2015 (11) TMI 433 - HC - Income Tax

Interest under Sections 234B and 234C - contention of the assessee was that the interest should have been charged with reference to the income tax return and not the assessed income and further that the assessee also challenged the inclusion of demand notice with reference to the same in the assessment order - Held that - There is a clear distinction made by the Income Tax Act in the provisions of Section 234B and 234C with regard to interest under Section 234B, the calculation is to be made not on the returned income but on the tax as may be finally assessed and determined by the assessment whereas under Section 234C, what is to be determined is tax due on the returned income for the purpose of calculation of the shortfall in the advance tax paid. It is further clear that both the provisions are in mandatory terms and would apply automatically, as has been held by the Apex Court also in the Bhagat Construction Company case (2015 (8) TMI 621 - SUPREME COURT), the moment there is any shortfall in deposit of advance tax in terms of the provisions of Sections 234B and 234C of the Act. Thus, we are of the view that the present matter is squarely covered in favour of the appellant revenue by the decision of the Supreme Court in Kalyan Kumar Ray s case (1991 (8) TMI 291 - SUPREME COURT ). The first substantial question of law is, accordingly, answered in favour of the Revenue and it is held that the Tribunal should have held the computation sheet and demand notice as integral parts of the assessment order and thus charging of the interest was legal and valid. With regard to second substantial question of law it is held that the decision in Ranchi Club Limited case ( 2000 (8) TMI 79 - SUPREME Court) would not be applicable in the present matter as the amendment of the provisions of Sections 234A and 234B of the Finance Act, 2001 having retrospective effect from 1.4.1989, has the effect of making chargeable interest mandatory and not directory. - Decided against assessee.

Summary

Issues:
1. Charging of interest under Sections 234B and 234C without an order of the Assessing Officer.
2. Interpretation of the computation sheet in ITNS 150 as part of the assessment order.
3. Applicability of retrospective amendments in proviso to Section 234A & 234B by Finance Act 2001.

Issue 1:
The case involved a dispute regarding the charging of interest under Sections 234B and 234C without an order of the Assessing Officer. The Income-tax Appellate Tribunal, Patna Bench, set aside the order of the Commissioner of Income-tax (A)-II, holding that interest under these sections cannot be charged in the absence of an order from the assessing officer. The Tribunal relied on a Supreme Court decision in Ranchi Club Limited vs. Commissioner of Income-tax, stating that interest cannot be charged without an order. However, the Revenue argued that the computation sheet in ITNS 150 should be considered part of the assessment order, and cited a Supreme Court decision in Kalyan Kumar Ray's case to support this argument. The Apex Court's recent decision in Commissioner of Income Tax v. M/s. Bhagat Construction Company Private Limited was also referenced, emphasizing the automatic levy of interest under Section 234B when conditions are met.

Issue 2:
The interpretation of the computation sheet in ITNS 150 as part of the assessment order was a significant aspect of the case. The Revenue contended that the computation sheet should be considered an integral part of the assessment order, as per the Supreme Court's decision in Kalyan Kumar Ray's case. The Apex Court's decision in Commissioner of Income Tax v. M/s. Bhagat Construction Company Private Limited was cited to support this argument, highlighting that the calculation of interest payable on the tax assessed must be recognized as part of the assessment order. The Court agreed with the Revenue's position, stating that the computation sheet and demand notice are integral parts of the assessment order, making the charging of interest legal and valid.

Issue 3:
Regarding the applicability of retrospective amendments in proviso to Section 234A & 234B by Finance Act 2001, the Court held that the decision in Ranchi Club Limited case would not be applicable due to the retrospective effect of the amendments. The Finance Act 2001 introduced an Explanation in the provisions with retrospective effect from 1.4.1989, clarifying that interest should be calculated based on the assessed tax, not the returned income. The Court emphasized the mandatory nature of the provisions under Sections 234B and 234C, stating that they apply automatically in case of any shortfall in advance tax payment. The decision in Kalyan Kumar Ray's case was deemed applicable, and it was held that the amendments made charging of interest mandatory, not directory.

In conclusion, the High Court of Patna ruled in favor of the Revenue, upholding the charging of interest under Sections 234B and 234C based on the assessment order and computation sheet in ITNS 150. The Court emphasized the mandatory nature of the provisions and the retrospective effect of the amendments, ensuring that interest is calculated based on the assessed tax as per the statutory requirements.