Exquisite Jewellery v. ITO

Case snapshot

Sections / provisions: 234B

Questions before the Court / Tribunal

• Interest under section 234B where addition arises from retrospective amendment: The reported Tribunal decision addresses whether advance-tax interest can be imposed when the underlying adjustment became taxable because of a retrospective statutory amendment.

Material facts and background

Facts of the case are that the assessee filed its return of income

for AY 2008-09 on 27.09.2008 offering income at Rs.29,686/-. The assessee’s case was selected for scrutiny and the matter was referred to the Transfer Pricing Officer (TPO) u/s 92CA(1) of the Act. The TPO, vide order dated 31.10.2011 passed order u/s 92CA therein making adjustment of Rs.2,88,55,641/-. The AO, accordingly, added the same to the assessee’s income in the assessment order dated 30.12.2011. In appeal, the CIT(A)-15, Mumbai, vide order dated 15.06.2012, partly allowed the assessee’s appeal, pursuant to which, the AO vide order giving effect dated 13.08.2012, worked out the total income of the

Page |3 ITA No. 123/Mum/2025 A.Y. 2008-09 M/s. Exquisite Jewellery, Mumbai

assessee at Rs.1,07,83,780/- and thereby charging interest u/s 234B incorrectly at Rs.20,15,970/-.Aggrieved, the assessee filed a rectification application u/s 154 of the Act before the AO as well as an appeal before the ld.CIT(A). The CIT(A)-15, Mumbai, vide appellate order dated 02.09.2014 directed the AO to dispose of the assessee’s petition u/s 154. However, pursuant to the directions of the CIT(A), while disposing of the said application made by the appellant, the AO, vide order dated 12.11.2024 again added interest u/s 234B amounting to Rs.20,15,970/and rejected the rectification application made by the assessee. Aggrieved, the assessee again filed appeal before ld.CIT(A) who observed that Section 234B of Act deals with the interest charged for late payment of advance tax. When taxpayers fail to pay the advance tax or pay less than 90% of the assessed tax, interest under Section 234B is attracted. The assessed tax refers to the tax liability determined by the Department based on the declared total income of the taxpayer and deductions claimed. It is the final amount of tax payable by the taxpayer after deducting TDS, advance tax, and any other tax credits. The interest is...

Page |4 ITA No. 123/Mum/2025 A.Y. 2008-09 M/s. Exquisite Jewellery, Mumbai

income offering income at Rs.29,686/-, whereas the final assessed income of the appellant stands at Rs.1,07,83,780/-, determined by the AO vide order giving effect dated 13.08.2012. On perusal of the provisions of section 234B, it is clear that charging of interest is mandatory, hence, the AO was correct in charging interest u/s 234B, which worked out to Rs.20,15,970/- in the present case. He further held that charging of u/s 234B are mandatory as per the decision of Hon'ble Supreme Court in the case of Anjum M.H. Ghaswala & Others reported in 252 ITR 1 (SC). In view of the above, the appeal of the assessee was dismissed. 4. Before us,the ld.DR has supported the orders of authorities below while the ld.AR of the assessee has vehemently agitated the action of the ld.CIT(A).It is contented that the assessee is a partnership firm engaged in the business of manufacturing and exporting of diamond studded gold jewellery. The unit of the assessee is situated in Seepz and it is claiming exemption u/s 10A of the Act. During the year, it had income of Rs.29,686/- under the head Income from Business and Profession after claiming exemption u/s 10A. It had worked out the interest liability u/s...

Page |5 ITA No. 123/Mum/2025 A.Y. 2008-09 M/s. Exquisite Jewellery, Mumbai

Appellant / assessee submissions

The judgment copy does not separately set out this component in a distinct section; refer to the full order and the reasoning section below.

Revenue / respondent submissions

The judgment copy does not separately set out this component in a distinct section; refer to the full order and the reasoning section below.

Court / Tribunal analysis and reasoning

during the previous year 2007-08 in accordance with the then prevailing legal position and the provisions of the Act and hence there was no failure/ default on the part of the appellant in payment of advance tax on provision for excess tariff during the financial year 2007-08, no interest was leviable under sections 234B of the Act. Therefore, the appellant was not liable to pay interest u/s 234B for consequent change in income due to ad-hoc addition in Assessment proceedings or consequent amendment in law. 4.1

4.4 The ld.AR has further argued that the finding of the AO that the provisions were existing at the time of filing of the return of income are factually incorrect. While the return of income was filed on 27/09/2008, the amendment was introduced only by the Finance Act, 2012.The observation of the AO that the ‘amendment was clarificatory in nature’ is out of context since the issue before the AO was not whether the amendment could be applied to the assessment year in question or not. The question was whether interest could be levied even when there was no default of the assessee while computing and paying advance tax on the basis of the provisions existing at the relevant time.The observation of the CIT (A) that charging interest u/s 234B is mandatory is also out of context since it fails to take into consideration the peculiar circumstances of a retrospective amendment The question really is whether an assessee could be burdened with interest for non-payment of advance tax when there was no provision for treating the excess credit period granted to associated enterprises as an international transaction and treating the notional interest as assessee ’s income.A bare perusal of...

view in the case of CIT vs JSW Energy Ltd. reported in 379 ITR 36 [Bom] in the context of 115JB, clause [h] of Explanation 1 that was brought in by the Finance Act, 2008 with retrospective effect from 01.04.2001. The Hon'ble Bombay High Court has taken the view that the levy, of interest u/s.234B by virtue of the retrospective amendment is not warranted. The following observations of the Hon'ble Bombay High Court are relevant : "17. In the present case, what the assessee has pointed out is that some of the amounts included in the book profits as per Explanation ) to section 115JB were brought in by the Finance Act, 2008 with retrospective effect from 1st April, 2001. The assessee cannot be held be liable for failing to make a provision for payment of advance tax which was not possible on the last date as per the law then prevailing. Thus clause (h) which is reproduced above having been brought in with retrospective effect but by Finance Act 2008, the advance tax computation by the assessee for the year 2006-07 cannot be faulted and it cannot be said that the assessee is in default and therefore, there is any liability to pay interest in terms of section 234B of the Income-tax Act,...

P a g e | 11 ITA No. 123/Mum/2025 A.Y. 2008-09 M/s. Exquisite Jewellery, Mumbai 19. The Supreme Court noted that the Appellants' appeal pending before the Commissioner was rejected by him on the basis of this amendment. The tribunal also maintained this order and that part of the order passed by the Commissioner was not challenged in appeal. However, the appellant was aggrieved by the fact that the tribunal held it liable to pay Interest on the amount which it was required to pay by reason of the 2002 amendment. The assessee contended that once the amendment was brought in, pending the appeal, there was no question of applying section 234B or any analogous provision and payment of interest. It is in that regard that the Hon'ble Supreme Court held as under: "7. In any event, it is clear from the language of the validation clause, as quoted by us earlier, that the liability was extended not by way of clarification but by way of amendment to the Finance Act with retrospective effect. It is well established that while it. is permissible for the Legislature to retrospectively legislate, such, retrospectivity is normally not permissible to creak offence retrospectively. There were...

Operative decision and relief

7. In the result, appeal of the assessee stands allowed. Order pronounced in the open court on 19/03/2025.

आदे श की प्रयियलयि अग्रेयिि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2.

गार्ड फाईल / Guard file. सत्यावपि प्रवि //True Copy// आदे शानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीलीय अयिकरण/ ITAT, Bench, Mumbai.

Authorities and precedents appearing in the judgment

• Prime Securities Ltd. v. ACIT (Inv.)
• CIT v. JSW Energy Ltd
• Emami Ltd. v. CIT (2011) 337 ITR 470 (Cal) and also on
• Supreme Court in the case of ACIT v. Saurashtra Kutch Stock Exchange Ltd
• CIT vs JSW Energy Ltd. reported in 379 ITR 36
• In the present case of Star India (P.) Ltd. v. CCE

This list is machine-assisted from the judgment text and is not a substitute for checking the full citation chain in the PDF.

Ratio and legal principle

The decision turns on Interest under section 234B where addition arises from retrospective amendment. The operative result is classified as Allowed. Read the rule only with the statutory version, factual findings and precedent chain recorded in the full judgment.

Why this judgment matters

The case is relevant to taxpayers, advisers and litigators dealing with Interest under section 234B where addition arises from retrospective amendment. Its practical value lies in the interaction between the statutory text, the evidentiary record and the procedural route followed in this case.

Practitioner action points

• Use the judgment as a fact-specific precedent: match the statutory version, assessment period, procedural stage and evidentiary record before relying on the result.
• Check whether a later High Court/Supreme Court order has affirmed, reversed, distinguished or rendered the decision academic.
• For litigation, attach the full judgment/order to the working paper and cite the paragraph/page supporting the proposition rather than relying on a headnote alone.

Full judgment and source trail

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