2010 (6) TMI 633 - AT - Income Tax

Tribunal modifies interest computation, assessee not liable for advance tax. Revenue's appeals partly allowed.

The Tribunal upheld the deletion of interest under section 234B as the assessee was not liable to pay advance tax on unknown income. However, the interest ... Interest, chargeable as Issues Involved:1. Charging of interest under section 234A of the Income-tax Act, 1961 for delay in filing returns.2. Charging of interest under section 234B of the Income-tax Act, 1961 for default in payment of advance tax.Detailed Analysis:1. Charging of Interest under Section 234A:The primary issue is the levy of interest under section 234A for the delay in filing income tax returns. The CIT (Appeals) deleted the interest levied under section 234A, reasoning that the returns were voluntarily filed to claim refunds of Tax Deducted at Source (TDS), even though the declared income was below taxable limits. The revenue argued that the levy of interest under section 234A is mandatory and that the returns were filed late.The Tribunal noted that the assessee was an agriculturist with no taxable income at the due dates prescribed under section 139(1) of the Act. The interest income was received much later, evidenced by Form Nos. 16A dated 18-5-1998 and 2-9-1999. The Tribunal referred to similar cases, such as CIT v. Anupinder Singh and Shanti Sarup Sharma v. CIT, where interest was not levied for periods before the receipt of income. The Tribunal concluded that interest should be charged only from 1-9-1999 to 30-11-2007, excluding the period before the income was received. Thus, the order of the CIT(A) was set aside, and the Assessing Officer was directed to recompute the interest under section 234A accordingly.2. Charging of Interest under Section 234B:The second issue pertains to the levy of interest under section 234B for defaults in payment of advance tax. The CIT (Appeals) deleted the interest, stating that the assessee was not aware of the interest income during the relevant period for advance tax payments. The CIT (Appeals) relied on the judgment of the Delhi High Court in CIT v. Anand Prakash and the Chandigarh Bench of the Tribunal in the case of Sukhdev Singh.The revenue contended that the CIT (Appeals) erred in deleting the interest without considering that the chargeability of interest under section 234B is mandatory. The Tribunal, however, observed that the assessee was not liable to pay advance tax because the income was not known or received by the assessee during the due dates for advance tax payments. The Tribunal cited the case of CIT v. Anjum M.H. Ghaswala, emphasizing that interest under section 234B is compensatory and applies only when there is a failure to pay advance tax.The Tribunal upheld the CIT (Appeals) decision, stating that the assessee could not be expected to pay advance tax on an unknown income. The Tribunal also referred to the decision of the Punjab and Haryana High Court in CIT v. Haryana Warehousing Corpn., which clarified that the liability to pay advance tax must be established before invoking section 234B.Conclusion:The Tribunal concluded that the CIT (Appeals) correctly deleted the interest under section 234B, as the assessee was not liable to pay advance tax on the unknown income. However, the Tribunal modified the interest computation under section 234A, directing the Assessing Officer to charge interest only for the period from 1-9-1999 to 30-11-2007. The appeals of the revenue were partly allowed, applying the same reasoning to all other identical appeals.