Interest on tax arrears curtailed where returns followed departmental advice and recovery was available from an attached account.

Where tax dues were recoverable from an attached account and the assessee filed returns on departmental advice after the compensation became available, interest under section 234A was not leviable because the return filing delay was not attributable to the assessee. Interest under section 234B was confined to the period ending when the revenue received notice seeking adjustment from the attached account, as recovery was then within the department's knowledge and control. The note also records that the section 119(2)(a) waiver mechanism had been invoked and partial relief granted, reinforcing that interest could not be charged beyond the point at which the department had the means to recover the dues.

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Issues: Whether interest under sections 234A and 234B of the Income-tax Act, 1961 could be sustained in the facts of the case, and if so, for what period.

Analysis: The enhanced compensation was credited after the award and the petitioner's account had already been attached for recovery of tax dues. The petitioner was advised to pay tax on a year-to-year basis and, acting on that advice, filed returns on 08.01.1999 after the amount became available. The respondents accepted and acted upon those returns. In these circumstances, liability to interest under section 234A did not arise. As regards section 234B, the interest could not extend beyond the date on which the respondents received the petitioner's letter requesting adjustment from the attached account. The Court also noted that the statutory waiver framework under section 119(2)(a) had already been invoked and partial relief had been granted.

Conclusion: Interest under section 234A was not leviable, and interest under section 234B was restricted to the period 15.12.1998 to 23.12.1998 only.

Ratio Decidendi: Where tax liability is effectively recoverable from an attached account and the assessee has acted on departmental advice in filing returns, interest cannot be charged beyond the point at which the revenue had notice and the means to recover the dues.

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