M/s. Textile Dye-Chem Corporation vs The Assistant Commissioner of Income Tax

Chitra Venkataraman, J.—The assessee is on appeal as against the order of the Tribunal, raising the following substantial questions of law,

relating to the Assessment Year 2004-05:

(i) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that interest u/s 234B

is chargeable u/s 234B(1) and Section 234B(3) has no application?

(ii) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in not following the decision of

the Income Tax Appellate Tribunal, Mumbai Bench, in the case of (2008) 110 ITD 24 and deciding the issue contrary to that decision, without

referring to Special Bench?

It is seen from the facts narrated herein that the assessee returned an original assessment u/s 143(1) of the Income Tax Act on 31.03.2006.

Subsequently, the assessment was completed u/s 147 read with Section 143(3) of the Income Tax Act, computing the total income at Rs.

90,28,820/- as against the returned income of Rs. 7,81,009/-. Admittedly, the assessee paid an advance tax of Rs. 6,48,000/- and filed

certificates towards tax deducted at source to the value of Rs. 3,61,449/- that the assessee was entitled to a refund of Rs. 2,26,320/-. However,

by reason of assessment u/s 147 read with Section 143(3) of the Income Tax Act, proceedings were initiated for levy of interest u/s 234B(1) of

the Income Tax Act. The assessee contested the levy of interest u/s 234B(1) by placing reliance on the decision of the Mumbai Bench of the

Tribunal reported in (2008) 110 ITD 24 . The Commissioner of Income Tax (Appeals) allowed the case of the assessee by following the decision

of the Mumbai Bench of the Tribunal and held that there was no default on the part of the assessee in paying the advance tax and hence, no penalty

could be levied u/s 234B of the Income Tax Act. The Revenue contended that considering the fact that the assessment made on the assessee u/s

147 read with Section 143(3) was a regular assessment, going by Explanation (2) to Section 234B, the provisions under Sections 234B(1) of the

Income Tax Act stood attracted. Thus the Department disputed the view of the Commissioner of Income Tax (Appeals) in following the decision

of the Mumbai Bench of the Tribunal and allowing the assessee''s case.

On a consideration of the rival contentions and the provisions of the Income Tax Act, the Tribunal held that going by Explanation (2) to Section

234B of the Income Tax Act, when the assessment in the assessee''s case was admittedly made for the first time u/s 147 read with Section 143(3)

of the Income Tax Act, the said assessment is a regular assessment attracting sub section (1). It further pointed out that the Mumbai Bench

decision related to a case of reassessment; hence, the case of the assessee being different from the decided case, interest was chargeable u/s

234B(1) of the Income Tax Act. Aggrieved by this, the assessee is on appeal before this Court.

We do not agree with the submission of the assessee herein on the admitted fact that the assessment made on the assessee is a regular

assessment made for the first time u/s 147 read with Section 143(3) of the Income Tax Act.

Given the fact that the assessment is a regular assessment, rightly the Assessing Officer levied interest u/s 234B(1), as confirmed by the Tribunal.

For the sake of convenience, we extract the relevant portion from Section 234B(1) Explanation (2) and Section 234B(3) of the Income Tax Act:

234-B. Interest for defaults in payment of advance tax. (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.

Explanation 1....

Explanation 2. Where, in relation to an assessment year, an assessment is made for the first time u/s 147 or Section 153-A, the assessment so

made shall be regarded as a regular assessment for the purposes of this section.

Explanation 3....

(2)...

(3) Where, as a result of an order of reassessment or recomputation u/s 147 or Section 153-A, 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 153-A, 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.

(4)...

(5)...

Going by the clear wording of the Section and the admitted fact position that the assessment is a regular assessment and not a reassessment, we

have no hesitation in confirming the order of the Tribunal, thereby dismissing the Tax Case Appeal.

In the result, the Tax Case Appeal stands dismissed. No costs.