2025 (9) TMI 896 - AT - Income Tax

Excess interest under s.234B deleted when tax paid by 30.04.2023; s.140B(1) payment characterization upheld and relief limited accordingly

ITAT, Mumbai held that interest under s.234B cannot be levied beyond the date on which the tax due was paid (30.04.2023); excess interest computed by the ... Charging Interest u/s 234B - payment of self-assessment tax and payment of taxes u/s 140A - AR contended that interest under Section 234B was levied up to the date of processing of the return u/s 143(1) i.e., December 2024, whereas the tax amount had already been paid on or before 30th April 2023, prior to the filing of the updated return HELD THAT:- On consideration of the rival contentions, we find merit in the assessee’s submission that interest u/s 234B cannot be levied beyond the date on which the tax due was paid, i.e., 30.04.2023. Accordingly, the excess interest so computed by the CPC is liable to be deleted. However, insofar as the determination of the payment which has been treated by the CPC as payment under Section 140B(1) of the Act, we find no infirmity in the findings of the Ld. CIT(A). The observation of the Learned CIT(A) on this issue is, therefore, upheld. ISSUES PRESENTED AND CONSIDERED 1. Whether the payment of Rs. 1,79,14,730 made between 27/04/2023 and 30/04/2023 is to be treated as self-assessment tax under section 140A or as payment pursuant to the scheme of section 140B(1) in relation to an updated return filed under section 139(8A). 2. Whether interest under section 234B can be levied beyond the date on which tax payable was discharged (i.e., whether interest is chargeable up to the date of payment made on or before 30/04/2023 or until processing of the return under section 143(1) in December 2024). 3. Whether the additional income-tax @25% on updated income (as provided in section 140B) is inapplicable where there is no fraud or willful attempt to evade tax, particularly when other penalties (e.g., section 234F) have been paid. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Characterisation of tax payment of Rs. 1,79,14,730: Legal framework Section 139(8A) (updated return) and section 140B (computation of taxes/payments and additional tax on updated income) govern consequences of furnishing an updated return; section 140A deals with self-assessment tax. Section 140B(1) contemplates computation of 'amount payable' on updated return after taking into account advance tax, TDS/TCS and self-assessment tax; section 140B(4) prescribes the effect of payments - and the statutory scheme distinguishes payments made in pursuance of the updated-return computation from ordinary self-assessment payments. Issue 1 - Precedent treatment The assessee relied on pre-amendment Supreme Court and High Court decisions concerning compensatory interest and characterisation of payments; the Tribunal observed those authorities relate to a regime prior to the insertion of sections 139(8A) and 140B (with effect from 01.04.2022) and are thus factually distinguishable. Issue 1 - Interpretation and reasoning The Tribunal examined the updated return filed on 30/04/2023 and the subsequent updated return on 31/01/2024 and the tax payments ledger. The Assessing Officer and the CIT(A) concluded that the payments of Rs. 1,79,14,730 made from 27/04/2023 to 30/04/2023 were made in relation to the tax liability computed on filing the updated return and therefore fall within the scheme of section 140B(1) (amount payable on updated return) rather than general self-assessment tax under section 140A. The Tribunal accepted the CIT(A)'s detailed factual findings that: (a) the appellant had computed an amount payable of Rs. 1,79,14,730 in the context of the updated return filed on 30/04/2023; (b) the appellant, being a qualified chartered accountant and assisted by professionals, was aware of the legal consequence and the statutory requirement to compute additional tax under section 140B but deliberately presented payments as self-assessment tax; and (c) the subsequent updated return filed on 31/01/2024 did not reflect the corrected figures that would have cured the defect, reinforcing the conclusion of deliberate mis-characterisation. The Tribunal found no infirmity in the CIT(A)'s conclusion that the payments were to be treated under section 140B(1)/(4). Issue 1 - Ratio vs. Obiter Ratio: The payment of Rs. 1,79,14,730 made immediately prior to filing an updated return under section 139(8A) must be characterized in accordance with the statutory scheme of section 140B where the payment corresponds to 'amount payable' computed on updated return; factual evidence of how the payment was computed and the form of the updated return is decisive. Obiter: Distinguishing earlier precedents on compensatory interest as inapplicable due to the post-2022 amendment is an explanatory remark supporting the ratio but not overturning past law. Issue 1 - Conclusion The Tribunal upheld the CIT(A)'s finding that the Rs. 1,79,14,730 payment was properly treated by the revenue as payment under section 140B and not as a self-assessment tax under section 140A; the CIT(A)'s factual and inferential findings of deliberate mis-characterisation were sustained. Issue 2 - Extent of liability to interest under section 234B: Legal framework Section 234B imposes interest for default in payment of advance tax where tax on total income is not covered by advance tax payments; interest is generally computed up to the date the tax due is paid. Issue 2 - Precedent treatment The assessee relied on authorities (pre-amendment) to contend that once tax liability is discharged on or before filing the updated return, interest should not continue beyond that payment date. The Tribunal considered these contentions but evaluated them in the context of the statutory language of section 234B and the post-2022 statutory amendments. Issue 2 - Interpretation and reasoning The Tribunal found merit in the assessee's contention that interest under section 234B cannot be levied beyond the date on which the tax due was paid. The factual matrix showed the tax corresponding to the updated return was paid on or before 30/04/2023; accordingly, interest computed by the CPC up to the processing date of the return (December 2024) was excessive. The Tribunal therefore directed deletion of the excess interest so computed by the CPC. Issue 2 - Ratio vs. Obiter Ratio: Interest under section 234B is liable only up to the date on which the tax due for the year is actually paid; if the tax is discharged on or before a given date, interest beyond that date cannot be justified. Issue 2 - Conclusion The Tribunal allowed the assessee's grounds relating to the liability of interest under section 234B beyond 30/04/2023 and directed deletion of excess interest computed by the CPC up to December 2024. Issue 3 - Applicability of additional income-tax @25% under section 140B where fraud or willful evasion is denied: Legal framework Section 140B prescribes computation of additional income-tax on updated income (25% of amount payable on updated income) where an updated return is furnished; the provision coexists with penal provisions for fraud or willful evasion under other sections. Issue 3 - Precedent treatment The assessee argued that in absence of fraud or willful attempt to evade tax, levy of 25% additional tax is not justified, especially when penalty under section 234F was already paid. The CIT(A) treated the facts as evidencing deliberate non-compliance and computed additional tax accordingly. The Tribunal reviewed the factual record and the CIT(A)'s reasoning. Issue 3 - Interpretation and reasoning The CIT(A) concluded that the appellant deliberately failed to compute and show the correct 'Amount Payable' and 'Additional income-tax liability on updated income' in the updated return filed on 30/04/2023, and that the subsequent updated return on 31/01/2024 did not rectify the matter but instead confirmed incongruent figures. The Tribunal accepted the CIT(A)'s findings that the appellant's conduct (given professional qualifications and assistance) evidenced deliberate misrepresentation rather than inadvertence, justifying the application of section 140B consequences. The Tribunal therefore dismissed the grounds seeking to avoid the additional tax on the basis that there was no fraud or willful evasion. Issue 3 - Ratio vs. Obiter Ratio: Where factual findings establish deliberate mis-characterisation of amounts in the updated return and payments correspond to computation under section 140B, the additional income-tax under section 140B is appropriately attracted; absence of separate fraud/evasion findings under penal sections does not preclude operation of section 140B based on the updated-return scheme and attendant computations. Issue 3 - Conclusion The Tribunal dismissed the assessee's challenge to the application of section 140B additional tax on the ground that there was no fraud or willful evasion; the CIT(A)'s factual conclusions and consequent computation under section 140B were upheld. Cross-References and Overall Disposition Issues 1 and 3 are closely related: the Tribunal's acceptance that the Rs. 1,79,14,730 payment falls within section 140B necessarily supports the imposition of additional income-tax under section 140B. Issue 2 was considered separately and in favour of the assessee: interest under section 234B was held chargeable only up to the date tax was paid (30/04/2023), and excess interest computed up to processing of the return was deleted. Consequent adjudication: grounds contesting date of filing and interest computation (grounds 1 & 2) were allowed; grounds contesting classification and additional tax (grounds 3 & 4) were dismissed; the appeal was partly allowed accordingly.