2022 (9) TMI 409 - AT - Income Tax

Valid intimation u/s 245 - Determination of interest u/s 244A - Adjustment of refund and interest determined u/s. 244A against outstanding demand - whether assessee has been informed by the Assessing Officer while granting refund u/s. 245, the break-up of the details of the refund and interest determined u/s. 244A of the Act and how the same have been adjusted against the outstanding demand in assessee s case? - HELD THAT - It is seen on record that the AO has not intimated what is the interest determined u/s. 244A of the Act relevant to the Assessment Year 2001-02. Similarly for the AY 2002-03 only during the assessment proceedings for the Assessment Year 2008-09 this break up was shown to the assessee by way of a show cause notice so the same cannot be treated as a proper disclosure by the Assessing Officer as required u/s. 245 - When the assessee have bonafidely has shown this interest income and offered in the Assessment year 2011-12 for taxation the same cannot be ignored. The Bombay High Court judgment 2009 (11) TMI 491 - BOMBAY HIGH COURT referred by the Ld. CIT(A) is in the context of chargeability of interest u/s. 234B of the Act, the same is in no way relevant to the issue in hand before us. Therefore the addition made by the assessing officer without properly issuing intimating u/s. 245 is liable to be deleted. Thus, the grounds of appeals raised by the assessee is hereby allowed.

Summary

Issues:
1. Accrual of income based on knowledge of the assessee
2. Accrual of interest u/s 244A
3. Charging of interest u/s 234A, 234B, and 234C

Accrual of Income based on Knowledge of the Assessee:
The appeal was filed against the order passed under section 143(3) of the Income Tax Act, 1961 for the Assessment Year 2008-09. The assessee, engaged in the business of processing milk and dairy products, had not disclosed interest income received on refunds in the Return of Income. The assessing officer issued a show cause notice for adding the interest income to the assessment year 2008-09. The assessee argued that without knowing the details of interest determined under section 244A, they couldn't disclose it. The CIT(A) held that once income accrues, the knowledge of the assessee is irrelevant. Citing relevant case laws, it was concluded that the income accrual does not depend on the assessee's knowledge. The appeal against the addition of interest income was dismissed.

Accrual of Interest u/s 244A:
The issue revolved around the accrual of interest u/s 244A on refunds granted to the assessee. The assessing officer added interest income to the assessment year 2008-09, which the assessee had not disclosed. The intimation u/s 245 did not provide a break-up of the refund amount and interest. The assessee argued that the interest component was not intimated, and they offered the income in a revised return for the assessment year 2011-12. The Tribunal found that the assessing officer did not properly intimate the interest determined u/s 244A, as required by the Act. The Tribunal allowed the appeal, stating that the addition made without proper intimation u/s 245 should be deleted.

Charging of Interest u/s 234A, 234B, and 234C:
The appeal also contested the charging of interest u/s 234A, 234B, and 234C. The Tribunal upheld the charging of interest, stating it is mandatory and consequential to the determination of total income. As no relief was granted in the computation of total income, the ground against charging interest was dismissed.

In conclusion, the Tribunal allowed the appeal filed by the assessee, finding that the addition of interest income without proper intimation u/s 245 should be deleted. The decision highlighted the importance of proper disclosure and intimation in determining the accrual of income and interest under the Income Tax Act.