2011 (1) TMI 1187 - HC - Income Tax

Whether in a re-assessment completed under section 153A read with section 143 (1) of the Income-tax Act (hereinafter referred to as the Act for short), interest for short payment of advance tax is to be demanded for the period provided under section 234B(1) or section 234B(3) of the Act Held that - Department conducted search and made revised assessments under section 153A of the Act though by accepting returns of undisclosed income filed and by issuing proceedings under section 143(1) read with section 153A of the Act, assessments under section 153A are revised assessments and so much so, interest could be demanded for the period mentioned in section 234(B)(3) of the Act as held by the Tribunal, order of the Tribunal upheld and dismiss the Department appeals

Summary

Issues: Interpretation of sections 234B(1) and 234B(3) of the Income-tax Act in the context of re-assessment under section 153A.

Analysis:

Issue 1: The primary issue in this case revolves around whether interest for short payment of advance tax in a re-assessment under section 153A should be demanded under section 234B(1) or section 234B(3) of the Income-tax Act.

Analysis: The department contended that interest should be charged under section 234B(1) from the beginning of the financial year following the previous year when advance tax was payable, regardless of the nature of the assessment completed. On the other hand, the assessee argued that interest should be levied under section 234B(3) for a limited period specified therein, applicable to re-assessments or recomputations under section 153A. The Tribunal ruled in favor of the assessee, emphasizing the distinction between regular assessments under section 143(1) and re-assessments under section 153A. The court held that interest for non-payment or short payment of advance tax in re-assessments should be governed by section 234B(3), not section 234B(1), as claimed by the Revenue.

Issue 2: Determining the appropriate provision for interest on short payment or non-payment of advance tax in cases of re-assessment under section 153A.

Analysis: The court clarified that interest under section 234B(1) applies to regular assessments completed under section 143(1) for the periods specified therein. However, in cases where the original assessment is revised under section 147 or section 153A, interest for non-payment or short payment of advance tax should be charged as per the provisions of section 234B(3). The court highlighted that the nature of the assessment, whether based on accepted returns or determined income, does not alter the applicability of the relevant provision. Re-assessments under section 153A are considered revised assessments, warranting the application of section 234B(3) for the period specified, as determined by the Tribunal.

In conclusion, the court upheld the Tribunal's decision, dismissing the Revenue's appeals for both years and affirming that interest in re-assessments under section 153A should be demanded as per the provisions of section 234B(3) of the Income-tax Act.