Commissioner Of Income Tax, Hisar v. Adarsh Kumar Goel,J

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. Income Tax Appeal No.554 of 2008 Date of decision: 20.1.2011-----Appellant Commissioner of Income Tax, Hisar Vs. Smt.Sarbati Devi ----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE AJAY KUMAR MITTAL Present:Mr. K.K.Mehta, Advocate for the revenue. Adarsh Kumar Goel,J. 1.This appeal has been preferred by the revenue under section 260A ofthe Income Tax Act, 1961 (for short, ‘the Act’) against the order of the IncomeTax Appellate Tribunal, Delhi bench “SMC” New Delhi (in short, ‘the Tribunal’)dated 31.10.2007 in ITA No.3625/DEL/2007 for the assessment year 1992-93,raising following substantial questions of law:- “i) Whether on the facts and in the circumstances of the case,the learned ITAT is right in law in directing the AO not tocharge interest under section 234A and 234B aggregating toRs.6,57,893/- charged by the AO without appreciating thatcharging of interest under section 234A and 234B is mandatoryand compensatory as a result of Direct Tax Laws (AmendmentAct) 1989? ii) Whether on the facts and in the circumstances of the case,the appeal was competent before the CIT(A)/ITAT in view ofamendment brought about w.e.f 1.4.1989 in the scheme ofcharging of interest under section 234A and 234B of theIncome Tax Act, 1961? 2. Land of the assessee was acquired under Land Acquisition Act,1894 and compensation was awarded which was enhanced on reference. The assessee was also held entitled to statutory interest. The Assessing Officer issuednotice under section 148 of the Act alleging that the income received by way ofcapital gains escaped assessment. Accordingly, the assessment was made anddemand raised included interest under sections 234A and 234B of the Act. Thesaid demand was upheld by Commissioner of Income Tax (Appeals) {CIT(A} butset aside by the Tribunal and matter was remanded for a fresh decision. Afterremand, the CIT(A) held that interest was not chargeable which finding has beenupheld by the Tribunal as follows:- “I have considered the rival submissions. I am in agreementwith the submission by the learned counsel for the assessee.Interest under section 234A is chargeable provided the assesseewho is required to file his return of income has failed to do sobefore the due date prescribed under section 139(1) of the Act.Similarly interest under section 234B is chargeable provided theassessee fails to pay advance tax as required under section 208of the Act. However, the fact in the present case revealed thatprior to settlement of dispute, the assessee had not earned anyincome subject to taxation except the interest oncompensation/enhanced compensation receivable from LandAcquisition Officer. The dispute was settled only on 30[th] July1996. Thus the assessee is neither liable to file return of incomenor required to pay advance tax on the due date for assessmentyear 1992-93. In the circumstances, the assessee cannot besaddled with liability of interest under section 234A as well asinterest under section 234B. It is to be noted that in complianceto notice under section 148 the return was filed within the timementioned in the notice. Thus, there is no default under section234A of the Act. The assessee has also paid taxes due with thereturn of income. Accordingly, interest under section 234B isalso not chargeable. The assessee could not have visualized infinancial year 1991-92 that the dispute will be resolved and anyadditional compensation will be received which is liable fortaxation. In the circumstances, there was no current incomewithin the meaning of Section 208 on which the assessee canpay advance tax. Accordingly, interest under section 234B is not chargeable. We, therefore, uphold the order of the learnedCIT(A).” 3. We have heard learned counsel for the revenue. None appears for theassessee inspite of service. not chargeable. We, therefore, uphold the order of the learnedCIT(A).” 3. We have heard learned counsel for the revenue. None appears for theassessee inspite of service. 4.Learned counsel for the revenue submits that levy of interest wasmandatory and the Tribunal erred in observing that the assessee had no liability topay tax or to file return till proceedings were pending in the High Court. In view ofamendment to section 45 and judgment of the Hon’ble Supreme Court in CIT v.Ghanshyam ,(2009) 315 ITR 1, taxability of the amount received was in the yearof receipt. In CIT v. M.H.Ghaswala and others, (2001) 252 ITR 1, the Hon’bleSupreme Court interpreted Sections 234B and 234C and held the same to bemandatory. 5.We find merit in the contention raised. The assessee was notfollowing any method of accountancy in absence of which she was liable to betaxed in the year of receipt, particularly after amendment to Section 45(5) as heldby the Hon’ble Supreme Court in Ghanshyam’s case (supra). Liability of interestis mandatory in view of law laid down by the Hon’ble Supreme Court inM.H.Ghaswala’s case(supra). 6.In view of above, questions of law raised by the revenue have to beanswered in its favour. We order accordingly. 7.The appeal is allowed. (Adarsh Kumar Goel) Judge January 20, 2011‘gs’ (Ajay Kumar Mittal) Judge