TMI Blog2001 (9) TMI 247X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 143(3) of the Act, by his order dated 27-3-1996, on a total income of Rs.2,29,380, the Assessing Officer charged interest under section 234A of Rs.30,438; under section 234B of Rs.26,846 and under section 234C upto 3/94 of Rs.2,745. In the appeal preferred against the said assessment, the assessee questioned the above levies of interest on the ground that the Assessing Officer did not issue any show-cause notice and hence violated the principles of natural justice. It was also submitted that income has been brought to tax on estimate basis, and thus notional income has been brought to tax, and therefore, the levy of interest was not warranted. Since the very levy of interest was questioned, the CIT(A) following the decisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r No. 549 dated 30-10-1989 (Explanatory Notes DTA 1987), he submitted that charging of interest under sections 234A, 234B and 234C are mandatory and as such, showcause notice to the assessee was not called for. He also placed reliance on the decisions of the Karnataka High Court in Union Home Products Ltd. v. Union of India[1995] 215 ITR 758; and of the Punjab Haryana High Court in Sant Lal v. Union of India [1996] 222 ITR 375 2 in support of the above proposition. 5. I find merit in the contentions of the Revenue in this appeal. Levy of interest under sections 234A, 234B and 234C is of mandatory nature, and does not call for any opportunity of hearing to be afforded to an assessee. In the case of Union Home Products Ltd , Hon'ble Karna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under each one of these provisions simultaneously for the same period nor can the compensatory nature of the provisions be deemed to have been lost simply because in a given situation the provisions may, on account of their simultaneous application to an assessee, raise the liability to pay interest for the overlapping period to a rate higher than two per cent, per month. So long as the basic character of the levy remains compensatory the rate of interest which is levied either by the provision itself or on account of its dual effect in a given situation will be wholly immaterial. ....................................... Sections 234A, 234B and 234C do not envisage the grant of any hearing or the grant of any relief to the assessee conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 217 forms part of the order of regular assessment and the ITO became functus officio after the order of regular assessment was passed, it may be possible to contend that an omission to make a reference to the penal interest payable under any of those sections would amount to an order which is erroneous and which is amenable to the jurisdiction of the Commissioner under section 263 of the Act. As an order under section 215 or section 216 or section 217 can be passed only after a regular assessment is made, the ITO will not become functus officio in so far as those provisions are concerned on the making of an order of regular assessment, and an omission to make a reference to interest payable under those provisions in the order of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levying interest and the existence of an order which is prejudicial to the interests of Revenue is a precondition to invest the Commissioner with jurisdiction under section 263. Even though there are remarks of the Hon'ble High Court that the Assessing Officer could levy interest under section 217, after granting hearing to the assessee, the issue did not directly crop up before the Hon'ble High Court as to whether grant of hearing opportunity is a precondition for levy of interest tinder section 217. At any rate, the entire discussion in that decision, as also in the. subsequent decision of Karnataka High Court in Century Hotel's (P.) Ltd's case was in the context of levy of interest under section 217 and not, the levy of interest under s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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