2015 (12) TMI 1069 - HC - Income Tax

Interest u/s 234A, 234B and 234C - CIT(A) s jurisdiction to entertain the first appeal under Section 246 against the chargeability of interest - ITAT upholding the order of CIT(A) in deleting interest u/s 234A and 234C and to restrict the levy of interest u/s 234B - Held that - Apex Court in Central Provinces Manganese Ore Co. Ltd. v. CIT (1986 (5) TMI 3 - SUPREME Court) observed that the levy of interest is the part of the process of assessment. Although Sections 143 and 144 of the Act do not specifically provide for the levy of interest but it is nevertheless a part of the process of assessing the tax liability of the assessee. The Supreme Court held that since levy of interest is a part of the process of assessment, it could be challenged in appeal provided the assessee disputes the chargeability of interest on the ground that he is not liable to the levy of interest at all. It was clarified that where the assessee claims waiver or reduction of the interest levied, that could not be agitated in appeal under Section 246 of the Act but more appropriately by resorting to revisional jurisdiction of the Commissioner. It was further observed that before the revisional jurisdiction of the Commissioner can be invoked for waiver or reduction, the assessee is required to demonstrate before the Assessing Officer that there is a case for waiving or reducing the levy of interest. Thus the appeal filed by the assessee laying challenge to the very levy of interest under Sections 234A, 234B and 234C of the Act before the CIT(A) was clearly maintainable. As the assessee had paid due taxes within 4 days of the receipt of the cheque in the month of September, 2007 and filed the return voluntarily, thus, the CIT(A) had rightly held that interest under Section 234A of the Act be not charged for the reasons that the sale was conditional sales which was to be completed only after the realization of the last cheque and thus considerations were beyond the control of the assessee. Further, interest under Section 234B of the Act was also restricted by directing the Assessing Officer to charge it only on the amount of capital gain worked out after taking sales consideration at the amount received by the assessee during the financial year 2006-07 and deducting proportionate indexed cost of acquisition and allowing exemption under Section 54EC of the Act for ₹ 50 lacs out of the capital gain so worked out. Still further, the liability to pay interest under Section 234C of the Act qua the capital gains was held to be unwarranted in view of the specific provisions of the Act and the CIT(A) was correct in deleting the interest levied under Section 234C of the Act - Decided against revenue

Summary

Issues:
1. Maintainability of appeal under Section 246 of the Income Tax Act against levy of interest under Sections 234A, 234B, and 234C.
2. Justification of deleting interest under Sections 234A and 234C, and restricting interest charged under Section 234B.

Issue 1: Maintainability of Appeal under Section 246:
The High Court considered the appeal filed by the revenue challenging the levy of interest under Sections 234A, 234B, and 234C of the Income Tax Act. The court referred to the Supreme Court's decision in Central Provinces Manganese Ore Co. Ltd. v. CIT, which established that the levy of interest is part of the assessment process and can be challenged in appeal if the assessee disputes the chargeability of interest altogether. The court clarified that if the assessee seeks waiver or reduction of the interest, that should be addressed through the Commissioner's revisional jurisdiction. The High Court found that the appeal filed by the assessee against the levy of interest was maintainable under Section 246 of the Act.

Issue 2: Justification of Deleting and Restricting Interest:
Regarding the second issue, the High Court analyzed the Tribunal's decision on deleting interest under Sections 234A and 234C, and restricting interest charged under Section 234B. The Tribunal noted that the assessee had paid due taxes promptly and filed the return voluntarily, leading to the CIT(A) rightly deciding not to charge interest under Section 234A due to the conditional nature of the sale. The CIT(A) also restricted interest under Section 234B to the capital gain worked out based on actual sales consideration received by the assessee during the relevant financial year. The Tribunal found the liability to pay interest under Section 234C unwarranted and upheld the CIT(A)'s decision to delete the interest levied under this section. The High Court concurred with the Tribunal's findings, stating that they were not erroneous or perverse. Consequently, the court upheld the decision of the CIT(A) and the Tribunal, dismissing the appeal as no substantial question of law arose.

This detailed analysis of the judgment from the Punjab and Haryana High Court provides a comprehensive understanding of the issues involved and the court's reasoning behind its decision.