1999 (4) TMI 121 - AT - Income Tax

Summary

Issues Involved:

1. Whether interest under section 234B is chargeable on the income assessed under section 143(3) of the Income Tax Act.
2. The interpretation of the legislative intent behind section 234B and its amendments.
3. The applicability of the rule of strict construction to section 234B.

Detailed Analysis:

1. Chargeability of Interest under Section 234B:

The primary issue was whether interest under section 234B of the Income Tax Act should be charged on the income assessed under section 143(3) after it has already been charged under section 143(1)(a). The revenue contended that interest should be charged on the assessed tax determined under section 143(3) from the date of the regular assessment, even if it was previously charged under section 143(1)(a). The assessee argued that once interest is charged under section 143(1)(a), it should not be increased during the regular assessment under section 143(3).

The Tribunal concluded that the interest under section 234B should indeed be charged up to the date of regular assessment under section 143(3). This conclusion was based on the legislative amendments and the clear language of section 234B, which specifies that interest should be charged until the date of regular assessment, even if it was previously charged under section 143(1)(a).

2. Legislative Intent and Amendments to Section 234B:

The Tribunal examined the legislative intent behind section 234B and its amendments. The Direct Tax Laws (Amendment) Act, 1989, and the Finance Act, 1995, clarified that interest for defaults in payment of advance tax is to be charged until the date of the regular assessment. The explanatory memorandum to the Finance Bill, 1995, explicitly stated that the legislative intention was to charge interest till the date of regular assessment, even if interest had already been charged under section 143(1).

The Tribunal noted that the amendments were intended to remove any ambiguity and to ensure that interest is charged until the date of regular assessment, thereby supporting the revenue's position.

3. Rule of Strict Construction:

The assessee argued that section 234B, being a charging section, should be strictly construed, and since there was no specific mention of section 143(3) in sub-section (4) of section 234B, the Assessing Officer should not increase the interest during the regular assessment. The Tribunal, however, found that the language of section 234B was clear and unambiguous, and the legislative intent was to charge interest until the date of regular assessment.

The Tribunal referred to various judgments of the Apex Court, which emphasized that while charging sections should be strictly construed, machinery provisions should be interpreted in a manner that effectuates the object and purpose of the statute. The Tribunal concluded that the strict construction of section 234B supports the view that interest should be charged until the date of regular assessment.

Conclusion:

The Tribunal set aside the order of the Commissioner of Income Tax (Appeals) and restored the order of the Assessing Officer, holding that interest under section 234B should be charged up to the date of regular assessment under section 143(3), even if it had already been charged under section 143(1)(a). The revenue's appeal was allowed.