2013 (12) TMI 1371 - HC - Income Tax

High Court rules in favor of assessee on interest charges under Income Tax Act

The Commissioner of Income Tax & Another Versus New SV. Leather Store

The High Court ruled in favor of the assessee in a case involving the interpretation of sale proceeds claimed during appellate proceedings and the ... Whether sale proceeds claimed during assessment proceedings be accepted - Held that:- It is a question of fact which has been decided by the Tribunal - The Tribunal has accepted the claim of the assessee - No substantial question of law arises before High Court - Decided against Revenue. Interest u/s 234A, 234B and 234C - Held that:- Following CIT Vs. Ranchi Club Ltd [2000 (8) TMI 79 - SUPREME Court] - Even if any provision of law is mandatory and provides for charging of tax or interest - Such charge by the assessing officer should be specific and clear and assessee must be made to know that the assessing officer has applied its mind and has ordered charging of interest - The mandatory nature of charging of interest and the actual charging of interest by application of mind and the mention of the proviso of law under which such interest is charged are two different things - Decided against Revenue. Issues:1. Interpretation of sale proceeds claimed by the assessee during appellate proceedings against addition made by the A.O.2. Charging of interest under sections 234-A, 234-B, and 234-C of the Income Tax Act without specific mention by the Assessing Officer.Analysis:Issue 1 - Interpretation of Sale Proceeds:The High Court heard arguments regarding the acceptance of Rs.10,87,245 as sale proceeds by the assessee during the appellate proceedings, contrasting the addition made by the Assessing Officer under section 68 of the Act. The Tribunal had already considered this matter, and the High Court found it to be a question of fact without substantial legal implications. Consequently, the first issue was decided against the revenue and in favor of the assessee.Issue 2 - Charging of Interest:Regarding the charging of interest under sections 234-A, 234-B, and 234-C of the Income Tax Act without explicit specification by the Assessing Officer, the High Court referred to a previous decision in CIT Vs. M/s. Deep Awadh Hotel. The Court highlighted that the assessing authority's order to charge interest must be specific and clear, ensuring that the assessee is aware of the decision. Even if interest is mandatory, the charging must be explicitly mentioned in the assessment order or computation sheets. The Court emphasized the distinction between the mandatory nature of interest and the necessity for clear communication of the decision to charge interest. Consequently, the second issue was decided against the revenue and in favor of the assessee.In conclusion, the High Court upheld the Tribunal's decision on both issues, ruling in favor of the assessee. The department was directed to proceed accordingly based on the judgment provided by the Court.