2017 (9) TMI 1235 - HC - Income Tax

Excessive interest u/s 234B beyond the date of the order passed by the Settlement Commission u/s 245D - Held that - This Court finds considerable force in the submission made by the learned counsel for the assessee and the impugned orders passed by the Assessment Authority charging interest under Section 234B of the Act beyond the date of the order passed by the Settlement Commission under Section 245D(I) cannot be sustained. See Brij Lal s case 2010 (10) TMI 8 - SUPREME COURT in which it is clearly held that the interest under Section 234B of the Act cannot go beyond the stage of S.245D(I) before the Settlement Commission. - Decided in favour of assessee.

Summary

Issues:
1. Excessive interest charged under Section 234B of the Income Tax Act by Assessing Authority post order by Settlement Commission.

Analysis:
The judgment addressed the grievance of excessive interest charged by the Assessing Authority under Section 234B of the Income Tax Act beyond the date of the order passed by the Settlement Commission under Section 245D of the Act. The order by the Settlement Commission for the block of Assessment Years 1989-1990 to 1996-1997 was issued on 11.03.2008, and the Assessing Authority passed the appeal effect orders on 11.04.2008, charging interest apparently beyond the Settlement Commission order date.

The petitioner relied on the Constitution Bench judgment in BRIJ LAL & ORS. Vs COMMISSIONER OF INCOME TAX, where the Supreme Court clarified the nature of advance tax and the operation of Sections 234B, 245D(2C), and 245D(6A) of the Income Tax Act. The Court emphasized the distinct stages under Chapter XIX-A and concluded that interest under Section 234B cannot be levied beyond the stage of Section 245D(1) before the Settlement Commission.

The respondent argued that at the time of passing the appellate orders, the Brij Lal judgment was not available, justifying the Assessing Authority's actions based on the earlier Hindustan Bulk Carriers decision. However, the petitioner contended that the impugned orders cannot stand in light of the Brij Lal judgment, which restricts interest under Section 234B post-Section 245D(1) stage.

The Court, after considering the arguments, found merit in the petitioner's submission. It held that the Assessing Authority's orders charging interest under Section 234B beyond the Settlement Commission's order date cannot be sustained. The Constitution Bench's ruling in Brij Lal's case prevails over the earlier decision, even for the period preceding the Brij Lal judgment. Consequently, the petition was allowed, quashing the impugned orders and remanding the matter back to the Assessing Authority for fresh orders in line with the law declared by the Supreme Court in Brij Lal's case and the Settlement Commission's order in the present case. No costs were awarded in this matter.