The Commissioner of Income Tax vs Abdul Wahid and Company

F.M. Ibrahim Kalifulla, J.—The revenue has come forward with these appeals raising the following substantial questions of law:

Whether on the facts and circumstances of the case, the Tribunal is right in holding that the additional tax liability due to the amendment cannot

give rise to a levy of interest u/s 234-B of the Income Tax Act?

The additional tax liability on the assessee for the relevant assessment years namely 1998-1999 and 1999-2000 came to be imposed by the

order of assessment dated 28.03.2006. The issue is concerned with interest leviable u/s 234B of the Income Tax Act on the belated payment of

additional tax for the relevant years. It is not in dispute that the assessee was liable to pay such additional tax by virtue of the non availability of

90% of profit on DEPB credits by way of deduction u/s 80HHC due to the insertion of Section 80HHC(3) retrospectively from 01.04.1998 by

the Amendment Act of 2005. By virtue of the said statutory amendment, the assessing officer found that the assessee failed to furnish the details for

satisfying the two conditions enumerated in the Proviso to Section 80HHC(3) and consequently, the liability for payment of additional tax was

created. In such circumstances, the question for consideration was whether such liability to payment of additional tax would also create a further

liability of payment of interest u/s 234(B) of the Act on the ground that such additional tax payable with effect from 01.04.1998 for the assessment

years 1998-1999 and 1999-2000 was not paid in time. It is in that respect, the Commissioner (Appeals) as well as the Tribunal held that such a

liability of payment of interest u/s 234(B) cannot be fastened on the assessee. The Tribunal, in its order, while dealing with the said issue has held

that,

From the decision of the Hon''ble Jurisdictional High Court as well as the Tribunal and also in the order of the Delhi Benches of this Tribunal in

case of Haryana Warehousing Corporation v. Deputy Commissioner of Income Tax reported in 75 I.T.D. 155, it is clear that the assessee cannot

be made liable for the interest u/s 234B of the Income Tax Act, 1961 when at the time of payment of advance tax the liability was not foreseeable.

In the present case, the liability has arisen only due to the subsequent amendment in the year 2005 with retrospective effect. The additional tax

liability due to the subsequent amendment cannot give rise to a levy of interest u/s 234B because at the time of payment of the advance tax under

no means, the assessee could foresee the said additional tax liability. Accordingly, by following the above noted decisions/orders, we decide this

issue in favour of the assessee and against the Revenue. The order of the Commissioner of Income Tax (Appeals) is upheld.

We are in full agreement with the principles stated by the Tribunal while upholding the order of the Commissioner (Appeals). When the liability

for payment of additional tax itself was created for the first time, based on the subsequent amendment, in the year 2005, with retrospective effect

from 01.04.1998, it would be incongruent to expect the assessee to have satisfied the requirement of payment of advance tax as prescribed u/s

234(B) of the Income Tax Act. Therefore, while the liability for additional tax by virtue of the amendment was found to be satisfied by the

respondent/assessee, the payment of interest u/s 234(B) for failure to pay advance tax in anticipation of such liability created on a future year,

based on an amendment, cannot be made. We are, therefore, convinced that the conclusion arrived at by the C.I.T. (Appeals) as well as that of

the Tribunal cannot be found fault with. We therefore do not find any scope to entertain these appeals. The substantial question of law raised in

these tax case appeals are answered in favour of the assessee. Connected miscellaneous petition is closed.