2024 (6) TMI 417 - AT - Income Tax

Levying of interest u/s 234B - proceedings u/s. 147 / 148 - enhancing the levy of interest u/s. 234B for the period starting from the date of passing of the original assessment order u/s. 143(3) dated 31/01/2017 till the date of passing of order u/s. 147 dated 18/12/2019. HELD THAT - AO has levied the interest for the period when there was no demand. The original demand was of Rs. 52.68 Crores which was raised vide order u/s. 143(3) r.w.s. 144C(13) dated 30/01/2017 which was already paid in the month of February 2017. Thus, there was no liability to pay interest u/s 234B thereafter. Once the ld. AO in his re-assessment order u/s. 143(3) r.w.s. 147 has accepted the income as determined vide original assessment order u/s. 143(3) dated 30/01/2017; and there is no discussion in the order enhancing the interest u/s. 234B between the period 31/01/2017 to 18/12/2019, then how interest can be charged for this period. CIT(A) has completely misunderstood the entire issue wherein he has held that charging of interest u/s. 234B is automatic and interest u/s. 234B is to be assessed from 01/04/2012 to the date of regular assessment. Here the regular assessment was already completed 30/01/2017 and there was no variation in the re-assessment order dt. 18/12/2019, then where is the question of levying penalty of Section 234B for this period when assessee had already paid the entire demand arising out of order dated 30/01/2017 within the time limit of 30 days, i.e., by February 2017. Thus, there was no payment pending nor there is any variation in the income. Accordingly, we hold that assessee was not liable for charging of interest u/s. 234B from the period 30/01/2017 to 16/12/2017. Thus, interest computed by the ld. AO in the re-assessment order is deleted.Appeal of the assessee is allowed.

Summary

Issues:
1. Validity of reopening assessment u/s. 147
2. Levy of interest u/s. 234B

Analysis:

Issue 1: Validity of reopening assessment u/s. 147

The appeal was filed against the order passed by NFAC, Delhi for the quantum of assessment under section 143(3) read with section 147. The assessee raised grounds challenging the reopening of assessment, arguing that the notice issued under section 148 was not valid as the reasons recorded were not established prior to the issuance of the notice. The assessee also contended that the AO did not follow the procedure laid down by the Supreme Court in the case of GKN Driveshafts, as objections raised were not rejected. However, after reassessment proceedings and verification of accounts, the AO concluded that no income had escaped assessment, and the income determined in the original assessment order was accepted without variation. The CIT(A) upheld the AO's decision, citing the automatic nature of interest under section 234B when conditions are met, leading to the dismissal of the assessee's objections. The Tribunal found that since there was no demand pending after the original assessment order and the income remained unchanged, the levy of interest under section 234B was unwarranted. Consequently, the Tribunal allowed the appeal, holding the assessee not liable for interest under section 234B.

Issue 2: Levy of interest u/s. 234B

The AO had levied interest under section 234B from the date of the original assessment order to the date of the reassessment order, despite no variation in the assessed income. The CIT(A) upheld the AO's decision, stating that interest under section 234B is automatic when conditions are met. However, the Tribunal disagreed, noting that there was no liability to pay interest after the original demand was paid and no variation in income was found in the reassessment order. The Tribunal held that the CIT(A) misunderstood the issue and deleted the interest computed by the AO in the reassessment order. As a result, the Tribunal allowed the appeal, finding the assessee not liable for interest under section 234B for the period in question.

In conclusion, the Tribunal allowed the appeal, ruling in favor of the assessee on both issues of the validity of reopening assessment under section 147 and the levy of interest under section 234B.