2016 (5) TMI 973 - AT - Income Tax

Rectification of mistake - charging interest u/s.234B is wrongly calculated as per the provisions of section 234B (1), whereas, it should have been calculated as per the provisions of section 234B (3) - Held that - Determination of total income under sub-section (1) of section 143 was made on 21.02.2012. No regular assessment was made u/s.143(3) of the Act. Notice was issued u/s.148 of the Act on 02.01.2014 and assessment was made u/s.143(3) of the Act read with section 148 on 27.06.2014 for the first time. This re-opened assessment was resulted in demand of ₹ 1,23,150/-. A demand notice u/s.156 was served on the assessee on 08.07.2014. The assessment made for the first time u/s.143(3) read with section 147 of the Act fits into Explanation-2 to section 234B(1) of the Act, which is to be regarded as Regular Assessment for the purpose of sec.234B of the Act. As intimation u/s.143(1) is obviously not an assessment and it is the case of Assessment for the first time in the hands of assessee u/s.147, the case will fall under sub-section(1) of section 234B. We Therefore, hold that the AO is justified in coming to the conclusion that the starting point for charging interest u/s.234B have been as First April 2011 and end point of the same is 27.06.2014 and as such there is no error in the assessment order so as to rectify u/s.154 of the Act. More so, the issue raised by the assessee herein cannot be considered u/s.154 of the Act as the issue in dispute is highly debatable. Under section 154 of the Act, only mistakes apparent on record could be rectified by the Authorities. The issue in dispute is not a mistake apparent from record. It is required long process of reasoning and points on which there may be conceivably two opinions possible. As such the issue in dispute cannot be considered u/s.154 of the Act. - Decided against assessee

Summary

Issues Involved:
1. Levy of interest under section 234B of the Income-tax Act.
2. Calculation of interest under section 234B(3) versus section 234B(1).
3. Applicability of section 154 for rectification.

Detailed Analysis:

1. Levy of Interest under Section 234B:
The primary issue was whether the interest should be levied under section 234B(1) or section 234B(3) of the Income-tax Act. The assessee argued that since the assessment was a re-assessment under section 147, interest should be calculated as per section 234B(3) and not section 234B(1).

2. Calculation of Interest under Section 234B(3) versus Section 234B(1):
The assessee contended that the interest should be calculated from the date of determination of tax under section 143(1) to the date of re-assessment under section 147. The assessee referenced the decision of the Karnataka High Court and the Income-tax Appellate Tribunal, Mumbai, to support their claim. However, the lower authorities held that the assessment completed was the first assessment under section 147, thus treating it as a regular assessment, and consequently applied the provisions of section 234B(1).

The Tribunal upheld this view, stating that for calculating interest under section 234B, the re-assessment under section 147 should be treated as a regular assessment if it is made for the first time. Since there was no prior scrutiny assessment under section 143(3), the re-assessment was considered the first assessment, making section 234B(1) applicable. Therefore, the interest was correctly calculated from the first day of April following the financial year to the date of regular assessment under section 147.

3. Applicability of Section 154 for Rectification:
The assessee filed an application under section 154 for rectification, arguing that the interest was wrongly calculated under section 234B(1) instead of section 234B(3). The Assessing Officer (AO) rejected this application, stating that the issue raised did not constitute a rectifiable mistake under section 154. The Tribunal agreed, noting that the issue was highly debatable and not a mistake apparent from the record. Under section 154, only apparent mistakes can be rectified, and the issue in question required extensive reasoning and could have multiple opinions.

Conclusion:
The Tribunal dismissed the appeal, affirming that the AO correctly calculated the interest under section 234B(1) and that the issue could not be rectified under section 154 due to its debatable nature. The order pronounced on 20th May 2016, upheld the decision of the lower authorities and dismissed the assessee's appeal.