2004 (3) TMI 321 - AT - Income Tax

Summary

Issues:
Whether interest under section 234A can be levied when self-assessment tax is paid before the due date of filing the income tax return.

Analysis:
The appeal was filed against an order under section 154 read with section 143(1)(a) of the Income-tax Act, 1961, for the assessment year 1994-95. The core issue was whether an Assessing Officer can levy interest under section 234A when self-assessment tax is paid before the due date of filing the income tax return. The tribunal referred to the judgments of the Delhi High Court and the Bombay High Court to determine the legal position on this matter.

The Delhi High Court in the case of Dr. Prannoy Roy v. CIT held that interest under section 234A is not leviable if the tax has been paid, even if the return is not filed. The Bombay High Court in the case of CIT v. Smt. Godavaridevi Saraf emphasized the importance of respecting the law laid down by higher courts. The tribunal, following the Delhi High Court's judgment, concluded that the Assessing Officer cannot charge interest under section 234A if the tax has been paid, and only the filing of the return is delayed.

The tribunal rejected the contention that charging interest under section 234A was mandatory for the Assessing Officer, emphasizing the need to follow higher court judgments. It also addressed the objection raised by the Departmental Representative regarding rectification under section 154, stating that if the levy of interest is debatable, it cannot be subject to unilateral adjustments by the Assessing Officer under section 143(1)(a).

Furthermore, the tribunal discussed the nature of interest under section 234A, stating that it cannot be compensatory if taxes are already paid by the assessee, and if viewed as penal, it would violate principles of natural justice by not providing an opportunity for a hearing. Therefore, the levy of interest under section 234A, in a situation where self-assessment tax is paid, was deemed unsustainable in law, and the tribunal deleted the same, allowing the appeal.