TMI Blog2008 (5) TMI 385X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent No. 1. By the former order, dated March 31, 1993, respondent No. 1 had computed the taxable income of the assessee and had charged an interest under sections 234A, 234B and 234C of the Income-tax Act, 1961 (in short, "the Act"). By the latter order, dated April 11, 2001, respondent No. 1 had revised the total taxable income of the assessee and had created a demand of Rs. 37,795. A computation sheet attached with order dated April 11, 2001, reveals that interest was levied under sections 234A, 234B and 234C of the Act. 2. The brief facts of the case are that the assessee was carrying on the business of manufacturing of jewellery. According to the assessee, he was regularly submitting his returns to the Income-tax Department. For the assessment year 1990-91, the assessee had declared his income as Rs. 45,000. However, on September 17, 1989, his residential premises were searched by the officers of the Income-tax Department and certain documents were recovered. On the basis of the documents, a notice under section 143(2) of the Act was issued to the assessee. The assessee had appeared before respondent Na 1 from time to time. However, vide order dated March 31, 1993, resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... April 11, 2001, are non-speaking orders. For, the orders do not specifically mention that the interest is being levied under sections 234A, 234B and 234C of the Act. Secondly, neither of these two orders reveals the "satisfaction" of respondent No. 1 for levying interest under the afore mentioned sections of the Act. Thirdly, it is not sufficient in the eyes of law for the orders to merely read "charge interest as per law". According to learned counsel, the requirement of law is that the specific provisions of the Act have to be mentioned and the interest has to be computed and mentioned in the order itself. Fourthly, in case, the orders do not mention the specific provision of law under which the interest is being levied, then interest cannot be levied by the Department. In order to buttress his contentions, learned counsel for the assessee has relied upon the cases of Ranchi Club Ltd. v. CIT [1996] 217 ITR 72 (Patna), CIT v. Ranchi Club Ltd . [2001] 247 ITR 209 (SC), Smt. Tej Kumari v. CIT [2001] 247 ITR 210 (Patna) [FB], CIT v. Autolite (I) P. Ltd . [2002] 256 ITR 303 (Raj) and Zakir Hussain v. CIT [2006] 202 CTR 40 (Raj). 5. On the other hand, Mr. J. K. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st is to be charged as indicated in the said provisions. In order to buttress his contention, learned counsel has relied upon the case of CIT v. Anjum M. H. Ghaswala [2001] 252 ITR 1 (SC). 9. Fifthly, learned counsel have distinguished the present case from the cases relied upon by learned counsel for the assessee. Learned counsel has contended that the case of Ranchi Club Ltd. v. CIT [1996] 217 ITR 72 decided by the Patna High Court and, subsequently, upheld by the hon'ble Supreme Court in the case of CIT v. Ranchi Club Ltd. [2001] 247 ITR 209, did not deal with the assessment order, but with the demand notice. More over, in the case of Ranchi Club Ltd. v. CIT [1996] 217 ITR 72 (Patna), the assessment order did not reveal the fact that interest would be charged. Yet still, a demand notice was issued where the interest was charged. However, in the present case, the assessment order clearly mentions that interest shall be charged. Therefore, the decision rendered in the case of Ranchi Club Ltd. v. CIT [1996] 217 ITR 72 by the Patna High Court is distinguishable from the present case. Similarly, the other cases, namely, Autolite (I) P. Ltd. [2002] 256 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court as the apex court had dismissed the civil appeal in limine arising from the decision of the Patna High Court. In the case of Smt. Tej Kumari [2001] 247 ITR 210, the position with regard to the dismissal of the said civil appeal by the apex court was duly explained. Thus, it seems that the case of Ranchi Club Ltd. [1996] 217 ITR 72 decided by the Patna High Court is the bedrock of the entire contention of learned counsel for the assessee. Therefore, let us turn to the case of Ranchi Club [2001] 247 ITR 209 (Sc). 14. The Ranchi Club Ltd. was a company registered under the companies Act. It had challenged the validity of the assessment order and the consequential demand notice under the Act for the assessment year 1991-92, so far as it related to the levy of interest. It had also challenged the vires of sections 234A and 234B of the Act. However, we need not be concerned with the vires of the said two sections, as the said issue is not involved in the present case. Although, with respect, the factual matrix of the case is unclear, but it seems that the Ranchi Club had filed a return for the assessment year 1991-92 on August 19, 1992. It had clearly declare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in dispute as being includible within taxable income or not, the mere issue (sic) of notice under section 142 will not confer jurisdiction upon the authority to levy interest". Lastly, the court held, "in my considered opinion, therefore, the necessary conditions as required under section 234A are not made out in the instant case and, therefore, the levy of interest is not justified". 16. The case of Ranchi Club (supra) is inapplicable on the present case. For, there are material differences between the two cases. Firstly, in Ranchi Club case (supra), the assessee had clearly mentioned that the point of tax ability of income generated under the heading of "entrance fee" is a questionable proposition. Although it had clearly mentioned the generation of Rs.1,58,000 as the amount generated from "entrance fee" but it had argued that the same is not taxable on the principle of mutuality. More over, since the issue was still alive between the assessee and the Revenue, the assessee did not want to concede this point before the Revenue. But, in the present case, there is not a single item that is debatable between the assessee and the Revenue. Secondly, in Ranchi Club's case (supra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gated to the demand notice. Furthermore, since these statutory requirements were not complied with, the assessee had argued that the assessment order should be held to be void and consequently annulled. However, dismissing the contention raised by the petitioner, the hon'ble Supreme court has held as under (page 638 of 191 ITR): "The statute does not, however, require that both the computations (i.e., of the total income as well as of the sum payable) should be done on the same sheet of paper, the sheet that is superscribed 'assessment order'. It does not prescribe any form for the purpose. It will be appreciated that once the assessment of the total income is complete with indications of the deductions, rebates, reliefs and adjustments available to the assessee, the calculation of the net tax payable is a process which is mostly arithmetical but generally time consuming. If, therefore, the Income-tax Officer first draws up an order assessing the total income and indicating the adjustments to be made, directs the office to compute the tax payable on that basis and then approves of it, either immediately or some time later, no fault can be found with the process, though it is only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d April 11, 2001, also dearly revealed the specific amount to be charged as the interest. Therefore, the contention of learned counsel for the assessee that the specific provisions of law and the amount to be charged as interest, have not been revealed in the assessment order dated March 31, 1993 and in the order dated April 11, 2001, is without force. 21. Prior to the Finance Act, 1987, sections 234A, 234B and 234C of the Act had used the word "may". However, in 1987, the word "shall" was substituted for the word "may". Since, the word "may" has been substituted by the word "shall", such a substitution clearly indicates that the intention of the Legislature was to make the payment of interest mandatory in nature and not merely directory. This view has been confirmed in the case of Anjum M. H. Ghaswala [2001] 252 ITR 1 (SC). Therefore, once the conditions of sections 234A 234B and 234C of the Act are satisfied, the Assessing Officer has no option but to charge the interest at the rate mentioned in the said provisions. Therefore, the contention of learned counsel for the assessee that the Assessing Officer must indicate his "satisfaction" in the assessment order for charging ..... X X X X Extracts X X X X X X X X Extracts X X X X
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