2025 (8) TMI 1439 - AT - Income Tax

Section 234B interest runs from April 1 of AY to payment date; excess interest beyond self-assessment payment impermissible under s.143(1).

Vimal Sureshbhai Mishra Versus Central Processing Unit, Bangaluru Present Jurisdiction Income Tax Officer, Ward-5 (3) (2), Ahmedabad

Vimal Sureshbhai Mishra Versus Central Processing Unit, Bangaluru Present Jurisdiction Income Tax Officer, Ward-5 (3) (2), Ahmedabad - TMI ISSUES PRESENTED AND CONSIDERED 1. Whether interest under section 234B is properly computed up to the date of processing of return under section 143(1) when self-assessment tax under section 140A was paid prior to such processing. 2. Whether an erroneous computation of interest under section 234B that charges interest beyond the date of payment of self-assessment tax constitutes a 'mistake apparent from the record' rectifiable under section 154. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Proper period for computation of interest under section 234B where self-assessment tax under section 140A is paid before processing under section 143(1) Legal framework: Section 234B imposes interest for shortfall in advance tax; section 234B(2) contemplates computation in two periods - (a) from 1 April of the assessment year to the date of payment of self-assessment tax and (b) from that date to the date of assessment, but only to the extent any further shortfall remains unpaid. Section 140A permits payment of self-assessment tax on filing of updated return under section 139(8A). Precedent treatment: The Tribunal referred to a coordinate-bench decision (Oasis Landmarks LLP) and another Tribunal decision (Dhirendra Narbheram Sheth) holding that interest under sections 234A/234B, being compensatory, is leviable only up to the date of self-assessment payment and not beyond where no additional tax remains unpaid. Interpretation and reasoning: The Tribunal examined the statutory scheme and concluded that section 234B requires a bifurcated computation: interest accrues up to the date of payment of self-assessment tax; thereafter interest continues only if assessed tax exceeds the aggregate of advance tax and self-assessment tax actually paid. Where the processing under section 143(1) does not alter assessed tax (i.e., no increase in tax liability), there is no 'further shortfall' post payment to justify continuing interest beyond the payment date. Charging interest until the date of processing therefore ignores the statutory condition for the second period of liability. Ratio vs. Obiter: Ratio - Interest under section 234B must be computed only up to the date of payment of self-assessment tax where the subsequent processing under section 143(1) does not increase assessed tax; continuing to charge interest beyond that date is contrary to the statutory scheme. Obiter - Reliance on compensatory character of interest as supportive reasoning and references to other Tribunal decisions are persuasive but ancillary. Conclusion: The Tribunal held that charging interest under section 234B beyond the date of payment of self-assessment tax (when no additional tax remained payable) is not permitted by the statute and was incorrectly done by the processing centre. Issue 2 - Whether the incorrect charging of interest under section 234B is a mistake apparent from the record rectifiable under section 154 Legal framework: Section 154 allows rectification of 'mistake apparent from the record' in orders passed by tax authorities. The rectification remedy applies where an error is patent on the face of the record and does not require elaborate inquiry into facts. Precedent treatment: The Tribunal relied on a coordinate-bench finding (Oasis Landmarks LLP) that identical erroneous charging of interest beyond the date of self-assessment payment constituted a mistake apparent from the record and was therefore rectifiable under section 154. The Tribunal also cited a decision emphasizing the compensatory nature of interest limiting its levy to the self-assessment date. Interpretation and reasoning: The Tribunal reasoned that the record showed (i) payment of self-assessment tax on a specified date, (ii) processing under section 143(1) that did not alter assessed tax, and (iii) computation by CPC of interest beyond the payment date despite the absence of any remaining shortfall. These facts made the error patent: the computation plainly failed to apply the statutory two-part scheme of section 234B(2). No further fact-finding was necessary to conclude the computation was erroneous on its face, thus falling squarely within the scope of section 154 rectification. Ratio vs. Obiter: Ratio - An erroneous computation that charges interest under section 234B beyond the date of self-assessment payment, where the assessed tax remains unchanged, is a mistake apparent from the record and rectifiable under section 154. Obiter - Observations on the automaticity or mandatory nature of CPC's processes, and broader comments on departmental practice, are explanatory rather than essential to the decision. Conclusion: The Tribunal concluded that the processing centre erred in computing interest under section 234B up to the date of processing; this error was a patent mistake amenable to correction under section 154 and the rectification should have been allowed to restrict interest to the date of self-assessment tax payment. Remedial Direction and Outcome Interpretation and reasoning: Applying the statutory scheme and precedent, and finding the error apparent on the face of the record, the Tribunal directed recomputation of interest under section 234B only up to the date of payment of self-assessment tax. Ratio vs. Obiter: Ratio - Where self-assessment tax was paid on a date prior to processing and the assessed tax remains unchanged at processing, interest under section 234B must be limited to the period up to that payment and the processing authority must rectify computations to that effect. Conclusion: The Tribunal allowed the appeal and set aside the lower authority's confirmation, directing CPC to recompute interest under section 234B only up to the date of payment of self-assessment tax.