2001 (7) TMI 66 - HC - Income Tax

Delayed advance tax payment: s.234B interest upheld where s.156 demand notice and assessment order issued same day

Interest under s.234B was challenged on the ground that a separate and valid notice of demand under s.156 had not been issued. The HC held that where the ... Liability to pay interest u/s 234B - Notice of demand u/s 156 - HELD THAT:- The assessment order, a copy of which has been produced as annexure P-4 and the demand notice, a copy of which is at annexure P-5 have been passed on the same day and by the same officer. It is only on the passing of these two orders that the assessment was complete and the demand was made. Resultantly, the test as laid down in the cases of Uday Mistanna/Ranchi Club [1996 (7) TMI 126 - PATNA HIGH COURT] is fully satisfied in the present case. It deserves mention that the orders relate to the assessment year 1994-95. The revised return had been filed by the petitioner after he had been questioned in April, 1998. The petitioner knew that there was delay in payment of the due tax. The amount is clearly payable under section 234B. The petitioner was aware of his liability under the law. The amount due on account of interest had been determined by the Assessing Officer himself. It was made known to the petitioner. Thus, there was no infirmity in the order passed by the Assessing Officer. Thus, it is not necessary for us to go into the question of alternative remedy as raised on behalf of the Revenue. Issues Involved:1. Legality of the action of the respondents in holding the petitioner liable to pay interest u/s 234B of the Income-tax Act, 1961.2. Whether the notice of demand u/s 156 for interest u/s 234B is valid without a specific order in the assessment order.3. Consideration of alternative remedy u/s 264 of the Income-tax Act, 1961.Summary:1. Legality of the action of the respondents in holding the petitioner liable to pay interest u/s 234B of the Income-tax Act, 1961:The petitioner filed a return of income for the assessment year 1994-95, declaring an income of Rs.98,515. During the assessment proceedings, the Assessing Officer found an unaccounted amount of Rs.5 lakhs in the petitioner's bank account. The petitioner surrendered this amount as income to avoid litigation, subject to no penal action or prosecution. On April 20, 1998, the petitioner filed a revised statement of taxable income and paid the additional tax, noting that no interest u/s 234A, 234B, and 234C was payable. However, on January 12, 2000, the Assessing Officer assessed the taxable income at Rs.5,98,520 and ordered to 'Charge interest as per law,' initiating penalty proceedings u/s 271(1)(c). A demand notice u/s 156 was issued, including Rs.2,06,940 as interest u/s 234B. The petitioner challenged this demand, alleging it was illegal and without jurisdiction.2. Whether the notice of demand u/s 156 for interest u/s 234B is valid without a specific order in the assessment order:The petitioner argued that the assessment order did not specifically state the liability to pay interest u/s 234B, relying on the Patna High Court's decision in Uday Mistanna Bhandar and Complex v. CIT [1996] 222 ITR 44, affirmed by the Supreme Court in CIT v. Ranchi Club Ltd. [2001] 247 ITR 209. The court noted that the primary rationale in Uday Mistanna Bhandar's case was that the assessee must be made aware that the Assessing Officer has ordered the charging of interest and under which section. In this case, both the assessment order and the demand notice were issued by the same officer on the same day, fulfilling the requirement of the Assessing Officer applying his mind regarding the levy of interest. Thus, the court found no infirmity in the orders.3. Consideration of alternative remedy u/s 264 of the Income-tax Act, 1961:The respondents argued that the petitioner had an effective alternative remedy of revision u/s 264. However, given the court's conclusion on the primary issue, it did not delve into the question of alternative remedy.Conclusion:The court dismissed the writ petition, finding no merit in the challenge to the levy of interest u/s 234B. The assessment order and the demand notice were deemed valid as they were issued by the same officer on the same day, fulfilling the requirement of the Assessing Officer applying his mind to the levy of interest. No order as to costs was made.