K.K.KANSAL vs. COMMISSIONER OF INCOME TAX

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ITA/157/2004HC Punjab & HaryanaPHHC01051281200413 October 2010Author: MR. JUSTICE AJAY KUMAR MITTAL,MR. JUSTICE ADARSH KUMAR GOEL4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the levy of interest under Sections 234B and 234C of the Income Tax Act, 1961, is mandatory. The Court found the assessee's submission that interest could not be recovered in the absence of a specific direction in the assessment order to be unacceptable. It reasoned that the mandatory nature of these statutory provisions means that the recovery of interest does not depend on the specific language used in the assessment order. The Court noted that the judgments relied upon by the assessee were either decided prior to the Supreme Court's decision in Anjum Ghaswala and others or did not consider it. Therefore, these judgments could not be relied upon to support the argument that interest was not leviable. The Court answered the question against the assessee and in favour of the revenue. The additional ground of appeal in one of the cases was not pressed by the assessee.

What were the facts?

The appeals were filed by the assessee, K.K. Kansal, against the order of the Income Tax Appellate Tribunal (ITAT) concerning assessment years not explicitly stated. The dispute centered on the levy of interest under Sections 234B and 234C of the Income Tax Act, 1961. The assessee had received an incentive bonus from the Life Insurance Corporation, which was treated as taxable income under 'Salary'. The Commissioner of Income Tax (Appeals) [CIT(A)] dismissed the assessee's appeal and rejected the contention regarding the non-levyability of interest. The ITAT upheld the CIT(A)'s view, relying on the Supreme Court's decision in CIT v. Anjum Ghaswala and others. One of the appeals also raised an additional ground challenging the validity of a notice under Section 148, but this ground was not pressed by the assessee.

What were the issues?

1. Whether, in the absence of any specific direction in the assessment order for the levy of interest under Sections 234B and 234C of the Income Tax Act, 1961, the Assessing Officer could still charge such interest while computing the tax liability? (Question of law) Assessee's contention: The assessee argued that Section 156 of the Act mandates that a demand for interest must be raised in pursuance of the assessment order. Therefore, without a specific direction in the assessment order for the levy of interest, it could not be recovered. Reliance was placed on CIT v. Krishan Lal (HUF), V.N. Dubey v. CIT, and Uday Mistanna Bhandar & Complex v. CIT & ors. Revenue's contention: The revenue relied on the Supreme Court's judgment in CIT v. Anjum Ghaswala and others, which held that the levy of interest under Sections 234B and 234C is mandatory.

Which sections of the Income-tax Act were involved?

Section 234B,Section 234C,Section 156,Section 148

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.A. No.157 of 2004 Date of decision: 13.10.2010 K.K. Kansal. -----Appellant. Vs. Commissioner of Income Tax. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:- Mr. D.K. Goyal, Advocate for the appellant. Mr. Sanjeev Kaushik, Sr. Standing Counsel for the respondent. --- ADARSH KUMAR GOEL, J. 1. This order will dispose of I.T.A. Nos.157 and 158 of 2004, as both the appeals have been filed by the same assessee raising common questions of law. While admitting the appeals vide order dated 27.7.2004, following questions were framed:- In I.T.A. No.157 of 2004:- “Whether on the facts and circumstances of the case, in the absence of any direction in the assessment order for levy of interest under Section 234B and 234C of the Income Tax Act, 1961, the Assessing Officer could charge such interest while computing the tax liability? I.T.A. No.157 of 2004 In I.T.A. No.158 of 2004:- “1. Whether on the facts and circumstances of the case, in the absence of any direction in the assessment order for levy of interest under Section 234B and 234C of the Income Tax Act, 1961, the Assessing Officer could charge such interest while computing the tax liability? 2. Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal was justified in not entertaining the additional ground of appeal raised before it challenging the validity of notice under Section 148 of the Income Tax Act, 1961?” 2. Learned counsel for the assessee states that he does not press question No.2 in I.T.A. No.158 of 2004. 3. Thus, common question in both the appeals which survives for consideration is levy of interest under Sections 234B and 234C of the Act, in absence of any direction in the

assessment order.

4.

The assessee received incentive bonus from Life Insurance Corporation which was held to be taxable under the head of ‘Salary’. Appeal of the assessee was dismissed by the CIT(A). The CIT(A) also rejected the contention that interest was not leviable under Sections 234B of the Act. The Tribunal, on further appeal, upheld the said view relying upon judgment of the Hon’ble Supreme Court in CIT v. Anjum Ghaswala and others [2001] 252 ITR 1. 5. We have heard learned counsel for the parties.

6.

Learned counsel for the assessee submits that since in the order of assessment, there is no direction for recovering interest, the interest could not be recovered. He submits that Section 156 of the Act provides for demand being raised for interest in pursuance of the assessment order and thus, without assessment order containing a direction for levy of interest, levy of interest under Sections 234B and 234C of the Act was not permissible. Reliance has been placed on CIT v. Krishan Lal (HUF) [2002] 258 ITR 359 (Delhi), V.N. Dubey v. CIT [2008] 10 DTR 175 (MP) and Uday Mistanna Bhandar & Complex v. CIT & ors. [1996] 222 ITR 44 (Patna).

7.

We are unable to accept the submission. It has been held by the Hon’ble Supreme Court in Anjum Ghaswala and others that levy of interest under Sections 234B and 234C of the Act is mandatory. Mere non-mention of levy of interest in the order of assessment cannot render the said statutory provision nugatory. The interest being mandatory and not discretionary, the recovery thereof does not depend on the language of the assessment order. The judgments relied upon are either prior to judgment of the Hon’ble Supreme Court in Anjum Ghaswala and others or do not consider the Supreme Court judgment. The said judgments cannot, thus, be relied upon to hold that the levy of interest under Sections 234B and 234C of the Act was not permissible in absence of mention of levy of interest in the assessment order.

8.

Accordingly, we answer the question against the assessee and in favour of the revenue.

9.

The appeals are dismissed. (ADARSH KUMAR GOEL) JUDGE October 13, 2010 ( AJAY KUMAR MITTAL ) ashwani JUDGE 4

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