Brief of the Case- In the case of Bhagat Construction Co Private Limited vs CIT Hon;ble Supreme Court has held that Interest u/s 234B of Income Tax Act, 1961 is automatic even if assessment order does not contain any direction for payment subject to computation of same in Form I.T.N.S 150.
Brief Facts of the Case and Question of Law
a. The assessment order of the Asst. Commissioner of Income-tax dated 29.03.1995 did not contain any direction for the payment of interest u/s 234B.
b. The order merely stated that interest is payable u/s 234B of the Income-tax Act without more. However, the tax and interest was determined in the Form I.T.N.S 150.
c. The assessee contended that interest u/s 234B was not leviable
d. On appeals to the ITAT, the ITAT held that since no direction had actually been given in the assessment order for payment of interest, the present case would be covered by the decision of the Apex Court in case of CIT & Ors vs Ranchi Club Limited [(2001 ) 247 ITR 209], in which the Apex Court dismissed the appeal and affirmed the decision of High Court.
e. On appeals to the Hon’ble Delhi High Court, it was held that the issue has been decided by the judgement of CIT & Ors vs Ranchi Club Limited [(2001 ) 247 ITR 209.
Question of Law
Whether interest u/s 234B is automatic given that the directions for payment of the same is not given in the assessment order but has been computed and determined in Form I.T.N.S 150. In other words, can Form I.T.N.S 150 be considered as part of assessment order?
Contention of the Assessee
a. The assessee’s contention was that since the direction for payment of interest was absent in the assessment order, it could not be fastened with liability to interest u/s 234B.
b. The assessee supporting the decisions of ITAT and High Court in its case, stated that the judgement in Ranchi Club Ltd squarely covers the facts of the case.
Contention of the Revenue
a. The senior counsel appearing on behalf of the revenue, relied upon the decision in case of “Kalyankumar Ray vs CIT , West Bengal , Calcutta [ 1992 Supp (2) SCC 424]”.
b. According to the revenue, interest u/s 234B is in any case, part of Form I.T.N.S 150 which is not only signed by the assessing officer but it is really part of the assessment order itself.
c. Further the revenue contended that the decision in Ranchi Club Ltd is distinguishable in as much as it arose only in a writ petition in the context of best judgement assessment. In the present case there was a shortfall of advance tax that was paid, therefore automatically leading to interest u/s 234B.
d. Interest u/s 234B is parasitic in nature as it applies the moment there is shortfall of advance tax or income tax payable under the Act and it is also compensatory in nature.
Held by the Apex Court
a. The Apex Court explained the provisions of Section 234B and also stated that under the provisions of Section 234B, the moment an assessee who is liable to pay advance tax has failed to pay such tax or where the advance tax paid by such an assessee is less than 90 per cent of the assessed tax, the assessee becomes liable to pay simple interest at the rate of one per cent for every month or part of the month.
b. The Apex Court supported the view of the revenue by stating that levy of such interest is automatic when the conditions of Section 234B are met.
c. The Apex Court held that the facts of the case are squarely covered by the decision in Kalyankumar Ray’s case in as much as it is undisputed that contained a calculation of interest payable on the tax assessed.
d. Form I.T.N.S 150 must be treated as part of the assessment order in the context of Section 143 read with Explanation 1 to Section 234B.
e. The Supreme Court set aside the decision of the High Court and allowed the appeal of the revenue.