2023 (4) TMI 1208 - AT - Income Tax

Charging interest u/s 234A, 234B and 234C - late filing of return of income - return of income u/s 139 was not filed for the relevant year under bonafide belief that since the assessee has not having any other income from business or profession the assessee does not require to file any return of income - HELD THAT - It is pertinent to note that Section 234A is a mandatory provision as the wording used by the statute is when the assessee furnished return of income after the due date or is not furnished under sub-Section 1 or sub-Section 4 of Section 139 the assessee shall be liable to pay simple interest at the rate of 1% for every month or part of a month comprising in the period commencing on the date immediately following the due date. Section 234A(1) Explanation 3 categorically states that where in relation to an assessment year is made for the first time under Section 147 the assessment so made shall be regarded as a regular assessment for the purposes of this Section. Here in the Explanation the assessment for the first time under Section 147 is mandatory to be recorded as regular assessment under Section 139 itself. Hon ble Bombay High Court in case of Priti Pithawala 2003 (3) TMI 743 - ITAT MUMBAI has decided the issue and granted the relief to the assessee as appears that in that case the belated return which cannot be submitted after the expiry of one year than the assessment made for the first time u/s 147, the assessee cannot be made liable to pay interest for the period during which it was not possible on the part of the assessee to file return till issuance of notice u/s 148. CIT(A) was not right in levying interest under Section 234A of the Act when the return was filed under Section 148 itself and therefore, the interest should be charged from the date of notice under Section 148 of the Act itself and not from the date of return filed under Section 139 or it is due date under Section 139. Appeal of the assessee is partly allowed.

Summary

Issues involved:
The appeal challenges the order passed by the Ld. CIT(Appeals), National Faceless Appeal Centre (NFAC), Delhi for A.Y. 2015-16, specifically regarding the imposition of interest under Section 234A for late filing of return of income.

Details of the Judgment:

Issue 1: Invocation of provisions of Section 234A and imposition of interest
The assessee contended that the imposition of interest under Section 234A for late filing of return of income was illegal, unlawful, and against the principles of natural justice. The CIT(A) upheld the invocation of Section 234A without providing an opportunity of hearing, leading to a violation of principles of natural justice. The assessee argued that no mention of charging interest under Section 234A was made in the assessment order or any notices. The Ld. A.R. submitted that the provisions of Section 234A were incorrectly applied as they are meant for returns filed under Section 139(1), whereas the return in question was filed in response to Section 148.

Issue 2: Applicability of Section 234A to the case
The Ld. A.R. further contended that the assessee should not be charged interest for the period during which no return of income was filed, i.e., after the due date under Section 139(1) to the notice under Section 148. The argument was that there is no mechanism in the law allowing the assessee to file a return after the due date under Section 139(1) and be asked to pay interest for that period.

Conclusion:
After considering the arguments from both parties, the Tribunal noted that Section 234A mandates the payment of interest for late filing of returns. The Explanation under Section 234A(1) clarifies that assessments made for the first time under Section 147 are considered regular assessments. Citing a decision of the Hon'ble Bombay High Court, the Tribunal emphasized that interest should be charged from the date of the notice under Section 148, not from the date of return filed under Section 139 or its due date. Consequently, the appeal was partly allowed, and the interest under Section 234A was to be charged from the date of the notice under Section 148.