2022 (8) TMI 801 - AT - Income Tax

Tribunal upholds interest levy under Section 234A in rectification order for Assessment Years

The Tribunal dismissed all three appeals challenging the levy of interest under Section 234A in the rectification order passed under Section 154 for the ... Levy of interest under Section 234A - rectification under Section 154 - mandatory nature of interest under Sections 234A, 234B and 234C - requirement of specific direction for levy of interest - distinguishing precedent in Ranchi Club Ltd.Rectification under Section 154 - levy of interest under Section 234A - mandatory nature of interest under Sections 234A, 234B and 234C - Validity of levying/recomputing interest under Section 234A by an order passed under Section 154. - HELD THAT: - The Tribunal held that interest under Section 234A is statutory and mandatory in nature, and therefore an Assessing Officer need not have specifically recited the levy in the original assessment order for it to be levied subsequently by way of rectification under Section 154 where interest was omitted due to oversight. The court relied on the principle that statutory interest provisions impose an obligation to charge interest for delay in furnishing return, and rectification to compute or correct the quantum of such interest is permissible. The assessee's contention that a debatable issue could not be the subject of Section 154 rectification was rejected on the basis that omission of interest in computation amounted to an oversight capable of correction. The Tribunal referred to the Supreme Court's decision recognising the mandatory character of interest under Sections 234A, 234B and 234C, and applied that principle to uphold the rectification which recomputed the interest quantum. [Paras 4, 7]Rectification under Section 154 to levy/recompute interest under Section 234A was valid and sustainible; appeals dismissed on this ground.Requirement of specific direction for levy of interest - distinguishing precedent in Ranchi Club Ltd. - Whether the absence of an express direction in the assessment order precludes levy of interest under Section 234A, having regard to precedents relied upon by the assessee. - HELD THAT: - The Tribunal distinguished the cited decision in Ranchi Club Ltd. on its facts, noting that in Ranchi Club the Court found no default in filing return and held interest leviable only on tax as declared in the return; those factual and legal premises did not apply to the present case where delay in filing return was explicitly recorded and interest had already been shown in the income-tax computation (albeit understated) and later recomputed. The Tribunal also considered other decisions relied upon by the assessee and found them inapplicable on the facts. Consequently, the absence of a particular phraseology in the original order did not bar levying interest where the demand notice and rectification clearly identified interest under Section 234A. [Paras 5, 6]Precedents requiring a specific direction were distinguished on facts; absence of express wording in the original order did not preclude valid levy by rectification.Final Conclusion: The Tribunal upheld the assessing officer's rectification under Section 154 which recomputed and levied interest under Section 234A for the specified assessment years, distinguishing the precedents relied upon by the assessee; all three appeals are dismissed. Issues:Levy of interest u/s. 234A in rectification order passed u/s 154.Analysis:1. The appellant challenged the levy of interest u/s. 234A in the rectification order passed u/s 154 for Assessment Years (AY) 2010-11, 2012-13 & 2013-14. The appellant contended that such a levy could not be made without specific direction. The Assessing Officer (AO) had rectified the demand and passed the order u/s 154 on 18.07.2018, recomputing the interest u/s. 234A to Rs.1,23,944/-. The appellant argued that interest u/s. 234A could not be levied without specific directions.2. The Ld. CIT(A) noted the observations made by the AO regarding the delay in filing the Return of Income (ROI) and the subsequent levy of interest u/s. 234A. The Ld. CIT(A) distinguished the case law cited by the appellant and held that the circumstances of the present case were different from the case law cited by the appellant. The Ld. CIT(A) confirmed the levy of interest u/s. 234A based on the facts and circumstances of the case.3. The Tribunal referred to the decision of the Hon'ble Supreme Court in CIT v. Anjum M.H. Ghaswala, where it was held that the interest under Sections 234A, 234B, and 234C is mandatory and need not be specifically levied in the assessment order. The Tribunal also distinguished the decisions cited by the appellant, stating that they were not applicable to the present case. The Tribunal upheld the order of the AO and dismissed all three appeals.4. In conclusion, the Tribunal found no reason to interfere with the impugned orders and dismissed all the appeals related to the levy of interest u/s. 234A in the rectification order passed u/s 154 for the mentioned Assessment Years.Judgment:All three appeals challenging the levy of interest u/s. 234A in the rectification order passed u/s 154 were dismissed by the Tribunal on 17th August, 2022.