2023 (2) TMI 513 - AT - Income Tax

Levying the interest u/s 234A and 234B up to the date of the assessment order u/s 147 - as per the assessee interest shall be chargeable up-to the payment of self-assessment tax paid 19-3-2015 - HELD THAT -The issue, however, is no longer res-integra. The Hon ble Supreme Court and Various Hon ble High Court thorough judgements have well settled that when the statute says interest, which would be compensatory in nature, would be levied upon happening of a particular event or action. It has been held in the case of CIT v. Prannoy Roy 2001 (12) TMI 68 - DELHI HIGH COURT that the interest under section 234A of the Act on default in furnishing return of income shall be payable only on the amount of tax that has not been deposited before the due date of filing of the income-tax return for the relevant assessment year. The impugned provisions are only compensatory in nature and no part thereof is penal in character. Also see ANAND PRAKASH 2009 (2) TMI 30 - DELHI HIGH COURT as held argument raised on behalf of the revenue that such payment of tax did not strictly comply with the meaning of advance tax and would therefore, have to be disregarded for the purposes of charging interest u/s 234A, was rejected. The Court also held that interest u/s 234A was compensatory in nature and unless any loss was caused to the revenue, the same could not be charged from the assessee. Thus we are of the opinion that the interest under section 234A and 234B of the Act can be levied in the given facts and circumstances up-to the date of self-assessment tax paid by the assessee along with the interest and not to the period beyond that date. Hence, we set aside the order of the learned CIT-A with the direction to the AO to delete the interest charged by him. Thus, the ground of appeal of the assessee is allowed.

Summary

Issues:
1. Condonation of delay in filing the appeal due to Covid-19.
2. Levying interest under section 234A and 234B beyond the date of self-assessment tax payment.
3. Nature of interest under section 234A and 234B - compensatory or penal.

Condonation of Delay:
The appeal was filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, regarding the assessment order passed under Section 143(3) r.w.s. 147 of the Income Tax Act, 1961 for the Assessment Year 2011-12. The assessee requested condonation of a 105-day delay in filing the appeal due to Covid-19, which was granted based on Supreme Court judgment. The delay was not objected to by the Revenue, and the appeal was considered on merit.

Levying Interest under Section 234A and 234B:
The main issue raised by the assessee was the levy of interest under section 234A and 234B beyond the date of self-assessment tax payment. The assessee argued that interest under these sections is compensatory, paid to avoid revenue loss due to late tax payment. The AO had charged interest till the date of assessment order, despite the assessee's self-assessment tax payment in 2015. The CIT(A) upheld the AO's decision, considering the provisions of the Act as mandatory and penal. However, the Tribunal found that interest should only be charged up to the date of self-assessment tax payment. Various case laws supported the compensatory nature of such interest, emphasizing that no interest should be charged post-tax payment. The Tribunal allowed the appeal, directing the AO to delete the interest charged beyond the self-assessment tax payment date.

Nature of Interest under Section 234A and 234B:
The Tribunal analyzed whether interest under section 234A and 234B is compensatory or penal in nature. It was established that the purpose of such interest is compensatory to ensure timely tax payment and avoid revenue loss. The Tribunal referred to Supreme Court and High Court judgments emphasizing the compensatory nature of this interest. The Tribunal concluded that interest should only be levied until the date of self-assessment tax payment, as charging interest beyond that point would not serve the purpose of compensating revenue loss. Therefore, the Tribunal allowed the appeal, directing the deletion of interest charged post-self-assessment tax payment.

In conclusion, the Tribunal allowed the appeal, setting aside the order of the CIT(A) and directing the AO to delete the interest charged beyond the date of self-assessment tax payment. The judgment clarified the compensatory nature of interest under section 234A and 234B, emphasizing that such interest should only be levied until the date of tax payment to avoid revenue loss.