Bharatbhai B. Shah vs. ITO; 255 CTR 278 (Guj):
The due date for filing of the return of income for the A. Y. 1996-97, was 31-8-/1996. The assessee had filed the return of income late, on 27-3-1998. However, he had paid tax of Rs. 10 lakh u/s. 140A of the Income Tax Act, 1961 on 30-8-1996. The Assessing Officer processed the return u/s. 143(1)(a) of the Act and assessed the tax at Rs. 15,08,474/- and after deducting the TDS of Rs. 25,533/-, determined the tax liability at Rs. 14,82,941/-. He also levied the interest u/s. 234A of the Act on the said amount ignoring the amount of Rs. 10 lakh paid on 30-8-1996.
The assessee filed a writ petition contending that interest u/s. 234A could be levied not on the entire amount of Rs. 14,82,941/-, but only on the amount of Rs. 4,82,941/- after reducing the amount of Rs. 10 lakh paid before the due date.
The Gujarat High Court allowed the petition and held as under:
“i) If the Revenue is allowed to recover interest on the tax which is already paid within the due date, merely because the return was not filed in time, would make the provision penal in nature and expose it to challenge of its vires.
ii) In the present case, the assessee had already deposited tax of Rs. 10 lakh before the due date of filing return. The return, of course, was filed belatedly. While framing the assessment of such belated return, the Assessing Officer held that the assessee should pay further tax of Rs. 4,82,941/-. Thus, the Revenue’s demand for interest for the entire amount of Rs. 14,82,941/- u/s. 234A would fall foul to the ratio of the decision of the Delhi High Court in the case of Dr. Prannoy Roy vs. CIT; 254 ITR 755 (Del) which has been confirmed by the Supreme Court in CIT vs. Pranoy Roy; 309 ITR 231 (SC).
iii) Revenue can collect interest u/s. 234A only on the additional sum of Rs. 4,82,941/- and not on the entire amount.”
