2011 (4) TMI 1211 - AT - Income Tax

Summary

Issues involved: Confirmation of dismissal of petition u/s 154 for rectification of interest levied u/s 234A.

The appeal challenged the confirmation of dismissal of the assessee's petition u/s 154 before the Assessing Officer, regarding the computation of interest under section 234A. The assessee, a Hindu undivided family, had paid tax prior to the date when interest was to be charged based on the filing of the return. The Assessing Officer initiated rectification proceedings under section 154, claiming interest under section 234A was charged less. The assessee argued that interest under section 234A should only be charged till the payment of self-assessment tax, not till the filing of the return, citing various court decisions. The Department contended that interest should be calculated for belated filing of the return, in accordance with pre-1989 provisions. The ITAT held that interest under section 234A is compensatory, not penal, and should be charged till the date of payment of tax, not till the date of filing the return. The appeal was allowed, directing the Assessing Officer to rectify the claim in accordance with the law.

The ITAT analyzed the decision in the case of Dr. Prannoy Roy v. CIT, emphasizing that interest under section 234A is compensatory, not punitive. The Assessing Officer had correctly levied interest under section 234A, but the Commissioner of Income-tax (Appeals) erred in insisting on interest being levied for delayed submission of the return. The ITAT found that the interest charged was over and above what the law permitted, as the Revenue had not suffered any monetary loss due to the delayed filing of the return. The ITAT allowed the appeal, directing the Assessing Officer to rectify the claim and not compute the balance payable demand against the assessee.