2016 (10) TMI 215 - AT - Income Tax

Charging of interest u/sec.234C on return of income filed in response to notice u/sec. 148 - whether no interest u/s.234C of the Act should be charged on Return of income filed in compliance to notice Sec. 148 of the Act as the chargeability provisions are applicable only to the Return of income filed u/s.139(1)? - Held that - The provisions of charging of interest u/s.234C of the Act is automatic and assessee need not be provided an opportunity. Further, we perused the Explanations to the provisions of Sec. 234C of the Act the tax due on returned income shall be reduced by (i) tax deducted and collected at source, (ii) the amount of relief of tax allowed under sections 90 and 90A and deduction from the Indian income tax payable, allowed under section 91, and (iii) tax credit allowed to be set off under section 115JAA/115JD from the tax on the total income. The assessee firm cannot interprete that the tax due on Return income shall imply only to the Return of income filed u/s.139(1) of the Act were income is declared. The provisions of Sec.234C of the Act are mandatorily applicable in respect of deferment of payment of advance tax as per the rates prescribed in the previous year relevant to subsequent assessment year and interest is charged. We are of the considered opinion that levy of interest u/s.234C of the Act is an automatic and the interpretation of charging of interest u/s.234C of the Act cannot be restricted to the tax due on Returned income as referred u/sec. 139(1) of the Act is not logical interpretation and cannot be accepted in the Court of law. The ld.CIT(A) has dealt exhaustively on the applicability of provisions and the Explanations and upheld the order of the ld. Assessing Officer, on charging of interest u/sec.234C of the Act on return of income filed in response to notice u/sec. 148 of the Act. Hence, we are not inclined to interfere with the order of Commissioner of Income Tax (Appeals) - Decided against assessee.

Summary

Issues involved:
1. Interpretation of provisions regarding interest u/s. 234C of the Income Tax Act.
2. Applicability of interest u/s. 234C on revised return filed in response to notice u/s. 148 of the Act.

Analysis:

Issue 1: Interpretation of provisions regarding interest u/s. 234C of the Income Tax Act:
The appeal raised concerns regarding the chargeability of interest u/s. 234C, specifically focusing on the interpretation of "tax due on the returned income." The appellant argued that interest u/s. 234C should not be levied on the return of income filed in response to a notice u/s. 148 of the Act, contending that the chargeability provisions apply only to returns filed u/s. 139(1) of the Act. The Tribunal examined the case of a partnership firm that initially disclosed income in its original return but later revised it after a survey operation revealed additional income. The Tribunal emphasized that the provisions of Sec. 234C are mandatory and automatic, applying to the deferment of advance tax payment based on rates from the previous year relevant to the subsequent assessment year. The Tribunal concluded that the interpretation limiting the charging of interest u/s. 234C to the "tax due on returned income" as per Sec. 139(1) is illogical and not legally tenable. The Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) to levy interest u/s. 234C on the revised return filed in response to the notice u/s. 148 of the Act.

Issue 2: Applicability of interest u/s. 234C on revised return filed in response to notice u/s. 148 of the Act:
The appellant contended that interest u/s. 234C should only be charged on the return of income filed u/s. 139(1) of the Act, not on a revised return submitted following a notice u/s. 148. The Tribunal reviewed the case where a partnership firm revised its income declaration after a survey operation, leading to the inclusion of additional income in the revised return. The Tribunal noted the appellant's argument that interest u/s. 234C should not apply to returns filed in response to a notice u/s. 148. However, after considering the mandatory nature of Sec. 234C and the explanations provided in the Act, the Tribunal concluded that interest u/s. 234C is automatically chargeable and not limited to returns filed u/s. 139(1) only. The Tribunal found the Commissioner of Income Tax (Appeals) decision to uphold the levy of interest u/s. 234C on the revised return to be in accordance with the law. Consequently, the Tribunal dismissed the grounds raised by the appellant and upheld the decision of the Commissioner of Income Tax (Appeals).

In conclusion, the Tribunal dismissed the appeal of the assessee, affirming the decision regarding the levy of interest u/s. 234C on the revised return filed in response to a notice u/s. 148 of the Income Tax Act.