2024 (11) TMI 1028 - AT - Income Tax

Denial of benefit of extension to interest u/s 234A - assessee had opportunity to remit the self-assessment tax before 31st October 2021 but did not do so - interest u/s 234A is compensatory OR penal - HELD THAT - We note that assessee deposited interest u/s 234A for one month i.e., (from the original due date i.e., 31st October 2021 till the deposition of taxes i.e., 29th November 2021). However, the CPC / Ld. AO computed interest till the date of filing return i.e. 7th March 2022 and Ld. CIT(A) upheld that action of CPC / Ld. AO on the contention that the assessee had opportunity to remit the self-assessment tax before 31st October 2021 but did not do so and CBDT Circulars do not grant the benefit of extension to interest u/s 234A. We find considerable cogency in the contention of the Ld. AR that the decision of Dr. Prannoy Roy 2001 (12) TMI 68 - DELHI HIGH COURT which was upheld by Hon ble Supreme Court in the case of CIT vs Prannoy Roy 2008 (9) TMI 150 - SUPREME COURT , fully supports the case of the assessee, wherein, it has been held that the interest u/s 234A is compensatory and not penal in nature and interest is payable where tax has not been deposited prior to due date of filing the Income tax return. Thus, irrespective of date of filing of ITR, interest u/s 234A of the Act, shall accrue on the balance of taxes outstanding from the first date immediately following the due date and shall cease to accrue on the date of payment by installment /when paid in parts) or on the date of full discharge of entire tax liability computed on the total income. See Milind Madhav Padhye 2023 (4) TMI 726 - ITAT PUNE Decided in favour of assessee.

Issues:
1. Validity of order passed under section 250 of the Act.
2. Opportunity of being heard before levying interest under section 234A.
3. Imposition of interest under section 234A beyond the date of self-assessment tax payment.
4. Calculation of interest under section 234A till the date of filing income tax return.
5. Interpretation of circulars and judicial rulings regarding interest under section 234A.
6. Compliance with the judgment of the Honorable Supreme Court in the case of CIT vs. Pranoy Roy.

Analysis:

1. The appellant challenged the order of the Ld. Addl/JCIT(A), Madurai, regarding the assessment year 2021-22 on various grounds, including the validity of the order passed under section 250 of the Act.

2. The appellant contended that the Assessing Officer erred in not providing an opportunity of being heard before levying interest under section 234A of the Act.

3. The dispute arose regarding the imposition of interest under section 234A beyond the date on which self-assessment tax, including interest, was already paid. The appellant argued that interest should only be calculated till the date of tax deposition, as per CBDT circular relief.

4. The appellant raised objections to the calculation of interest under section 234A until the date of filing the income tax return, emphasizing that interest should cease accruing upon full tax payment, as per judicial precedents.

5. The appellant contested the interpretation of circulars and judicial rulings concerning the imposition of interest under section 234A, highlighting discrepancies in the application of these guidelines by the authorities.

6. The appellant argued that the authorities failed to follow the judgment of the Honorable Supreme Court in the case of CIT vs. Pranoy Roy, which clarified the compensatory nature of interest under section 234A and its non-leviability if tax is paid before the due date of filing the income tax return.

7. The ITAT, after considering the submissions and precedents cited, ruled in favor of the appellant, setting aside the orders of the lower authorities and allowing the grounds raised by the assessee. The appeal was thus allowed in favor of the appellant.

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