2024 (5) TMI 292 - AT - Income Tax

Levy of interest u/s 234A and 234B - Interest for defaults in furnishing return of income - Determination of date of regular assessment - obliteration of demand consequent to an assessment being set aside - original assessment stands set aside in the appellate proceedings for fresh assessment - as original demand surviving no longer, the Revenue claims the subsequent assessment as the regular assessment, while the assessee claims it to be the first one HELD THAT - As explained in CIT vs. Prakash Chand Lunia 2023 (4) TMI 1057 - SUPREME COURT for a precedent to be binding there has to be a conscious consideration of an issue involved (Also see - Hussain Bhai Ors. v. 1971 (4) TMI 1 - SUPREME COURT . The decision in Modi Industries Ltd. 1995 (9) TMI 324 - SUPREME COURT settles the issue qua the date of regular assessment , clarifying it to be for the purpose of determination of interest payable to or, as the case may be, by the assessee, i.e., ss. 214, 215, also adverting to ss. 243 and 244 - The said provisions are no longer operative, with, further, there being legislative changes, the legal import of which is to be judicially determined. The decision in Mahesh Investments . 2020 (10) TMI 428 - KARNATAKA HIGH COURT and by the Tribunal in Santhimadom Herbal City Trust 2013 (7) TMI 1219 - ITAT COCHIN stand rendered de hors the same. There being no consideration of the changed legal scenario, we only consider it fit and proper to restore this issue, i.e., computation of interest u/ss. 234A 234B, back to the file of the ld. CIT(A) for a consideration afresh, who shall adjudicate thereon per a speaking order after allowing adequate opportunity of hearing to the parties before him, in accordance with law, considering all the decisions that may be relied upon by them, or that he may wish to rely upon, confronting them therewith. All contentions qua this issue, whether raised and considered in this order or not, are, without reservation, open to both the sides. We may not be construed as having expressed any final view in the matter, save as to the instant appeals, as indeed the assessments from which they arise, as being maintainable. Two, we may clarify that the nature of levy as mandatory, as well as compensatory, and of the default being a continuing one, is not in dispute, so that demand, where paid, would automatically close the interest, even as found in CIT v. Pranoy Roy 2008 (9) TMI 150 - SUPREME COURT - The compensatory aspect, which also prevailed with the Apex Court in Modi Industries Ltd. 1995 (9) TMI 324 - SUPREME COURT stands met by the extant law providing for interest up to the date of grant of interest; a statutory confirmation of the interest being compensatory. The dispute concerns only the aspect of date of regular assessment in the given facts and circumstances of the case, and the law in the matter. Assessee s appeals are allowed for statistical purposes.

Summary

Issues Involved:
1. Delay in filing appeals and condonation of delay.
2. Levy of interest u/s 234A and 234B of the Income Tax Act, 1961.

Summary:

1. Delay in filing appeals and condonation of delay:
The appeals by the assessee were delayed by 27 days. The delay was explained by the assessee through a condonation petition and an accompanying affidavit, citing a difficult situation where the office was ransacked. The Tribunal found the reasons genuine and bona fide, condoning the delay and admitting the appeal for decision on merits.

2. Levy of interest u/s 234A and 234B:
The assessee contested the levy of interest u/s 234A and 234B, arguing that interest should be charged only up to the date of the original assessment (28.12.2010), which was set aside, and not up to the date of the fresh assessment (31.07.2014). The Tribunal referred to its earlier decision in Santhimadom Herbal City Trust v. Asst. CIT, where it was held that interest should be charged up to the date of the first assessment, even if set aside later, as the default of non-filing the return received a closure in law on the assessment being made.

The Tribunal examined the relevant provisions of sections 234A and 234B, noting that these sections provide for interest on defaults in furnishing return of income and payment of advance tax, respectively. The Tribunal also considered the legal position, including the decision in Modi Industries Ltd. v. CIT, which clarified that the date of the original assessment should be regarded as the "regular assessment" for the purpose of determining interest, even if subsequently set aside.

The Tribunal observed that the original assessment, once set aside, no longer exists, and thus, the demand arising from it is also obliterated. The Tribunal noted that the legislative changes and judicial precedents support the view that the original assessment, once set aside, cannot be considered valid for the purpose of charging interest.

The Tribunal concluded that the computation of interest u/ss 234A and 234B should be reconsidered by the Commissioner of Income Tax (Appeals) [CIT(A)] in light of the legal principles and judicial precedents. The issue was restored back to the file of the CIT(A) for fresh consideration and adjudication per a speaking order, allowing adequate opportunity of hearing to the parties.

Conclusion:
The appeals were allowed for statistical purposes, and the issue of computation of interest u/ss 234A and 234B was remanded to the CIT(A) for fresh adjudication. The Tribunal emphasized the need for a detailed consideration of the legal and factual aspects, ensuring compliance with the principles of natural justice.