Case Details:
Civil Appeal No. 1169/2006
Commissioner of Income Tax (Appellant) vs Bhagat Construction Co. Pvt. Ltd  (Respondent)
Civil Appeal No. 1198/2006
Commissioner of Income Tax (Appellant) vs M.R.G. Plastic Techonologies & Ors (Respondent)
Date of Order : 06-08-2015
Coram: Justice A. K. Sikri and Justice Rohinton Fali Nariman

Case Law Referred:
Commissioner of Income Tax & Ors. v. Ranchi Club Ltd' [(2001) 247 ITR 209]
Kalyankumar Ray v. Commissioner of Income Tax, West Bengal-IV, Calcutta [1992 Supp (2) SCC 424]

Facts of the Case:
In the present case, the assessment order issued by the Assistant Commission of Income Tax, Delhi did not contain any direction for the payment of interest. It merely stated that stated that interest is payable under Section 234B of the Income Tax Act.

The ITAT and the Delhi High Court both held that since no direction had actually been given in the assessment order for payment of interest, the case was covered by the decision of the Supreme Court in Ranchi Club Ltd case and disposed off the appeal.

Contention of the Revenue:
The Income Tax Department advanced three arguments:

(a) that in view of the decision of the Supreme Court in Kalyankumar Ray case, interest under Section 234B is part of Form I.T.N.S. 150 which is not only signed by the assessing officer but it is really part of the assessment order itself.
(b) judgment in Ranchi Club Ltd.'s case is distinguishable inasmuch as it arose only in a writ petition and arose in the context of best judgment assessment whereas on the facts of the present case, there was a shortfall of advance tax that was paid, which, therefore, led to the automatic levy of interest under Section 234B.
(c) Section 234B a provision is parasitic in nature and it applies the moment there is shortfall of advance tax or income tax and also the section is compensatory in nature.

Excerpts from the Judgment:
We have heard learned counsel for the parties. We do not feel the need to go into the various submissions made by Mr. Guru Krishna Kumar as this appeal can be disposed of on a short ground. In a three-Judges Bench decision, viz., 'Kalyankumar Ray v. Commissioner of Income Tax, West Bengal-IV, Calcutta' [1992 Supp (2) SCC 424], this Court took note of a similar submission made by the assessee in that case and repelled it as follows: -

"6. In this context, one may take notice of the fact that, initially, Rule 15(2) of the Income Tax Rules prescribed Form 8, a sheet containing the computation of the tax, though there was no form prescribed for the assessment of the income. This sub-rule was dropped in 1964. Thereafter, the matter has been governed by departmental instructions. Under these, two forms are in vogue. One is the form of, what is described as, the "assessment order", (I.T. 30 or I.T. N.S.65). The other is what described the "Income Tax Computation Form" or "Form for Assessment of Tax/Refund" (I.T.N.S.150). The practice is that after the "assessment order" is made by the ITO, the tax is calculated and the necessary columns of I.T.N.S. 150 are filled up showing the net amount payable in respect of the assessment year. This form is generally prepared by the staff but it is checked and signed or initialled by the ITO and the notice of demand follows thereafter. The statute does not in terms require the service of the assessment order or the other form on the assessee and contemplates only the service of a notice of demand. It seems that while the "assessment order" used to be generally sent to the assessee, the other form was retained on file and a copy occasionally sent to the assessee. I.T.N.S. 150 is also a form for determination of tax payable and when it is signed or initialed by the ITO it is certainly an order in writing by the ITO determining the tax payable within the meaning of Section 143(3). It may be, as stated in CIT v. Himalaya Drug Co. only a tax calculation form for departmental purposes as it also contains columns and code numbers to facilitate computerisation of the particulars contained therein for statistical purposes but this does not detract from its being considered as an order in writing determining the sum payable by the assessee. We are unable to see why this document, which is also in writing and which has received the imprimatur of the ITO should not be treated as part of the assessment order in the wider sense in which the expression has to be understood in the context of Section 143(3). There is no dispute in the present case that the ITO has signed the form I.T.N.S. 150. We therefore, think that the statutory provision has been duly complied with and that the assessment order was not in any manner vitiated."

The Supreme Court judgment in the Ranchi Club Ltd.'s case, is a one line order which merely states: -

"We have heard learned counsel for the appellant. We find no merit in the appeals. The civil appeals are dismissed. No order as to costs."

The High Court judgment which was affirmed by this Court as aforesaid arose in the context of a challenge to the vires of Sections 234A and 234B of the Act. After repelling the challenge to the vires of the two sections, the High Court found that interest had been levied on tax payable after assessment and not on the tax as per the return. Following this Court's judgment in JK Synthetics Ltd. [(1994) 94 STC 422], the High Court held that the assessee is not supposed to pay interest on the amount of tax which may be assessed in a regular assessment under Section 143(3) or best judgment under Section 144 as he is not supposed to know or anticipate that his return of income would not be accepted. The High Court further held that interest is payable in future only after the dues are finally determined.

It will be seen that under the provisions of Section 234B, the moment an assessee who is liable to pay advance tax has failed to pay such tax or where the advance tax paid by such an assessee is less than 90 per cent of the assessed tax, the assessee becomes liable to pay simple interest at the rate of one per cent for every month or part of the month.

Shri Guru Krishna Kumar is right in stating that levy of such interest is automatic when the conditions of Section 234B are met.

We are of the view that the facts of the present case are squarely covered by the decision contained in Kalyankumar Ray's case inasmuch as it is undisputed that contained a calculation of interest payable on the tax assessed. This being the case, it is clear that as per the said judgment, this Form must be treated as part of the assessment order in the wider sense in which the expression has to be understood in the context of Section 143, which is referred to in Explanation 1 to Section 234B.

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