2006 (2) TMI 247 - AT - Income Tax

Summary

Issues Involved:
1. Confirmation of charging of interest under Section 234B of the Income Tax Act, 1961.
2. Charging of interest under Section 234C of the Income Tax Act, 1961.
3. Maintainability of the appeal against the levy of interest under Section 234C.

Detailed Analysis:

1. Confirmation of Charging of Interest under Section 234B:
The appellant conceded during the hearing that they were not pressing the issue of charging interest under Section 234B. Consequently, this issue was dismissed as not pressed.

2. Charging of Interest under Section 234C:
The core issue for adjudication was the charging of interest under Section 234C. The appellant received a communication regarding the adjustment of an income-tax refund amounting to Rs. 1,05,95,908 on 26th March 1999 and declared this interest in the return for the assessment year 1999-2000. The Assessing Officer (AO) processed the return and charged interest under Sections 234B and 234C due to the shortfall in advance tax paid by the appellant. The appellant contested this, arguing that they couldn't foresee the payment of advance tax as the intimation of the refund adjustment was received after the due date of the last instalment of advance tax.

3. Maintainability of the Appeal Against Levy of Interest under Section 234C:
The appellant's counsel argued that the appeal was maintainable as it disputed the very levy of interest under Section 234C and not the quantum. They relied on the apex Court's judgment in Central Provinces Manganese Ore Co. Ltd. vs. CIT and the Madras High Court's decision in CIT vs. Veppalodai Salt Corporation, asserting that an appeal is maintainable if it contests the levy of interest itself. The Departmental Representative, however, contended that charging interest under Section 234C is mandatory, referencing the Supreme Court's decision in CIT vs. Anjum M.H. Ghaswala & Ors. and argued that the appeal was not maintainable based on a Tribunal order in a similar case.

The Tribunal, after considering both sides, held that the appeal was maintainable based on the apex Court's ruling that an appeal lies against an order charging interest if the assessee disputes the liability to pay the levy at all. The Tribunal noted that the appellant challenged the levy of interest under Section 234C completely.

Judgment on the Merits of Section 234C:
The Tribunal examined the provisions of Section 234C and the nature of the interest as statutory and mandatory, as discussed in the apex Court's decision in CIT vs. Anjum M.H. Ghaswala & Ors. However, it also considered the Rajasthan High Court's ruling in CIT vs. Smt. Premlata Jalani, which dealt with the timing and liability of advance tax payment concerning capital gains and similar incomes.

The Tribunal found that the appellant received the refund adjustment intimation after the due date of the last advance tax instalment, making it impossible to foresee and pay the advance tax on time. It emphasized that the liability to pay interest arises only on income that can be estimated by the assessee at the given time, and income arising from unforeseen events cannot be subject to advance tax before the event occurs.

Conclusion:
The Tribunal concluded that the appellant had no obligation to pay advance tax on the refund adjustment received after the last instalment date. It followed the Rajasthan High Court's decision, which clarified that no obligation to pay advance tax exists before the income accrues. Consequently, the appeal was allowed on this issue.

Result:
The appeal of the assessee was partly allowed.