Court rules interest under section 234B can be charged without prior mention in assessment order

The court held in favor of the revenue and against the assessee, ruling that it is not necessary for the Assessing Officer to mention or levy interest under section 234B in the assessment order before issuing a demand notice under section 156. The court determined that interest under section 234B is mandatory and automatic, with the Assessing Officer having the authority to charge interest directly in the notice under section 156. All appeals were resolved accordingly.

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Issues Involved:
1. Whether it is mandatory for the Assessing Officer to mention/levy/charge interest under section 234B of the Income Tax Act in the assessment order before raising a demand in the notice issued under section 156 of the Act.
2. Whether the Assessing Officer can charge/levy interest directly in the notice under section 156 of the Act.

Issue-Wise Detailed Analysis:

Issue 1: Mandatory Mention of Interest under Section 234B in the Assessment Order
The court considered the arguments from both the revenue and the assessee regarding whether the Assessing Officer must mention the charging of interest under section 234B in the assessment order itself. The assessee relied on the Patna High Court's decision in the case of Rachi Club Ltd., which was affirmed by the Supreme Court, stating that interest cannot be charged unless specified in the assessment order. The revenue, however, argued that subsequent Supreme Court decisions in Anjum M.H. Ghaswala and Karanvir Singh Gossal have established that the charging of interest under section 234B is mandatory and automatic, and therefore, it need not be explicitly mentioned in the assessment order.

The court examined the relevant sections of the Income Tax Act, namely sections 234B, 143, and 156, and concluded that the levy of interest under section 234B is mandatory and automatic. The court noted that the Assessing Officer has no discretion regarding the rate of interest and that the interest is a consequence of the assessed tax. The court held that the Assessing Officer is not required to mention the interest under section 234B in the assessment order before raising a demand in the notice issued under section 156.

Issue 2: Charging/Levying Interest Directly in the Notice under Section 156
The court further considered whether the Assessing Officer could directly charge or levy interest in the notice issued under section 156 of the Act. The revenue argued that since the interest under section 234B is mandatory and arises by operation of law, it can be directly included in the notice under section 156. The assessee contended that the assessment order must contain the imposition of interest, and only then can a notice of demand be issued.

The court referred to the Supreme Court's decisions in Anjum M.H. Ghaswala and Karanvir Singh Gossal, which emphasized the mandatory and automatic nature of interest under section 234B. The court concluded that since the levy of interest is consequential and merely arithmetical, it can be demanded directly in the notice under section 156 without being explicitly mentioned in the assessment order.

Conclusion:
The court answered both substantial questions of law in favor of the revenue and against the assessee. It held that it is not sine qua non for the Assessing Officer to mention/levy/charge interest under section 234B in the assessment order before raising a demand in the notice issued under section 156. The Assessing Officer can charge/levy interest directly in the notice under section 156 of the Act. All appeals were accordingly disposed of.

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