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.

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