2021 (9) TMI 279 - AT - Income Tax

Interest u/s 234B and 234C charged for default in payment of advance tax - assessee has submitted certificate from the Punjab National Bank that the cheques issued by the assessee have been deposited and sent for clearing on the same date (i.e. before 15th) but were cleared after the due date (17 th and 18th) thus not liable to pay interest for default of payment of advance tax - HELD THAT - A collecting banker acts as an agent of the customer if he credits the latter s account with the amount of the cheque after the amount is actually realized from the drawee banker - As an agent of his customer, the collecting banker does not possess title to the cheque better than that of the customer. If the customer has no title thereto, or his title is defective, the collecting banker cannot have good title to the cheque. In case the cheque collected by him did not belong to his customer, he will be held liable for conversion of money, i.e., illegally interfering with the rights of true owner of the cheque. From the concurrent reading of the above, it can be said that the assessee is deemed to have paid the advance tax within the due date of payment. Hence, not liable to be charged any interest u/s 234B and 234C AO denied grant of interest u/s 244A on the grounds that the refund determined doesn t exceed 10% of the total tax payable - A.Y. 2007-08 - HELD THAT - Since, the issue of interest u/ s 234B and 234C has been adjudicated in favour of the assessee, there would be upward revision of the interest receivable. The Assessing Officer is hereby directed to re- compute the interest payable and issue the same at the earliest as per Section 244A(1 )(a). AO has added back difference in income reported in AIR - AY 2009-10 - While checking the total interest during the period from AYs 2008-09 and 2009 -10, interest shown as income by the bank as a whole is much higher than the interest shown in the 26 AS and interest certificates. So the data provided in AIR is variable, hence the additions deserves to be deleted. The mismatch arose due to difference in the TDS deducted, the receipt of TDS certificate and the interest earned. The assessee has been continuously following the same system of accounting and found to be accounting for the interest rightly more than which has been reflected in the 26AS - the similar rate of tax for all the years, it is a revenue neutral exercise and no disallowance on account of mismatch is called for. Appeal of assessee allowed.

Summary

Issues:
1. Default in payment of advance tax - Interest charged u/s 234B and 234C.
2. Grant of interest u/s 244A.
3. Addition on account of difference in income reported in AIR.

Analysis:

Issue 1: Default in payment of advance tax - Interest charged u/s 234B and 234C
- The appellant filed appeals against the orders of ld. CIT(A) regarding default in payment of advance tax for AYs 2007-08 & 2008-09.
- Revenue claimed interest u/s 234B and 234C as the assessee paid advance tax after due dates.
- Assessee argued that payments were made on time but cleared by the bank after due dates, supported by a Circular No. 676 of CBDT.
- Circular clarified that if the last day for payment falls on a holiday, payment on the next working day is acceptable without interest charges.
- The collecting banker acts as an agent of the customer, and if the cheque is cleared after the due date, it is deemed as paid on time.
- The Tribunal concluded that the assessee paid advance tax within due dates and was not liable for interest u/s 234B and 234C.

Issue 2: Grant of interest u/s 244A
- For AY 2007-08, the Assessing Officer denied interest u/s 244A, claiming the refund didn't exceed 10% of total tax payable.
- Since interest u/s 234B and 234C was decided in favor of the assessee, interest receivable needed upward revision.
- The AO was directed to re-compute interest payable as per Section 244A(1)(a).

Issue 3: Addition on account of difference in income reported in AIR
- In AY 2009-10, the AO added a sum due to differences in income reported in AIR.
- Assessee explained that interest income was accounted for provisionally due to pending TDS certificates.
- The difference in interest was adjusted in the next financial year, ensuring no tax avoidance or deferment.
- The Tribunal noted that the mismatch was due to TDS deductions and interest earned, with the assessee consistently following the same accounting system.
- Considering the revenue-neutral nature of the exercise and consistent tax rates, no disallowance was warranted.
- Consequently, all appeals of the assessee were allowed.

This detailed analysis covers the issues of default in payment of advance tax, grant of interest u/s 244A, and addition due to differences in income reported in AIR, as addressed in the ITAT Delhi judgment.