2014 (7) TMI 218 - HC - Income Tax

Admission of appeal - Deduction u/s 80HHC of the Act Sale of goods at counter in convertible foreign exchange Held that - The decision in Ram Babu and Sons vs. Union of India 1996 (5) TMI 61 - ALLAHABAD High Court followed - the assessee was entitled to get the deductions u/s 80-HHC in respect of counter sales against foreign currency. Charge of interest Held that - The decision in Ranchi Club Ltd. vs. Commissioner of Income Tax and others 2000 (8) TMI 79 - SUPREME Court - an order of the AO in the assessment order to charge interest has to be specific and clear - the assessee must know that the assessing officer after applying his mind had ordered charging of interest under a particular Section and that a general order directing that interest would be charged as per Rules or directing that charge interest as per Law was not a specific order for levying interest - If interest is leviable under Sections 234-A, 234-B or 234-C of the Act, then such levy of interest is mandatory and compensatory in nature - in order to levy interest under the Sections the AO is specifically required to mention the specific section of charging interest, failing which, no interest could be levied under those Sections - Penal proceedings are totally different and distinct from charging interest - it is not necessary nor obligatory for the AO to direct initiation of penal proceedings and that penal proceedings would be initiated without a specific direction from the AO Decided against Revenue.

Summary

Issues:
1. Deduction under Section 80-HHC of the Income Tax Act for goods sold at the counter in convertible foreign exchange.
2. Charging of interest under Sections 234-A, 234-B, and 234-C without specific mention in the assessment order.

Analysis:
1. The case involved the deduction claim under Section 80-HHC of the Income Tax Act for goods sold at the counter in convertible foreign exchange. Initially, the assessing officer disallowed the deduction claim as the assessee failed to provide evidence that the goods were custom cleared. The Tribunal, however, allowed the deduction, citing relevant legal precedents. The High Court, after considering previous judgments, upheld the Tribunal's decision, stating that the assessee was entitled to the deductions under Section 80-HHC for counter sales against foreign currency.

2. Regarding the issue of charging interest under Sections 234-A, 234-B, and 234-C without specific mention in the assessment order, the assessing officer had directed the charging of interest as per rules. The Court referred to the judgment in Ranchi Club Ltd. case, where it was held that a specific and clear order is required to levy interest under a particular section. The Court emphasized that unless the assessing officer specifies the section for charging interest, no interest could be levied. The appellant argued that a subsequent Supreme Court decision overruled the Ranchi Club Ltd. case, making the charging of interest mandatory even without a specific direction in the assessment order. However, the Court disagreed with this argument, stating that the assessing officer must mention the specific section for charging interest under Sections 234-A, 234-B, or 234-C; otherwise, no interest could be levied under those sections. The Court clarified that penal proceedings are separate from charging interest and can be initiated without a specific direction from the assessing officer.

In conclusion, the High Court dismissed the appeal at the admission stage, affirming the Tribunal's decision on the deduction claim under Section 80-HHC and reiterating the requirement for a specific mention of the section for charging interest under the relevant provisions of the Income Tax Act.