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Judgment
N. Kumar, J.—These appeals are by the Assessee against the order of the Tribunal which has upheld the order passed by the Commissioner as well as the Assessing Authority who have held that Assessee is liable to pay interest u/s 234-B of the Income Tax Act.
The Assessee filed the return on 26.09.1990 u/s 139 of the Income Tax Act, 1961, for short, hereinafter referred to as the ''Act''. The order u/s 143(1)(a) dated 24.06.1991 came to be passed accepting the income of Rs. 30,590-00 filed by the Assessee. Thereafter, proceedings were initiated u/s 147 of the Act, on the ground of escapement of income. In pursuance of the notice issued the Assessee filed a revised return on 30.12.1993 showing the income of Rs. 1,50,590-00. An order came to be passed on such revised return u/s 143(3) of the Act on 28.01.1994. in the said order, the Assessing Authority levied interest u/s 234-B on the difference of the amount by which tax on the total income determined on the basis of the re-assessment or re-computation, vis-a-vis the return filed by the Assessee.
The Assessee preferred an appeal challenging the imposition of interest u/s 234-B and also the period for which the said interest is levied. The Commissioner of income tax (Appeals) dismissed the appeal, affirming the order of the Assessing Officer. Aggrieved by the same, the Assessee preferred an appeal to the Tribunal. The Tribunal following the decision of the Bangalore Benches of the Tribunal in ITA No. 1077/Bang/2002 and also Shri Ram Saboo. HUF and also the judicial pronouncement of the Hon''ble High Court of Madras in the case of Shri Krishna Mahal v. ACIT (250 ITR 335) and also the decision of the Hon''ble High Court of Karnataka in the case of Commissioner of Income Tax Vs. H.V. Mirchandani, dismissed the appeal. Aggrieved by the said order, the Assessee has preferred this appeal.
These appeals were admitted on 10.11.2010 to consider the following substantial questions of law:
(i) Whether in the facts and circumstances of the case the Tribunal was light in law in holding that in spite of their admission that intimation u/s 143(1)(a) in an order, the Tribunal erred in holding that the provisions of Section 234B are applicable?
(ii) Whether in the facts and circumstances of the case, the order of reassessment made u/s 147 is assessment made for the first time as envisaged in Explanation 2 to Section 147?
(iii) Whether in the facts and circumstances of the case interest could be charged u/s 234B in the order of reassessment when in the original order No. interest was charged?
(iv) Whether interest is to be levied invoking the provision of Section 234B(3) and not Section 234B(1) of Income Tax Act on the facts and circumstances of the case?
At the time of argument, the learned Counsel appearing for the assessee, in view of the judgment of this Court in the case of Shri Ram Saboo v. Assistant Commissioner of Income tax reported in ITA 166/03, fairly conceded that Section 234-B of the Act has retrospective effect and the assesses is liable to pay interest under the said provisions. Therefore, the substantial question of law (i) and (iii) framed in this appeal is answered in favour of the revenue and against the Assessee.
However, he contended that in the instant case, the order of assessment passed on 28.01.1994 u/s 147 of the Act is not an order of assessment made for the first time as envisaged in Explanation 2 to Section 147 and therefore Section 234-B(3) is attracted and not Section 234-B(1) of the Act.
In order to appreciate this contention, it is necessary to refer to those provisions. Section 234-B deals with interest for defaults in payment of advance tax. It reads as under:
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 percent 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 tar or as the case may he on the amount by which the advance tax paid as aforesaid falls short of the assessed tax.
Explanation 1.- xxx Explanation
2.- Where in relation to an assessment year, an assessment is made for the first time u/s 147 or Section 153A. the assessment so made shall be regarded as a regular assessment for the purposes of this Section.
Explanation 3 xxx
The 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 percent 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 on the amount by which the advance tax paid as aforesaid falls short of the assessed tax. As is clear from the aforesaid provisions, interest is leviable from the date of first day of April next following the financial year till the determination of total income under Sub-Section 1 of Section 143 or till the date of regular assessment, if made, if such an assessment is made for the first time u/s 147 also, the said assessment is treated as a regular assessment. Therefore the question that arise for consideration is that if assessment made u/s 147 is not for the first time, then, how such assessment is treated and from what date to what date the interest is payable on such advance tax?
That is what is provided in Sub-section (3) of Section 234-B. It reads as under.
Where as a result of an order of reassessment or 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,
If an order passed u/s 147. is not made for the first time, the assessment is treated as re-assessment or re-computation made u/s 147. Then the Assessee shall be liable to pay simple interest at the rate of 1% for every month from the period commencing on the following the date of determination of total income under Sub-section (1) of Section 143 and where a regular assessment is made as referred to in Sub-section (1) following the date of such regular assessment till the date of re-assessment or re-computation u/s 147, on the amount by which the tax on the total income determined on the basis of re-assessment or re-computation exceeds the tax on total income determined under Sub-section (1) of Section 143 or on the basis of regular assessment aforesaid.
A harmonious reading of the entire provision makes it clear that if No. advance tax is paid or what is paid is less than 90% of the assessed tax, the Assessee is liable to pay interest on the difference in the tax. For the purpose of levying tax it is computed from first day of April next following, till the date of determination of tax under Sub-section (1) of Section 143 or from that day till the date of regular assessment. If in a given case, there is No. determination of tax under Sub-section (1) of Section 143 or regular assessment and the assessment is made for the first time u/s 147, such assessment is also treated as a regular assessment and interest is payable from the first clay of April next following till the date of assessment order. But if proceedings u/s 147 is initiated in a case where there is determination of tax under Sub-section (1) of Section 143 or where a regular assessment order is passed under Sub-section (3) of Section 143, then, the order passed u/s 147 is treated as an order of reassessment or re-computation. In the case of order of reassessment or re-computation, the interest is leviable not from the first day of April next following, but from the dote of determination of tax under Sub-section (1) of Section 143 or order of regular assessment u/s 143(3). Therefore, when the assessment order is passed u/s 147 and that is made the basis for levying interest, the Assessing Authority has to find out whether it is an order made for the first time u/s 147 or is it a case of re-assessment or re-computation u/s 147 Depending on that finding, the interest is to be calculated either from the date of first day of April next following such financial year or from the date of determination of tax under Sub-section (1) of Section 143 or regular assessment u/s 143(3).
In the instant case, there was a determination of tax u/s 143(1)(a) and return filed by the Assessee declaring his income as Rs. 30,590-00 was accepted by the Department by its order dated 24.06.1991. It is thereafter, proceedings were initiated u/s 147 of the Act. In pursuance of the notice issued, revised return was filed on 30.12.1993 declaring the income of Rs. 1.50,590-00. it is on that return, the order came to be passed u/s 143(3) on 28.01.994. Therefore, it is not a case of assessment made for the first time. It is a case of order of re-assessment or re-computation u/s 147. Therefore, the interest is to be calculated from 24.06.1991, the date on which determination of tax was made u/s 143(1)(a) of the Act. To that extent, the order passed by the authorities is illegal and requires to be set aside, Hence the substantial questions of law (2) and (4) are answered in favour of the Assessee and against the revenue.