The order of the Bench was delivered by
B. RAMAKOTAIAH, A.M. :-These are three appeals by assessee for the AYs. 2005-06, 2008-09 and 2009-10. The only issue in these appeals relate to the rectification u/s. 154 of the Income Tax Act [Act] for recalculation of interest u/s. 234B. Since the facts in all the appeals are similar, we are adjudicating all the appeals by this common order.
2. Assessee was a firm in all these impugned years known as M/s. Maheswari Brothers. The firm was converted into a Company in August 2012 under the name of M/s. MBG Commodities (P) Ltd. The company in its name, pursued the appeals before the CIT(Appeals) for these three years.
3. A tabular statement was filed in the course of the appeal hearing for the AYs. 2005-06, 2008-09 & 2009-10 giving the dates of filing the returns, incomes returned, dates of order u/s. 143(1), date of Notice u/s. 153A and details of returns filed in response thereto and the date of order u/s. 143(3) r.w.s. 153A and r.w.s. 245D(4). For the sake of convenience, we deal with the facts relating to the AY. 2005-06.
AY. 2005-06:
4. During the year under consideration, assessee filed its return on 03-01-2006 declaring an income of Rs. 69,17,240/-. After the return was processed u/s. 143(1), the intimation was received on 24-03-2006. For the shortfall of the advance tax paid, the AO charged an amount of Rs. 50,132/- as interest u/s. 234B of the Act. No scrutiny was taken up for this year. There was a search and seizure operation in the premises of the assessee and its sister concerns on 08-09-2010, consequent to which, a notice u/s. 153A was issued on 06-01-2011 to the erstwhile firm of M/s. Maheswari Brothers. The return was filed on 21-08-2012 in response to such Notice, declaring a total income of Rs. 2,07,10,115/-. Assessment was taken up in the FY. 2012-13. When the scrutiny assessment was in progress, an application u/s. 245D was filed on 26-03-2013 before the Settlement Commission. The Settlement Commission passed an order on 30-07-2013. Subsequently, the assessment was completed in accordance with the directions of the Settlement Commission through order u/s. 143(3) r.w.s. 153A and r.w.s. 245D(4) on 03-12-2013. Interest u/s. 234B was charged for the shortfall of the advance tax from the date of order u/s. 143(1). Subsequently, the AO issued a notice u/s. 154 for charge of interest u/s. 234B from 01-04-2005 ie. from the beginning of assessment year. In response to that notice, assessee filed a reply on 17-12-2014 objecting to the same relying on the provisions of the Act. However, rejecting the contentions of assessee, the AO passed an order u/s. 154 charging interest u/s. 234B from 01-04-2005. Against the same, assessee filed an appeal before the CIT(A).
5. During the course of appellate proceedings, Ld. CIT(A) while upholding the order of AO, dismissed the appeals on this issue with the following observations:
“08.0 I have gone through the facts of the case and carefully considered the submissions of the appellant. A mistake should exist and it should be apparent from the record in such a way that its discovery should not be dependent on an elaborate process of reasoning or argument. Apparent means visible, manifest or obvious. The test of TS Balaram vs Volkart Brothers, 82 ITR 50 [SC] is that it should be a mistake simpliciter, and apparent from the record. It should appear to be so exfacie, and should be incapable of debate or argument.
08.1 Undisputed facts of the case are that neither the charge of tax nor the levy of interest u/s 234B is disputed, only the quantification of interest levied is assailed. The Assessing Officer noticed from the record that the assessment order dt. 03.12.2013 was the first order of assessment, and therefore, not an order of reassessment. Since sec 234B(3) is triggered in cases where income computed increases upon an order of reassessment, as distinct from a regular assessment, the sub-section had been erroneously employed. It is sub-section 1 to section 234B which provides for interest calculation upon regular assessment. Explanation 2 to section 234B(1) as amended by Finance Act 2003, w.e.f 01-06-2003, immediately provides the clarification that in a case where an assessment is made for the first time, by having to take recourse to the provisions of section 147 or section 153A, it would nevertheless have to be reckoned as a regular assessment. On the facts of the present case, the issue for determination is simple enough to be answered in yes/no terms. Was the assessee subjected to a regular assessment before issuance of notice u/s 153A? No. Is the order dt.03.12.2013 u/s 143(3) r.w.s 153A the first instance of scrutiny, with due process in terms of sec 143(2), etc ? Yes. In terms of the aforesaid Explanation 2, therefore, it is a self-evident proposition that this order is a 'regular assessment' and not a 're-assessment'. The time period for interest calculation under sec 234B cannot therefore, be anything other than what is spelt out in sub-section 1. To do otherwise would be to attribute redundancy to Explanation 2 .
08.2 The act of reading constituent parts of a section together is an obvious requirement. To posit an argument that it can be otherwise is a logical fallacy. To reiterate this position can hardly be construed as an act of interpretation, much less elaborate argument. On the contrary, not to do so would be perverse. The Assessing Officer also relied on a decision of the Madras High Court [Textile Dye-Chern Corporation vs ACIT(2013-TIOL- 487-HC-MAD-IT)]. This was plainly unnecessary. No principle of interpretation or construing statutes has it that a section be read de hors the Explanation appended immediately there-under. The matter being self evident on a plain reading of the section, an act of invoking case-law in support of the proposition can hardly make the position arguable. While the Assessing Officer did not require such case-law to state his case, such an act by itself cannot render it a point of view. This has to be seen as the only point of view.
08.3 During the hearing Ld AR furnished a copy of the decision in the case of Datamaties Ltd vs ACIT 110 ITO 24[Mum] by way of placing reliance thereon. On a consideration of facts it emerges that in this case the assessee is not contesting the details of levy of interest such as period, amount, etc. Rather, the assessee is denying it's liability to the levy of interest altogether, in contrast to the Assessing Officer's stand that interest u/s 234B is mandatory. It was contended that since it had a net refund position at the point of the Intimation u/s 143(1)(a), the threshold requirement for charge of interest u/s 234B viz, Advance Tax paid falling short of 90% of 'Assessed Tax' as defined in Explanation 1 to sec 234 was not satisfied. The Hon'ble ITAT agreed with the assessee that there could be nothing mandatory about levy of interest u/s 234B under these circumstances. It was held that if nothing was chargeable at the outset, there would be nothing for enhancement in subsequent proceedings. The case, therefore, provides no basis to decide the presentcase either with reference to merits or even the assumption of jurisdiction.
08.4 A ground has been raised to the effect that issue being 'controversial', or needing elaborate elucidation, did not permit assumption of jurisdiction u/s 154 - which has to confine itself to any matter apparent from the record. It has been noticed hereinabove, that a plain reading of the relevant provisions, in their factual context, permitted no other view. An issue does not become argumentative or contentious merely because it is so claimed. It has to be decided whether any other view is possible on a plain reading of the section, in its entirety. The central issue determining whether sub section 1 was to be invoked or sub section 3 turned on the question whether the assessment order in question was an order of assessment or an order of re-assessment. As noticed hereinabove, this is plain enough to be answered in Yes/No terms.
08.5 While the specific facts of the case are more important than legal precedents, especially when they are clear enough to settle the impugned matter, several legal precedents, nevertheless, bear to be noticed, because of the light they shed on the jurisdictional scope of sec 154. When a statutory provision was lost sight of, the matter was an error apparent from the record, liable to be rectified, as held in the case of India Woollen Textile Mills Pvt Ltd vs CIT, 111 ITR 205[P&H]. In the case of CIT vs Mc Leod & Co, 134 ITR 674[Cal] it was held that where misreading a section resulted in a wrong view being taken and a wrong calculation being made, the provisions of section 154 are attracted. In the case of Dr Rajah Sir M.A. Muthaiah Chettiar (decd) by LR vs CIT, 238 ITR 505 [Mad], it was held that if the effect of the rectification is to make the assessment conform to the substantive law, the rectification is correct. It followed the proposition enunciated in CIT vs Alankar Borewells, 13.3 Taxman 91[Mad], that any failure to follow the clear position of law generates rectification under sec 154. In S.I.J Chains Pvt Ltd vs Asst CIT, the Hon'ble ITAT[Asr] 284 ITR 246, had to decide whether in the circumstances of the case, provisions of sec 115JB were applicable or not, and whether the matter could have been decided u/s 154. Relying on Northern Air Products vs CIT 274 ITR 225[MP], it was held that granting a benefit to assessee in ignorance of a statutory requirement is a mistake attracting the rigours of section 154 of the Act. In the case of CIT vs Kesaria Tea Co Ltd 233 ITR 700 [Ker], facts related to a wrong application of sec 356, corrected by the Assessing Officer u/s 154. Relying on the Supreme Court's decision in the case of TS Balaram ITO vs Volkart Bros & ors, 82 ITR 50, the High Court distinguished between a long drawn process of reasoning' and a 'mandatory application of provisions of the Act', and upheld the stand of Revenue by reversing the order of the ITAT. The Delhi High Court in the caseof Escorts Ltd vs Vol & Ors, 189 ITR 81, held on the specific facts of the case, that the withdrawal by an order u/s 154 of a deduction that was earlier allowed u/s 436, was valid. It was held that in view of the clear and unambiguous language employed, no scope for interpretation existed and it could not be said that two views were possible. Hence, jurisdiction was validly assumed u/s 154.
08.6 It was urged by the Ld AR during the hearing, that an Intimation u/s 143(1) was an order too. Hence, the order under sec 143 r.w.s 153A was a subsequent order of assessment insofar as the assessee was concerned. Construed thus, it was suggested that the fact of a subsequent order qualified the assessee for an interest calculation under sub-section 3, especially when the order resulted in an enhanced assessable income. I am unable to persuade myself to see any merit in this position. As already noted, this involves overlooking the literal meaning self evident from a plain reading of the sub-section and the Explanation 2 appended thereunder. Semantics apart, an Intimation u/s 143(1) and assessment u/s 143(3) are vastly different in their scope and process of determination employed. So much so, that while the former is an "Intimation", the latter is an "Order". The former is summary while the latter is an elaboration, in writing. The intimation u/s 143(1), even where adjustments are made u/s. 143(1)(a), can never be considered as an assessment. This is a distinction judicially noticed in several cases, in varying contexts - Hilltop Holdings India Pvt Ltd vs CIT & Ors, 278 ITR 501[Cal]; Tata Metaliks vs CIT, 368 I1R 643[Cal]; CIT vs Ravindran Prabhakar, 326 ITR 363[Mad]; Rajendra Prasad &Co vs CIT, 52 ITO 142[Pat]; CIT vs Orient Craft Ltd, 354 ITR 536[Del]; Airune Financial Services (India) Pvt Ltd, 36 DTR 30, ITAT[Mum], etc. It would appear from the above that the clarification supplied via Explanation 2 is nothing but a reiteration of the scheme of things in the Act as noticed above.
08.7 In the above light of the matter, the ground fails and is dismissed”.
6. Before us, Ld. Counsel for assessee submitted that, the CIT(A) felt that the scheme of the Act for charge of Interest U/s. 234B is clear and no case law is required to understand these provisions. No doubt the scheme of the Act in this regard is clear but the CIT(A) has misconstrued the provisions relating to the calculation of Interest U/s.234B as envisaged in the section. It was felt that Explanation-2 under sub-section(1) of the section will be redundant if the contention raised by the appellant is accepted. On the other hand, the scheme of the section can be understood clearly without resulting in any redundancy if the provisions are correctly interpreted. The section holds that the interest under that section is to be calculated for any shortfall of advance tax paid, firstly, under the assessment U/s.143(1) from the beginning of that assessment year. If there is a scrutiny assessment, the interest will be calculated U/s.234B from the first day of the relevant assessment year upto the date of scrutiny assessment. Subsequently, if there is a reassessment either U/s.147 or U/s.153A, interest will be recalculated on the shortfall either from the date of Intimation U/s.143(1) or from the date of regular assessment in case of a regular assessment. The CIT(A) has given a narrow meaning to the word 'assessment' in the Explanation-2. Explanation-2 reads as under:
"Explanation 2. - Where, in relation to an assessment year, an assessment is made for the first time under section 147 [or section 153A], the assessment so made shall be regarded as a regular assessment for the purposes of this section."
It was contended that the CIT(A) has understood that the determination of income U/s.143(1) and the tax or refund, involved in Section 143(1) is not an assessment. The word 'assessment' should be understood depending on the context in which it is to be used. When the income of the assessee, the tax liability and the Interest U/s.234A, 234B and 234C are computed in the processing U/s.143(1) and an Intimation is made thereafter to the assessee, this also should be understood as an assessment for purposes of Explanation-2. Only when understood thus, the provisions of subsection( 3) in total will be operative. If the view adopted by the CIT(A) that the assessment made, as in the case of the assessee U/s.143(3) r.w.s.153 and r.w.s.245D(4), is the assessment made for the first time and interest is to be computed U/s.234B from 1st of April'05 (for the AY. 2005-06), the underlined clauses in subsection( 3) will be inoperative and redundant:
"(3) Where, as a result of an order of reassessment or recomputation under section 147 [or section 153A}, the amount on which interest was payable under sub-section(1) is increased, the assessee shall be liable to pay simple interest at the rate of [one] per cent for every month or part of a month comprised in the period commencing on the day following [the date of determination of total income under sub-section(1) of section 143 [and where a regular assessment is made as is referred to in sub-section(1) following the date of such regular assessment]] and ending on the date of the reassessment or recomputation under section 147 [or section 153A], on the amount by which the tax on the total income determined on the basis of the reassessment or recomputation exceeds the tax on the total income determined [under sub-section(1) of section 143 or on the basis of the regular assessment aforesaid. "
This is because, as in the case of the assessee, if the reassessment U/s.147/153A is preceded only by an Intimation U/s.143(1), the determination of Interest U/s.234B, as understood by the CIT(A), will be from 1st of April, ignoring the date of determination U/s.143(1). If the reassessment is preceded by an Intimation U/s.143(1) and a subsequent scrutiny assessment, the Interest U/s.234B should be calculated from the date of scrutiny assessment. In either case, the above underlined clauses in subsection (3) of Section 234B will be inoperative, if the Commissioner of Income Tax(Appeals)'s version will be accepted.
6.1. It was submitted that to understand the correct position, as to the scheme of calculation of Interest U/s.234B, a chart showing 3 hypothetical cases was submitted as under:
| Case-1 |
Case-2 |
Case-3 |
Return of income filed in the normal course: |
Return of income filed in the normal course |
Belated Return of income/No Return of Income/Return of Income filed in response to Notice u/s. 147/153A: |
Order u/s. 143(1) |
Order u/s. 143(1) |
-- |
Order u/s. 143(3) |
-- |
-- |
Order u/s. 147/153A |
Order u/s. 147/153A |
Order u/s. 147/153A |
In case-1, a normal Return is followed an Intimation U/s.143(1), there is scrutiny assessment and subsequently, a reassessment. In such a case, Interest U/s.234B is calculated from 1st of April for the shortfall in the Intimation U/s.143(1). The interest is recalculated in the scrutiny assessment from 1 st of April. In the reassessment, the Interest U/s.234B is calculated for the shortfall from the date of scrutiny assessment.
In case-2, the Return is filed in the normal course and it is processed U/s.143(1). Interest U/s.234B is calculated for the shortfall from 1 st of April of the relevant assessment year in the Intimation U/s.143(1). In the reassessment U/s.147/153A, the Interest U/s.234B is calculated from the date of Intimation U/s.143(1) upto the date of such reassessment on the shortfall.
In case-3, there is no Return in the normal course or there is belated Return or Return is filed in response to the Notice U/s.147/153A. There is no Intimation U/s.143(1). There is no scrutiny assessment. The assessment U/s.147/153A was made as the first assessment. It is in this case, the Interest U/s.234B is calculated from 1st of April of the relevant assessment year.
It is in this case, the Explanation-2 under sub-section(1) of Section 234B will come to operation.
6.2. Thus, it was submitted that all the provisions including Explanation-2 and the underlined portions contained in subsection( 3) will be operative and there is no redundancy if the Section 234B is interpreted in this manner. This is the scheme of calculation of Interest U/s. 234B as understood by assessee.
7. Ld. Counsel also referred to the amendments made by the Finance Act, 2015, where sub-section(3) has undergone a change, in so far as Interest U/s.234B for any shortfall of advance tax in a reassessment U/s.147/153A is to be calculated from 1st of April of the relevant assessment year. The proposition put forth by the CIT(A) is obtained in the amended sub-section(3) of Section 234B. If this position is obtainable even before the amendment, this amendment is not necessary. This amendment also makes it very clear that the proposition put forth by the assessee under the un-amended provisions is correct. The relevant portions of the Notes on the clauses in the Finance Bill, 2015, available in 371 ITR Page No.272 is as under:
"The existing provisions contained in sub-section(3) of the said section provides that where the total income is increased on reassessment under section 147 or section 153A, the assessee shall be liable for interest at the rate of one per cent on the amount of the increase in total income for the period commencing from the date of determination of total income under sub-section(1) of section 143 or on regular assessment and ending on the date of reassessment under section 147 or section 153A.
It is proposed to amend sub-section(3) of the said section so as to provide that the period for which the interest is to be computed will begin from the 1st day of April next following the financial year and end on the date of determination of total income under section 147 or section 153A.
These amendments will take effect from 1st day of June, 2015”.
8. It was submitted that the interpretation made by the Revenue is not correct and AO has correctly calculated the interest while giving effect to the directions of Settlement commission in the order passed.
9. Ld. DR supported the action of AO/ CIT(A). Ld. DR also reiterated the decision of Hon'ble Madras High Court in the case of Textile Dye-Chem Corporation [35 taxmann.com 467 (Mad)]. He submitted that ‘assessment’ used in the Income Tax Act cannot extend to the intimation u/s. 143(1) and reliance was placed on the decision of the Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers Pvt. Ltd., [291 ITR 500]. His submissions are that processing under Section 143(1) cannot be considered as an ‘assessment’ and since assessment has been completed u/s. 147 and this ‘assessment’ being first time made, provisions of sub-section 3 of Sec.234B will apply. He also relied on the following decisions:
i. Hilltop Holdings India P. Ltd., [278 ITR 501 (Cal);
ii. Tata Metaliks Ltd., [368 ITR 643 (Cal)];
iii. Ravindra Prabhakar [326 ITR 363 (Mad); and
iv. Rajendra Prasad & Co [52 ITRD 142 (pat)]
10. We have considered the rival contentions and perused the material available on record. The undisputed facts in this case are that the returns were accepted u/s. 143(1) and there is no assessment u/s. 143(3) initially. In the intimations issued when assessee has filed returns, the intimations indicate that the following interests were levied u/s. 234B:
| AY. |
Date of intimation u/s. 143(1) |
Amount of interest (Rs) |
2005-06 |
24-03-2006 |
50,132 |
2008-09 |
19-02-2010 |
8,41,533 |
2009-10 |
28-03-2011 |
6,67,766 |
10.1. Consequent to the search and seizure operations, a notice u/s. 153A was issued. During pendency of such proceedings, assessee filed an application u/s. 234D. Consequent to the orders passed by the Settlement Commission on 30-07- 2013, the proceedings have been finalised by issuing a consequential order u/s. 143(3) r.w.s. 153A and r.w.s. 245D(4) on 03-12-2013. In those orders, AO levied interest u/s. 234B as under:
| AY. |
(Rs) |
2005-06 |
43,78,865 |
2008-09 |
1,00,06,397 |
2009-10 |
32,23,815 |
Subsequently, AO noticing that interest has to be levied under Sub-section (1) of Section 234B, he modified the levy of interest u/s. 234B considering the order passed on 03-12-2013, as ‘first assessment’ order and levied the following amounts in the impugned orders u/s. 154. He levied the interest from the first day of the assessment year till the date of the order ie upto 03-12- 2013. The modified interest so levied is as under:
| AY. |
(Rs) |
2005-06 |
42,12,903 |
2008-09 |
1,35,28,878 |
2009-10 |
16,55,520 |
10.2. It seems there are no appeals on the consequential orders dt. 03-12-13, but the appeals were preferred only on the rectification orders passed u/s. 154. As can be seen from the above tables, the interest u/s. 234B revised in the order u/s. 154 is less than originally levied amount, in the consequential orders for AY. 2005-06 and AY. 2009-10. Only in AY. 2008-09, there is a higher levy of interest u/s. 234B. We are not sure why assessee has preferred appeals, when AO reduced the interest in AYs. 2005-06 and 2009-10 in the modification orders.
11. Be that as it may, assessee’s contention is that interests are to be considered u/s. 234B(3) rather than u/s 234B(1) as was done by the AO in the orders u/s. 154. The entire submissions made by assessee are on the notion that interest u/s. 231B(1) and interest u/s. 234B(3) are mutually exclusive. This is not correct. As per the scheme of Act, interest u/s. 234B(1) is leviable from the period 1st April of the assessment year following the closure of the financial year till the date of intimation u/s. 143(1) or completion of assessment u/s. 143(3). The explanation provided u/s. 234B(1) states that where the assessment was done u/s. 147 or u/s. 153A for the first time, then, the interest is to be levied u/s. 234B(1). In other words, the interest liability u/s. 234B(1) is attracted if there is any shortfall of any advance tax from the first day of the assessment year till the completion of/processing of return for the first time. Interest is compensatory in nature. Therefore, the Legislature has provided for levy of interest for shortfall of advance tax and the interest is calculated from the first day of the assessment year till assessee discharges its liability u/s. 140A or if there is a further shortfall, till the completion of assessment for the first time either under 143(3) or 147 or 153A or processing u/s. 143(1). The AO accordingly levied interest u/s. 234B(1) in the intimations given in respective assessment years (as stated above in para 10).
11.1. In case of re-assessment and re-determination of income either u/s. 147 or u/s. 153A, the Statute provides for further levy of interest on the higher amount of tax determined in the re-assessment proceedings. The period of levy is from the date of first order either u/s 143(1) or 143(3) or 147 or 153A as the case may be to the date of revised order. Thus, there is levy of interest from the first day of the assessment year till the completion of assessment/processing for the first time on the returned income/assessed income u/s 234B(1) and a further enhancement of interest u/s. 234B(3) on the additional tax determined in the reassessment proceedings for the later period..
Thus, there are two separate calculations of interest u/s. 234B(1) and 234B(3). Since interest was already demanded in earlier proceedings only fresh demand is raised u/s 234B(3). Thus the levy of interest are complimentary and not exclusive.
12. This mechanism of levy of interest was elaborately explained in the Co-ordinate Bench decision in the case of ACIT Vs. Ronald Nardi [14 SOT 24 (Mumbai)], wherein it was held:
“Once an order of reassessment is passed under section 143(3)/148, the original order determining the total income under section 143(1) or 143(3) or 144 gets merged with the order of reassessment for the simple reason that two orders determining the total income cannot stand together. It, therefore, logically follows that the figures of total income determined and tax, interest, etc., thereon have to be incorporated in the reassessment order passed under section 143(3)/147 and in the computation sheet accompanying therewith. if the Assessing Officer had not followed the aforesaid course of action, the total income originally determined under section 143(1) or 143(3) or 144 and tax, interest, etc., thereon would have escaped taxation. The assessee did not challenge the levy of interest under section 234B(1) as per the intimation originally issued under section 143(1). The Assessing Officer was, therefore, justified in incorporating the said figure of interest originally charged under section 234B(1) as per the intimation issued under section 143(1) in the computation sheet accompanying the order of reassessment passed under section 143(3)/147.
While sub-section (1) of section 234B is applicable to cases involving determination of total income under section 143(1) or regular assessment made under section 143(3) or under section 144, sub-section (3) of section 234B is applicable, inter alia, to a case where the amount of tax on the total income determined on the basis of reassessment or re-computation under section 147 exceeds the tax on the total income originally determined under sub-section (I) of section 143. It was not in dispute that the Assessing Officer had originally determined the income under section 143(1) and charged interest under section 234B(1) thereon. Provisions of section 234B(1) were relevant till that stage, i.e., the stage of determination of total income under section 143(1). The Assessing Officer, subsequently, issued a notice under section 147 and reassessed the income with the result that the tax on total income determined on such reassessment exceeded the tax on total income earlier determined under sub-section (I) of section 143. Resultantly the assessee became liable to pay incremental interest for every month or part of a month comprised in the period commencing on the day following the day of determination of total income under sub-section (1) of section 143 and ending on the day of reassessment or re-computation under section 147. 1t is not permissible under section 234B(3) to charge interest from the first day of the assessment year till the date of reassessment or re-computation under section 147 where the income has been determined under section 143(1) and allowed to become final.
Therefore, the Assessing Officer was directed to modify the order under section 154 as :
(a) The figure of interest originally charged under section 234B(1) as per the intimation issued under section 143(1) was to be incorporated and included in the computation sheet accompanying the reassessment order passed under section 143 (3)/148; and
(b) In addition to the above, the incremental interest required to be charged under section 234B(3) was also to be charged for every month or part of a month .comprised in the period commencing on the day following the date of determination of total income under sub-section (I) of section 143 and ending on the date of reassessment under section 143(3)/147 on the amount by which the tax on the total income determined on the basis of the reassessment exceeded the tax on the total income determined under section 143(1)”.
13. The Hon'ble High Court of Karnataka in the case of Sri Vijay Kumar Saboo (HUF) Vs. ACIT, Bangalore [201 Taxman 366 (Karnataka)] has held that interest u/s. 234B(3) is attracted in the case of re assessment completed and AO is bound to give a finding whether it is an order made for the first time u/s. 147 or it is a case of re-assessment or re-computation u/s. 147. It was held that in a case where there is determination of tax u/s. 143(1) or where regular assessment order is passed u/s. 143(3), then, order passed u/s. 147 is treated as an order of re-assessment or recomputation and in such case, interest u/s. 234B is leviable not from the first day of April next following such financial year, but from the date of determination of tax u/s. 143(1) or order of regular assessment u/s. 143(3). The Hon'ble High Court in the above referred case Vijay Kumar Saboo (HUF) Vs. ACIT, Bangalore [201 Taxmann 366 (Karnataka)](supra) has held as under:
“A harmonious reading of entire section 234B makes it clear that if no advance tax is paid or what is paid is less than 90 per cent of the assessed tax, the assessee is liable to pay interest on the difference in the tax. For the purpose of levying tax, it is computed from first day of April next following, till the date of determination of tax under sub-section (1) of section 143 or from that day till the date of regular assessment. If in a givencase, there is no determination of tax under sub-section (1) of section 143 or regular assessment and the assessment is made for the first time under section 147, such assessment is also treated as a regular assessment and interest is payable from the first day of April next following till the date of assessment order. However, if proceedings under section 147 are initiated in a case where there is determination of tax under sub-section (1) of section 143 or where a regular assessment order is passed under sub-section (3) of section 143, then the order passed under section 147 is treated as an order of reassessment or recomputation. In the case of order of reassessment or recomputation, the interest is leviable not from the first day of April next following, but from the date of determination of tax under subsection (1) of section 143 or order of regular assessment under section 143(3). Therefore, when the assessment order is passed under section 147 and that is made the basis for levying interest, the assessing authority has to find out whether it is an order made for the first time under section 147 or is it a case of reassessment or recomputation under section 147. Depending on that finding, the interest is to be calculated either from the date of first day of April next following such financial year or from the date of determination of tax under sub-section (1) of section 143 or regular assessment under section 143(3).
In the instant case, there was a determination of tax under section 143(1)(a) and return filed by the assessee was accepted by the department by its order dated 24-6-1991. It was thereafter, proceedings were initiated under section 147. In pursuance of the notice issued, revised return was filed on 30-12-1993. It was on that return that the order came to be passed under section 143(3) on 28-1-1994. Therefore, it was not a case of assessment made for the first time. It was a case of order of reassessment or recomputation under section 147. Therefore, the interest was to be calculated from 24-6-1991, the date on which determination of tax was made under section 143 (1)(a). To that extent, the order passed by the authorities was illegal and required to be set aside”.
14. Similar view is also held by the Hon'ble High Court of Kerala in the case of CIT(Central), Cochin Vs. B. Lakshmikanthan [198 Taxman 485 (Ker)], wherein on a similar case as that of assessee where proceedings u/s. 153A were initiated, it was held that:
“There was no substance in the contention raised by the revenue that in a reassessment completed under section 153A interest for nonpayment or short payment of advance tax was payable under section 2348(3) merely because the said reassessment under section 153A was completed by accepting the return filed under section 143(1). Interest for non-payment or short-payment of advance tax is payable under section 2348 for different periods under sub-sections (I) and (3) of the said section. In all cases of regular assessment completed under section 143(1), interest is to be charged for the period provided under section 2348(1). Further, if the first assessment is itself income escaping assessment made under section 147 or under section 153A, then such assessment will be treated as regular assessment and interest for non-payment or short payment of advance tax in such cases will be payable under section 2348(1). However, when an original assessment completed under section 143 is revised either under section 147 or under section 153A, then interest for non-payment or short- payment of advance tax is payable only for period mentioned in section 2348(3), which provides for interest from the date of completion of the regular assessment under section 143 (1) till date of completion of reassessment or recomputation under section 147 or section 153A. For the purpose of levy of interest under section 234B(3), it is immaterial whether recomputation or reassessment under section 147 or under section 153A is made by accepting the revised return filed and by processing the same under section 143(1) or whether reassessment is made by rejecting such returns and by determining the income. The fact that the procedure for calling for return and assessment after search or requisition under section 153A is the same as provided under section 139 does not mean that a reassessment completed under the said provision is a regular assessment or original assessment. On the other hand, whatever be the procedure adopted for assessing escaped income or undisclosed income pursuant to search or requisition, such an assessment will always be a reassessment or recomputation under section 153A, and unless it is a first assessment, that can be treated as the regular assessment in terms of the Explanation (2) to section 234B(1), interest can be charged only under section 234B(3). In the instant case, the original returns were processed under section 143(1) and the proceedings so completed were issued to the assessee. It was only thereafter that the department conducted search and made revised assessment under section 153A, though by accepting return of undisclosed income filed and by issuing proceedings under section 143(1), read with section 153A. Therefore, the assessments under section 153A were revised assessments and, so much so, interest could be demanded for the period mentioned in section 234(B)(3) as held by the Tribunal”.
15. The principle laid down by the Hon’ble Madras High Court in the case of Textile Dye-chem Corpn. (supra) also support the above. Infact, there was a finding that the assessment made on assessee was for the first time under Section 147 and on that fact the Hon’ble High Court held that interest was leviable under 234B(1). Thus, the provisions of the Act and various case law support the view that where intimation u/s. 143(1) was issued levying interest u/s 234B(1), the subsequent proceedings will attract only 234B(3) on the enhanced income/tax whereas interest levied originally u/s. 234B(1) will stand as such. Thus, interest u/s. 234B(1) is to be levied, from 1st April following the financial year till the date of processing u/s. 143(1) Us 234B(1) and then on enhanced income/enhanced tax u/s. 234B(3). Viewed in this perspective, there is no conflict in the provisions of the Act.
16. In this case, the dispute is with reference to whether the 143(1) order passed earlier is to be considered as an assessment? Ld. CIT(A) was of the opinion that 143(1) is not an assessment and is only an intimation. This view can be accepted in the context of re-opening of assessment as held by the Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers Pvt. Ltd., [291 ITR 500] or for any other provisions on assessment. For the purpose of levy of interest u/s. 234B where it is very clearly mentioned that even processing u/s. 143(1) is also to be considered as an assessment by specifically mentioning in the Section the periods therein then, for the purpose of levy of interest u/s. 234B(3), the period it was already considered in an intimation u/s. 143(1) is to be excluded while calculating the interest u/s. 234B(3). The provisions of Section 234B(3) are as under:
“Section 234B :
1.….
….
(3) Where, as a result of an order of reassessment or recomputation under section 147 (or section 153A), the amount on which interest was payable under sub-section (1) is increased, the assessee shall be liable to pay simple interest at the rate of [one] per cent for every month or part of a month comprised in the period commencing on the day following [the date of determination of total income under sub-section (1) of section 143 [and where a regular assessment is made as is referred to in subsection (1) following the date of such regular assessment]] and ending on the date of the reassessment or recomputation under section 147 [or section 153A], on the amount by which the tax on the total income determined on the basis of the reassessment or recomputation exceeds the tax on the total income determined [under sub-section (1) of section 143 or] on the basis of the regular assessment aforesaid”. ( emphasis supplied)
In view of the specific exclusion of the period considered u/s. 234B(1), the balance of the period till the completion of assessment u/s. 147/153A as the case may be was only be considered for levy of interest u/s. 234B(3) on the enhanced amount of tax.
17. The amendment brought out by the Finance Act, 2015 in fact modifies the then existing provisions which are applicable for the impugned assessment years. In fact under the new Sub- Section (3), it was provided that interest will be calculated on the enhanced amount from the period commencing on 1st April next following the relevant financial year for which advance tax was payable and ending on that date of the re-assessment or re computation u/s. 147/153A. Thus, where in a case interest u/s. 234B(1) was levied on regular assessment u/s. 234B(1), enhanced interest was payable for the entire period and not on broken period as it was provided earlier. This is the substance of the amendment brought to Sub-section(3) by the Finance Act, 2015. In view of this, we are of the opinion that the interest u/s. 234B(1) is to be calculated on the originally accepted amount u/s. 143(1) as was done by the AO in the intimations and the enhanced amount is to be levied from the date of intimation till the date of consequential order passed u/s. 143(3) r.w.s. 153A r.w.s. 245D(4) ie on 03-12- 2013.
18. We are not sure whether the AO is correct about the levy of interest in the orders u/s. 154, as the period and calculations were not provided for our examination. In fact there is reduction of demand in AYs 2005-06 and 2009-10. In view of this, we, while allowing the appeals of assessee, direct the AO to modify the interest levied as per the provisions of the Act. The appeals are considered allowed for statistical purposes.
19. In the result, all the appeals are allowed for statistical purposes.
The order pronounced in the open court on 15th July, 2016