Interest demand under sections 234A, 234B and 234C cannot stand without a direction in the assessment order.

Statutory interest under sections 234A, 234B and 234C is mandatory, but recovery through a notice of demand under section 156 requires the assessment order to record a levy or direction to charge such interest. In the absence of any such direction in the assessment order, interest cannot be fastened merely by issuing the demand notice. Applying its earlier Division Bench precedent, the Allahabad HC upheld deletion of the interest demand and rejected the Revenue's contrary contention.

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Issues: Whether interest under sections 234A, 234B and 234C of the Income-tax Act, 1961 could be levied by notice of demand when the assessment order did not record any direction for charging such interest.

Analysis: The statutory interest under sections 234A, 234B and 234C is mandatory in nature, but the Court followed its own Division Bench precedent holding that, for recovery through a notice of demand under section 156, the assessment order must contain the levy or direction to charge interest. In the absence of such a direction in the assessment order, interest could not be fastened merely by issuing a demand notice. The Court declined to accept the Revenue's contrary contention in view of the binding earlier decision of the same Court.

Conclusion: The levy of interest could not be sustained in the absence of a direction in the assessment order, and the assessee succeeded on the issue.

Final Conclusion: The Tribunal's deletion of the interest demand was upheld and the revenue appeal failed.

Ratio Decidendi: Where the assessment order does not record a direction for charging interest, a notice of demand cannot validly create or recover such interest, notwithstanding the mandatory character of interest under sections 234A, 234B and 234C.

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