By TIOL News Service

AHEMDABAD, NOV 25, 2016: THE ISSUE IS - Whether when a demand of interest u/s 234(B) is set aside by the CIT(A) and the ITO did not preferred an appeal against the said order of CIT(A), it is not open to the ITO to again levy interest u/s 234(B) in exercise of powers u/s 154. YES IS THE VERDICT.

Facts of the case:

During assessment, the AO passed an order u/s 143(3) alongwith a demand notice including demand of interest u/s 234(B). On appeal, CIT(A) granted certain relief against quantum addition and also directed to delete interest u/s 234(B). Thereafter AO passed an order giving effect to order of CIT(A) deleting interest charged u/s 234(B) which was charged for the first time while issuing demand notice. Thereafter a notice u/s 154 was issued by AO proposing to rectify the original order to disallow unpaid provident fund contribution u/s 43B to recover short levy of Tax and interest u/s 234(B) on account of such disallowance. An order u/s 154 was passed by AO, disallowance was made u/s 43B and demand was raised including interest u/s 234(B) and u/s 234(D). On appeal, the CIT(A) again deleted the disallowance made u/s 43B. Thereafter the assessee filed rectification application against order passed by AO u/s 154, contending inter-alia that there was apparent and glaring mistake in the order passed u/s 154 in so far as interest charged u/s 234B, and the same was incorrectly charged in view of earlier decision of CIT(A) wherein interest originally charged u/s 234(B) was directed to be deleted and also on the ground that interest charged u/s 234(D) was wrongly charged, as the same was introduced w.e.f. 1/6/2003 and the same applies to the assessment orders falling thereafter. The AO however dismissed the said rectification application and refused to rectify the earlier order passed u/s 154. On appeal, CIT(A) quashed the order passed u/s levying interest u/s 234(B) and u/s 234(D) on the ground that once levy of interest u/s 234(B) was already set aside by CIT(A) earlier and the said order was not challenged by revenue by way of appeal, thereafter it was not open for the AO to levy and/or charge interest u/s 234(B).

Having heard the parties, the High Court held:

++ it is not in dispute that earlier by Demand Notice and after assessment order interest was charged u/s 234(B). However, the said demand of interest under section 234(B) was set aside by the CIT(A) vide order dated 28/11/2002. It is an admitted position that thereafter the matter was not carried to appeal by the revenue against the order passed by the CIT(A) dated 28/11/2002 setting aside demand of interest under section 234(B). If that be so, thereafter it was not open for the A.O. to again levy / charge interest u/s 234(B) in exercise of powers u/s 154. Under the circumstances, as such, no error has been committed by tribunal in confirming the order passed by CIT(A) deleting levy of interest under section 234(B), which was passed by the A.O. in exercise of powers u/s 154, which was passed after CIT(A), in exercise of appellate jurisdiction setting aside the levy of interest under section 234(B) vide order dated 28/11/2002;

++ so far as deletion of interest, charged u/s 234(D) by CIT(A), by the tribunal is concerned, counsel appearing on behalf of the department has stated at the bar that as the amount involved is Rs.97,009/- only, on the smallness of the amount only she does not press the present appeal qua deletion of interest charged u/s 234(D) is concerned. However, she has requested to make suitable observation that the question of law i.e. whether section 234(D) would be applicable with respect to assessment orders falling after 1/6/2003 be kept open. In view of the above and for the reasons stated above, we see no reason to interfere with the impugned judgement and order passed by the tribunal. The question of law framed is held in favour of the assessee and against the revenue with respect to deletion of interest charged u/s 234(B). So far as deletion of levy of interest u/s 234(D) is concerned, we are not passing any order as the same is not pressed by the counsel for the revenue.

(See 2016-TIOL-2855-HC-AHM-IT)