Interest u/s 234B and 234C for default in payment of advance tax

Last updated: 11 September 2021

Save Share

Quick Summary

This Income Tax Appellate Tribunal case concerns interest charged under Sections 234B and 234C for delayed advance tax payments. The assessee argued that while cheques were issued before the due dates, bank clearance took longer, meaning the funds weren't technically received by the due date. The Tribunal allowed the appeals, acknowledging the bank's role as an agent and the circumstances of cheque clearance.

Court :
ITAT Delhi

Brief :
The present appeals have been fi led by the assessee against the orders of ld. CIT(A)-20, New Delhi dated 28.02.2018 and 28.03.2018.

Citation :
ITA No. 3594/Del/2018 : Asstt. Year : 2007-08

IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH ‘F’, NEW DELHI
Before Sh. Kul Bharat, Judicial Member
Dr. B. R. R. Kumar, Accountant Member
(Through Video Conferencing)
ITA No. 3594/Del/2018 : Asstt. Year : 2007-08
ITA No. 3595/Del/2018 : Asstt. Year : 2008-09
ITA No. 3596/Del/2018 : Asstt. Year : 2009-10

The Kangra Co-operative Bank Ltd.,
Jain Khandelwal & Co., CA,
510, New Delhi House, 27,
Barakhamba Road,
New Delhi-110001

ACIT,
Circle-62(1),
New Delhi-110002

Assessee by : Sh. S. L. Gupta, CA
Revenue by : Ms. Alka Gautam, Sr. DR
Date of Hearing: 25.08.2021 Date of Pronouncement: 01.09.2021

ORDER

1. The present appeals have been fi led by the assessee against the orders of ld. CIT(A)-20, New Delhi dated 28.02.2018 and 28.03.2018.

2. The assessee contended that the amounts have been indeed paid on 15th September, 14th December and 14th March. The assessee has submitted certif icate from the Punjab National Bank that the cheques issued by the assessee have been deposited and sent for clearing on the same date (i.e. before 15th) but were cleared after the due date (17th and 18th). Hence, he argued that the assessee was not liable to pay interest for default of payment of advance tax.

3. As an agent of his customer, the collecting banker does not possess title to the cheque better than that of the customer. If the customer has no title thereto, or his title is defective, the collecting banker cannot have good title to the cheque. In case the cheque collected by him did not belong to his customer, he will be held liable for conversion of money, i.e., i l legally interfering with the rights of true owner of the cheque.

4. In the result, al l the appeals of the assessee are allowed.
Order Pronounced in the Open Court on 01/09/2021.

Please find attached the enclosed file for the full judgement

FAQ :

The case is about whether interest under Sections 234B and 234C is applicable when advance tax payments were made by cheque before the due date, but the cheques were cleared by the bank after the due date.

The assessee contended that they issued cheques before the due dates, and provided bank certificates to show the cheques were deposited for clearing on the same day. They argued that the delay in clearance by the bank meant they should not be liable for interest.

The Tribunal noted that a collecting banker acts as an agent for its customer and does not have a better title to a cheque than the customer. If the customer's title is defective, the banker's title is also affected.

The Income Tax Appellate Tribunal allowed all the appeals filed by the assessee.