2009 (7) TMI 57 - HC - Income Tax

Interest u/s 234B - Period of computation - whether Interest under Section 234B can be claimed upto the date of intimation under Section 143(1) or regular assessment under Section 143(3) - Whether the interest under Section 243B can be charged along with interest under Section 220 - Held that interest u/s 234B is payable upto the date of assessment u/s 143(3) - Interest payable u/s 220 is not connected with section 234B and interest u/s 220 is payable for failure to pay demand u/s 156 - Simultaneous levy of interest u/s 234B and 220 are not unconstitutional - decision in the matter of Umesh S. Bangera vs. Union of India & Ors. 2008 -TMI - 11128 - BOMBAY High Court followed.

Summary

Issues:
1. Calculation of interest under Section 234B up to the date of intimation or regular assessment.
2. Charging of interest under Section 220 along with interest under Section 234B.
3. Constitutionality of charging interest for late filing of returns under Section 234A.

Analysis:

Issue 1: Calculation of interest under Section 234B
The court analyzed the provisions of Section 234B and concluded that interest is payable based on the date of regular assessment under Section 143(3), not the date of intimation under Section 143(1). The judgment emphasized that the interest is to be paid from the 1st day of April following the financial year to the date of determination of total income under Section 143 or to the date of regular assessment, whichever is later. Therefore, the Assessing Officer was deemed justified in levying interest for the relevant period.

Issue 2: Charging of interest under Section 220
The court clarified that interest under Section 220 of the Income Tax Act is distinct from the interest under Section 234B. It highlighted that Section 220 pertains to amounts specified as payable in a notice of demand under Section 156 and must be paid within 30 days of notice service. The judgment rejected the argument that once interest is paid under Section 234B, no interest is payable under Section 220. The court directed the Assessing Officer to recompute the interest under Section 220 considering the correct dates of notice service and payment.

Issue 3: Constitutionality of charging interest under Section 234A
The court referred to a previous judgment and upheld the constitutionality of charging interest under Section 234A. It emphasized that interest on different heads is independent and serves as compensation for defaults. The judgment concluded that Parliament has the authority to charge interest for defaults under the Act, and the contention against the constitutionality of Section 234A lacked merit.

In conclusion, the court upheld the demand for interest, except under Section 220 where a recalculation was required. The Assessing Officer was instructed to consider the payments made by the petitioner while determining the interest under Section 220. The judgment made the rule partly absolute, with no order as to costs.