2024 (6) TMI 802 - AT - Income Tax

Manner of computing the interest liable to be levied u/s. 234B - Interest for defaults in payment of advance tax - Scope of amendment to section 234B(3) by Finance Act, 2015 - HELD THAT - In the facts of the instant case, income stands assessed in the first instance vide order u/s. 153A on 28.03.2013, which therefore is to be regarded as per regular assessment. The interest charged u/s. 234B upon this assessment is only u/s. 234B(1). The same, thus, and correctly, is for the 36-month period, from April, 2010 to March, 2013. The only adjustment in the said interest is to be upon passing the appellate order u/s. 250(6) on 16/2/2016, i.e., by allowing the assessee credit for the reduction in tax, as originally assessed (Rs. 83,35,990), to that pursuant to the appellate order (Rs. 60,58,729), i.e., in terms of s. 234B(4). The same, as afore-said, has no bearing on the period for which interest stands levied. Interest stands charged on assessment u/s.153A dated 28.03.2013, being the first assessment either u/s. 147 or there-under, u/s. 234B(1) r/w Explanation 2 thereto, for a period of 36 months, i.e., from 01.04.2010 (the first day of the relevant assessment year) to March, 2013 (i.e., up to the month of assessment). There being no subsequent assessment, either u/s. 147 or u/s. 153A, there is no occasion to charge interest u/s. 234B(3). Reference thereto is thus wholly misplaced. The only change subsequent thereto is in the appellate proceedings, and which would, as afore-stated, not impact the period for which the interest stands to be levied u/s. 234B, but only, in view of the modification in the assessed income and, thus, the assessee s tax liability and, consequently, the assessed tax, i.e., the principal sum on which interest for shortfall is to be levied (s. 234B(4)). All that the law therefore provides is for the corresponding increase or, as the case may be, decrease in the interest chargeable u/s. 234B with reference to the revised principal sum, substituting tax liability with that determined in the appellate/revisionary proceedings. Sheer force of logic would also dictate the same inasmuch as interest could only be charged, on the change in the principal sum, for the same period for which it was earlier charged/payable. It is this that admits the rectification in the interest payable u/s. 154. Section 234B(3) would, as afore-noted, come into play only in the case where an assessment u/s. 147/153A is not made for the first time, while it is so in the instant case. Interest shall accordingly be charged on the assessed tax computed with reference to the assessee s tax liability as determined pursuant to the appellate proceedings for the 36-month period, i.e., April, 2010 to March, 2013. The assessee s case is thus without basis on facts or in law. The AO is directed accordingly. If and where, however, we may add, the computation of interest chargeable u/s. 234B consequent to this order is at variance with that already computed by him, he shall provide opportunity to the assessee to raise objection/s, if any, and take same into account in his final computation. This is with a view to ensure that the interest u/s. 234B is charged to the assessee strictly in terms of this order, eschewing another round of litigation, which was wholly avoidable in view of the law in the matter being trite and well-settled.

Summary

Issues Involved:
1. Computation of interest under section 234B of the Income Tax Act, 1961.
2. Applicability of the amendment to section 234B(3) by Finance Act, 2015.
3. Rectification of interest computation under section 154.

Detailed Analysis:

1. Computation of Interest under Section 234B:

The primary issue in this case is the manner of computing the interest liable to be levied under section 234B of the Income Tax Act, 1961. The assessee argued that the interest under section 234B(3) should be computed from the date of processing the return up to the date of reassessment under section 153A, which in this case would range from 12 to 29 months. The Assessing Officer (AO), however, computed the interest from the first day of the assessment year (01/04/2010) up to the date of reassessment in March 2013, for a period of 36 months.

2. Applicability of the Amendment to Section 234B(3) by Finance Act, 2015:

The assessee contended that the amendment to section 234B(3) by the Finance Act, 2015, effective from 01/06/2015, would not be applicable to her case. The CIT(A) held that the provisions of section 234B(3) as amended w.e.f 01/06/2015 are applicable, and interest is chargeable from 01/04/2010 to 31/03/2013 for a period of 36 months. This position was upheld by the appellate tribunal, which noted that the amendment aligns the computation of interest under section 234B(3) with that under section 234B(1).

3. Rectification of Interest Computation under Section 154:

The AO initially computed interest for a period of 42 months instead of the actual 36 months. This was rectified under section 154, and the rectification was confirmed by the CIT(A). The tribunal observed that the interest charged under section 234B(1) is for the period from April 2010 to March 2013, as the assessment under section 153A on 28/03/2013 is to be regarded as a regular assessment. The tribunal clarified that there was no subsequent assessment under sections 147 or 153A, and thus no occasion to charge interest under section 234B(3).

Conclusion:

The tribunal concluded that interest should be charged on the assessed tax computed with reference to the assessee's tax liability as determined pursuant to the appellate proceedings for the 36-month period from April 2010 to March 2013. The assessee's appeal was found to be without basis on facts or in law. The AO was directed to provide an opportunity to the assessee to raise objections, if any, and to ensure that the interest under section 234B is charged strictly in terms of this order to avoid further litigation.

Order:

The assessee's appeal was decided on the aforesaid terms, and the order was pronounced on March 28, 2024, under Rule 34 of The Income Tax (Appellate Tribunal) Rules, 1963.