Appeal can be filed against Levy of Interest u/s 234A,234B and 234C

Brief of the case :

• The Hon’ble Punjab & Haryan High Court in the case of Shri Krishan Gopal HUF held that the levy of interest u/s 234A , B & C is part and parcel of the of assessment process and it is open to an assessee to dispute the levy in appeal provided he challenge the very levy rather than claiming any waiver or reduction.
• Therefore, such levy in totality could be challenged before appellate authorities.

Facts of the case:

• The assessee is an agriculturist and had filed the return of income on 10.10.2007 for the assessment year 2007-08 declaring a total income of Rs. 11,69,85,910/- including long term capital gain of Rs. 11,69,05,260/-.Along with the return assessee had voluntarily paid interest to the tune of Rs. 5,24,261/-, Rs. 15,72,783/- and Rs. 2,62,130/- under Sections 234A,234B and 234C of the Act respectively. The case of the assessee was picked up for scrutiny wherein the AO accepted the returned income but raised a demand of Rs. 91,206/- was raised due to short levy of interest under Sections 234A and 234B of the Act
• CIT(A) deleted the interest amounting to Rs. 5,24,261/- charged under Section 234A of the Act and Rs. 2,62,130/- under Section 234C of the Act and restricted the interest to Rs.5,88,244/- charged under Section 234B of the Act. Tribunal also concurred with the findings of AO. Aggrieved by the same revenue is in appeal before the High Court.

Contention of the Revenue:

• The learned counsel for the revenue submitted that appeal u/s 246 cannot be entertained on the issue of chargeability of interest u/s 234A , B and C because the same has been declared in return as payable by the assessee who has also paid the same and there was no grievance against the order and the separate ITNS 150 was prepared to calculate tax and interest.
• Thus, the chargeability of interest being an issue falling outside the cover of assessment order cannot be entertained by appellate authorities.

Issue before the High Court:

• Whether the CIT(A) was well within his jurisdiction to entertain the first appeal under Section 246 of the Act against the chargeability of interest by the Assessing Officer under Sections 234A, 234B and 234C of the Act?

Held by the Hon’ble High Court:

• High Court observed that the identical issue has been disposed by the Hon’ble Supreme Court in the case of Central Provinces Manganese Ore Co. Ltd. v. CIT (1986) 160 ITR 961 wherein the court held that the levy of interest is the part and parcel of the process of assessment even though Sections 143 and 144 of the Act do not specifically provide for the levy of interest. Thus, since the levy of interest is the part of the process of assessment, it is open to an assessee to dispute levy in appeal provided he challenges the levy itself rather than claiming waiver or reduction of interest levied.
• Clause (c) of the Sec 246 provides that appeal can be filed against an order where the assessee denies his liability to be assessed under the Act or against any assessment order under sub-section (3) of sections 143 or 144, where the assessee objects to the amount of income assessed or to the amount of tax determined or to the amount of loss computed or to the status under which he is assessed. Inasmuch as, the levy of interest is part of the process of assessment, it is open to an assessee to dispute the levy in appeal provided he limits himself to the ground that he is not liable to the levy of interest at all.
• Respectfully following the judgment of Supreme Court, the case was decided in the favour of assessee. In result the appeal filed by the revenue was dismissed.