ITAT Delhi Says Computation Of Mandatory Interest Must Be Examined Before Dismissing Appeal

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that while the levy of interest under the Income Tax Act is statutory and mandatory, an appeal challenging its computation cannot be dismissed without examining the issue on merits.

A coram of Judicial Member Vimal Kumar and Accountant Member Ramit Kochar ruled,

“There is no dispute that the interest is statutory and mandatory, but working /computation could be subject to challenge, if the assessee is so aggrieved, which then need to be worked out as per mandate of the 1961 Act. It is observed that Ld. CIT(A) has dismissed the appeal without checking the computation of working of interest u/s 234A and 234B.”

The dispute arose after the Assessing Officer completed reassessment proceedings and directed the levy of interest. Diamond Piston and Rings Ltd. challenged the levy of interest under Sections 234A and 234B before the Commissioner of Income Tax (Appeals).

The appellate authority dismissed the appeal ex parte after recording that the company had not filed any submissions despite being granted repeated opportunities and seeking adjournments on multiple occasions.

It also held that since the grievance related to the levy of interest rather than the assessment itself, the appropriate remedy was rectification instead of an appeal.

The tribunal found that the appellate authority neither verified the computation of interest nor called for the assessment records before dismissing the appeal, despite having the power to do so. It held that the appellate authority was required to independently examine the issues raised and pass a reasoned order on the merits.

“The appellate order of the CIT(A) is clearly in violation of section 250(6) of the Act and liable to be set aside. Merely dismissing appeal of the assessee for non-appearance/non-prosecution is not sufficient," the tribunal observed.

The tribunal also noted that the company had failed to furnish the requisite details despite repeated opportunities during the appellate proceedings. However, it held that this did not relieve the appellate authority of its obligation to independently examine the issues arising in the appeal and render a reasoned decision on the merits.

The tribunal set aside the appellate order and restored the matter to the Commissioner of Income Tax (Appeals) for fresh adjudication after granting both sides an opportunity of hearing. It clarified that it had expressed no opinion on the merits of the dispute.

For Revenue: Shri Pramod Kumar, Senior Departmental Representative