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2019 (1) TMI 600 - HC - Income TaxLevy of interest u/s 234D for the amount of refund - rectification application u/s 154 - whether the provisions of Section 234D introduced with effect from 01.6.2003 is applicable for the assessment years prior to assessment year 2004-05? - Held that - An order passed under Section 154 cannot be taken to be framing of a regular assessment for such a year. Further, in our opinion, the regular assessment in the assessee's case is the assessment order passed under Section 143(3) of the Act on 30.3.2001. Admittedly, in the said order dated 30.3.2001, there was no levy of interest on the assessee. Furthermore, it is clear that Sub- Section (2) of Section 234D of the Act would be attracted only if reduction occurs and it cannot be made applicable when there is an increase. The Hon'ble Supreme Court, in the case of Reliance Energy Limited 2013 (10) TMI 280 - SUPREME COURT has held that Explanation (2), which has been inserted by the Finance Act, 2012, in Section 234D of the Act, declared that the provisions of the said Section shall also apply to an assessment year commencing from 01.6.2003 if the proceedings in respect of such assessment year is completed after the said date. Having regard to the legal position, which has been clarified by the Parliament, by insertion of Explanation (2) to Section 234D of the Act, in the said case, where the assessment was completed prior to 01.6.2003, it was held that retrospectivity of Section 234D of the Act does not arise. The above decision would be squarely applicable to the case of the assessee, as, admittedly, the regular assessment was completed under Section 143(3) of the Act much prior to 01.6.2003 i.e. On 30.3.2001. For the above reasons, we are of the view that no interest can be charged under Section 234D of the Act for the assessment year in question. - Decided in favour of assessee
Issues Involved:
1. Justification of levy of interest under Section 234D. 2. Applicability of Section 234D for assessment years prior to 2004-05. 3. Charging of interest under Section 234D in a revision passed under Section 143(3) read with Section 254. Issue-wise Detailed Analysis: 1. Justification of Levy of Interest under Section 234D: The core issue is whether the Tribunal was justified in confirming the levy of interest under Section 234D of the Income Tax Act, 1961. The assessee contended that Section 234D, which deals with the levy of interest on excess refund, was introduced only with effect from 01.6.2003 and is not applicable for assessment years prior to 2004-05. The Tribunal, however, followed the decision of the Kerala High Court in the case of CIT Vs. Kerala Chemicals and Proteins Limited, which allowed the levy of interest, leading to the appeal by the assessee. 2. Applicability of Section 234D for Assessment Years Prior to 2004-05: The assessee argued that the regular assessment in their case under Section 143(3) was completed on 30.3.2001, prior to the introduction of Section 234D, and therefore, interest under Section 234D could not be charged. The Tribunal's reliance on the Kerala High Court's decision was challenged, with the assessee citing the Supreme Court's decision in CIT-I Vs. Reliance Energy Limited, which clarified that Section 234D would not apply retrospectively to assessments completed before 01.6.2003. 3. Charging of Interest under Section 234D in a Revision Passed under Section 143(3) Read with Section 254: The assessee contended that the order passed under Section 154 on 20.6.2008, which levied interest under Section 234D, was not valid as it was not a regular assessment. The regular assessment was completed on 30.3.2001, and no interest was levied at that time. The Revenue argued that Explanation (2) to Section 234D, inserted by the Finance Act, 2012 with retrospective effect from 01.6.2003, allowed for the levy of interest on proceedings completed after 01.6.2003, irrespective of the assessment year. Judgment: The High Court elaborated that Section 234D was inserted by the Finance Act, 2003 with effect from 01.6.2003, and its applicability to proceedings completed after this date was clarified by Explanation (2) inserted by the Finance Act, 2012. However, the Court emphasized that the provision should be read as a whole, and the charging provision in Sub-Section (1) of Section 234D refers to "regular assessment." The Court concluded that an order under Section 154 cannot be considered a regular assessment, and the regular assessment in the assessee's case was completed on 30.3.2001. The Supreme Court's decision in Reliance Energy Limited was deemed applicable, which held that Section 234D does not apply retrospectively to assessments completed before 01.6.2003. Therefore, the Court ruled that no interest could be charged under Section 234D for the assessment year in question. Conclusion: The appeal filed by the assessee was allowed, the order passed by the Tribunal was set aside, and the substantial questions of law were answered in favor of the assessee. No costs were awarded.
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