2017 (3) TMI 1031 - AT - Income Tax

Interest charged u/s 234B and 234C - returned income or assessed income - additional income was surrendered during survey to buy peace and avoid further adverse consequences - Held that - There is no iota of evidence brought by the Revenue that this income has actually arisen in assessment year 2006-07. Even the provisions of section 209(1) of the Act talks of the payment of advance tax in the financial year. In our view, in view of the peculiar facts of this case, in the financial year neither the assessee can foresee accrual of the income which has arisen as on 5.3.2008 nor the Assessing Officer could have required the assessee to pay advance tax in pursuance of an order made under section 210 of the Act. In view of this fact, we are of the view that due to the clear mandate of section 234B (1) of the Act, since the assessee was not liable to pay advance tax under section 208 or 210 of the Act, therefore, that the assessee was not liable to pay advance tax in respect of income of ₹ 90 lakhs which he declared on 5.3.2008. Since the assessee was not liable to pay advance tax, no question of deferment of advance tax under section 234C of the Act arises. In view of this fact, we are of the view that it is a case where interest cannot be levied under section 234B and 234C of the Act on the assessee. We accordingly set aside the order of the ld. CIT(A) and delete the interest. - Decided in favour of assessee.

Summary

Issues:
- Assessment of interest under sections 234B and 234C of the Income Tax Act.

Analysis:

The appeal was filed against the order of the ld. CIT(A)-33, Mumbai, for the assessment year 2006-07. The assessee, engaged in freight forwarding, disclosed a sum of ?90 lakhs during a survey to avoid litigation. The Assessing Officer determined the total income at ?95,84,870 and levied interest under sections 234B and 234C amounting to ?9,58,591. The only ground for disposal was the reduction of interest charged under these sections. The primary issue was whether the interest should be levied from the date of survey or from 1.4.2006 to the date of assessment. The Hon'ble Karnataka High Court's decision was cited, emphasizing the importance of peculiar facts in determining interest liability.

Upon careful consideration, the Tribunal noted that the Assessing Officer accepted the additional income offered by the assessee to avoid further scrutiny. The Tribunal acknowledged the mandatory nature of interest levy but focused on whether the assessee was liable to pay interest from 1.4.2006. The provisions of sections 234B and 234C were discussed, highlighting the requirement for advance tax payment under sections 208 and 210 of the Act. The Tribunal analyzed the financial year relevant to the assessment year and concluded that the assessee was not liable to pay advance tax for income declared after a survey in 2008, as it did not exist during the relevant financial year. Consequently, the Tribunal set aside the interest levied under sections 234B and 234C, emphasizing the absence of advance tax liability.

In conclusion, the Tribunal allowed the appeal, stating that the assessee was not liable to pay advance tax for the income declared post-survey, leading to the deletion of interest under sections 234B and 234C. The decision was pronounced in accordance with Rule 34(4) on 15th February 2016.