Applicability of Interest u/s 234B(3) for the first time in reassessment completed under section 147

CASE LAWS DETAILS

DECIDED BY: HIGH COURT OF KERALA,

IN THE CASE OF : The South Indian Bank Ltd. Vs CIT, APPEAL NO: ITA No. 1611 of 2009, DECIDED ON: December 2, 2009

RELEVANT PARAGRAPH

4. It is clear beyond doubt from the above provisions that interest payable under section 234B(1) could be levied even in a reassessment completed under section 147 on excess short fall of advance tax, consequent to increase in demand of tax pursuant to revision of assessment under section 147. In this case, the first assessment which is in the form of intimation under Section 1430X&) led to a refund of above Rs. 8 crores to the assessee, and therefore no interest could be demanded undo* Section 234B( l). Therefore obviously interest could be levied under Section 234B(3) when assessment was revised under Section 147 on 28.1.2004 which led to a demand of tax-on a positive income of above Rs. 16 crores as against loss of around Rs. 7 crores initially accepted by the Officer based on revised return filed. Admittedly interest that should have been levied under Section 234B (3) was not levied in the course of first revision of assessment completed under Section 147 on 28.1.2004. The contention of the assessee that interest under Section 234B{3) cannot be levied without levying interest under Section 234B(1) is not tenable because there may be cases, as in this case, in the original assessment there may not be any short foil in payment of advance tax which does not give rise to liability for interest under Section 234B(1) of the Act Further under Explanation 2 to Section 234B(1) when the assessment itself is made for the first time under Section 147 interest under Section 234B (1) could be levied. This makes it clear that the purpose of providing interest for the short-fall in payment of advance tax based on income escaping assessment under Section 147 is that interest is mandatory and it could be levied on the actual short fall in payment of advance tax with reference to the tax ultimately determined in reassessment under Section 147. Therefore we are of the view that in order to levy interest in reassessment proceedings under Section 147, under Section 234B (3) there is no need for a pre-existing levy of interest under Section 234B (1) in the regular assessment. In other words, for the first time, interest could be levied under Section 234B (3) in reassessment completed under Section 147.

5. The next question to be considered is whether the omission of the Officer to levy interest under Section 234B (3) in the first revision of assessment completed under Section 147 will deprive him of his authority to levy interest under the very same provision when assessment for the very same assessment year is revised a second time under Section 147. We do not find any significance about the number of reassessments carried out undo: Section 147 for the purpose of levy of interest under Section 234B (3). In fact, interest payable under this provision is for the increase in short-tall of advance tax with reference , to the original assessment and it is levied for the period commencing from the date of completion of original assessment till date of completion -of revised assessment under Section 147. When the section contemplates levy of interest in stages, interest under Section 234B(3) could be levied in all the reassessments completed under Section 147. Therefore interest could be levied under section 234B(3) in the second revision of assessment under section 147 even if in the first reassessment proceeding completed under the very same provision, interest under Section 234B(3) was not levied We therefore hold that the omission of the Officer to levy interest under Section 234B(3) in the first reassessment completed tinder Section 147 which could have been rectified under Section 154 does not bar the AO from levying interest under the very same provision, when the assessment was again revised a second time under Section 147.) In feet interest under Section 234B(3) is on the differential amount of short-foil of advance tax with reference to die advance tax found to have been paid in the original assessment. In this case, when the revised loss return was accepted, in original assessment there was non liability for any advance tax and so much so no interest was found payable under section 234B(l). Therefore the differential amount on which interest could be demanded

Under section 234B(3) is actually on the total short fall in advance tax payable with reference to the revised assessment completed under section 147 of the Act. Therefore the contention of the assessee that in order to levy interest under section 234B (3) there should have been a levy of interest in regular assessment under section 234B (1) is not tenable.

We therefore dismiss the appeal by upholding the order of the Tribunal confirming the levy.

NF