2017 (3) TMI 571 - AT - Income Tax

Charging of interest u/s.234C - Interest for deferment of advance tax - whether to charge interest u/s.234C only on the income disclosed in the return of income filed u/s.139 or the income disclosed in the return of income filed u/s.148? - Held that - Sec.234C, the assessee is liable to pay simple interest @1% on the amount of shortfall from the tax difference on the returned income. It does not distinguish the income admitted by the assessee u/s.139 or Sec.148, which is a provision to bring the income escaped from the assessment from the tax net. The income admitted by the assessee in response to the notice issued u/s.148 is within the knowledge of the assessee and the assessee should have estimated the advance tax and paid the same on total income. No other exception is provided u/s.234C for charging interest. Therefore, we are of the considered opinion that the returned income includes the income admitted in response to the notice issued u/s.148 also. Therefore, we are unable to accept the contention of the assessee that the interest u/s.234C is chargeable only in respect of income returned u/s.139(1) but not the income admitted in the revised return of income. As discussed above, except in two circumstances provided in Sec.234C as per the proviso referred above, in all the remaining cases interest u/s.234C is chargeable without any exception. This view is supported in the case of MRF Ltd. v. Deputy Commissioner of Income-tax, Large Tax Payer Unit, Chennai 2016 (11) TMI 1011 - MADRAS HIGH COURT .

Summary

Issues Involved:
1. Whether interest under Section 234C of the Income Tax Act is chargeable on the basis of the returned income filed under Section 139(1) or the revised income filed in response to a notice under Section 148.
2. Interpretation of the term "tax due on the returned income" under Section 234C.
3. Applicability of Section 234C to returns filed under Section 148.

Issue-wise Detailed Analysis:

1. Chargeability of Interest under Section 234C:
The primary issue is whether interest under Section 234C should be charged based on the income declared in the original return filed under Section 139(1) or the revised return filed in response to a notice under Section 148. The assessee argued that interest under Section 234C should only apply to the income declared in the original return under Section 139(1). However, the Assessing Officer (AO) charged interest on the revised income declared in response to the notice issued under Section 148. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, stating that Section 234C does not distinguish between returns filed under Section 139(1) and those filed under Section 148. The tribunal agreed with the CIT(A), concluding that interest under Section 234C is applicable to the revised income declared under Section 148 as well.

2. Interpretation of "Tax Due on the Returned Income":
The assessee contended that "tax due on the returned income" under Section 234C should only refer to the tax on the income declared in the original return filed under Section 139(1). The CIT(A) interpreted the term to mean the tax chargeable on the total income declared in any return filed by the assessee, whether under Section 139 or Section 148. The tribunal supported this interpretation, emphasizing that Section 234C does not provide any distinction between the types of returns filed. Therefore, "tax due on the returned income" includes the income declared in the revised return filed under Section 148.

3. Applicability of Section 234C to Returns Filed under Section 148:
The CIT(A) and the tribunal both concluded that Section 234C applies to returns filed under Section 148. The tribunal noted that the purpose of Section 234C is to levy compensatory interest for the deferment of advance tax payments. Since the income declared in response to a notice under Section 148 is within the knowledge of the assessee, the assessee is expected to have estimated and paid the appropriate advance tax on the total income. The tribunal highlighted that the provisions of Section 148(1) state that all other provisions of the Act, including Section 234C, apply to the return filed in response to a notice under Section 148 as if it were a return filed under Section 139.

Conclusion:
The tribunal dismissed the appeal, upholding the CIT(A)'s decision that interest under Section 234C is chargeable on the revised income declared in response to a notice under Section 148. The tribunal emphasized that Section 234C does not distinguish between returns filed under Section 139(1) and Section 148, and the term "tax due on the returned income" includes the income declared in any return filed by the assessee. The tribunal also noted that the exceptions provided under Section 234C do not apply to the assessee's case. Therefore, the interest levied under Section 234C was sustained.