2002 (11) TMI 36 - HC - Income Tax

1. Whether Tribunal was justified in law in upholding the Commissioner of Income-tax (Appeals) decision cancelling interest under section 234A of the Income-tax Act levied by the Assessing Officer on the basis of income determined invoking the provisions of section 115J of the Income-tax Act? 2. Whether Tribunal was justified in upholding the action of the Commissioner of Income-tax (Appeals) in assuming jurisdiction to adjudicate on the mandatory levy of interest under section 234B especially in the light of the fact that the assessee had income making it liable to advance tax even without applying the provisions of section 115J of the Income-tax Act? - We answer both the questions of law referred to us in the negative in favour of the Revenue and against the assessee.

Issues Involved:
1. Levy of interest under section 234A of the Income-tax Act, 1961.
2. Levy of interest under section 234B of the Income-tax Act, 1961.

Detailed Analysis:

1. Levy of Interest under Section 234A:

The primary issue was whether the assessee-company is liable to be charged interest under section 234A when its income was determined by applying the provisions of section 115J at the time of regular assessment. Section 234A imposes interest for delays in filing the return of income after the due date or for non-filing of the return. The court observed that the obligation to file the return before the due date is statutory, and the invocation of section 115J during regular assessment is irrelevant for the application of section 234A. The Tribunal erred in holding that interest under section 234A is not leviable when section 115J is applied. The court concluded that interest under section 234A is levied for delayed or non-filing of the return, irrespective of the application of section 115J.

2. Levy of Interest under Section 234B:

The second issue was whether the assessee-company is liable to pay interest under section 234B when its income was determined under section 115J. Section 234B applies to all assessees, including companies, and mandates interest for defaults in advance tax payment or when the advance tax paid is less than 90% of the assessed tax. The court noted that the definition of "assessed tax" includes tax determined on regular assessment, which encompasses tax determined under section 115J. The court disagreed with the Karnataka High Court's view that the provisions of sections 207, 208, 209, and 210 (precursors to sections 234B and 234C) are not applicable until the accounts are audited and the balance sheet is prepared. Instead, the court agreed with the Madhya Pradesh High Court and Gauhati High Court's stance that companies can estimate their current profits and are required to pay advance tax accordingly, even if section 115J is invoked later.

The court emphasized that it is possible for companies to estimate their current profits and pay advance tax based on those estimates. The court found no logic in the argument that companies cannot estimate their current profits when they have been doing so before the insertion of section 115J. The court held that companies must estimate their profits during the financial year and pay advance tax on those estimates, and if the advance tax paid is less than 90% of the assessed tax, interest under section 234B is applicable.

Conclusion:

The court answered both questions of law in the negative, ruling in favor of the Revenue and against the assessee. The court held that interest under sections 234A and 234B is leviable even when the assessee's income is determined by applying section 115J. The court appreciated the assistance provided by the amicus curiae in this matter.

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