2021 (9) TMI 805 - AT - Income Tax

Rectification of mistake u/s 154 - Wrong computation of interest u/s 234D - assessee contended that there could not have been any levy of interest u/s 234D when refund was never granted to the assessee - HELD THAT - As it could be seen that order giving effect to ITSC order has been passed by Ld. AO on 31/12/2013 and a demand to ₹ 102.21 Lacs has been raised against the assessee - the order was rectified u/s 154, at assessee s instance, on 11/06/2014 and fresh computations have been made reducing the demand to ₹ 38.06 Lacs. The demand has been reduced due to reworking of interest u/s 244A and 234D without disturbing the assessed income. The assessee has paid this demand on 04/07/2014. Another rectification has been made in this order on 05/06/2018 raising fresh demand of ₹ 3.50 Lacs against the assessee. This rectification is at the instance of Ld. AO since excess interest was allowed u/s 244A and interest u/s 234D was wrongly charged. In this order also, the assessed income has not been disturbed. Therefore, in our opinion, what this order has rectified is the order passed u/s 154 on 11/06/2014 and not the assessment order framed pursuant to the directions of Hon ble ITSC on 31/12/2013. Therefore, as counted from 11/06/2014, the rectification order passed u/s 154 on 05/06/2018 is well within the limitation period of four years (from the end of financial year in which order sought to be rectified has been passed) and the same could not be held to be bad in law. AO was obligated by law to provide opportunity of hearing to the assessee before raising fresh demand. We find that Ld. CIT(A) has directed Ld. AO to compute correct interest u/s 234D as well as grant correct interest u/s 244A after due verification of facts and in accordance with law. Therefore, with these directions, the grievance of the assessee has been taken care of and Ld. AO has been directed to charge / grant interest as per law.

Summary

Issues:
1. Rectification of assessment u/s 154 being void ab-initio
2. Violation of principles of natural justice in rectification process
3. Wrong computation of interest u/s 234D

Issue 1: Rectification of assessment u/s 154 being void ab-initio:
The appeal concerned the rectification order passed by the Assessing Officer (AO) u/s 154 of the Income Tax Act. The appellant contended that rectification after four years from the end of the financial year in which the original order was passed is void ab-initio. The appellant argued that the rectification made without granting an opportunity of being heard was invalid. However, the Commissioner of Income-Tax (Appeals) upheld the rectification order. The Tribunal found that the rectification order was within the limitation period of four years from the date of the previous rectification, not the original assessment order. The Tribunal also noted that the appellant was given an opportunity of hearing during the appellate proceedings, satisfying the principles of natural justice.

Issue 2: Violation of principles of natural justice in rectification process:
The appellant raised concerns about the violation of principles of natural justice in the rectification process. The appellant argued that rectification without providing an opportunity of being heard was improper. However, the Tribunal held that since the appellant was granted an opportunity of hearing during the subsequent appellate proceedings, the rectification order was not rendered bad in law due to the lack of prior hearing. The Tribunal emphasized that the opportunity of hearing was provided in the appellate stage, addressing the appellant's concerns regarding natural justice.

Issue 3: Wrong computation of interest u/s 234D:
The appellant contested the wrong computation of interest u/s 234D by the Assessing Officer. The appellant argued that interest u/s 234D should not have been levied as no refund was granted. Additionally, the appellant highlighted the non-granting of interest u/s 244A for the relevant period. The Tribunal agreed with the appellant's contentions and directed the Assessing Officer to verify the facts and charge interest u/s 234D correctly, as well as grant interest u/s 244A in accordance with the law. The Tribunal found merit in the appellant's arguments regarding the incorrect computation of interest, and directed the Assessing Officer to rectify the interest calculations accordingly.

In conclusion, the Tribunal partly allowed the appeal for statistical purposes, addressing the issues raised by the appellant regarding the rectification of assessment, violation of natural justice principles, and incorrect computation of interest. The Tribunal provided detailed reasoning for each issue, ensuring that the appellant's concerns were appropriately considered and addressed in the final decision.