2003 (11) TMI 278 - AT - Income Tax

Summary

Issues Involved:
1. Maintainability of the appeal.
2. Period for which interest under section 234B is chargeable.
3. Applicability of the decision in Ranchi Club Ltd. regarding the charging of interest under section 234B.

Issue-wise Detailed Analysis:

1. Maintainability of the Appeal:
The primary issue was whether the appeal was maintainable, considering it pertained solely to the reduction of interest under section 234B. The Department argued that the appeal was not maintainable based on the Supreme Court decision in Central Provinces Manganese Ore Co. Ltd. v. CIT, which stated that reduction or waiver of interest under section 139(8) or section 215 was not appealable under section 246(c). However, the Tribunal noted that the appeal in question was against an order under section 154, which falls under clause (f) of section 246(1). This clause allows appeals against orders under section 154 or 155 that enhance the assessment or reduce the refund. Since the order under section 154 had the effect of reducing the refund, the Tribunal held that the appeal was maintainable under section 246(1)(f).

2. Period for which Interest under Section 234B is Chargeable:
The core issue was whether the interest under section 234B should be charged up to the date of the regular assessment of the firm (31-3-1992) or the date of passing of intimation under section 143(1) in the assessee's own case (27-12-1989). The Tribunal examined the provisions of section 234B(1), which state that interest is chargeable from the first day of April following the financial year to the date of determination of total income under section 143(1) or regular assessment. Since no regular assessment was made in the assessee's case, and the income was determined under section 143(1) on 27-12-1989, the Tribunal concluded that the interest should be charged only up to this date. It rejected the Department's reliance on the "spirit of the section" and emphasized that the provisions casting additional burden on the assessee must be strictly construed.

3. Applicability of the Decision in Ranchi Club Ltd.:
The assessee contended that no interest under section 234B should have been charged based on the Supreme Court's decision in CIT v. Ranchi Club Ltd. The Tribunal, however, found that the facts of the present case were different. Initially, the returned income was accepted under section 143(1), and no interest was charged. Later, when the order under section 155 was passed, interest under section 234B was charged. The Tribunal noted that the demand notice specified the quantum of interest charged under section 234B, which was valid as per the jurisdictional High Court's decision in Vinod Khurana v. CIT. This decision, which considered the Ranchi Club Ltd. case, was upheld by the Supreme Court. Consequently, the Tribunal rejected the additional ground raised by the assessee.

Conclusion:
The Tribunal concluded that the first appellate authority erred in upholding the action of the Assessing Officer in charging interest under section 234B up to the date of the regular assessment of the firm. Instead, the interest should be charged only up to the date of passing of intimation under section 143(1) in the assessee's own case. The assessee's appeal was thus allowed on the main ground.