. The ITAT and the High Court relied on previous judgments, particularly the Ranchi Club Ltd. case, to support their stance that interest was payable. The appellant argued that the interest was part of Form I.T.N.S. 150 and should be considered part of the assessment order. The Court referred to the Kalyankumar Ray case, emphasizing that such forms are integral to the assessment process. The judgment in Ranchi Club Ltd.'s case was a brief dismissal of appeals, while the High Court decision focused on the vires of Sections 234A and 234B, emphasizing that interest should be levied only after final determination of dues.

The crux of the matter lay in the interpretation of Section 234B, which mandates the automatic levy of interest if advance tax is not paid or falls short of the assessed tax. The Court concurred with the appellant's argument that the interest calculation in Form I.T.N.S. 150 is part of the assessment order, as per the Kalyankumar Ray case. Therefore, the Court set aside the High Court judgment and allowed the Revenue's appeal, highlighting the automatic nature of interest levy under Section 234B. The decision in Civil Appeal No. 1198 of 2006 was aligned with the outcome of Civil Appeal No. 1169 of 2006, resulting in both appeals being disposed of accordingly.