2012 (11) TMI 1147 - AT - Income Tax

Tribunal rules interest on tax; law at payment prevails over retrospective changes

The Tribunal allowed the appeal against the order confirming interest charged under section 234B for tax payable due to a retrospective amendment. It held ... - Issues involved: Appeal against order confirming interest charged u/s 234B for tax payable due to retrospective amendment.Summary:The appeal was filed against the order confirming the charging of interest u/s 234B by the Assessing Officer for tax payable due to a retrospective amendment. The assessee contended that there was no tax payable initially as per the estimated income for A.Y. 2005-06, and the retrospective amendment to section 115JB of the Act was not in force when the advance tax was due. The AO levied interest under section 234B, assuming the provision was in existence when the return was filed. The CIT(A) upheld the AO's decision, leading to the appeal.The main argument of the assessee was that a retrospective legislation cannot impose an obligation that was impossible to fulfill initially. The assessee relied on the legal maxim 'Lex Non Cogit Ad Impossibilia' and cited a decision of the Hon'ble Calcutta High Court where it was held that interest cannot be levied under sections 234B and 234C solely based on a retrospective tax liability. The assessee emphasized that there was no contradictory decision from any other court, making the Calcutta High Court's decision applicable in this case.After considering the submissions and the record, the Tribunal noted that the Calcutta High Court had ruled that amended provisions cannot be used to penalize an assessee for non-payment of advance tax due to retrospective changes in the law. The Tribunal held that the law applicable at the time of advance tax payment should determine the default, not retrospective amendments. As there was no conflicting decision, the Tribunal followed the Calcutta High Court's decision and allowed the appeal.