My assessment order just says 'interest will be charged as per rules'. It never names s.234A, s.234B or s.234C. Is that enough to levy the interest?
The Allahabad High Court held it is not. The direction must be specific and clear, so that the assessee knows the Assessing Officer applied his mind and ordered interest under a particular section; a general direction to charge interest as per rules or as per law is not a specific order and no interest can be levied on it. The Court expressly considered the Supreme Court's order in Karanvir Singh Gossal and held that it does not displace this requirement.
Decided by the High Court (Tarun Agarwala J and Mahesh Chandra Tripathi J) on 2014-07-01, reported as Income Tax Appeal No. 386 of 2007 (High Court of Judicature at Allahabad). It bears on section 234A, section 234B, section 234C, section 80HHC, section 260A of the Income Tax Act 1961, in Assessment & Scrutiny, Appeals, How Tax Law Is Read and Demand, Recovery & Stay matters.
This is the taxpayer's side of a split the library must carry whole. The department answers with Anjum Ghaswala and with the sentence in Karanvir Singh Gossal that a leviable charge under s.234B/234C is mandatory and compensatory. This judgment reads that sentence and holds that it decides the CHARACTER of the levy once attracted, not the manner of levying it: interest is mandatory and compensatory, but the officer must still name the section, failing which no interest can be levied. It also draws the line that the Supreme Court itself drew — the observation that a recitation directing institution of penal proceedings is not obligatory concerns PENALTY, which is 'totally different and distinct from charging interest'. The other side is real: the Chandigarh Bench of the Tribunal in Karanvir Singh Gossal itself upheld interest where the assessment order was silent but Form ITNS 150 of the same date carried the computation. So the practical question is usually whether an ITNS 150 exists and what it says.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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For assessment year 1990-91 the assessee, a dealer in marble goods exporting directly and also selling at the counter of its emporium to foreign tourists in convertible foreign exchange, claimed deduction under s.80-HHC on the counter sales. The Assessing Officer disallowed that part of the claim for want of evidence of customs clearance, and while processing the income also directed that interest would be charged as per the Rules, without naming any section. The first appeal was dismissed. The Tribunal allowed the appeal on the s.80-HHC issue and also reversed the interest, holding that unless there is a specific order under a particular section to levy interest, no interest could be charged, and that the section under which interest was levied had not been mentioned. The Revenue appealed under s.260A, contending that in the light of the Supreme Court's decision in Karanvir Singh Gossal the decision in Ranchi Club Ltd. stood overruled and that, interest under ss.234A, 234B and 234C being mandatory, no specific direction was required.
The Revenue's appeal was dismissed at the admission stage. If interest is leviable under ss.234A, 234B or 234C the levy is mandatory and compensatory in nature, but in order to levy it the Assessing Officer is specifically required to mention the specific section under which interest is charged, failing which no interest can be levied under those sections. A general direction that interest will be charged as per Rules or as per law is not a specific order for levying interest and has no effect.
The Court recorded that the Assessing Officer had directed that "interest would be charged as per rules", and set out the Patna High Court's holding in Ranchi Club Ltd. that the direction in the assessment order must be specific and clear so that the assessee knows the officer has applied his mind and ordered interest under a particular section, that a general direction to charge interest as per Rules or as per Law is not such an order, and that where such a general direction is given it has no effect and no interest is leviable — noting that the Patna decision was affirmed by the Supreme Court in CIT v. Ranchi Club Ltd. (2001) 247 ITR 209. It then reproduced the passage from Karanvir Singh Gossal on which the Revenue relied, in which the Supreme Court noted the earlier conflict among High Courts, recorded that the appeals against the Patna judgment had been dismissed by a three-Judge Bench while Anjum Ghaswala was a five-Judge Bench, and held that after Anjum Ghaswala a leviable charge under s.234B/234C is mandatory and compensatory and that a recitation directing institution of penal proceedings is not obligatory. The Court examined Anjum Ghaswala and found it to concern the Settlement Commission's power to reduce or waive interest under s.245D(4) and (6), which it held the Commission does not have except to the extent of relief under the Board's circulars and s.119. Having considered Karanvir Singh Gossal, the Court held that the position of law propounded in Ranchi Club Ltd. does not change and that decision still holds the field, and distinguished penalty as a matter totally different and distinct from charging interest, for which no specific direction is needed.
If interest is leviable under Sections 234-A, 234-B or 234-C of the Act, then such levy of interest is mandatory and compensatory in nature, but, in order to levy interest under these Sections the assessing officer is specifically required to mention the specific section of charging interest, failing which, no interest could be levied under those Sections.
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Handle my notice → Ask a CA on WhatsAppThe Allahabad High Court held it is not. The direction must be specific and clear, so that the assessee knows the Assessing Officer applied his mind and ordered interest under a particular section; a general direction to charge interest as per rules or as per law is not a specific order and no interest can be levied on it. The Court expressly considered the Supreme Court's order in Karanvir Singh Gossal and held that it does not displace this requirement. This was decided by the High Court (Tarun Agarwala J and Mahesh Chandra Tripathi J) and bears on section 234A, section 234B, section 234C, section 80HHC, section 260A of the Income Tax Act 1961. It is reported as Income Tax Appeal No. 386 of 2007 (High Court of Judicature at Allahabad). This is the taxpayer's side of a split the library must carry whole. The department answers with Anjum Ghaswala and with the sentence in Karanvir Singh Gossal that a leviable charge under s.234B/234C is mandatory and compensatory. This judgment reads that sentence and holds that it decides the CHARACTER of the levy once attracted, not the manner of levying it: interest is mandatory and compensatory, but the officer must still name the section, failing which no interest can be levied. It also draws the line that the Supreme Court itself drew — the observation that a recitation directing institution of penal proceedings is not obligatory concerns PENALTY, which is 'totally different and distinct from charging interest'. The other side is real: the Chandigarh Bench of the Tribunal in Karanvir Singh Gossal itself upheld interest where the assessment order was silent but Form ITNS 150 of the same date carried the computation. So the practical question is usually whether an ITNS 150 exists and what it says. If it applies to you, the first step is this: Read the assessment order for the exact words used and quote them in the ground of appeal; 'as per rules', 'as per law' and 'charge interest' are the formulations this line strikes down.
For assessment year 1990-91 the assessee, a dealer in marble goods exporting directly and also selling at the counter of its emporium to foreign tourists in convertible foreign exchange, claimed deduction under s.80-HHC on the counter sales. The Assessing Officer disallowed that part of the claim for want of evidence of customs clearance, and while processing the income also directed that interest would be charged as per the Rules, without naming any section. The first appeal was dismissed. The Tribunal allowed the appeal on the s.80-HHC issue and also reversed the interest, holding that unless there is a specific order under a particular section to levy interest, no interest could be charged, and that the section under which interest was levied had not been mentioned. The Revenue appealed under s.260A, contending that in the light of the Supreme Court's decision in Karanvir Singh Gossal the decision in Ranchi Club Ltd. stood overruled and that, interest under ss.234A, 234B and 234C being mandatory, no specific direction was required. The matter was decided on 2014-07-01 by the High Court (Tarun Agarwala J and Mahesh Chandra Tripathi J). On those facts the High Court held as follows. The Revenue's appeal was dismissed at the admission stage. If interest is leviable under ss.234A, 234B or 234C the levy is mandatory and compensatory in nature, but in order to levy it the Assessing Officer is specifically required to mention the specific section under which interest is charged, failing which no interest can be levied under those sections. A general direction that interest will be charged as per Rules or as per law is not a specific order for levying interest and has no effect.
The Court recorded that the Assessing Officer had directed that "interest would be charged as per rules", and set out the Patna High Court's holding in Ranchi Club Ltd. that the direction in the assessment order must be specific and clear so that the assessee knows the officer has applied his mind and ordered interest under a particular section, that a general direction to charge interest as per Rules or as per Law is not such an order, and that where such a general direction is given it has no effect and no interest is leviable — noting that the Patna decision was affirmed by the Supreme Court in CIT v. Ranchi Club Ltd. (2001) 247 ITR 209. It then reproduced the passage from Karanvir Singh Gossal on which the Revenue relied, in which the Supreme Court noted the earlier conflict among High Courts, recorded that the appeals against the Patna judgment had been dismissed by a three-Judge Bench while Anjum Ghaswala was a five-Judge Bench, and held that after Anjum Ghaswala a leviable charge under s.234B/234C is mandatory and compensatory and that a recitation directing institution of penal proceedings is not obligatory. The Court examined Anjum Ghaswala and found it to concern the Settlement Commission's power to reduce or waive interest under s.245D(4) and (6), which it held the Commission does not have except to the extent of relief under the Board's circulars and s.119. Having considered Karanvir Singh Gossal, the Court held that the position of law propounded in Ranchi Club Ltd. does not change and that decision still holds the field, and distinguished penalty as a matter totally different and distinct from charging interest, for which no specific direction is needed. In the words reproduced by the source cited on this page: "If interest is leviable under Sections 234-A, 234-B or 234-C of the Act, then such levy of interest is mandatory and compensatory in nature, but, in order to levy interest under these Sections the assessing officer is specifically required to mention the specific section of charging interest, failing which, no interest could be levied under those Sections." The decision followed or applied Ranchi Club Ltd. v. CIT (1996) 222 ITR 44 (Patna) — followed; CIT v. Ranchi Club Ltd. (2001) 247 ITR 209 (SC) — relied on as affirming the Patna decision; Karanvir Singh Gossal v. CIT (2012) 349 ITR 692 (SC) — considered and held not to change the position; CIT v. Anjum M.H. Ghaswala (2001) 252 ITR 1 (SC) — considered and confined to the Settlement Commission's powers; Ram Babu and Sons v. Union of India [1996] 222 ITR 606 (All) and CIT v. Silver & Arts Palace (2003) 129 Taxman 56 (SC) — applied on the s.80-HHC question.
It was decided by the High Court on 2014-07-01 and is reported as Income Tax Appeal No. 386 of 2007 (High Court of Judicature at Allahabad). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 234A, section 234B, section 234C, section 80HHC, section 260A, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The Revenue's appeal was dismissed at the admission stage. If interest is leviable under ss.234A, 234B or 234C the levy is mandatory and compensatory in nature, but in order to levy it the Assessing Officer is specifically required to mention the specific section under which interest is charged, failing which no interest can be levied under those sections. A general direction that interest will be charged as per Rules or as per law is not a specific order for levying interest and has no effect. It arises in Assessment & Scrutiny, Appeals, How Tax Law Is Read and Demand, Recovery & Stay matters, on section 234A, section 234B, section 234C, section 80HHC, section 260A of the Income Tax Act 1961, and was decided by Tarun Agarwala J and Mahesh Chandra Tripathi J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Apply at once for a certified copy of Form ITNS 150 and of the demand notice. If ITNS 150 names the sections and is dated the same day, expect the Revenue to say the order and the form are one document, and be ready on that. Take the point as a ground of appeal against the assessment, framed as an absence of a valid charging direction, and keep it separate from any argument on the merits of the interest computation. Do not overstate the authority. This is a High Court decision that reads the Supreme Court order in Karanvir Singh Gossal as leaving Ranchi Club intact; a different High Court may not, and the Punjab & Haryana line in Vinod Khurana went the other way. Never carry the argument across to penalty. The Court is explicit that penal proceedings need no specific direction.
Validity check could not be completed. Validity check could not be completed; whether this judgment was appealed, followed or doubted was not checked. The conflict it addresses is real and is not confined to a difference between High Courts: the Punjab & Haryana High Court's line in Vinod Khurana v. CIT 253 ITR 578 (P&H) upheld interest where the assessment order was silent, and the Chandigarh Bench of the Tribunal on remand in ITO v. Karanvir Singh Gossal (23 August 2013), read in full on this pass, upheld interest where the s.143(3) order made no mention of it but Form ITNS 150 of the same date set out the computation. Because the tension runs between High Courts, a Tribunal line, and the Supreme Court's own orders in Ranchi Club and Karanvir Singh Gossal, the label 'high courts differ' would misdescribe it; the position is best stated as unresolved, turning heavily on whether an ITNS 150 naming the sections was issued with the order. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment carries NO paragraph numbers of its own; the quote below is identified by position. The block quotation set out in the middle of the judgment is the Supreme Court's language in Karanvir Singh Gossal v. CIT (2012) 349 ITR 692 (SC), reproduced by this Court — it is not this Court speaking, and it must not be cited as a paragraph of this judgment. The Patna decision the Court relies on is Ranchi Club Ltd. v. CIT (1996) 222 ITR 44, which was NOT read on this pass; a different Patna judgment reported at [1996] 217 ITR 72 was read separately and is the subject of its own entry. The judgment describes CIT v. Ranchi Club Ltd. (2001) 247 ITR 209 as a three-Judge Bench decision affirming the Patna High Court; the Supreme Court order at indiankanoon /doc/256318/ (1 August 2000) is indeed a three-Judge Bench but is two sentences long and gives no reasons. The assessment year is 1990-91 and the first question, on s.80-HHC counter sales, is decided on other authority and is not the subject of this entry. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The Revenue's appeal was dismissed at the admission stage. If interest is leviable under ss.234A, 234B or 234C the levy is mandatory and compensatory in nature, but in order to levy it the Assessing Officer is specifically required to mention the specific section under which interest is charged, failing which no interest can be levied under those sections. A general direction that interest will be charged as per Rules or as per law is not a specific order for levying interest and has no effect.
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