In ITO v. M/s. Heritage Project, the Amritsar bench of the Income Tax Appellate Tribunal (ITAT) held that interest under Section 234A of Income Tax Act cannot be levied in the absence of any direction in the Original Assessment Order. While doing so, the division bench deleted a rectification order passed by the Assessing Officer.
In the original assessment order, the Assessing Officer made certain additions and in the body of assessment order charged interest under Section 234B and has omitted to provide the section under which the assessee was required to pay interest under Section 234A of the Income Tax Act. Subsequently, the Assessing Officer passed a rectification order and asked assessee to pay interest.
On first appeal, the first appellate authority deleted the order has wrongly deleted the demand of interest by holding that the said omission was not rectifiable under Section 154 of the Income Tax Act.
It was argued on behalf of the department that charging of interest is a statutory provision and omission of applying statutory provision is a rectifiable mistake under Section 154 of the Act and reliance was placed on the order of Hon’ble Punjab & Haryana High Court in the case of CIT Vs. Steel Strips Ltd.
Before the Tribunal, the assessee relied on the Apex Court decision in CIT Vs. Ranchi Club Ltd. wherein it was held that in the absence of any specific mention of charging of interest in the assessment order u/s 234A and 234B no interest would be recovered from the assessee merely by way of a demand notice.
The bench noticed that the Delhi High Court followed the above Apex Court decision in CIT Vs. Kishan Lal (HUF) and held that in the absence of any direction in the assessment order for charging interest u/s 234A and 234B interest cannot be recovered.
Considering the above decisions, the bench upheld the order of the first appellate authority and observed that “the Hon’ble Court has held that if there is no direction in the original assessment order, no rectification can be made as there is no mistake apparent from record. The case law relied on by Ld. DR is on a different aspect where the Hon’ble Court has said that omission of application of statutory provision is a mistake rectifiable u/s 154 of the Act whereas in the present case the issue is as to whether interest not charged in the original assessment can be rectified or not and the case law of Hon’ble Supreme Court and other case laws are directly on the issue.”
Read the full text of the Order below.
