2024 (1) TMI 24 - AT - Income Tax

Computation of interest u/s 234A - date on which the quantification of interest liability under section 234A is to be taken - Assessee pleaded that interest u/s 234A was paid by the assessee on 27/09/2021 itself though the return was filed a bit late, but that too within the time allowed by the CBDT for filing of the returns - According to the assessee, as on the date of paying the taxes on 27/09/2021, the interest liability under section 234A of the Act was less than Rs. 1 lakh and, therefore, such payment of taxes shall be construed to be before the due date - HELD THAT - As decided in PRANOY ROY ANR ANOTHER INDIA METERS LTD. 2008 (9) TMI 150 - SUPREME COURT interest under section 234A of the Act could be levied only by way of compensation to compensate the Revenue in order to avoid it from being deprived of the payment of tax on the due date and, therefore, such interest would be payable only in a case where tax has not been deposited prior to the due date of filing of the income tax return. We are in agreement with the submission of the learned AR. The clarification No. 1 of the circular is not clear as to the date on which the quantification of interest liability under section 234A of the Act has to be taken. But, when we read the circular as a whole in the light of the decision of the Hon ble Apex Court in the case of Prannoy Roy (supra), the reasonable inference is that if the assessee deposits the taxes at a date at which the interest liability under section 234A of the Act, does not exceed Rs. 1 lakh, such an assessee is entitled to the extended period of due date and, therefore, any return of income filed thereafter will not fasten any additional interest liability. We direct the AO to verify whether the taxes paid by the assessee as on 27/09/2021 took care of the interest liability till such date, and if it is so, to delete the addition made. Grounds of appeal are allowed accordingly.

Summary

Issues:
The judgment involves the issue of levy of interest under section 234A of the Income Tax Act, 1961 based on the due date for filing the return of income and the payment of taxes by the assessee.

Summary:

Issue 1:
The assessee filed an appeal against the order of the Commissioner of Income Tax (Appeals) regarding the levy of interest under section 234A of the Act due to a variance in computation. The assessee contended that despite filing the return late, the taxes were paid before the due date as per Circular No. 17/2021, extending the deadline to 31/12/2021. The Commissioner dismissed the appeal citing the non-applicability of the circular to the case.

Issue 2:
The appeal before the Appellate Tribunal challenged the Commissioner's decision, arguing that the circular issued by the CBDT should have been considered beneficially. The assessee maintained that the payment of taxes within the stipulated time should exempt them from additional interest liability, even if the return was filed late due to circumstances beyond their control.

Issue 3:
The Tribunal analyzed the circular and its implications on the due date for filing the return of income. It was observed that the extension of the due date was subject to the interest liability not exceeding Rs. 1 lakh. The Tribunal noted the anomaly created by this restriction and the conflict it posed in determining the applicable due date for different assessees.

Issue 4:
Considering the purpose of the circular and the conflicting interpretation of Clarification No. 1, the Tribunal held that the extension of the due date should prevail generally. The Tribunal emphasized that the payment of taxes before the due date, when the interest liability was below Rs. 1 lakh, should entitle the assessee to the extended deadline without incurring additional interest liability.

Issue 5:
In light of the above analysis, the Tribunal directed the Assessing Officer to verify if the taxes paid by the assessee covered the interest liability until the payment date. If so, the Tribunal instructed the deletion of the additional interest imposed. Consequently, the grounds of appeal were allowed, and the appeal of the assessee was granted.

This judgment delves into the interpretation of Circular No. 17/2021 regarding the due date for filing income tax returns and the implications on interest liability under section 234A of the Income Tax Act. The Tribunal's decision emphasizes the importance of timely tax payments and the applicability of circulars in determining the extended due date for filing returns.