CIT vs. Awadh Hotels (P) Ltd (Allahabad High Court)
S. 234A, 234B & 234C interest, though mandatory, is not payable if AO does not direct it to be charged in assessment order
The
AO passed a s. 143(3) assessment order in which he omitted to direct
that interest u/s 234A, 234B & 234C should be levied. The Tribunal,
relying on Ranchi Club Ltd 247 ITR 209 (SC) held that in the absence of a
specific direction, interest was not leviable. Before the High Court,
the department relied on the larger bench decision in Anjum M.H Ghaswala
252 ITR 1 (SC) and argued that as interest u/s 234A, 234B & 234C
was mandatory, there was no need for the assessment order to
specifically direct that interest should be charged. HELD dismissing the
appeal:
In CIT vs. Ranchi Club Ltd 247 ITR 209 (SC) it was held
that the order of the AO in the assessment order to charge interest has
to be specific and clear and the assessee must be made to know that the
AO after applying his mind has ordered charging of interest. In Anjum
M.H. Ghaswala 252 ITR 1 (SC), it was held, in the context of whether the
Settlement Commission could waive interest, that the levy was mandatory
and could not be waived. Subsequently, in Insilco Ltd 278 ITR 1 (SC),
the Supreme Court remanded the matter to decide whether the law laid
down in Ranchi Club had been changed by Anjum M.H. Ghaswala or not.
Ranchi Club Ltd has not been expressly overruled nor has a different
view been taken in Anjum M.H. Ghaswala`s case. There is also no force in
the department's argument that even if assessment order or computation
sheet does not provide for interest, since interest is mandatory, it can
be charged in the demand notice which is signed by the AO. Even if a
provision of law is mandatory and provides for charging of tax or
interest, the view taken in Ranchi Club Ltd is that such charge by the
AO should be specific and clear and assessee must be made to know that
the AO has applied his mind and has ordered charging of interest. The
mandatory nature of charging of interest and the actual charging of
interest by application of mind and the mention of the proviso of law
under which such interest is charged are two different things.
Consequently, if the assessment order is silent, interest u/s 234A, 234B
& 234C cannot be levied.
Dr. R.P. Patel 182 TM 305 (Ker)
& Nilgiri Sleepers 2010 TLR 105 (Pat) are impliedly dissented from.
The same view has been taken in Dehradun Club Ltd (Utt) (included in
file) and Sarin Chemical Laboratory (All) (included in file). For a
thorough discussion of the entire law see Motorola 95 ITD 269 (Del)(SB)
Related Judgements
EMA
India vs. ACIT (Allahabad High Court) The judgement of the Full Bench
of the Delhi High Court in CIT vs. Kelvinator of India Ltd. 256 ITR 1
where it was held that when an order u/s 143 (3) is passed, a
presumption is raised that it has been passed on application of mind and
that…
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assessment year falling within the period of six assessment years
pending on the date of initiation of the search u/s 132 shall abate".
The words "pending on the date of initiation of search" has to be
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