2001 (9) TMI 247 - AT - Income Tax

Summary

Issues:
1. Whether the levy of interest under sections 234A, 234B, and 234C by the Assessing Officer without affording an opportunity of hearing to the assessee is justified.
2. Whether the decision of the CIT(A) in setting aside the levy of interest under sections 234A, 234B, and 234C is valid.
3. Whether the principles of natural justice require the Department to grant a hearing before charging interest under sections 234A, 234B, and 234C.

Analysis:
Issue 1: The Revenue appealed against the CIT(A)'s order setting aside the interest levied under sections 234A, 234B, and 234C for the assessment year 1993-94. The CIT(A) held that the Assessing Officer erred in levying interest without affording the assessee an opportunity of being heard. The Revenue contended that the levy of interest is mandatory and does not require a show-cause notice. The Tribunal found merit in the Revenue's argument, citing precedents from the Karnataka and Punjab & Haryana High Courts. The Tribunal held that sections 234A, 234B, and 234C do not require a hearing and upheld the levy of interest.

Issue 2: The CIT(A) set aside the levy of interest based on the decision in M. Mani v. Asstt. CIT and Central Provinces Manganese Ore Co. Ltd. v. CIT, stating that the Assessing Officer should have provided a hearing before levying interest. However, the Tribunal disagreed, emphasizing that the new provisions of sections 234A, 234B, and 234C do not derive from the old system and must be interpreted based on their language. The Tribunal held that the decisions relied upon by the CIT(A) were inapplicable to the current case, and therefore, reinstated the interest levied by the Assessing Officer.

Issue 3: The Departmental Representative argued that the levy of interest under sections 234A, 234B, and 234C is mandatory and does not necessitate a hearing. The Tribunal concurred with this argument, citing judgments from the Karnataka and Punjab & Haryana High Courts. The Tribunal held that the provisions do not require a grant of hearing or relief to the assessee concerning the levy of interest. Consequently, the Tribunal allowed the Revenue's appeal and restored the interest levied by the Assessing Officer in the assessment order.