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Facts
The assessee, a trust, filed a return of income declaring 'NIL' income. The AO made an addition for anonymous donations. The AO calculated interest under Sections 234A and 234B but did not explicitly mention it in the assessment order. Subsequently, the AO issued a rectification order under Section 154 to levy surcharge and revise the interest. The CIT(A) upheld the rectification.
Held
The Tribunal held that the levy of interest under Section 234A and 234B is mandatory and automatic. The Supreme Court's decision in Anjum MH Ghaswala (supra) was relied upon, stating that even if the AO does not explicitly mention the charging of interest in the assessment order, the calculation in the computation sheet is sufficient. The rectification order was therefore considered valid.
Key Issues
Whether the charging of interest under Section 234A and 234B, even if not explicitly mentioned in the assessment order but calculated in the computation sheet, can be rectified under Section 154.
Sections Cited
143(1), 143(2), 142(1), 12A, 80G, 143(3), 115 BBC, 154, 234A, 234B, 234, 156, 250(6), 234C
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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI R. K. PANDA & SHRI VINAY BHAMORE
Assessee by : Shri Prateek Jha Revenue by : S/Shri Ajay Kumar Keshari & Milind Debaje Date of hearing : 23.04.2025 Date of pronouncement : 22.07.2025 आदेश / ORDER
PER VINAY BHAMORE, JM:
This appeal filed by the assessee is directed against the order dated 13.09.2024 passed by Ld.CIT(A)/NFAC for the assessment year 2016-17.
The assessee has raised the following grounds of appeal :-
1. On the facts and circumstance previeling in the case, the Honorable CIT Appeal (NFAC) has erred in confirming the order passed u/s 154 rws 143(3) of the Income Tax Act dated 2 21.10.2021 passed by Dy.CIT Exemption Aurangabad on 21.10.2021 in as much as he did not considered the grounds of appeal in fair and judicious manner.
2. On the facts and circumstance previeling in the case, the Honorable CIT Appeal (NFAC) has erred in confirming the order passed u/s 154 rws 143(3) of the Income Tax Act dated 21.10.2021 passed by Dy.CIT Exemption Aurangabad on 21.10.2021 in as much as he did not consider facts that the JAO has charged interest u/s 234A and 234B without assuming the Jurisdiction even though, the mistake was not apparent from record to be rectified u/s 154 of the Income Tax Act.
3. On the facts and circumstance previeling in the case, the Honorable CIT Appeal (NFAC) has erred in confirming the order passed u/s 154 rws 143(3) of the Income Tax Act dated 21.10.2021, even though, the claim of the appellant raised in grounds of appeal was supported with the Judicial decisions delivered by the honorable ITAT in the cases of Rushikesh Balbhim Pathare v/s ACIT and Akshar Udyog Ahmednagar v/s ACIT. Thus, the Hon'ble CIT Appeal has not maintained Judicial discipline even though, the aforesaid decision delivered by Hon'ble ITAT Pune was having binding force.
On the facts and circumstance previeling in the case, the ld. CIT A (NFAC), has erred in dismissing the ground of appeal in regard to charging of interest u/s 234A, 234B of the Income Tax Act that, the JAO DCIT Exemption has charged interest by passing the order u/s 154 even though there was no mistake 3 apparent from the record which could be cured u/s 154 as per the legal narratives.
5. On the facts and circumstance previeling in the case, the ld. CIT A (NFAC), has erred in non adjudication of legal grounds as per section 250(6) when he is duty bound to decide each and every ground of appeal raised by the assessee in appeal either legal or on facts. In the present appeal the CIT A (NFAC) has not given due consideration on the Judicial pronouncement delivered by Jurisdictional Courts.(Ram Vinod Agrawal v/s CIT ITAT Pune SMC Pune) It is requested that the interest charged u/s 234A and 234B may kindly be deleted.
Facts of the case in brief are that the assessee is a trust furnished its return of income on 05 November 2016 declaring income at Rs.NIL. The return was processed under section 143(1) of the Income Tax Act. The case was selected for scrutiny under CASS. Statutory notices under section 143(2) and 142(1) were issued and served upon the assessee. The trust is registered under section 12A and section 80G of the Income Tax Act. The assessing officer completed assessment under section 143(3) of the income tax act on 22 December 2018 and made addition of Rs.2,79,02,790/- on ad-hoc basis towards anonymous donation to be taxed under section 115 BBC of the Income Tax Act, since 4 assessee trust was unable to provide complete details of donors. In the computation sheet attached to the assessment order the assessing officer calculated interest under section 234A of ₹ 3,44,352 and interest under section 234B of ₹ 28,40,904, however in the assessment order nothing was mentioned regarding charging of interest under section 234A and section 234B of the Income Tax Act. The Demand raised in this assessment order of ₹ 1,17,94,108 was deposited by the assessee. Subsequently it was found by the AO that the income of the assessee is more than Rs.1 crore therefore applicable 12% surcharge remained to be levied in the computation of income and calculation of interest under section 234A and 234B also needs to be revised accordingly. Hence the AO issued notice under section 154 of the Income Tax Act. Since the assessee remained absent learned assessing officer passed rectification order on 21 October 2021 and Levied surcharge at the rate of 12% and also revised interest calculation u/s.234A to ₹ 3,86,264 and interest u/s.234B to ₹ 31,86,677/-. Against the above rectification order, the assessee preferred appeal before the learned CIT(Appeal)[NFAC].
5 4. After considering the reply of the assessee learned CIT appeal dismissed the appeal by observing as under “6.3 I have carefully perused the matter. This is mistake apparent from record. Charging of interest is mandatory not optional or discretionary. In the assessment order the assessing officer has stated issue demand notice, if there is an error in computation of demand it is mistake apparent from record. Interest under section 234A and 234B is leviable as per law and error in computation of demand can be rectified under section 154 of the Income Tax Act.”
4.1 It is this order against which the assessee is in appeal before this Tribunal.
Learned AR appearing from the side of the assessee submitted before us that the order passed by learned CIT(Appeal)[NFAC] is unjustified. Learned AR submitted before us that the assessing officer has not mentioned anything in the body of assessment order regarding charging of interest under section 234 A and 234B of the Income Tax Act and therefore imposition of interest under section 234A and 234B of the Income Tax Act and further revision of above interest amount in 154 rectification proceeding is not correct. In support of this contention learned AR relied on the order passed by the coordinate bench of 6 this tribunal in the case of Rishikesh Balbhim Pathare Vs. ACIT Ahmednagar & Akshar Udyog V ACIT Ahmednagar passed in & 2007 /PUN/2017 order dated 04-11-2019. Wherein by relying on other coordinate bench decision passed in the case of Heritage project wherein reliance was made on the judgement passed by Hon’ble High Court of Patna in the case of CIT versus Ranchi club, it was held that when the assessment order is silent if any interest is leviable, the notice of demand under Section 156 of the Act cannot go beyond the assessment order and the assessee cannot be served with any such notice demanding interest.
5.1 Learned AR further relied on the judgement passed by Hon’ble High Court of Himachal Pradesh in the case of Commissioner of Income Tax, Shimla Vs. M/s.Ruchira Papers Ltd., in of 2006 order dated 19 September 2012 in support of its contentions. Accordingly learned AR requested before the bench to set aside the order passed by learned CIT(Appeal) and further requested to hold that the order passed under section 154 of the Income Tax Act is without jurisdiction 7 and also requested to delete the interest charged under section 234A and 234B of the Income Tax Act.
5.2 Learned DR appearing from the side of the Revenue relied on the orders passed by subordinate authorities and requested to confirm the same. Learned DR further placed heavy reliance on the judgement passed by Hon’ble Supreme Court in the case of ANJUM MH GHASWALA Vs. CIT 252 ITR 1 which was also referred in the case law, CIT Shimla Vs. M/s.Ruchira papers relied on by the Counsel of the assessee. Learned DR further submitted that the decision of coordinate bench of this tribunal passed in the case of Rishikesh Balbhim Pathare which was relied on by the Counsel of the assessee refers to the judgement passed by Hon’ble Patna High Court in the case of CIT versus Ranchi club, which was later affirmed by Hon’ble Supreme Court which involves 3 Judges whereas the Judgement passed by Hon’ble Supreme Court in Anjum MH Ghaswala was a 5 Judge full bench Judgement & was passed subsequent to the judgement of CIT V Ranchi Club Ltd. Accordingly, it was prayed by learned DR that the subsequent and full bench judgement should be followed by the tribunal and 8 since it was held in the above full bench judgement that the levy of interest u/s. 234 is mandatory, therefore the rectification order passed by the Assessing Officer (AO) was correct & accordingly the appeal filed by the assessee may kindly be dismissed. It was further argued by the learned DR that in the instant case interest under section 234A and 234B was already imposed in the computation sheet annexed with the assessment order & the same was deposited by the assessee without disputing the same and subsequently it was only revised due to imposition of surcharge. Accordingly it was submitted that there was no error in the rectification order passed by the AO which was rightly confirmed by Ld.CIT(A)[NFAC].
We have heard the Learned counsels from both the sides and perused the material available on record including the case laws relied on by both the parties. In this regard we find that it is undisputed fact that in the original assessment order nothing was mentioned regarding charging of interest under section 234A and 234B of the Income Tax Act, however it is also undisputed that the assessing officer has charged and calculated interest under section 9 234A and 234B of the Income Tax Act, in the computation sheet annexed with the assessment order. It is also admitted fact that the assessee has accepted the original assessment order & the demand which includes interest u/s.234A & 234B which was duly mentioned in the computation sheet annexed to the assessment order & deposited the same. Subsequently when the assessing officer found that the surcharge remained to be imposed he issued notice under section 154 of the Income Tax Act for imposition of surcharge and revision of interest already calculated under section 234A and 234B of the Income Tax Act on the basis of additional demand due to imposition of surcharge . In this regard we also find that various notices were issued by the assessing officer to the assessee to furnish its reply to 154 proceedings however the assessee did not comply to any of the notices which compelled the assessing officer to pass rectification order under section 154 of the Income Tax Act. In this regard we also find that in the computation sheet annexed with the assessment order the assessing officer has already charged interest under section 234A of ₹ 3,44,352/- and also interest of ₹ 28,40,904/- under section 234B 10 which was later on revised in 154 proceedings to ₹ 3,86,264/- and ₹ 31,86,677/- respectively due to addition of surcharge amount. When the assessee approached before learned CIT appeal the appeal filed by the assessee was dismissed by observing that the assessing officer has simply revised the interest already calculated under section 234A and 234B of the Income Tax Act and there is no error in rectifying the amount of interest already imposed.
However, before u/s., learned AR for the assessee placed heavy reliance on the order of coordinate bench of this tribunal passed in the case of Rishikesh Balbhim Pathare Vs. ACIT & M/s.Akash Udyog Vs. ACIT both order dated 04-11-2019 passed in & 2007/PUN/2017 & also relied on the judgement passed by Hon’ble High Court of Himachal Pradesh in the case of CIT Shimla versus Ruchira Papers Ltd., order dated 19-09-2012. In both the above orders reliance was placed on the judgement of Hon’ble High Court of Patna full bench CIT versus Ranchi club Ltd (supra) wherein the imposition of interest under section 234A and under section 234B of the Income Tax Act was held to be invalid on the footing that the assessing officer failed to mention 11 anything about charging of interest in the assessment order & against which the appeal of revenue was dismissed by Hon’ble Supreme Court. On the other hand learned DR vehemently argued that the judgement of Anjum MH Ghaswala(supra) was subsequent and constitutional bench judgement consisting of 5 judges of Hon’ble Supreme Court describes the correct law wherein it was held that the levy of interest under section 234A and 234B of the Income Tax Act is statutory and mandatory, therefore according to learned DR, even if AO has not mentioned regarding charging of interest in the assessment order the calculation of interest in the computation sheet annexed to the assessment order cannot be said to be wrong and the interest calculated in the computation sheet cannot be said to be illegal merely on the basis of not mentioning charging of interest in the assessment order.
We gave our thoughtful consideration to the rival contentions and also perused the judgements relied on by both the parties. In this regard we find that the in the judgement passed by Hon’ble Supreme Court constitutional bench consisting of 5 judges in the 12 case of Anjum MH Ghaswala (supra) in sum & substance it was held by Hon’ble Supreme Court as under : “26. Next, the Commission has elaborately discussed the object of introduction of Chapter XIX-A, the history behind the introduction and schematic rationalisation of the provisions of Chapter XIX-A brought about through Finance Act, 1987, to hold that in exercising its power under Chapter XIX-A it has almost an unbridled power to arrive at a settlement. This exercise of purposive interpretation by looking into the object and scheme of the Act and legislative intendment would arise, in our opinion, if the language of the statute is either ambiguous or conflicting or gives a meaning leading to absurdity. We do not find any such problem in the provisions of the Act to which we have already referred to. Sections 234A, 234B and 234C in clear terms impose a mandate to collect interest at the rates stipulated therein. The expression 'shall' used in the said section cannot by any stretch of imagination be construed as 'may'. There are sufficient indications in the scheme of the Act to show that the expression 'shall' used in sections 234A, 234B and 234C is used by the Legislature deliberately and it has not left any scope for interpreting the said expression as 'may'. This is clear from the fact that prior to the amendment brought about by the Finance Act, 1987, the Legislature in the corresponding section pertaining to imposition of interest used the expression 'may' thereby giving a discretion to the authorities concerned to either reduce or waive the interest. The change brought about by the Amending Act (Finance Act, 1987) is a clear indication of the fact that the intention of the Legislature was to make the collection of statutory interest mandatory. In this connection, we may usefully refer to the 13 judgment of this Court in Jaywant S. Kulkarni v. Minochar Dosabhai Shroff AIR 1988 SC 1817 wherein this Court held that when the Legislature changes the expression 'may' to 'shall' by amendment of the statute, it is clear that it intended to make the provision mandatory from the existing directory provision. Therefore, the question of the Commission relying upon external aids for the purpose of interpretation like Wanchoo Committee Report, Discussions of Select Committee of Parliament and introduction of Chapter XIX-A in the Act, Press Release of the Board dated 21-5- 1996, etc., are purposeless because of the clear and unambiguous language used in sections 234A, 234B and 234C and section 245D(4) and (6). We notice if only the Commission were to follow the golden rule of interpretation by giving the words of the statute their natural and ordinary meaning without unnecessarily going into a forensic exercise of trying to find out the object of the introduction of Chapter XIX-A or Part F of Chapter XVII, the Commission would not have fallen in error.
We find recently Hon’ble Supreme Court in the case of Mansarovar Commercial (P.) Ltd. v. Commissioner of Income-tax [2023] 149 taxmann.com 178 (SC) order dated 10-04-2023, under identical facts dismissed the appeal filed by the assessee by observing as under :- “12. Insofar as the submission on behalf of the respective assessees regarding levy of interest and the submission on behalf of the assessees that in absence of any specific order passed in the 14 assessment order to levy interest, the interest could not have been levied, is concerned, the said issue as such is concluded against the assessees in view of the Constitution Bench decision of this Court in the case of Anjum M.H. Ghaswala (supra) as well as the subsequent decision in the case of Karanvir Singh Gossal (supra). The ITAT relied upon the decision of the Patna High Court in the case of Ranchi Club Ltd. (supra), however, the decision of the Patna High Court in the case of Ranchi Club Ltd. (supra) is held to be not good law, in view of the Constitution Bench decision of this Court in the case of Anjum M.H. Ghaswala (supra).
12.1 In the case of Anjum M.H. Ghaswala (supra), while dealing with the interest under the provisions of Sections 234A, 234B and 234C of the Income-tax Act, 1961, it is observed and held that the interest contemplated under the said provisions is mandatory in nature and the power of waiver or reduction has not been expressly conferred on the Commission. The same indicates that insofar as the payment of statutory interest is concerned, the same is outside the purview of the settlement contemplated in Chapter XIX-A of the Act. In the present case also, the levy of interest under section 234A for default in furnishing the return of income is mandatory and automatic. Section 234A of the Act provides that where the return of income for any assessment year is furnished after the due date or is not furnished, the 15 assessee shall be liable to pay simple interest. Thus, interest under section 234A is statutory interest leviable and payable and therefore the decision of this Court in the case of Anjum M.H. Ghaswala (supra) shall be applicable with full force. Therefore, when the interest is levied as per the workings mentioned in ITNS 150 which is forming part of the assessment order, it is rightly held to be sufficient and good enough to charging interest. (See decision of this Court in the case of Bhagat Construction Co. (P.) Ltd. (supra)).”
From the perusal of above order, it becomes crystal clear that the judgement of CIT versus Ranchi Club Ltd.,(supra) was held not to be a good law in view of constitutional bench judgement passed in the case of Anjum MH Ghaswala supra and accordingly respectfully following the judgement passed in the case of Mansarovar Commercial (P.) Ltd. v. Commissioner of Income-tax [2023] 149 taxmann.com 178 (SC) order dated 10-04-2023, we hold that there is no infirmity in the order passed by learned CIT(Appeal)[NFAC] wherein he dismissed the appeal filed by the assessee as per the intent of Hon’ble Supreme Court expressed in the case of Anjum MH Ghaswala(supra) that the levy of interest u/s 234 A & 234 B is mandatory in nature & therefore there is no 16 error in passing rectification order by the AO. Accordingly, all the grounds raised by the assessee fails and the appeal filed by the assessee is dismissed.
In the result, the appeal filed by the assessee in is dismissed.