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2018 (1) TMI 669 - AT - Income TaxCharging interest u/s. 234B(3)/(4) - AO had levied interest u/s 234B from 1st April 1993 upto the date of reassessment u/s 147 which according to AR is patently wrong, because section 234B(3) states about levy of interest from the date of determination of total income u/s 143(1) of the Act up to the date of reassessment or recomputation u/s 147 - Held that - The section 234B(4) states that if there is any increase or decrease in the income, correspondingly interest shall be increased or reduced accordingly. In the instant case, since reassessment u/s 147 of the Act was completed and in the reassessment the assessed income being higher, the interest is to be calculated as per section 234B(3) of the Income-tax Act, instead of section 234B(4) of the Income-tax Act. The A.O., how he had computed interest u/s 234B of the Act is not very discernable and the period for which the same has been levied is also not mentioned in the order dated 12.10.2010. We are of the view, in the interest of justice and equity, the interest u/s 234B needs to be recalculated afresh. Therefore, we restore this appeal to the files of the A.O. to recalculate interest. The A.O. shall afford a reasonable opportunity of hearing to the assessee. The Assessing Officer shall also take note of the dictum laid down by the order of the Tribunal in the case of MBG Commodities (P.) Ltd. v. DCIT 2016 (8) TMI 82 - ITAT HYDERABAD while calculating the interest u/s 234B of the Act, afresh. It is ordered accordingly. Appeal filed by the Revenue is allowed for statistical purposes
Issues Involved:
1. Legality of charging interest under Section 234B(4) of the Income-tax Act. 2. Determination of the correct period for which interest under Section 234B should be levied. 3. Application of Section 234B(3) versus Section 234B(4) in the context of reassessment and appellate orders. Detailed Analysis: 1. Legality of Charging Interest under Section 234B(4): The Revenue contended that the CIT(A)'s order contradicts the legal tenet for charging interest under Section 234B(4) and the facts of the case. The CIT(A) directed to charge enhanced interest under Section 234B(4) up to the date of the original assessment under Section 143(3) (22/03/1996), without correctly appreciating the legal position. The CIT(A) opined that Section 234B(4) does not specify a terminus date, thus relying on Explanation-1 to Section 234B. 2. Determination of the Correct Period for Interest Levy: The CIT(A) held that interest under Section 234B(4) should be charged only up to the date of the original assessment under Section 143(3) (22/03/1996). The Revenue argued that the interest should be charged up to the date of reassessment under Section 147 (20/03/2000). The CIT(A) concluded that Section 234B(4) does not specify the period for which interest will be levied, hence the period specified under Section 234B(1) applies. However, the Tribunal noted that the CIT(A)'s observation of reduced assessed income in the reassessment order was incorrect. The Tribunal emphasized that the appellate proceedings are a continuation of the assessment proceedings, and the income assessed post the CIT(A)'s order should be considered. 3. Application of Section 234B(3) versus Section 234B(4): The Tribunal clarified that Section 234B(3) applies when the income assessed in the original assessment is increased by the reassessment order under Section 147. In this case, the reassessment increased the assessed income, thus invoking Section 234B(3). Section 234B(4) pertains to adjustments following appellate, rectification, or revisionary orders, which was not applicable here. The Tribunal distinguished the case from the Gujarat High Court's ruling in Principal Commissioner of Income-tax-1 v. Applitech Solutions Ltd., which dealt with interest levied while giving effect to a Tribunal order, thereby falling under Section 234B(4). Conclusion and Directions: The Tribunal found the Assessing Officer's method of computing interest under Section 234B unclear and remanded the case for fresh calculation. The Assessing Officer was directed to recalculate the interest, considering the Tribunal's guidance in MBG Commodities (P.) Ltd. v. DCIT and to provide a reasonable hearing opportunity to the assessee. Result: The appeal by the Revenue was allowed for statistical purposes, and the matter was restored to the Assessing Officer for recalculating the interest under Section 234B of the Act.
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