Section 234A – Interest u/s 234A can be charged only till the time tax is unpaid

Section 234A –
Interest u/s 234A can be charged only till the time tax is unpaid

FACTS

The assessee, a
private limited company, engaged in the business of multi-level marketing, did
not file its return of income within the time prescribed u/s 139 or 139(5). The
assessee filed its return of income manually on 7^th May, 2014
declaring total income of Rs. 16,49,960 under normal provisions and Rs.
1,39,326 u/s 115JB of the Act. The AO received information in Individual
Transaction Statement (ITS) that the assessee company was in receipt of credit
of Rs. 16,49,960 and that the assessee failed to disclose the said income for
the relevant assessment year.

The AO issued
and served notice u/s 148 dated 30^th March, 2017 and selected the
case for scrutiny. In response to the notice u/s 148, the assessee filed return
on 23^rd June, 2017. The assessment was completed on 13^th
October, 2017 u/s 143(3) r/w/s 147 and no addition was made to the returned
income. The AO, while passing assessment order, raised a demand of Rs. 5,81,470
on account of interest u/s 234A and 234B.

The due date of
filing return of income for the assessment year under consideration, i.e., A.Y.
2010-11, was 15^th October, 2010. From the calculation of interest
levied by the AO, the assessee noted that since the assessee paid tax on 24^th
March, 2014 he was liable to pay interest for 42 months (from 15^th
October, 2010 to 24^th March, 2014) and not for the period of 81
months (from 15^th October, 2010 to 30^th June, 2017) as
charged by the AO.

On 22^nd
December, 2017 the assessee applied for rectification u/s 154 seeking
rectification of the working of the interest. The AO partially rectified the
mistake vide order dated 9^th January, 2018.

Aggrieved, the
assessee preferred an appeal to the CIT(A) who confirmed the order passed by
the AO on an application u/s 154 of the Act.

Still
aggrieved, the assessee preferred an appeal to the Tribunal where he relied
upon the decision of the Mumbai Bench of the Tribunal in the case of Ms
Priti Prithwala vs. ITO [(2003) 129 Taxman 79 (Mum.)]. It was also
submitted that in the subsequent assessment year, on similar facts, no such
interest was charged from the assessee.

HELD

At the outset,
the Tribunal observed that, in principle, it is in agreement with the
calculation of interest as furnished by the assessee. It observed that in the
subsequent year, on similar facts, no such interest was charged by the Revenue.
It noted that the Co-ordinate Bench of the Tribunal had in the case of Priti
Prithwala (Supra) held that the words ‘regular assessment’ are used in
the context of computation. It does not show that the order passed u/s 143(3) /
144 shall be substituted by section 147. Considering the finding of the
Co-ordinate Bench and the fact that the assessee submitted that the assessee
could not be made liable to pay interest for the period during which it was not
possible on their part to file the return of income, the Tribunal directed the
AO to re-compute the interest up to the date of filing of the return.

The appeal
filed by the assessee was allowed.