ORDER
C.L. Sethi, J.M.
The department has preferred this appeal against the order dated 19-9-1996, passed by the Commissioner (Appeals) in the matter of an order under section 143(3)/154 of the Income Tax Act, 1961, for the assessment year 1989-90.
2. The issue involved in this appeal is with regard to the charging of interest under sections 234A, 234B and 234C of the Act. The assessing officer did not charge interest under sections 234A, 234B and 234C while completing the assessment under section 143(3) vide his order dated 29-3-1990. Later on, the assessing officer passed an order under section 154 of the Act charging interest under the aforesaid sections by saying that there was a mistake on the part of the assessing officer for not charging interest under the aforesaid sections at the time of passing the original assessment order under section 143(3)/250, dated 2-12-1993. On appeal, the Commissioner (Appeals) directed the assessing officer to delete the element of interest charged under sections 234A, 234B and 234C by forming an opinion that when the assessee was having a sum of Rs. 2 lakhs to his credit and the tax liability is much less than that, there was no justification in charging the interest as aforesaid. Hence, the department is in appeal.
3. There was a search conducted on 2-5-1998, by the department in the premises of T.M. Bank Ltd. and a bank draft of Rs. 2,70,450 purchased by M/s Bharat Galvanising Co. was seized. With regard to the source of money for purchasing the aforesaid draft, the assessee disclosed under section 132(4) of the Act sum of Rs. 2 lakhs showing that the aforesaid Rs. 2 lakhs were utilised for the purpose of purchasing a draft from the bank. Accordingly, the amount of Rs. 2 lakhs was assessed in the hands of the assessee, who is a partner of M/s Bharat Galvanising Co. The main contention of the assessee was that a demand draft of Rs. 2,70,459 was seized by the department out of which the sum of Rs. 2 lakhs was accepted by the assessee as assessee’s undisclosed income and as such, the proceeds realised out of the demand draft was liable to be adjusted against the tax liability of the assessee which was around Rs. 1,13,000 only resulting in the balance amount of Rs. 87,000 refundable to the assessee and as such, the assessee was not liable to be charged interest under sections 234A, 234B and 234C of the Act. The assessee has filed a copy of the order under section 220(2A) of the Act whereby the interest chargeable under section 220 was directed to be recomputed as if the assessee was not in default with regard to a sum of Rs. 2 lakhs when the first assessment under section 143(3) was made. In this order under section 220(2A) of the Act it was, however, clarified by the Commissioner that the assessee will be liable to pay interest under sections 234A, 234B and 234C as per law.
4. We have heard both the parties in the light of the material available on record. We have gone through the orders of the authorities below. It is an admitted fact that the Deputy Commissioner (Appeals) has directed the assessing officer to delete the aforesaid interest on a footing that the assessee was having a sum of Rs. 2 lakhs to his credit but in our considered opinion there was no credit of Rs. 2 lakhs to the credit of the assessee at the time when the advance-tax was required to be paid by the assessee on the income disclosed by him as discussed below. It is an admitted fact that no cash money was seized. It is also an admitted fact that a draft of Rs. 2,70,450 was purchased by the partnership firm M/s Bharat Galvanising Co. and as such, the true and real owner in the eyes of law is not the assessee but M/s Bharat Galvanising Co. We further observe that the assessee has merely disclosed the source of money to the extent of Rs. 2 lakhs for acquiring the aforesaid draft by the firm implying thereby that the assessee had advanced the sum of Rs. 2 lakhs to the partnership firm of which he was a partner. The assessee cannot be said to be an owner of the aforesaid draft seized by the department. Moreover, the assessee has neither requested the department nor the bank to release the money in favour of the department by the time when the advance-tax falling due to be paid by the assessee. The relevant assessment year is 1989-90 and as such, the assessee was bound to pay the advance tax in three instalments falling due on 15-9-1988, 15-12-1988 and 15-3-1989, by which date the assessee never requested the assessing officer to encase the draft and set off the amount against the advance-tax liability. It is also an admitted fact that only on 17-3-1993, the assessee for and on behalf of M/s Bharat Galvanising Co. requested the manager of the respective bank for re-issue of a fresh draft in lieu of the seized draft in favour of the Commissioner, West Bengal-X, Kolkata, and accordingly, a fresh demand draft was issued by the bank on 23-3-1993, in favour of the CIT, WB-X, Kolkata. It is, therefore, clear that the department had actually received the amount only on 23-3-1993. Further, the order under section 132(5) passed by the assessing officer determining the refund of Rs. 87,000 after taking into consideration the seizure of Rs. 2 lakhs is also of no help to the assessee inasmuch as the assessing officer has mistakenly took the amount of Rs. 2 lakhs as cash seized instead of admitted fact of seizure of draft. The seizure of draft could not be made equivalent to the seizure of cash. The order passed by the assessing officer under section 132(5) under a mistaken belief cannot be taken as the basis to say that the assessee had discharged his advance tax liability to the extent of Rs. 1,13,000 as ultimately determined on completion of the assessment. We, therefore, find no action or step taken by the assessee for converting the draft into cash for making further payment to the department till prior to 23-3-1993.
5. On reading of provisions of sections 234A, 234B and 234C, we find that interest contemplated under sections 234A, 234B and 234C are mandatory in nature as so held by the Hon’ble Supreme Court in the case of CIT v. Anjum M.H. Ghaswalla (2001) 252 ITR 1 (SC). It is, therefore, clear that overlooking mandatory provisions of law and non-complying the same can be held as a mistake apparent from the record and as such, the assessing officer was justified and proper in charging interest under sections 234A, 234B and 234C by way of an order under section 154 of the Act. It is a settled law that overlooking the mandatory provisions of law while passing an order under the provisions of the Act can be termed as a mistake apparent from the record.
6. In view of the above discussions and the facts and circumstances of the case, we are, therefore, of the considered opinion that the assessing officer was fully justified in charging interest under sections 234A, 234B and 234C by passing an order under section 154 of the Act. We, accordingly, reverse the order of the Deputy Commissioner (Appeals) and restore that of the assessing officer.
7. In the result, the appeal filed by the revenue is allowed.