2016 (2) TMI 633 - HC - Income Tax

Interest for defaults in payment of advance tax u/s 234B - demand raised in the notice issued under section 156 - Held that - Considering the totality of the facts and on conjoint reading of the aforesaid provisions of sections 143, 234B and 156 of the Income Tax Act and when levy of interest under section 234B of the Act is held to be mandatory and automatic, and the same is on the difference between the advance tax paid and assessed tax and as observed hereinabove, A.O. has no discretion to levy any other interest other than provided under section 234B of the Act. Thereafter, levy of interest under section 234 of the Act would be consequential only and only arithmetically amount of interest is required to be calculated, we are of the opinion that even in absence of any direction by the A.O. while passing assessment order under section 143(3) of the Income Tax Act, which according to under section only for determining assessed tax, there can be demand of levy and demand of interest under section 156 of the Income Tax Act. It would have been a different fact if the A.O. had any discretion with respect to rate of interest and/or to levy any interest considering the facts and circumstances of the case. As observed hereinabove, as such, A.O. had no such discretion and moment he determines the assessed tax and on the eventuality as mentioned in section 234B, i.e. (i) an assessee who is liable to pay advance tax under section 208 has failed to pay such tax, or, where advance tax paid by such assessee under the provisions of section 210 is less than 90% of the assessed tax , assessee shall, be liable to pay simple interest at the rate of 1% for every month or part of a month comprised in the period from the first day of April next following such financial year to the date of determination of total income under sub-section (1) of section 143 and (ii) where regular assessment is made to the date of such regular assessment, on the amount equal to assessed tax, or, as the case may be, on the amount by which advance tax paid, as aforesaid, falls short of assessed tax. Under the circumstances and considering the subsequent decisions of the Hon ble Supreme Court in the case of Anjum M.H. Ghaswala (2001 (10) TMI 4 - SUPREME Court) and in the case of Karanvir Singh Gossal (2012 (9) TMI 334 - SUPREME COURT ), question of law posed for consideration of this Court is to be answered in favour of the revenue and against the assessee.

Summary

Issues Involved:
1. Whether it is mandatory for the Assessing Officer to mention/levy/charge interest under section 234B of the Income Tax Act in the assessment order before raising a demand in the notice issued under section 156 of the Act.
2. Whether the Assessing Officer can charge/levy interest directly in the notice under section 156 of the Act.

Issue-Wise Detailed Analysis:

Issue 1: Mandatory Mention of Interest under Section 234B in the Assessment Order
The court considered the arguments from both the revenue and the assessee regarding whether the Assessing Officer must mention the charging of interest under section 234B in the assessment order itself. The assessee relied on the Patna High Court's decision in the case of Rachi Club Ltd., which was affirmed by the Supreme Court, stating that interest cannot be charged unless specified in the assessment order. The revenue, however, argued that subsequent Supreme Court decisions in Anjum M.H. Ghaswala and Karanvir Singh Gossal have established that the charging of interest under section 234B is mandatory and automatic, and therefore, it need not be explicitly mentioned in the assessment order.

The court examined the relevant sections of the Income Tax Act, namely sections 234B, 143, and 156, and concluded that the levy of interest under section 234B is mandatory and automatic. The court noted that the Assessing Officer has no discretion regarding the rate of interest and that the interest is a consequence of the assessed tax. The court held that the Assessing Officer is not required to mention the interest under section 234B in the assessment order before raising a demand in the notice issued under section 156.

Issue 2: Charging/Levying Interest Directly in the Notice under Section 156
The court further considered whether the Assessing Officer could directly charge or levy interest in the notice issued under section 156 of the Act. The revenue argued that since the interest under section 234B is mandatory and arises by operation of law, it can be directly included in the notice under section 156. The assessee contended that the assessment order must contain the imposition of interest, and only then can a notice of demand be issued.

The court referred to the Supreme Court's decisions in Anjum M.H. Ghaswala and Karanvir Singh Gossal, which emphasized the mandatory and automatic nature of interest under section 234B. The court concluded that since the levy of interest is consequential and merely arithmetical, it can be demanded directly in the notice under section 156 without being explicitly mentioned in the assessment order.

Conclusion:
The court answered both substantial questions of law in favor of the revenue and against the assessee. It held that it is not sine qua non for the Assessing Officer to mention/levy/charge interest under section 234B in the assessment order before raising a demand in the notice issued under section 156. The Assessing Officer can charge/levy interest directly in the notice under section 156 of the Act. All appeals were accordingly disposed of.