2007 (10) TMI 294 - HC - Income Tax

Short payment of advance tax interest on the basis of explanation1 inserted to section 234B when the assessee had filed return of loss and was not liable to pay advance tax - held that held that - A comparison of the two provisions shows that under the original provision interest was leviable on the income as declared in the return filed by the assessee. By the amended provision the interest is leviable on the income as determined by the assessing authority minus the income on which the tax has been paid or deducted. The amendment is only calculated to clarify the ambiguity that was felt in the original provision. It is not arbitrary or unreasonable interest is liable on assessed income less advance tax paid less tds.

Summary

Issues:
1. Application under Section 5 of the Limitation Act for condonation of delay in filing the appeal.
2. Appeal under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal for the assessment year 1991-92.

Issue 1: Application under Section 5 of the Limitation Act for condonation of delay in filing the appeal:
The judgment addresses an application under Section 5 of the Limitation Act for condonation of 117 days' delay in filing the appeal. The delay is condoned after hearing the counsel and perusing the application supported by an affidavit. The case is disposed of accordingly.

Issue 2: Appeal under Section 260A of the Income Tax Act, 1961:
The appeal under Section 260A of the Income Tax Act was filed by the assessee against the order of the Income Tax Appellate Tribunal for the assessment year 1991-92. The substantial questions of law raised in this appeal include whether the assessee, having paid the tax payable as per return, should be liable for interest under Section 234B of the Act, and whether the Tribunal was justified in imposing interest solely based on an amendment to the Act. The facts reveal that the Assessing Officer assessed the income of the assessee at a higher amount than declared, leading to a demand notice with interest under Section 234B. The CIT (A) initially deleted the interest, but the Tribunal later allowed the revenue's appeal, upholding the interest charge. The assessee contended that being in a loss position previously, they couldn't foresee positive income and thus shouldn't be liable for advance tax and consequent interest. However, the revenue argued that the amended provisions of the Act, effective from 1.4.1989, require interest to be charged based on assessed tax, as clarified by Explanation 1 to Section 234B. The judgment notes that prior to the amendment, interest was charged based on the total income declared in the return, not the assessed income. The court upheld the amendment and dismissed the appeal, stating that the judgments cited by the assessee were no longer applicable post-amendment.

In conclusion, the judgment addresses two main issues: an application for condonation of delay in filing the appeal under the Limitation Act and an appeal under the Income Tax Act against the Tribunal's order for the assessment year 1991-92. The court condoned the delay in filing the appeal and dismissed the appeal against the Tribunal's decision to uphold the interest charge under Section 234B of the Act based on the amended provisions. The judgment provides a detailed analysis of the legal aspects and precedents relevant to each issue, ultimately ruling against the assessee and in favor of the revenue.