2014 (10) TMI 622 - HC - Income Tax

Notice of demand u/s 156 Interest charged u/s 215/217 and 139(8) - Whether the Tribunal was justified in holding that interest u/s 215/217 and 139(8) of the Act could not be charged unless specifically mentioned in the assessment order particularly when charging of interest was mandatory Held that - There has to be a specific order passed by the AO charging interest and only thereafter, a notice of demand levying interest could be issued as decided in Commissioner of Income Tax Vs. Anjum M.H. Ghaswala & others 2001 (10) TMI 4 - SUPREME Court - levy of interest is mandatory but at the same time the Assessing Officer is specifically required to mention the specific section for charging interest, failing which no interest could be levied. A notice of demand is somewhat like a decree in a civil suit, which must follow the order - When a judgment in a civil suit does not specify any amount to be recovered, the decree could not contain such amount - Similarly, when the assessment order does not indicate that interest would be leviable, the notice of demand u/s 156 of the Act levying interest would be wholly illegal since interest is payable in consequence of an assessment order as is clear from Section 156 of the Act itself - the notice of demand cannot go beyond the assessment order and the assessee cannot be served with any such notice demanding interest - Further, the assessee must know that he has been charged interest under a particular section of the Act, which must be specify in the assessment order and only thereafter a notice of demand u/s 156 of the Act could be issued - if the assessment order does not specify charging of interest under a specific section then it could not be charged or levied u/s 156 of the Act as such no substantial question of law arises for consideration Decided against revenue.

Summary

Issues:
- Charging of interest under Section 139(8) and Section 215 of the Income Tax Act without a specific order in the assessment.

Analysis:
1. The case involved an appeal regarding the charging of interest under Section 139(8) and Section 215 of the Income Tax Act without a specific order in the assessment order. The Assessing Officer had not issued any direction for charging interest under these sections in the assessment order, but a notice of demand was issued later demanding interest. The issue was whether interest could be charged without a specific order in the assessment order.

2. The appellate authority allowed the appeal and quashed the order demanding interest, stating that there must be a specific order for charging interest in the assessment order before levying interest in the notice of demand. The Income Tax Appellate Tribunal affirmed this decision.

3. The department filed an appeal contending that the Tribunal was not justified in holding that interest under Section 215/217 and 139(8) of the Act could not be charged unless specifically mentioned in the assessment order, arguing that charging of interest was mandatory.

4. The High Court analyzed relevant case laws to support the view that interest can only be charged when there is a specific order in the assessment order. The court cited cases such as Ranchi Club Ltd. and Vinod Khurana to emphasize the importance of a clear and specific order for charging interest.

5. The court held that the notice of demand cannot go beyond the assessment order, and interest cannot be levied unless specifically mentioned in the assessment order. The court compared the notice of demand to a decree in a civil suit, stating that it must follow the order, and interest is payable in consequence of the assessment order.

6. The court rejected the department's argument that interest could be charged mandatorily, emphasizing that while the levy of interest is mandatory, the Assessing Officer must mention the specific section for charging interest in the assessment order for it to be valid.

7. Ultimately, the court dismissed the appeal, stating that if the assessment order does not specify charging of interest under a specific section, it cannot be charged or levied under Section 156 of the Act. The court found no merit in the appeal, concluding that no substantial question of law arose for consideration.