2005 (8) TMI 303 - AT - Income Tax

Summary

Issues Involved:
1. Charging of interest under sections 234B and 234C on income computed under section 115JA.
2. Applicability of section 143(1) as substituted with effect from 1-6-1999.
3. Rectification under section 154 for the alleged mistake in charging interest.

Detailed Analysis:

1. Charging of Interest under Sections 234B and 234C on Income Computed under Section 115JA:
The primary issue in this case is whether the Assessing Officer (AO) was justified in charging interest under sections 234B and 234C on the income computed under section 115JA based on book profit while processing the return under section 143(1)(a). The assessee argued that interest under these sections should not be charged when income is computed on the basis of book profit under section 115JA. The AO, however, levied interest under sections 234B and 234C, stating that the assessee had failed to pay advance tax on the said income.

2. Applicability of Section 143(1) as Substituted with Effect from 1-6-1999:
The assessee contended that the provisions of section 143(1) as substituted by the Finance Act, 1999, effective from 1-6-1999, did not allow for the determination of liability towards interest under sections 234B and 234C beyond what was shown by the assessee in the return. The assessee relied on the decision of the Hon'ble Rajasthan High Court in the case of Smt. Premlata Jalani, which held that the claim for enhanced interest under section 234C could not be made under section 143(1) as amended with effect from 1-6-1999.

3. Rectification under Section 154 for the Alleged Mistake in Charging Interest:
The assessee filed an application under section 154 for rectification of the alleged mistake in charging interest under sections 234B and 234C. The AO rejected this application, stating that the assessee had failed to pay the advance tax in respect of income computed under section 115JA, and hence, there was no mistake in charging the interest. The CIT(A) upheld the AO's decision, stating that the interest was charged as per the provisions of section 143(1) as amended with effect from 1-6-1999.

Tribunal's Decision:
The Tribunal considered the rival submissions and reviewed the relevant judicial pronouncements. It noted that in cases where income is computed under section 115JA on the basis of book profit and the assessee fails to pay advance tax, interest under sections 234B and 234C is indeed payable. The Tribunal referred to the decisions of various High Courts, including the Hon'ble Punjab & Haryana High Court in the case of Upper India Steel Mfg. & Engg. Co. Ltd., which upheld the charging of interest under sections 234B and 234C as automatic and mandatory.

The Tribunal distinguished the case of Smt. Premlata Jalani, noting that the facts involved were different and the issue there was debatable due to the peculiar circumstances of capital gains. In contrast, the present case involved no such debate as the liability towards interest under sections 234B and 234C was clear due to the failure to pay advance tax on income computed under section 115JA.

The Tribunal also observed that the provisions of section 143(1)(a) as applicable up to assessment year 1998-99 and section 143(1) as substituted with effect from 1-6-1999 were identical in relevant aspects. Therefore, the decision of the Hon'ble Punjab & Haryana High Court in Upper India Steel Mfg. & Engg. Co. Ltd. was applicable, and the AO was justified in charging interest under sections 234B and 234C.

Conclusion:
The Tribunal upheld the order of the CIT(A), confirming the charging of interest under sections 234B and 234C by the AO. The appeal filed by the assessee was dismissed, affirming that the charging of interest was within the scope of section 143(1) as substituted with effect from 1-6-1999.