The revenue is in appeal against the order of the Commissioner (Appeals), Jalandhar, in appeal No. 1093/1991-92/Commissioner (Appeals)/Jal, dated 29-3-1993, on the following effective grounds "1. That, on the facts and in the circumstances of the case, the learned Commissioner (Appeals) has erred in deleting the interest charged under section 234B of Income Tax Act.
1a. That, while allowing relief at '1' above, learned Commissioner (Appeals) has ignored the fact that when the lottery prize is paid in kind, no tax is deductible at source.
1b. That while allowing relief at '1', above the learned Commissioner (Appeals) has ignored the fact that charging of the interest under section 234B is mandatory." We have heard the learned Departmental Representative for the revenue.
None appeared on behalf of the respondent-assessee. Hence we proceed to decide the appeal ex parte under rule 24 of the IT (Appellate Tribunal), Rules,' 1963.
Stated briefly, the relevant and material facts I for the disposal of these grounds of appeal are stated as under.
At the time of framing the assessment, interest under section 234B of the Act was charged to the extent of Rs. 17,610. An application under section 154 of the Act was moved requesting the assessing officer to delete this interest contending that there was no liability to pay advance tax on the winning of a Maruti car in the draw held on 21-2-1990. It was pointed out that prize was received on 7-6-1990, and hence there was no liability to pay advance tax during the accounting period ending on 31-3-1990. The assessing officer rejected this application observing that receipt of lottery prize has been shown in the financial year relevant to the assessment year 1990-91 and, hence interest under section 234B had correctly been charged.
In appeal, filed by the assessee, before the Commissioner (Appeals), the assessee took the following pleas that the income assessed is from winning from lottery which was received in the form of Maruti car. As per relevant provisions of Income Tax Act, tax is required to be deducted from winning of lottery of prize money, etc. Therefore, it was duty of M/s. JFG Investment (J&K) (P) Ltd., who paid prize money to deduct tax from the value of such prize. In fact, Income Tax Officer, Ward 2(4) Jalandhar, did take up this matter with M/s. JFG Investment (J&K) (P) Ltd. Since the tax was required to be deducted by M/s. JFG Investment (J&K) (P) Ltd., there was no liability to pay advance tax on the same amount. Thus, there was no failure to pay advance tax and if there was any default, it was of non-deduction of tax at source by M/s JFG Investment (J&K) (P) Ltd. Therefore, charging of interest under section 234B of the Act was not correct as per law. It was next pointed out that he was declared lucky winner of Maruti car in a draw held on 21-2-1990, but his case was kept pending because of dispute which was ultimately settled on 30-3-1990, in the presence of witnesses. He was informed on 2-4-1990, regarding the settlement of dispute in his favour and car was handed over subsequently. Thus, there was no finality about the winning of the Maruti car as a prize before 31-3-1990, and hence liability to pay advance tax under section 234B of the Act was not called for.
The learned Commissioner (Appeals) while allowing the appeal of the assessee directed the assessing officer to make the necessary rectification and delete the interest charged under section 234B of the Act and made the following observations : "l.3 I have carefully considered the submissions made before me.
Admittedly, the income assessed is winning from lottery on which tax is required to be deducted at source, as per provisions of section 194B of the Act. Since the source of income was such on which tax was required to be deducted at source, there was no liability on the appellant to make payment of advance tax. In the absence of any liability to pay advance tax the charging of interest under section 234B was not proper.
In such circumstances the rejection of application made under section 154 of the Act was not justified." Now aggrieved with the order of the Commissioner (Appeals), the revenue is in appeal before us for setting aside the order of the Commissioner (Appeals) and for restoring the order of the assessing officer.
On going through the order of the Commissioner (Appeals), we find that her order seems to be arising out of wrong application of provisions of law and improper appreciation of the facts of this case. In this case, the admitted facts are that the assessee won a car in lottery as prize and since the assessee has won his lottery prize in kind, so no tax was deductible at source, whereas, on the other hand, for the assessment year 1990-91, on account of value of this car, the assessee has surrendered the amount of Rs. 1 lakh and the same was assessed to tax by the assessing officer. In these facts and the circumstances, the question of applicability of section 194B does not arise because no tax was required to be deducted at source and hence the Commissioner (Appeals) has misdirected while holding that as the assessee was not required to pay any advance tax, so even no interest under section 234B of the Act could be charged from him. The assessee has surrendered a sum of Rs. 1 lakh as the value of car won in prize during the assessment year in question and has agreed to pay tax on the same. So the provisions of section 208 of the Income Tax Act comes into play which have not been taken into consideration by the Commissioner (Appeals) while disposing of the appeal of the assessee. Section 208 reads as under : "208. Advance tax shall be payable during a financial year in every case where the amount of such tax payable by the assessee during that year, as computed in accordance with the provisions of this chapter, is one thousand five hundred rupees or more." It means that section 208 in its present form, which came into effect from 1-4-1988, for the assessment year 1988-89 onwards as the advance tax is payable during the financial year in every case where the tax payable during that year is Rs. 5,000 or more.
"234B. (1) Subject, to the other provisions of this section, where, in any financial year, an assessee who is liable to pay advance tax under section 208 has failed to pay such tax or where the advance paid by such assessee under the provision of section 210 is lass than ninety per cent of the assessed tax, the assessee shall be liable to pay simple interest at the rate of two per cent for every month or part of a month comprised in the period from, the 1st day of April next following such financial year to the date of determination of total income under sub-section (1) of section 143 -and where a regular asgessment is made, to the date of such regular assessment, 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." On reading section 208, it is clear that the assessee was required to pay advance tax on the amount in question, which he did not pay and on reading section 234B(1), we find that it authorises the levy of interest on shortfall in payment of advance tax. This section takes into consideration the following situation : (Applicable to the facts of this case and explains the manner of levy thereunder) "Where the assessee who is liable to pay advance tax under section 208 has failed to pay such tax, interest is payable by him on assessed tax at 2 per cent for every month or part of the month comprised in the period from the 1st day of April of the assessment year to the date of determination of total income under sub section (1) of section 143 and where a regular assessment is made, upto the date of regular assessment." The combined reading of these sections makes it apparently clear that the assessing officer has rightly charged the interest under section 234B on account of the default by the assessee for non-determination of advance tax and further he was also justified in rejecting the application moved by the assessee under section 154 of the Act in which he prayed for the deletion of interest under section 234B of the Act imposed by the assessing officer.
In the result, we find merit in the grounds of appeal of the revenue and consequent upon the same, we find merit in the order of the assessing officer and the same is restored and the order of the Commissioner (Appeals), having no merit, is set aside.