By TIOL News Service

AHMEDABAD, FEB 24, 2016: THE issue is - Whether it is sine qua non for the Assessing Officer to charge interest u/s 234B in the assessment order before he raises demand of the same in the notice issued under section 156 of the Act. NO is the answer.

Facts of the case

The assessee filed return declaring income which was subsequently revised. Assessing Officer finalized the assessment under section 143(3). CIT(A) partly allowed the said appeal and passed an order that so far as the charging of the interest under section 234B of the Act is concerned, the same is consequential and therefore, the Assessing Officer will recalculate the interest while giving effect to order passed by him. Assessee and revenue both preferred Appeals before the ITAT. ITAT held that as in the order of assessment the Assessing Officer had not charged any interest and therefore, no such interest is chargeable.

Having heard the parties, the Court held that,

++ levy of interest under section 234B of the Income Tax Act is held to be mandatory and automatic and at the rate prescribed and mentioned under section 234B of the Income Tax Act. The A.O. has no discretion to levy any interest other than right of interest mentioned in section 234B of the Income Tax Act. The A.O. has no jurisdiction and/or authority to reduce and/or charge interest less than provided under section 234B of the Act;

++ when levy of interest under section 234B of the Act is held to be mandatory and automatic, and the same is on the difference between the advance tax paid and assessed tax, A.O. has no discretion to levy any other interest other than provided under section 234B of the Act. Thereafter, levy of interest under section 234 of the Act would be consequential only and only arithmetically amount of interest is required to be calculated, even in absence of any direction by the A.O. while passing assessment order under section 143(3) of the Income Tax Act, there can be demand of levy and demand of interest under section 156 of the Income Tax Act. A.O. had no such discretion and moment he determines the "assessed tax" and on the eventuality as mentioned in section 234B, i.e. (i) an assessee who is liable to pay advance tax under section 208 has failed to pay such tax, or, where advance tax paid by such assessee under the provisions of section 210 is less than 90% of the "assessed tax", assessee shall, be liable to pay simple interest at the rate of 1% for every month or part of a month comprised in the period from the first day of April next following such financial year to the date of determination of total income under sub-section (1) of section 143 and (ii) where regular assessment is made to the date of such regular assessment, on the amount equal to assessed tax, or, as the case may be, on the amount by which advance tax paid, as aforesaid, falls short of assessed tax;

++ it is not sine qua non for the Assessing Officer to mention / levy / charge interest under section 234B of the Income Tax Act in the assessment order before he consider / raises demand of the same in the notice issued under section 156 of the Act. It is also held that the Assessing Officer could charge / levy / interest as per section 234B of the Income Tax Act in the notice issued under section 156 of the Act directly.

(See 2016-TIOL-337-HC-AHM-IT)