The Commissioner of Income Tax vs Hind Lamps Ltd.

We have heard Shri R.K. Upadhyaya, Standing Counsel, Income Tax Department. Shri R.R. Agarwal appears for the Respondent-Assessee.

In this Income Tax Appeal, the following question of law has been raised:

Whether the Hon''ble Tribunal is correct in law in setting aside the impugned order of the learned CIT (Appeals) on the issue of charging of interest under Sections 234B and 234C of the IT Act, 1961 and in restoring the matter to the file of the Assessing Officer for affording an opportunity to the Assessee of being heard, especially in view of the contrary decision of the Hon''ble Supreme Court in the cases of Commissioner of Income Tax, Mumbai Vs. Anjum M.H. Ghaswala and Others, and Commissioner of Income Tax Vs. Sant Ram Mangat Ram Jewellers and Others, holding that charging interest under Sections 234A, 234B and 234C is mandatory and that these sections in clear terms imposed a mandate to collect interest at the specified rate.

We have gone through the order of Income Tax Appellate Tribunal dated 21.11.2005, and do not find that the Tribunal has decided the question of charging of mandatory interest as determined u/s 234-A, 234-B and 234-C of the Income Tax Act, 1961 to raise it in the grounds in appeal.

As regards grounds Nos. 4, 5 and 6 relating to levy of interest u/s 234B and 234C, it was submitted by learned Counsel for Assessee, that the provision was made by the Assessee company in its books of account for bonus payable to the employees and the said amount was deductible on payment thereof to the employees on or before 30th November, 1996, being the due date for filing of the income tax return. The Assessee could not have anticipated that the said amount of bonus shall remain unpaid upto 30th November, 1996 and it was only because of the refusal of the employees to accept the said bonus that the same remained unpaid. The Tribunal thereafter observed:

...His contention, therefore, is that there was no default being committed by the Assessee company for which it was liable to pay interest u/s 234B and 234C and in the absence of any opportunity having been given by the Assessing Officer, the Assessee company could not put forth its case before him. Relying upon the decision of Delhi Special Bench of ITAT in the case of Motorola Inc. v. DCIT reported in 95 ITD 269, he has contended that the impugned order of the learned CIT (A) on this issue may be set aside and the matter be restored to the file of the Assessing Officer for providing such opportunity to the Assessee. The learned D.R. has not raised any objection to such request of the learned Counsel for the Assessee being acceded to by the Tribunal. We, therefore, set aside the impugned order of the Ld. CIT (A) on this issue and restore the matter to the file of the Assessing Officer for proper adjudication in accordance with law after affording an opportunity to the Assessee of being heard. Ground No. 4, 5 & 6 of the Assessee are treated s allowed for statistical purposes.

The appeal was consequently treated to be allowed by the Tribunal.

Shri R.K. Upadhyaya submits that in Commissioner of Income Tax Vs. Sant Ram Mangat Ram Jewellers and Others, the Supreme Court has held that after pronouncement of judgment in Commissioner of Income Tax, Mumbai Vs. Anjum M.H. Ghaswala and Others, it is not open to re-consider the same as it has been specifically held that the settlement commission has no power to waive mandatory interest as contemplated under Sections 234A, 234B, and 234C of the Income Tax Act.

Shri R.R. Agarwal has, on the other hand, relied upon a Constitution Bench judgment of Supreme Court in Brij Lal and Others Vs. Commissioner of Income Tax, Jalandhar, He submits that the Ghaswala''s case arose out of the proceedings of the settlement commission, and that the effect of the Ghaswala''s case has been diluted by the Supreme Court in Brij Lal''s case.

We do not find that the Tribunal has decided the question of interest, either way. The question has been left open. The representative of the department has not raised any objection to the request of restoration of the matter to the file of the assessing officer. It will thus be open to the assessing officer to consider the question and the charging of mandatory interest as contemplated u/s 234B and 234C of the Act. Since the question of law raised by the department does not arise for consideration, at this stage, we leave the question open to be considered at a later stage, if the occasion may arise.

The Income Tax Appeal is accordingly dismissed.