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Income Tax Appellate Tribunal, `C BENCH, CHENNAI
Before: SHRI MANU KUMAR GIRI & SHRI S.R. RAGHUNATHA
आदेश /O R D E R
PER MANU KUMAR GIRI, JM:
This appeal filed by the assessee is directed against the order of the Ld. Commissioner of Income Tax(Appeals), Addl/JCIT(A), Agra [hereinafter the “Ld.CIT(A)”] dated 29.03.2025 arising out of the intimation dated 27.12.2023 issued by the Deputy Director of Income Tax, CPC, Bengaluru (hereinafter referred to as the "AO") passed u/s.143(1) of the Income-tax Act, 1961 (hereinafter "the Act') for the Assessment Year 2020-21 (hereinafter the"AY").
-2 - ITA. No:1105/Chny/2025
Chronical dates chart is as under:
# Date Event 1 31.07.2020 Original due date u/s 139(1) for AY 2020-21 (individual, non-audit case) 2 10.01.2021 Extended due date for filing ROI for AY 2020-21 (COVID-related extension) 3 31.03.2021 End of AY 2020-21 4 31.03.2022 Last date to file Updated Return with 25% additional tax under section 140B(3)(i) 5 01.04.2022 Section 139(8A) & 140B came into force via Finance Act, 2022 (start of Updated Return regime) 6 25.05.2022 Self-assessment tax of Rs.4,64,062 paid (includes tax, interest, fee after TDS credit) 7 27.06.2022 ITR-U enabled on portal for ITR-1 and ITR-4 for AY 2020-21 8 09.07.2022 ITR-U enabled on portal for ITR-2 and ITR-3 for AY 2020-21 9 31.10.2022 Updated Return filed u/s 139(8A) for AY 2020-21 10 01.02.2023 CBDT issued FAQs via Press Release (e-Verification Scheme 2021) clarifying 25%/50% applicability 11 31.03.2023 Last date to file Updated Return with 50% additional tax under section 140B(3)(ii)
Brief facts of the case are as under: The assessee is an individual and has not filed his return of income within the due date as per sections 139(1) or 139(4) of the Act. The assessee paid self- assessment income tax of Rs.3,07,667/-, interest of Rs.1,46,395/- u/s.234A, 234B, 234C and fee of Rs.10,000/- u/s.234F of the Act, totaling to Rs.4,64,062/- on 25.05.2022 after deducting TDS of Rs.25,632/- from rental income. The assessee filed an updated return u/s.139(8A) of the Act on 31.10.2022 and claims that Form ITR 3 was not enabled for filing before that date. The assessee contends that the CPC has computed interest u/s.234A of the Act till 31.10.2022 (date of filing the updated return) instead of till 25.05.2022 (date of payment of tax) and has charged additional tax u/s.140B(3)(ii) of the Act at the rate of 50% instead of 25%,
-3 - ITA. No:1105/Chny/2025 leading to the demand of Rs.3,15,733/-. Aggrieved with the intimation issued u/s.143(1) of the Act dated 27.12.2023, the assessee filed an appeal before the CIT(A), who dismissed the appeal by holding as under: 5.2.1 The assessee has contended that the additional tax u/s 140B(3) should not have been charged at 50% as the forms for filing updated returns in ITR 3 were enabled only 31.10.2022, whereas forms for ITR 1 and 4 were enabled earlier on 12.07.2022. Additionally, the appellant argues that the additional tax should have been charged at 25% as this was the first year of implementation of the updated return scheme, making it impossible for the delay to exceed two years. 5.2.2 Section 140B(3) of the Act clearly prescribes two rates of additional tax: 25% if the updated return is filed before completion of twelve months from the end of the relevant assessment year, and 50% if filed thereafter but before twenty-four months, For AY 2020-21, the assessment year ended on 31.03,2021, The appellant filed the updated return 31.10.2022, which is beyond twelve months from 31.03.2021, making the 50% rate applicable as per section 140B(3)) 5.23 The practical difficulties regarding availability of forms, while acknowledged, cannot override the clear statutory timeline. Similarly, the argument regarding first-year implementation does not find support in the legislation, which provides no special dispensation based on the novelty of the scheme. The law stipulates objective timelines for determining the applicable rate, and the CPC has correctly applied the 50% rate as prescribed, Therefore, grounds of appeal No. 2 and 3 are rejected. 5.3 Analysis of Ground No. 4: 5.3.1 The appellant has contended that none of the sub-clauses of Section 143(1)(a) envisages raising an additional tax demand, as there was no apparent incorrect claim made in the return. Section 143(1)(a) provides for making certain adjustments to the income or loss returned, but the processing of a return involves more than just these adjustments. 5.3.2 The computation of tax liability based on the returned income, including the application of the correct rate of additional tax u/s 140B(3) and the calculation of interest under various provisions, is an integral part of processing u/s 143(1). This computation does not require any adjustment to the income itself but involves the application of the tax laws to the declared income. 5.3.3 In the present case, the CPC has not made any adjustment to the income returned by the appellant but has computed the tax liability in -4 - ITA. No:1105/Chny/2025 accordance with the provisions of the Act. The demand raised is a result of the correct application of the tax laws to the declared income, not an adjustment u/s 143(1)(a). Therefore, this ground of appeal is rejected.
Aggrieved by the order of the Ld. CIT(A), the assessee preferred an appeal before us.
Before us, the ld. counsel for the assessee has filed detailed submissions as under: Applicability of Additional Tax @25% uls. 140B(3)(i): 1. 1.1. The Finance Act, 2022 for the first time introduced a new compliance regime via Section 139(8A), enabling taxpayers to file an Updated Return (ITR-U) within a period of twenty-four months from the end of the relevant Assessment Year. 1.2. Section 140B(3)(i) provides that where such updated return is furnished within 12 months, the assessee is liable to pay an additional income tax of 25% of the aggregate of tax and interest payable under sub-sections (1) or (2). Section 140B(3)(ii) provides for 50% if furnished after 12 months but within 24 months. 1.3. In the present case, the relevant Assessment Year is 2020-21. The original due date u/s. 139(1) was 31.07.2020, subsequently extended to 10.01.2021 due to the COVID-19 pandemic. Accordingly, the 12-month period from the end of the AY expired on 31.03.2022. However, Sections 139(8A) and 140B were enacted only with effect from 01.04.2022 via the Finance Act, 2022. Further, the assessee discharged full self-assessment taX of Rs.4,64,062/- (inclusive of tax, interest., and fee after TDS credit) on 25.05.2022, and filed the return on 31.10.2022. 1.4. The delay in filing ITR-U was solely due to administrative constraints, as the ITR-U form was made available by the Department only on 27.06.2022 (for ITR-1/4) and 09.07. 2022 (for ITR-2/3). Given the assessee's individual status and income profile, the applicable return was ITR-3, which was released only on 09.07.2022. 1.5. The assessee could not have filed the updated return within the initial 12-rnonth window. Imposing 50% additional tax u/s, 140B(3)(ii) despite this administrative delay is arbitrary and inequitable, Even assuming that the 12-rnonth period commenced from 01.04.2022 (the date of enforcement of the provision), the assessee was eligible for the 25% additional tax rate until 31.03.2023. Alternatively, if calculated from the date |TR3 was made available (09.07.2022), the 25% rate would be applicable until 09.07.2023. In both cases, the assessees filing on 31.10.2022 clearly falls within the 25% period. 1.6. The ITR-U form is a system-generated form, leaving no option for the assessee to opt for 25% on his own. Therefore, the automatic application
-5 - ITA. No:1105/Chny/2025 of 50% additional tax, arising from administrative delay and system constraints, warrants rectification. 1.7. Further, the CBDT's own FAQs on e-Verification Scheme, 2021, issued via Press Release dated 01.02.2023, Para 20 in Page 5, states: "If the updated return is being filed within 12 months from the end of the relevant assessment year, then an additional income tax of 25%... shall be payable." When read with Section 140B(3)(i), it is evident that the legislature intended compliance to be enabled, and not frustrated, by administrative inaction. 1.8. It is a settled law, that substantive rights should not be defeated by procedural lapses of the department. The Doctrine of Legitimate expectation and Principles of Administrative Fairness support the assessee's plea. Accordingly, the additional income tax should be restricted to 25% and not 50%. 1.9. In Aprameya Engineering Ltd. V. DCIT (ITA.No.456/Ahd/2024, ITAT Ahmedabad, wherein it was held that "Delay in filing Form-10IC is a procedural requirement, but claiming the concessional rate is a substantive right. Procedural lapses should not override substantive benefits" 1.10. In the present case, the unavailability of ITR-U form for ITR-3 on 31.03.2022(the 12 month threshold) is a procedural barrier, not a failure of intent or eligibility, therefore the assessee is entitled to the additional tax rate u/s. 140B(3)(i). Excessive Levy of Interest U/s. 234A: 2.1. The assessee filed the updated return declaring an income of Rs.13,26,780 and paid the tax of Rs.4,64,062 on 25.05.2022, prior to filing the return; the tax calculation is as follows: Self-assessment tax Rs.3,07,667 Interest u/s 234A, 234B & 234C Rs.1,46,395 Fee u/s.234F Rs. 10,000 Total Rs.4,64,062
2.2. However, interest u/s. 234A was wrongly computed vide Intimation u/s. 143(1) of the Act, till the date of filing the updated return, i.e., 31.10.2022, rather than till the date of actual payment of tax, i.e., 25.05.2022. 2.3. It is submitted that Section 234A levies interest only on unpaid tax, and once the entire self-assessment tax is discharged, interest should cease to accrue. There is no legal justification to charge interest beyond the date of payment, as there is no revenue loss. 2.4. The following judicial precedents support this: # Citation Ratio i. CIT v. M.Chandra Sehkar 151 Levy of interest is to Levy of interest is to compensate the delay in -6 - ITA. No:1105/Chny/2025 compensate payment ii CIT v. Prannoy Roy v. [(2009) Interest u/s. 234A is 309 ITR 231 (SC)] compensatory, not penal iii Gautam Vinod Daftary v. ITO No interest is leviable beyond [2016] 69 taxmann.com 85 date of full tax payment. (Mumbai Trib). iv Annuj Goel v. DCIT [(ITAT 234A ceases once the entire Pune)] ITA tax liability is paid No.1632/PUN/2017 v Trisigma Apex Services LLP v. Irrespective of date of filing of AO [ITA No.3148/Del/2024] ITR, interest u/s 234A of the Act, shall accrue 2.5 Therefore, the department's computation is both factually and legally flawed, and the interest u/s. 234A should be recalculated only up to 25.05.2022.
3. Thus it is submitted that the additional income-tax u/s, 140B(3) be restricted to 25%, not 50%, in view of the administrative impossibility of filing the updated return within 12 months due to non-availability of ITRU, And, the interest u/s. 234A be recomputed only up to 25.05.2022, the date of full tax payment, in line with settled case law and the compensatory nature of the provision. Therefore, the final demand of Rs.3,15,733 may accordingly be reduced.
4. The following is the table showing the computation summary:
Particulars Amount (Rs.) Declared income u/s.139(8A) 13,26,780 Self-assessment tax paid 3,07,667 Interest paid u/s 234A,B&C 1,46,395 Fee paid u/s 234F 10,000 Total 4,64,062 TDS credit 25,632 Total Tax paid on 25.05.2022 4,38,430 Tax liability determined as per 7,54,000 Intimation u/s.143(1) of the Act Credit given by CPC 4,38,430 Additional demand raised 3,15,733 Dispute – I On 50% Additional tax Dispute – II Interest levied till filing and not payment to tax
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# DATE PARTICULARS PAGE No 1 04.12.1984 CIT v. M. Chandra Sekhar [1985] 20 Taxman 1 – 5 3 (SC) 2 17.09.2008 CIT v. Pranoy Roy [(2009) 309 ITR 231(SC)] 6 & 7 3 29.07.2015 Gautam Vinod Daftary v. DCIT [2016] 69 8 – 11 taxmann.com 85 (Mumbai Trib) 4 04.09.2019 Annuj Goel v. DCIT [(ITAT Pune)] 12-17 I.T.A.No.1632/PUN/2017 5 01.02.2023 FAQ on E-Verification Scheme, 2021 18 – 22 6 20.11.2024 Trisigma Apex Services LLP v. DCIT [ITA 23 – 26 No.3148/Del/2024] 7 - Screenshot of the Face page on the Latest 27 & 28 News during the year 2022, from the Income Tax e-filing portal 8 - Screenshot of the form ITR-U Excel Utility 29 - 31
Per contra, the ld.DR for the revenue supported the orders of the authorities below and pleaded for the dismissal of the appeal.
The assessee, an individual, did not file the return of income under section 139(1) or 139(4) of the Act for the A.Y. 2020–21. However, the assessee filed an Updated Return under section 139(8A) on 31.10.2022, declaring total income of Rs.13,26,780. Before filing the Updated Return, the assessee paid self-assessment tax of Rs.3,07,667/-, interest of Rs.1,46,395/- under sections 234A, 234B, and 234C, and fee of Rs.10,000/- under section 234F, totalling to Rs.4,64,062/-, on 25.05.2022 after adjusting TDS of Rs.25,632/-. The CPC, in processing the return under section 143(1), levied additional tax under section 140B(3)(ii) at 50% (instead of 25%) and computed interest under section 234A till 31.10.2022, i.e., the date of filing of the return, instead of the date of tax payment (25.05.2022), resulting in a net demand of Rs.3,15,733. The assessee’s appeal before the Ld. CIT(A) was dismissed on both grounds. Aggrieved, the assessee is in appeal before us. The key issues for adjudication before us are:
-8 - ITA. No:1105/Chny/2025 (i) Whether the additional income tax under section 140B(3) should be levied at 25% or 50% ? (ii) Whether interest under section 234A should be computed only up to the date of tax payment (25.05.2022) and not up to the date of filing the Updated Return (31.10.2022) ?
Assessee’s Contentions on Applicability of 25% Additional Tax u/s 140B(3)(i) that section 139(8A) and section 140B came into effect only from 01.04.2022, and thus the 12 month window as per section 140B(3)(i) ought to be reckoned from that date, making the Updated Return filed on 31.10.2022 well within 12 months. The relevant ITR-U form for ITR-3 was made available on the portal only on 09.07.2022, and the assessee could not have filed the return earlier due to the non-availability of utility, which constitutes a procedural impossibility. Reliance was placed on the CBDT FAQs dated 01.02.2023, the Doctrine of Legitimate Expectation, and case law including Aprameya Engineering Ltd. v. DCIT (ITAT Ahmedabad) and Trisigma Apex Services LLP v. DCIT (ITAT Delhi), arguing that procedural delays should not defeat substantive compliance.
On Interest u/s 234A, the assessee contends that the assessee paid the full self-assessment tax including interest and fees on 25.05.2022. Therefore, interest under section 234A should not be charged beyond this date. The interest computation up to 31.10.2022 is contrary to the compensatory nature of interest under section 234A, and violates judicial precedents including Prannoy Roy (309 ITR 231), Anuj Goel v. DCIT, and others.
Per contra, the ld.DR supported the orders of the lower authorities and argued that the return was filed after 12 months from the end of the relevant A.Y. 2020–21 (i.e., after 31.03.2022),
-9 - ITA. No:1105/Chny/2025 and hence, section 140B(3)(ii) requiring 50% additional tax squarely applies. Interest under section 234A has been rightly computed up to the date of filing of return, as there is no statutory exception in cases where tax is paid prior to filing.
Our Findings and Decision on Additional Tax u/s. 140B(3):
We have carefully considered the rival submissions and the legislative framework. Section 140B(3) prescribes two slabs of additional tax:
(i) 25% if the Updated Return is filed within 12 months from the end of the relevant A.Y. (ii) 50% if filed after 12 months but within 24 months.
In this case, the A.Y. 2020–21 ended on 31.03.2021, and the Updated Return was filed on 31.10.2022, clearly beyond 12 months. However, sections 139(8A) and 140B came into effect only on 01.04.2022 via the Finance Act, 2022. The corresponding forms (especially for ITR-3) were enabled only from 09.07.2022. The assessee's return was filed on 31.10.2022, which is within 12 months of the enforcement of the provision and well within 12 months from the utility’s release date. The assessee cannot be penalised for a procedural impossibility, namely, non-availability of form ITR-3 prior to 09.07.2022. Applying 50% rate in such cases would be inequitable and ultra vires the principle of administrative fairness. This view is fortified by judicial precedents, including:
(iii) Aprameya Engineering Ltd. v. DCIT (ITA No.456/Ahd/2024),
-10 - ITA. No:1105/Chny/2025 (iv) Trisigma Apex Services LLP v. DCIT (ITA No.3148/Del/2024), and (v) CBDT FAQs dated 01.02.2023.
Accordingly, we direct the AO/CPC to restrict the additional income- tax to 25% under section 140B(3)(i) instead of 50%.
Our Findings and Decision on Interest u/s 234A:
Interest under section 234A is compensatory in nature, meant to cover the delay in payment of tax, not delay in filing per se, once taxes are fully paid. In this case, the entire tax liability (including interest and fees) was paid on 25.05.2022, and hence interest under section 234A should be computed only up to that date, not up to 31.10.2022. This view is supported by multiple judicial pronouncements:
(i) CIT v. Prannoy Roy [(2009) 309 ITR 231 (SC)], (ii) Anuj Goel v. DCIT [ITA No.1632/PUN/2017], (iii) Gautam Vinod Daftary v. DCIT [69 taxmann.com 85], among others.
We therefore direct the AO to recalculate interest under section 234A only up to 25.05.2022, the date of tax payment.
Conclusion: In view of the above findings:
(a) The additional tax under section 140B(3) is to be restricted to 25%; (b) Interest under section 234A is to be computed only up to 25.05.2022;
-11 - ITA. No:1105/Chny/2025 (c) The net demand of Rs.3,15,733 raised through the intimation dated 27.12.2023 is liable to be modified accordingly. AO/CPC is directed to recompute the tax liability in accordance with this order. 13. In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 14th October, 2025 at Chennai.