Section 234B Interest Has To Be Charged On The Assessed Income And Not On The Returned Income: Jharkhand High Court

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

The bench of Justice Rongon Mukhopadhyay and Justice Deepak Roshan has observed that, as per Section 234B, 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). As per Explanation 1, “assessed tax” means the tax on the total income determined under sub-Section (1) of Section 143, and where a regular assessment is made, the tax on the total income determined under such a regular assessment is reduced by the amount provided in Explanation-I to Section 234B. Therefore, the interest under Section 234B has to be charged on the assessed income and not on the returned income of an assessee.

The respondent/assessee is an individual deriving income from trading spare parts of motorcars 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. In response to notices, the assessee appeared and produced all books of accounts, papers, and documents. In the course of assessment proceedings, the assessee voluntarily surrendered the long-term capital gain (LTCG) for taxation.

The AO added the entire receipt from the sale of shares, including the cost price and investment made by the assessee, as an unexplained investment.

The assessee brought the matter before the CIT (A). In the appellate proceeding, the CIT (A) upheld the action of the AO and dismissed the appeal of the assessee.

The assessee preferred an appeal before the ITAT. The appeal was allowed and directed the AO to delete the addition and charge the interest under Section 234B on returned income instead of assessed income.

The department contended that with respect to the charging of interest that is prevailing in the whole country, the interest is being charged on the assessed income and not on the returned income.

The assessee contended that the department can levy interest only on the total income declared in the return and not on income assessed by the AO.

The court held that interest has to be charged on the assessed income and not on the returned income.

Counsel For Petitioner: R. N. Sahay

Counsel For Respondent: Ajay Poddar

LL Citation: 2023 LiveLaw (Jha) 66

Case Title: PCIT Versus Manoj Kapoor

Case No.: T.A. No.55 of 2019

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