2019 (1) TMI 203 - AT - Income Tax

Tribunal Upholds Interest Charge for Non-Payment of Advance Tax in Reassessment

The Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) and confirmed that interest under section 234B of the Income Tax Act was ... Charging of interest u/s 234B for non payment of advance tax - assessment framed u/s 147 - additions made towards unexplained investment in partnership firm - Held that:- No taxes had been paid initially by the assessee and the addition made u/s 147 of the Act was on account of unexplained investment made by the assessee in partnership firm. The said addition cannot be said to be on account of an issue on which there existed a bonafide dispute. The assessee therefore was liable to include the same while estimating his income for payment of advance tax and having not done so the assessee had defaulted initially in the payment of advance tax and was thus liable to pay interest when the said amount was added to his income in reassessment proceedings as per section 234B(3) of the Act. - decided against assessee Issues Involved:1. Charging of interest under section 234B of the Income Tax Act, 1961 for non-payment of advance tax.Detailed Analysis:Issue 1: Charging of interest under section 234B of the Income Tax Act, 1961 for non-payment of advance taxThe present appeal concerns the charging of interest under section 234B of the Income Tax Act, 1961 for non-payment of advance tax. The assessee initially filed a return of income declaring Rs. 1,48,150, which was processed under section 143(1) without charging any interest under section 234B. Later, the case was reopened under section 148, adding Rs. 4,00,000 to the returned income, resulting in a taxable income of Rs. 5,48,150. Consequently, interest under section 234B amounting to Rs. 92,937 was charged for non-payment of advance tax.The assessee filed a petition under section 154 against this interest charge, which was dismissed by the Assessing Officer (AO). The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, stating that the interest was correctly charged as per law. The CIT(A) referred to section 234B, explaining that interest must be charged on the increased tax liability up to the date of reassessment, and rejected the assessee's contention that no interest could be charged if it was not initially levied under section 143(1).Aggrieved, the assessee appealed, arguing that interest under section 234B could not be charged in reassessment proceedings if it was not charged initially under section 143(1). The assessee relied on the ITAT Mumbai decision in Datamatics Ltd. v. ACIT, which held that interest under section 234B could not be imposed if no interest was payable under section 234B(1) initially.The Revenue argued that section 234B's provisions were clear and that interest had to be charged on the increased tax liability up to the date of reassessment. The Tribunal examined the facts and the legal provisions, noting that the liability to pay interest arose due to the addition made under section 147. Since the reassessment was not the first assessment for the year, interest was not leviable under section 234B(1) read with Explanation-2.However, under section 234B(3), interest is payable on the increased tax liability from the date of the initial intimation under section 143(1) to the date of reassessment. The Tribunal found that the assessee's contention that interest could not be charged if no initial liability existed was incorrect. Interest under section 234B is mandatory once the default occurs, and the manner of calculating the quantum of interest is specified in subsections (1) and (3).The Tribunal distinguished the facts of the present case from the Datamatics Ltd. case, where the assessee had initially paid surplus tax, resulting in a refund, and the addition on reassessment was due to a disputed issue. In the present case, the addition was due to unexplained investment, which the assessee should have included while estimating income for advance tax. Therefore, the assessee defaulted in paying advance tax and was liable to pay interest under section 234B(3).The Tribunal upheld the CIT(A)'s order, dismissing the appeal and confirming that interest under section 234B was correctly charged.Order pronounced in the Open Court.