TaxTMI 
TaxTMI 
2017 (7) TMI 108
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....s). 3] The Income Tax Return of the RespondentAssessee was processed under Section 143(1) of the Income Tax Act (for sake of brevity hereinafter referred to as "the Act"), demand was raised for Rs. 1,64,90,573/and penalty of Rs. 1,19,30,677/was imposed by the Assessing Officer under Section 221(1) of the Income Tax Act for default by Assessee in the payment of demand. Aggrieved thereby the Assessee filed Appeal before the Commissioner of IncomeTax (Appeals)17, Mumbai [for short "CIT(A)"]. The CIT(A) under its order dated 15/03/2010 deleted the penalty imposed by the Assessing Officer holding that interest component has to be excluded while levying penalty under Section 221(1) and since the penalty levied exceeded the tax component, it se....
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....ously held by the Hon'ble Tribunal. 3) Whether on facts and in the circumstances of the case and in law, the ITAT is justified in deleting the penalty levied u/s.221(1) in respect of arrears of interest u/s.234A, 234B & 234C, without appreciating that, as held by Hon'ble Supreme Court in the case of CIT vs. Anjum Ghaswala & Others and in the case of Karanvir Singh Gosssal vs. CIT and Another, interest u/s.234A, 234B & 234C is mandatory in nature and therefore by the ratio of the above cited decisions interest is an integral part of tax. 5] Mr.Tejveer Singh, the learned counsel for the Appellant strenuously contends that the Commissioner (Appeals) and the Tribunal have failed to consider Section 221(1) of the Income Tax Act (he....
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....l for the respective parties, so also have gone through the orders passed by the Tribunal and the authorities. 9] Before we proceed to advert to the arguments of the learned counsel, it would be appropriate to refer to the relevant provisions of Section 2(43) and 221 of the Act. Tax is defined under Section 2(43) of the Act. "Tax" in relation to the assessment year commencing on the 1st day of April, 1965, and any subsequent assessment year means incometax chargeable under the provisions of this Act, and in relation to any other assessment year incometax and supertax chargeable under the provisions of this Act prior to the aforesaid date [and in relation to the assessment year commencing on the 1st day of April, 2006, and any subse....
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....tion in the present matter is whether the phraseology "amount of tax in arrears" as envisaged in Section 221 of the Act would in addition to the tax include within its fold the interest component also. 11] The definition of the "Tax" u/Sec.2(43) read in its entirety suggests that the "tax" means incometax, supertax and/or the fringe benefit tax, as the case may be chargeable under the provisions of the Act. The definition of tax does not take within its fold the interest component. 12] The definition of "interest" as envisaged under Section 2(28A) of the Act would not be relevant in the present matter. As the said definition is restricted to the interest payable in respect of any moneys borrowed or debt incurred. 13] It is the elem....
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....t of tax. However, the total amount of penalty shall not exceed the amount of tax in arrears. The said penalty for non payment of the tax is in addition to the levy of interest under SubSection 2 of Section 220. Under no principle of interpretation, the arrears of tax as laid down in the said Section would include the amount of interest payable under SubSection 2 of Section 220. The amount of penalty will have to be restricted on the arrears of tax, which would not include the interest component charged under Section 220(2) of the Act. 16] Reference can be had to Section 156 viz. notice of demand. In Section 156 also tax, interest, penalty, fine are separately referred to. Even a notice of demand issued under Section 156 in 'Form No.....
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....ce of any order passed under this Act, the Assessing Officer shall serve upon the assessee a notice of demand as prescribed. The provisions for imposition of penalty and interest are distinct from the provisions for imposition of tax. The learned Special Court judge, after examining various authorities in paragraphs 51 to 70 of his judgment, has come to the conclusion that neither penalty nor interest can be considered as tax under Section 11(2)(a). We agree with the reasoning and conclusion drawn by the Special Court in this connection". 19] The Apex Court observed that the definition of tax under Section 2(43) does not include penalty or interest. Tax, penalty and interest are different concepts under Income Tax Act. The provisions for....