Interest u/s 234B of Income Tax Act has to be Charged on Assessed Income and not on Returned Income: Jharkhand HC [Read Order]

The Jharkhand High Court observed that the interest under Section 234B of the Income Tax Act, 1961 has to be charged on assessed income and not on returned income.

The instant appeal is directed against the judgment, passed by the Income Tax Appellate Tribunal (ITAT), preferred by the assessee-respondent; wherein the ITAT allowed the appeal of the assessee and reverse the order of CIT appeal who has sustained the addition of income and chargeability of interest passed by the Assessing Officer.

The assessee, Manoj Kumar is an individual and deriving income from trading of spare-parts of motorcar and mobile phones and filed its return of income declaring total income at Rs.6,61,080/- electronically. The case of the assessee was selected for scrutiny assessment.

In response to notices, the Assessee appeared and produced all books of accounts, papers and documents. In course of assessment proceedings, the Assessee voluntarily surrendered the LTCG for taxation. But the A.O added the entire receipt from sale of shares amounting to Rs.10,45,266/- including the cost price/investment made by the Assessee amounting to Rs.5,40,000/- as unexplained investment under Section 69 of the Income Tax Act.

From bare perusal of Section 234B of the Income Tax Act it is crystal clear that the interest has to be charged on an amount equal to the assessed tax or, as the case may be, on the amount by which the advance tax paid as aforesaid falls short of the assessed tax. The term “assessed tax” has been defined in Explanation-1 of Section 234B (1).

A Division Bench of Justices Rongon Mukhopadhyay and Deepak Roshan observed that “In the present case, the ITAT in its impugned judgment, relying on the aforementioned judgment of this Court passed in the case of Ajay Prakash Verma has, erroneously held that the interest under Section 234B of the Income Tax Act could be charged on the returned income and not on the assessed income.

“The ITAT has not even considered the provisions of Section 234B of the Income Tax Act, as applicable during the period of AY 2015- 16, which is relevant to the instant appeal. The said finding of the ITAT is totally contrary to the provisions of Section 234A and 234B as amended by the Finance Act, 2001 and the Finance Act, 2006” the Court concluded.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates