Advance tax not payable-Income declared after financial year closure. ITAT deleted interest u/s 234B and 234C on income declared in survey
ABCAUS Case Law Citation:
ABCAUS 1145 (2017) (02) ITAT
The Ground of Appeal:
The only ground that survived for consideration was as under:
That CIT(A) erred in not reducing interest charged under section 234B and 234C of Rs.9,58,591/- as against interest chargeable of Rs.1,66,906/- in the facts and circumstances of the case.
Assessment Year : 2006-07
Date/Month of Pronouncement: February, 2017
Important Case Laws Cited/relied upon:
T.P. Indrakumar vs. ITO, 322 ITR 454 (Karn.)
CIT vs. Anjum M.H. Ghaswala & Ors (SC)
Brief Facts of the Case:
The instant appeal was filed by the assessee against the order of the CIT(A). The assessee was engaged in the business of freight forwarding. There had been a survey at the premises of the assessee on 5.3.2008. During the course of survey, few discrepancies were noticed and the assessee to avoid litigation disclosed/offered a sum of Rs.90 lakhs on account of non deduction of TDS and cash payments.
The Assessing Officer (AO) completed the assessment and levied interest under section 234B and 234C of the Income Tax Act, 1961 (“the Act”) from 1.4.2006 to the date of assessment. The assessee went in appeal before First Appellate Authority (FAA). However, the CIT(A) dismissed the appeal of the assessee.
Contentions of the Appellant assessee:
The assessee contended his ground and raised the question whether the interest had to be levied from the date of survey to the completion of the assessment or from 1.4.2006 to the date of assessment. The assessee placed reliance on the decision of the Hon’ble Karnataka high Court which had held that where the assessee had offered a sum of Rs. 10 lakhs as an additional income in addition to the income already offered in his return only to buy peace with the Department and that had been accepted by the Assessing Officer without further scrutiny, it could not be held that the assessee had defaulted in payment of instalment of advance tax and the addition of income under sections 234A and 234B was not necessary and not justified.
Observations made by the Tribunal:
The Tribunal opined that the levy of interestis mandatory in view of the decision of the Hon’ble Supreme Court in the case of CIT vs. Anjum M.H. Ghaswala & Ors. but the question was whether the assessee was liable to pay interest from 1.4.2006 or not i.e., whether the provisions of section 234B and 234C of the Act were applicable to the facts of the case or not.
The Tribunal noted that it is apparent that the section 234B is applicable only if an assessee is liable to pay advance tax u/s 208 of the Act and has failed to pay the same or where the advance tax paid by such assessee under the provisions of section 210 is less than ninety per cent of the assessed tax. Section 208 of the Act castes duty on an assessee to pay advance tax during the financial year in every case where the amount of such tax payable by the assessee during that year has been computed in accordance with the provisions of Chapter XVII-C is Rs.10,000/- or more. Section 210 of the Act requires the assessee to pay advance tax at his own or in pursuance of the order of the Assessing Officer on or before each of the due dates specified under section 211 of the Act.
The ITAT observed that in the instant case, the relevant assessment year was 2006-07. Survey operation under section 133A was conducted at the business premises of the assessee on 5.3.2008 i.e. after close of the financial year relevant to the assessment year 2006-07. The question has arisen whether the assessee as per the provisions of section 210 read with section 208 for the financial year relevant to the assessment year 2006-07 for which it declared the income on 5.3.2008 was liable to pay advance tax during financial year 2005-06.
It was further noted that the income offered was not in existence during financial year 2005-06 neither as per assessee’s own account or in pursuance of the order of the Assessing Officer under section 210 of the Act, as the income had arisen only when survey had taken place as on 5.3.2008. The assessee could not foresee during financial year 2005-06 that there would be survey in 2008 and as per Revenue, they have found certain discrepancies and assessee will be compelled to disclose income for assessment year 2006-07 to buy peace and avoid litigation. There is no iota of evidence brought by the Revenue that the income offered had actually arose in the assessment year 2006-07. Also, even the provisions of section 209(1) of the Act talks of the payment of advance tax in the financial year.
It was observed that in the financial year neither the assessee could foresee accrual of the income which has arisen as on 5.3.2008 nor the Assessing Officer could have required the assessee to pay advance tax in pursuance of an order made under section 210 of the Act.
Therefore, in view of the facts observed, the Tribunal opined that due to the clear mandate of section 234B (1), since the assessee was not liable to pay advance tax under section 208 or 210, the assessee was not liable to pay advance tax in respect of income which he had declared on 5.3.2008. And since the assessee was not liable to pay advance tax, no question of deferment of advance tax under section 234C of the Act arises.
It was held that in the present case interest cannot be levied under section 234B and 234C. Accordingly, the order of CIT(A) was set aside and the interest was deleted.