2022 (5) TMI 447 - AT - Income Tax

Rectification of mistake u/s 154 - levying interest u/s. 234B - AR has substantiated that the interest calculation u/s 234B is excessive as the AO has charged the interest u/s 154, though the tax demand was prior to the passing of rectification petition but the AO has levied the interest u/s 234B of the Act after the date of 154 order - HELD THAT - Considering assessee submission that AO has erred in charging interest from first day of assessment year which the passing of rectification order u/s 154 and the ld. AR also substantiated with the chart referring the dates on which the payments have been made and further submitted that an opportunity to provide for substantiate before the lower authorities, the Ld. DR has no specific objection, circumstances and details we are of the opinion that the matter has to be reworked accordingly we restore the entire disputed issue to the file of the AO for limited purpose along with evidences in the course of hearing to verify, examine and pass the order on merits and allow the grounds of appeal of the assessee for statistical purposes.

Summary

Issues involved:
1. Violation of principles of natural justice in passing an ex parte order without considering the assessee's application for adjournment due to medical reasons.
2. Upholding the levy of interest u/s. 234B without considering the timing of tax demand payment and passing of rectification order.

Issue 1: Violation of principles of natural justice
The appeal was filed against the order passed by the National Faceless Appeal Centre under sections 271(1)(c) and 250 of the Act. The appellant contended that the order was passed ex parte without considering the application for adjournment filed due to the assessee testing positive for Covid-19. The appellant argued that the notice fixing the hearing date was duly replied seeking adjournment on medical grounds, making the ex parte order legally flawed. The appellant raised concerns regarding the violation of principles of natural justice by the CIT(A) in not considering the medical grounds for adjournment and passing an ex parte order.

Issue 2: Levy of interest u/s. 234B
The appellant challenged the upholding of the order levying interest u/s. 234B without taking into account the timing of tax demand payment and the passing of the rectification order. The appellant argued that the interest calculated was excessive as it was charged from the first day of the assessment year until the passing of the rectification order, despite payments made in the intervening period. The appellant presented a chart and judicial decisions to support the argument that the levy of interest u/s. 234B was legally incorrect. The Tribunal noted the excessive interest calculation and directed the matter to be reworked by the AO, emphasizing the need to verify, examine, and pass an order on merits. The Tribunal allowed the appeal for statistical purposes, indicating that the matter needed further review and adjustment.

In conclusion, the judgment addressed the issues of violation of natural justice principles and the incorrect levy of interest u/s. 234B. The Tribunal acknowledged the appellant's arguments, directing a reevaluation of the interest calculation by the AO for a fair and accurate determination.