Commissioner of Income Tax (Central) vs B. Lakshmikanthan

C.N. Ramachandran Nair, J.—The common question raised in these two appeals filed by the revenue against the very same Assessee is whether in a reassessment completed u/s 153A read with Section 143(1) of the income tax Act (hereinafter referred to as ''the Act'' for short), interest for short payment of advance tax is to be demanded for the period provided u/s 234B(1) or Section 234B(3) of the Act. While the case of the department is that interest is leviable u/s 234B(1) for the period stated therein, the case of the Assessee is that interest could be levied u/s 234B(3) for the limited period specified therein.

We have heard learned Standing Counsel appearing for the revenue and Shri Arun Raj, learned Counsel appearing for the Respondent Assessee.

The Respondent filed income tax returns for the assessment years 2001 -02 and 2002-03 on the due dates ie., on 30th October of the assessment years. Both the returns were processed and proceedings issued u/s 143(1) within the time provided under the Act. Since there was short payment of advance tax for the assessment year 2001-02 interest u/s 234B(1) was charged for the period specified therein, on which there is no dispute. For the next assessment year, ie., 2002-03, no interest was charged u/s 234B as there was no short payment of advance tax on the income then assessed. However, later, the Department conducted search in the premises of the Assessee and noticed escapement of income. Pursuant to the search, the Assessee was called upon to furnish returns disclosing undisclosed income, and the Assessee in fact returned undisclosed income for both the assessment years. The assessing authority processed the returns so filed, determined the tax payable thereon u/s 143(1) and based on the shortage in payment of advance tax with reference to the revised income assessed, the assessing authority computed interest payable u/s 234B(1) for the periods provided therein. The Assessee filed rectification application before the Assessing Officer contending that interest in reassessment could be charged only u/s 234B(3), whereunder the period for which interest could be charged is from the date of first completion of Section 143(1) proceedings till the date of the revision of assessment, which was done u/s 143(1) read with Section 153A and not from the beginning of the financial year following the accounting year in which advance tax was payable as provided u/s 234B(1) of the Act. The Assessing Officer rejected the rectification application on the ground that the reassessment u/s 153A itself is completed by processing the returns u/s 143(1) and so much so interest is payable u/s 243B(1) and not u/s 234B(3) as claimed by the Assessee. This order was challenged in appeal. Though the first appellate authority dismissed the appeal, the Tribunal held in favour of the Assessee against which the revenue has filed these appeals.

The question to be decided is the application and meaning of Sections 234B(1) and 234B(3) of the Act, and therefore, we extract hereunder these provisions for easy reference:

234B. (1) Subject to the other provisions of this section, where, in any financial year, an Assessee who is liable to pay advance tax u/s 208 has failed to pay such tax or, where the advance tax paid by such Assessee under the provisions of Section 210 is less than ninety per cent of the assessed tax, the Assessee shall be liable to pay simple interest at the rate of (one) per cent for every month or part of a month comprised in the period from the 1st day of April next following such financial year ( to the date of determination of total income under Sub-section (1) of Section 143 (and where a regular assessment is made, to the date of such regular assessment, on an amount)) equal to the assessed tax or, as the case may be, on the amount by which the advance tax paid as aforesaid falls short of the assessed tax.

(2)** ** **

(3) Where, as a result of an order of reassessment of recomputation u/s 147 (or Section 153A), the amount on which interest was payable under Sub-section (1) is increased, the Assessee shall be liable to pay simple interest at the rate of (one) per cent for every month or part of a month comprised in the period commencing on the day following ( the date of determination of total income under Sub-section (1) of Section 143 (and where a regular assessment is made as is referred to in Sub-section (1) following the date of such regular assessment)) and ending on the date of the reassessment or recomputation u/s 147 (or Section 153A), on the amount by which the tax on the total income determined on the basis of the reassessment or recomputation exceeds the tax on the total income determined ( under Sub-section (1) of Section 143 or) on the basis of the regular assessment aforesaid.

The contention of the revenue is that in all cases, where income returned is accepted and demand is raised by processing the return u/s 143(1), interest is to be charged u/s 234B(1) and the same is for the period commencing from the first date of the financial year following the previous year during which advance tax was payable. According to the learned Standing Counsel, pursuant to the search, notice was issued to the Assessee u/s 153A, and by virtue of the operation of Clause (a) of Section 153A(1) return filed pursuant to the notice under the said provision will be treated as the return filed u/s 139. So much so, the Department is entitled to process the return u/s 143(1) and issue the proceedings, which entitles the Assessing Officer to levy interest in terms of Section 234B(1) of the Act. It is further clarified by the learned Standing Counsel for the revenue that intimation issued u/s 143(1) is not an assessment and so much so, Section 234B(1) applies even in a case of intimation issued u/s 143(1) pursuant to the return called for after search u/s 153A of the Act. Learned Counsel for the Assessee, on the other hand, contended that irrespective of the nature of proceeding completed pursuant to the return filed on receipt of notice u/s 153A, such assessment is always a reassessment or recomputation u/s 153A of the Act and the provision applicable for interest on short payment or nonpayment of advance tax is Section 243 B(3) of the Act.

After hearing both sides, we feel there is no substance in the contention raised by the revenue that in a reassessment completed u/s 153A interest for non-payment or short payment of advance tax is payable u/s 234B(3) merely because the said reassessment u/s 153A is completed by accepting the return filed u/s 143(1) of the Act. Interest for non-payment or short payment of advance tax is payable u/s 234B for different periods under Sub-sections (1) and (3) of the said section. In all cases of regular assessments completed u/s 143(1) interest is to be charged for the periods provided u/s 234B(1) of the Act. Further, if the first assessment itself is income escaping assessment made u/s 147 or u/s 153A, then such assessment will be treated as regular assessment and interest for non-payment or short payment of advance tax in such cases will be payable u/s 234B(1) of the Act. However when an original assessment completed u/s 143 is revised either u/s 147 or u/s 153A, then interest for non-payment or short payment of advance tax is payable only for the period mentioned in Section 234B(3) of the Act, which provides for interest from the date of completion of regular assessment u/s 143(1) till the date of completion of reassessment or recomputation u/s 147 or Section 153A of the Act. In our view, for the purpose of levy of interest u/s 234B(3), it is immaterial whether recomputation or reassessment u/s 147 or u/s 153A is made by accepting the revised return filed and by processing the same u/s 143(1) or whether reassessment is made by rejecting such returns and by determining the income. The fact that the procedure for calling for return and assessment after search or requisition u/s 153A is the same as provided u/s 139 does not mean that a reassessment completed under the said provision is a regular assessment or original assessment. On the other hand, whatever be the procedure adopted for assessing escaped income or undisclosed income pursuant to search or requisition, such assessment will always be a reassessment or recomputation u/s 153A, and unless it is a first assessment, that could be treated as the regular assessment in terms of Explanation (2) to Section 234B(1), then interest can be charged only u/s 234B(3) of the Act.

In this case, the original returns were processed u/s 143(1) of the Act and the proceedings so completed were issued to the Assessee. It is only thereafter the Department conducted search and made revised assessments u/s 153A of the Act though by accepting returns of undisclosed income filed and by issuing proceedings u/s 143(1) read with Section 153A of the Act. We, therefore, hold that the assessments u/s 153A are revised assessments and so much so, interest could be demanded for the period mentioned in Section 234B(3) of the Act as held by the Tribunal. In this view of the matter, we uphold the order of the Tribunal and dismiss the Department appeals for both the years.