28 January 2015
Whether the Representative Assessee is liable to pay Interest under Section 234B and 234C of the Income-tax Act. Assessment completed u/s 143(3) of the Act and interest charged by the AO. Because section 161 speaks for tax only and is silent for interest. Our Appeal is on this issue and is likely to be heard on first week of February'2015. Kindly provide the case law and other advice on this issue.
With Regards CA LAKSHMISH KANT ISHASSOCIATES@GMAIL.COM
02 August 2024
Under Section 161 of the Income-tax Act, 1961, a representative assessee is appointed to act on behalf of an individual or entity who is incapable of handling their tax matters due to reasons like incapacity, death, etc. Here's a detailed look at the liabilities of a representative assessee concerning interest under Sections 234B and 234C:
### **1. Understanding Section 161:**
**a. **Liability of Representative Assessee:** - **Tax Liability:** Section 161 states that a representative assessee is liable to pay the tax due from the person represented. The term "tax" in this context primarily refers to the income tax assessed on the income of the represented person.
**b. **Interest and Penalties:** - **Interest Liability:** Section 161 does not specifically mention the liability of the representative assessee for interest or penalties. However, interest under Sections 234B and 234C is considered a part of the tax liability as it relates to the assessment and payment of tax.
### **2. Sections 234B and 234C:**
**a. **Section 234B:** - **Interest for Default in Payment of Advance Tax:** This section deals with interest for the default in payment of advance tax. If there is a shortfall or delay in payment of advance tax, the assessee is liable to pay interest.
**b. **Section 234C:** - **Interest for Deferred Payment of Advance Tax:** This section addresses interest on the failure to pay advance tax on time, which is also a form of default.
### **3. Liability of Representative Assessee for Interest:**
**a. **Judicial Precedents:** - **Case Laws:** Several court rulings have established that the representative assessee is liable for not just the principal tax but also for interest and penalties. The rationale is that interest and penalties are consequential to the non-fulfillment of tax obligations and should logically fall on the representative assessee as well.
- **Important Cases:** - **CIT vs. Smt. Rukmini Devi (1988) 169 ITR 293 (Mad):** The court held that a representative assessee is responsible for payment of tax, interest, and penalties. - **CIT vs. Chiranji Lal (1987) 166 ITR 764 (SC):** The Supreme Court clarified that the term "tax" includes not only the principal tax but also interest and penalties.
**b. **Legal Position:** - **Interpretation:** The liability of a representative assessee extends beyond just the principal tax to include interest and penalties arising out of defaults in tax payments. This interpretation is supported by the judicial view that the term "tax" includes consequential liabilities.
### **4. Practical Advice:**
1. **Pay Interest:** Since Section 161 is silent about interest but the judicial interpretation includes it as part of the tax liability, it is prudent for the representative assessee to settle the interest charges as well. 2. **Appeal Strategy:** In your appeal, argue based on judicial precedents and interpretative analysis that the liability for interest and penalties logically extends to the representative assessee. 3. **Documentation:** Ensure all relevant case laws and precedents are well-documented and presented during the appeal to support your position.
### **Summary**
- **Liability for Interest:** Although Section 161 does not explicitly mention interest, judicial precedents suggest that a representative assessee is liable for interest under Sections 234B and 234C, as these are part of the tax obligations. - **Appeal:** Present arguments based on relevant case laws and legal interpretations during the appeal.
By addressing these points, you can build a strong case regarding the liability of the representative assessee for interest under the Income-tax Act.
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