2015 (6) TMI 57 - AT - Income Tax

Appeal allowed, interest under section 234B deleted for assessment year 1992-93. No default in advance tax payment.

The appeal was allowed, and the interest levied under section 234B of the Income Tax Act for the assessment year 1992-93 was deleted. The Tribunal found ... Levy of interest u/s. 234B - payment of advance tax on estimated basis - assessee accounted the said merchant banking income on actual realization basis/receipt basis and claimed that this is as per consistent method of accounting followed by the assessee right from the beginning - Held that:- There is no quarrel on the point that charging of interest u/s. 234B is mandatory but firstly it is to be determined whether the assessee has committed default in payment of advance tax which is a necessary condition for levy of interest u/s. 234B as mandatory in nature. In view of the facts and circumstances of the case and by following the judgment of Hon'ble Jurisdictional High Court in Prime Securities Ltd. Versus Assistant Commissioner of Income Tax (Investigation) [2010 (12) TMI 475 - Bombay High Court] we are of the considered opinion that there is no default on the part of the assessee in payment of advance tax which was as per the estimated income of the assessee and is consistent with the practice followed by the assessee right from the beginning which was accepted by the revenue for earlier years. Accordingly, we delete the interest levied u/s. 234B. - Decided in favour of assesse. Issues:1. Appeal against order u/s. 154 of the Income Tax Act for the assessment year 1992-93.2. Upholding of the order u/s. 154 by CIT(A) and levy of interest u/s. 234B.Analysis:Issue 1: Appeal against order u/s. 154The appellant challenged the order u/s. 154 of the Income Tax Act for the assessment year 1992-93. The grounds raised included errors in upholding the order, violation of principles of natural justice, and concurring with the levy of interest u/s. 234B. During the hearing, the appellant decided not to press Ground No.1 and 2, which were subsequently dismissed. Ground No.3 specifically concerned the levy of interest u/s. 234B.Issue 2: Levy of interest u/s. 234BThe dispute revolved around the assessment of income from merchant banking on actual realization basis versus accrual basis. The appellant consistently offered income on actual realization basis, which was accepted by the Revenue in previous assessment years. However, the Assessing Officer assessed the income on accrual basis for the year in question and levied interest u/s. 234B. The appellant filed a petition for rectification of the assessment order, which was rejected by the Assessing Officer and subsequently confirmed by CIT(A).The appellant argued that there was no failure to pay advance tax in accordance with the provisions of section 208 and 209, hence not liable to pay interest u/s. 234B. Reference was made to the judgment of the Hon'ble Jurisdictional High Court in a similar case. The Department, on the other hand, relied on a judgment of the Hon'ble Supreme Court to support the mandatory nature of interest u/s. 234B. The Tribunal analyzed the legal provisions and previous judgments to determine the liability for interest.The Tribunal referred to the judgment of the Hon'ble Jurisdictional High Court, which emphasized that the liability to pay interest arises only on the failure to pay advance tax as per the provisions of sections 208 and 209. It was established that the appellant had estimated income and paid advance tax in accordance with the law in force, indicating no default in payment. The Tribunal concluded that there was no default on the part of the appellant in paying advance tax, as per consistent practice, and deleted the interest levied u/s. 234B.In conclusion, the appeal of the assessee was allowed based on the findings regarding the levy of interest u/s. 234B, as there was no default in payment of advance tax. The Tribunal's decision was in line with the judgment of the Hon'ble Jurisdictional High Court and the interpretation of relevant legal provisions.This detailed analysis highlights the legal arguments, judicial precedents, and the Tribunal's reasoning in reaching the decision to delete the interest levied u/s. 234B.