2013 (11) TMI 830 - AT - Income Tax

Interest u/s 234B and 234C of the Income tax act Application of section 210 which requires payment of advance tax as calculated u/s. 209 - Advance tax must not fall short by more than 10% of the assessed tax Contended that Assessee was not liable to pay any advance tax as the taxes paid by way of TDS were more than 90% of the Assessed tax and hence there was no interest chargeable u/s. 234 B and 234 C Held that - One of the reasonable mode of collection is to collect taxes in instalments. If assessees fail to adhere to schedule of payment, provisions have to be made to compensate the exchequer. Payment of interest or imposition of penalty can be considered justified modes of compensation. Assessee had the liability to pay advance-tax as provided in sections 207 and 208 within the time prescribed u/s. 211 of the Act, that the liability to pay such tax existed on the last date for payment of advance tax as provided under the Act or at least on the last date of the financial year preceding the assessment year in question - It is not the case that such liability arose subsequently, when the last date for payment of advance tax or even the last date of the financial year preceding the assessment year was over and the assessee had no liability to pay advance tax. In these circumstances it has been held that assessee was liable to pay advance tax for the year under consideration - It had failed to pay advance tax on stipulated dates. Therefore, the order passed by the FAA u/s. 154 of the Act; to recalculate the interest u/s. 234B and 234C of the Act, after giving credit to the taxes paid by the assessee;does not suffer from any legal infirmity Decided against the Assessee.

Issues Involved:

1. Liability to pay advance tax and applicability of interest under sections 234B and 234C of the Income Tax Act, 1961.
2. Rectification of mistake apparent from the record under section 154 of the Income Tax Act, 1961.
3. Interpretation and application of sections 234A, 234B, and 234C.

Detailed Analysis:

1. Liability to Pay Advance Tax and Applicability of Interest under Sections 234B and 234C:

The assessee argued that the taxes paid by way of TDS were more than 90% of the assessed tax, negating the need for advance tax and, consequently, the interest under sections 234B and 234C. However, the AO found a shortfall of Rs. 15,59,761/- in the advance tax paid, making the assessee liable for interest under sections 234B and 234C. The tribunal emphasized that sections 234B and 234C are compensatory and not penal, designed to ensure timely tax payments. The tribunal clarified that interest under section 234B is levied when the advance tax paid is less than 90% of the assessed tax, and section 234C is applicable for shortfalls in installment payments.

2. Rectification of Mistake Apparent from the Record under Section 154:

The FAA issued a notice to rectify the mistake apparent from the record, as the appellate order dated 23-6-2011 had not considered the shortfall in advance tax. The tribunal upheld the FAA's decision, stating that the shortfall in advance tax necessitated recalculating the interest under sections 234B and 234C. The tribunal found no legal infirmity in the FAA's order to rectify the mistake and directed the AO to recalculate the interest after verifying the payments, TDS, and MAT credit.

3. Interpretation and Application of Sections 234A, 234B, and 234C:

The tribunal provided a detailed history and interpretation of sections 234A, 234B, and 234C, emphasizing their compensatory nature. The tribunal noted that these sections were introduced to ensure uniform treatment and reduce litigation by removing discretionary powers of assessing officers. The tribunal highlighted that interest under section 234B is levied on the difference between the assessed tax and the advance tax paid if the latter is less than 90% of the former. Section 234C imposes interest for shortfalls in installment payments. The tribunal stressed that these provisions are automatic and do not require a hearing or relief grant.

The tribunal also discussed various principles, such as the automatic levy of interest, the non-requirement of notice, and the compensatory nature of the interest. It clarified that interest under sections 234B and 234C is payable on the tax declared in the return, not on the assessed income. The tribunal also noted that interest could be levied in reassessment cases and that non-residents with 100% TDS are not liable for advance tax.

Conclusion:

The tribunal concluded that the assessee was liable to pay advance tax as per sections 207 and 208 and had failed to do so within the stipulated dates. Therefore, the FAA's order under section 154 to recalculate the interest under sections 234B and 234C was upheld, dismissing the assessee's appeal.

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