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2012 (7) TMI 518 - HC - Income TaxChallenge against levy of interest u/s 234B - notice u/s 148 was issued to the assessee for the excess deduction claimed under Section 80HHC and 80-I - assessee contented that the assessment framed by the AO u/s 143(3)/147 was the first assessment - Held that - The statutory provision contained in Explanation 2 to Section 234B that where an assessment is made for the first time in pursuance to proceedings under Section 147 it shall be regarded as a regular assessment for the purposes of Section 234B and the decision of the Apex Court in K. Govindan & Sons case (1998 (7) TMI 61 - KERALA HIGH COURT ) which was binding under Article 141 of the Constitution would render the order ineffective and would not take away the right of the revenue to charge interest under Section 234B(4). Thus interest u/s 234B was correctly charged in the assessment order passed u/s 143(3)/147 and therefore it could be subsequently enhanced on completion of set aside assessment. Section 115JB is a self-contained code pertaining to MAT which imposed liability for payment of advance tax on MAT companies and therefore where such companies defaulted in payment of advance tax in respect of tax payable under Section 115JB it was liable to pay interest u/s 234B and 234C. Thus it can be concluded that interest u/s 234B and 234C shall be payable on failure to pay advance tax in respect of tax payable under Section 115JA/115JB - against assessee.
Issues Involved:
1. Interpretation of Section 234B(4) of the Income Tax Act, 1961. 2. Whether the assessment under Section 147 r.w. 143(3) is considered a regular assessment. 3. Applicability of interest under Section 234B for assessments based on book profits under Section 115J. Issue-wise Detailed Analysis: 1. Interpretation of Section 234B(4) of the Income Tax Act, 1961: The primary issue revolves around whether the interpretation of Section 234B(4) by the Income Tax Appellate Tribunal (ITAT) is sustainable in law. The Tribunal had held that the assessment completed under Section 147 was not a regular assessment, thus, interest under Section 234B was not chargeable. However, the High Court disagreed, stating that Explanation 2 to Section 234B clarifies that an assessment made for the first time under Section 147 shall be regarded as a regular assessment for the purposes of this section. The court referenced the Supreme Court's decision in K. Govindan & Sons, which affirmed that a first or initial assessment under Section 147 is a "regular assessment" within the meaning of Section 139(8), thus applicable to Section 234B as well. 2. Whether the assessment under Section 147 r.w. 143(3) is considered a regular assessment: The High Court examined whether the assessment framed on 25.8.1992 under Section 143(3)/147 was a regular assessment. The court concluded that the assessment made for the first time in pursuance of proceedings under Section 147 is indeed a regular assessment. This interpretation aligns with Explanation 2 to Section 234B, which states that an assessment under Section 147 is to be regarded as a regular assessment for the purposes of charging interest. The court found that the Tribunal's earlier decision, which did not consider an assessment under Section 147 as a regular assessment, was contrary to statutory provisions and the settled law as declared by the Supreme Court. 3. Applicability of interest under Section 234B for assessments based on book profits under Section 115J: The assessee argued that since the income was assessed on book profits under Section 115J, interest under Section 234B was not applicable, citing the Karnataka High Court's decision in Kwality Biscuits Ltd., which was affirmed by the Supreme Court. However, the High Court referenced the Supreme Court's decision in Rolta India Ltd., which clarified that Sections 115JA and 115JB are self-contained codes and that interest under Section 234B is applicable to MAT companies. The court noted that the provisions of Sections 234A, 234B, and 234C are compensatory and mandatory, and the liability for interest arises automatically in the case of default. Therefore, the court rejected the alternative contention of the assessee, affirming that interest under Section 234B is chargeable even when income is computed under Section 115J. Conclusion: The High Court concluded that the assessment under Section 147 is a regular assessment for the purposes of Section 234B, and interest under Section 234B is chargeable in such cases. The court also held that interest under Section 234B is applicable to assessments based on book profits under Section 115J. Consequently, the appeal by the revenue was allowed, and the question of law was answered in favor of the revenue and against the assessee.
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