1995 (11) TMI 120 - AT - Income Tax

Summary

Issues:
1. Whether rectification under section 154 of the IT Act, 1961 was permissible to charge interest under section 234A.
2. Whether the failure of the Assessing Officer to charge interest under section 234A was a mistake apparent from the record.
3. Whether the charging of interest under section 234A is mandatory and not discretionary.

Detailed Analysis:
1. The appeal was filed by the department for the assessment year 1989-90. The assessee filed the return after the due date, and the assessment was completed at a higher income than the amount returned. Subsequently, a rectification order was passed to charge interest under section 234A of the IT Act, 1961. The first appeal held that rectification was not permissible as the Assessing Officer did not conclude that interest was payable under section 234A. The department appealed this decision.

2. The department argued that the failure to charge interest under section 234A was a mistake apparent from the record and fell under the scope of rectification under section 154. The assessee contended that since there was no mention of interest in the assessment order, rectification proceedings could not direct its charge. The department cited a Rajasthan High Court decision, while the assessee relied on a Gujarat High Court decision.

3. The tribunal considered the mandatory nature of charging interest under section 234A, emphasizing that it is not discretionary for the Assessing Officer to waive or reduce it. The tribunal noted that the failure to charge interest where it is clearly chargeable constitutes a mistake apparent from the record. It distinguished the present case from the cases cited, highlighting that in this instance, there was no question of waiver as the levy of interest was mandatory. The tribunal concluded that the view of the Dy. CIT(A) was legally incorrect and upheld the direction given by the Assessing Officer to charge interest under section 234A.

In conclusion, the tribunal allowed the appeal, setting aside the decision taken during the first appeal and restoring the direction to charge interest under section 234A.