2019 (6) TMI 1093 - AT - Income Tax

Excess interest levied u/s 234A - whether interest u/s 234A could have been charged only till the time tax liability was outstanding? - due date of return 15.10.2010 - Date of tax deposited 24.3.2014 - Date of voluntary return filed 7-5-2014 - filing of return in response to notice u/s 148 23-6-2017 - HELD THAT - As in Priti Prithwala vs. ITO 2003 (3) TMI 743 - ITAT MUMBAI on similar ground of appeal held that in section 234A, the word regular assessment are used in the context of computation. It does not show that the order passed under section 143(3)/144 shall be substituted by section 147. In term of section 234A(1)(a)(b), the period for which interest liability is calculated is the period between the date on which return was due to be filed and the ending on the date, the same is actually furnished and when no return is furnished, ending on the completion of assessment under section 144. Section 234A(1)(b) contemplates the situation where no return has been furnished, in such a case, the period prescribed is ending on the date of completion of the assessment. Once the assessee conceded his liability to pay interest under section 234A, there was no point in going further into the matter and exemption whether interest was not liable to pay. As assessee submits that the assessee could not be made liable to pay interest for the period during which it was not possible on their part to file the return. Therefore, we direct the Assessing Officer to re-compute the interest up to the date of filing of return. Hence, Ground No. 3 of the appeal is allowed. Interest u/s 234B - HELD THAT - We find the interest u/s 234B is chargeable from the first day of assessment year till the date of assessment year on the amount of assessed tax due ( i.e. tax payable TDS) from time to time. We direct the Assessing Officer to compute the interest under section 234B as under - From 1.4.2010 till Marcfh 2014 on the assessed tax due which is considered as X Tax payable TDS ( ) X Y Then calculate interest from 1.4.2014 till the date of completion of assessment on the amount of Y. We direct the assessing officer to recompute the interest as stated above.

Summary

Issues:
1. Appeal against order of ld. Commissioner of Income Tax (Appeals)-20 for Assessment Year 2010-11.
2. Levy of excess interest under sections 234A and 234B.

Analysis:
1. The appeal was filed against the order of the ld. CIT(A) for Assessment Year 2010-11. The assessee, a Private Limited Company engaged in Multi Level Marketing, failed to file a return of income within the prescribed time. The Assessing Officer initiated scrutiny based on information regarding undisclosed income. The assessment was completed under section 143(3) r.w.s. 147, with no additions to the income. However, the Assessing Officer raised a demand for interest under sections 234A and 234B. The assessee sought rectification, but the ld. CIT(A) upheld the order. The appeal challenged this decision.

2. Regarding the levy of interest under section 234A, the ld. AR argued that interest should only be charged until the tax liability was outstanding, not beyond. A detailed computation comparison was presented, showing the excess interest levied. The assessee cited a Mumbai Tribunal decision to support the argument. The Tribunal agreed with the assessee's computation and noted that no interest was charged in a subsequent assessment year on similar grounds. Referring to the provisions of section 234A, the Tribunal directed the Assessing Officer to recompute the interest up to the date of filing the return, allowing Ground No. 3 of the appeal.

3. Moving to the issue of interest under section 234B, the Tribunal clarified that interest is chargeable from the first day of the assessment year until the date of the assessment year on the amount of assessed tax due. The Assessing Officer was directed to recalculate the interest under section 234B based on the assessed tax due. Consequently, the appeal of the assessee was allowed, and the assessing officer was instructed to recompute the interest as per the Tribunal's directions.