2019 (6) TMI 1093 - AT - Income Tax

Tribunal allows appeal against excess interest levy, directs reassessment.

The appeal was filed against the order of the ld. Commissioner of Income Tax (Appeals) for Assessment Year 2010-11. The Tribunal agreed with the ... Interest under section 234A - Period for computation of interest where return is filed late - Interest under section 234B - Recomputation of interest by Assessing OfficerAbandonment of grounds not pressed - Grounds No.1 and No.2 were not pressed by the assessee and dismissed as not pressed. - HELD THAT: - The authorised representative expressly stated that Grounds No.1 and No.2 were not being pursued before the Tribunal. The Tribunal recorded that submission and dismissed those grounds as not pressed, without further adjudication on their merits. [Paras 3]Grounds No.1 and No.2 dismissed as not pressed.Interest under section 234A - Period for computation of interest where return is filed late - Recomputation of interest by Assessing Officer - Excess interest under section 234A was charged; interest is leviable only up to the date the return was actually furnished and must be recomputed accordingly. - HELD THAT: - The Tribunal accepted the assessee's submission and computation that interest under section 234A should be computed from the due date for filing the return until the date the return was actually filed (i.e. until March 2014 in the facts of this case), and not until the date of completion of assessment when a return was subsequently filed. The Tribunal relied on the coordinate bench decision in Priti Prithwala and the statutory scheme of section 234A to hold that once the return is furnished the period for section 234A interest ends at the date of filing. The Assessing Officer had computed interest for an extended period; the Tribunal found that to be excessive and directed recomputation of interest up to the date of filing of the return. [Paras 4, 7, 8, 9]Ground No.3 allowed; Assessing Officer directed to re-compute interest under section 234A up to the date of filing of the return.Interest under section 234B - Recomputation of interest by Assessing Officer - Interest under section 234B is chargeable on the assessed tax due from the first day of the assessment year and the Assessing Officer was directed to compute interest following the Tribunal's prescribed method. - HELD THAT: - The Tribunal stated the legal principle that interest under section 234B is chargeable from the first day of the assessment year on the amount of assessed tax due (tax payable less TDS) from time to time. Applying that principle to the facts, the Tribunal directed a two stage computation: first compute interest from 1.4.2010 till March 2014 on the assessed tax due (X); then compute Y (tax payable less TDS plus X) and calculate interest from 1.4.2014 till the date of completion of assessment on Y. The Assessing Officer was directed to recompute interest accordingly. [Paras 10, 11]Ground No.4 allowed in part; Assessing Officer directed to recompute interest under section 234B in accordance with the Tribunal's formula.Final Conclusion: The appeal is allowed: Grounds No.1 and No.2 were dismissed as not pressed; the Tribunal set aside the excess interest charged under section 234A and directed recomputation up to the date of filing of the return; and directed recomputation of interest under section 234B in accordance with the specified method, with the Assessing Officer to give effect to these directions. Issues:1. Appeal against order of ld. Commissioner of Income Tax (Appeals)-20 for Assessment Year 2010-11.2. Levy of excess interest under sections 234A and 234B.Analysis:1. The appeal was filed against the order of the ld. CIT(A) for Assessment Year 2010-11. The assessee, a Private Limited Company engaged in Multi Level Marketing, failed to file a return of income within the prescribed time. The Assessing Officer initiated scrutiny based on information regarding undisclosed income. The assessment was completed under section 143(3) r.w.s. 147, with no additions to the income. However, the Assessing Officer raised a demand for interest under sections 234A and 234B. The assessee sought rectification, but the ld. CIT(A) upheld the order. The appeal challenged this decision.2. Regarding the levy of interest under section 234A, the ld. AR argued that interest should only be charged until the tax liability was outstanding, not beyond. A detailed computation comparison was presented, showing the excess interest levied. The assessee cited a Mumbai Tribunal decision to support the argument. The Tribunal agreed with the assessee's computation and noted that no interest was charged in a subsequent assessment year on similar grounds. Referring to the provisions of section 234A, the Tribunal directed the Assessing Officer to recompute the interest up to the date of filing the return, allowing Ground No. 3 of the appeal.3. Moving to the issue of interest under section 234B, the Tribunal clarified that interest is chargeable from the first day of the assessment year until the date of the assessment year on the amount of assessed tax due. The Assessing Officer was directed to recalculate the interest under section 234B based on the assessed tax due. Consequently, the appeal of the assessee was allowed, and the assessing officer was instructed to recompute the interest as per the Tribunal's directions.