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Facts
The assessee initially filed an Income Tax Return (ITR) for A.Y. 2014-15 under Section 139(1) on 31.08.2015. Later, a revised ITR incorporating capital gains was filed on 28.09.2016, which the A.O. treated as a compliance to a Section 148 notice, leading to an assessment under Section 143(3) r.w.s. 147. Subsequently, the A.O. issued a rectification order under Section 154 on 17.08.2021, enhancing interest under Section 234A, alleging a short levy. The assessee challenged this, arguing the rectification notice was time-barred and the interest levy was incorrect given the sequence of ITR filings and the AO's acceptance.
Held
The Tribunal found that since the assessee's original return under Section 139(1) was processed on time and the later return in response to the Section 148 notice was accepted as timely compliance, there was no ground to levy interest under Section 234A(3). The Tribunal concluded that the enhanced interest levied by the A.O. was erroneous and should be vacated to the extent of Rs. 13,22,337/-, allowing the assessee's appeal on this primary ground.
Key Issues
1. Whether a rectification order under Section 154 enhancing interest under Section 234A was validly passed when the notice for rectification was issued beyond the statutory time limit, despite COVID-19 related extensions. 2. Whether interest under Section 234A could be levied when the assessee's return in response to a Section 148 notice was treated as timely compliance by the Assessing Officer.
Sections Cited
154, 143(3), 234A, 147, 148, 139(1), 115BBE, 3(1) (TOLA, 2020), 186(4), 155, 144C, 139AA, 168, 153, 153B
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Income Tax Appellate Tribunal, Hyderabad ‘A’ Bench, Hyderabad
O R D E R प्रधत रवीश सूद, जे.एम./PER RAVISH SOOD, J.M.
The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 22.10.2024, which in turn arises from the order passed by the Assessing 2 Jugender Reddy Ananthula.
Officer (for short “A.O.”) under Section 154 of the Income Tax Act, 1961 (for short “the Act”) dated 17.08.2021 for A.Y. 2014-15. The assessee has assailed the impugned order on the following grounds of appeal before us:
“1.That the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi erred in passing the impugned appellate order by dismissing all the grounds of appeal raised by the appellant without appreciating the position of law that the CBDT vide its Notification No.10 of 2021 dt. 27-02-2021 and followed by notification 74 of 2021 dt.25th June, 2021has not extended the due dates for all actions specified under clause (a) of sub-section (1) of Section 3 of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 but only the time limits for passing the penalty orders under chapter XXI or assessment/reassessment order covered u/s 153/153B of the Income Tax Act stands extended to 30th June, 2021 and 30th September, 2021 respectively and thereby the time limit to pass the rectification order in the appellant case was expired by 31 March, 2021 and therefore the rectification order passed by the Assessing officer dt.17-08-2021 is bad-in-law and the same is liable to be quashed.
2. The appellant craves leave to add/alter/ modify the grounds of appeal as may be required for proper adjudication of the case. Also, the assessee has raised an additional ground of appeal which reads as under:
The Finance Act 2017 introduced an amendment to Section 115BBE of the IT Act, which set a higher tax rate of 60% through the Taxation (Second Amendment) Act, 2016. This amended rate is applicable only for assessments conducted from 01.04.2017 onward. Therefore, it is not permissible to apply the revised rate to the assessment year in question.
As the assessee by raising the aforesaid additional ground of appeal
, has sought for our indulgence for adjudicating a legal
3. Jugender Reddy Ananthula. issue that would not require looking any further beyond the facts available on record, therefore, we have no hesitation in admitting the same. Our aforesaid view is fortified by the judgment of the Hon'ble Supreme Court in the case of National Thermal Power Company Ltd. Vs. CIT (1998) 229 ITR 383 (SC).
Succinctly stated, the assessee had filed his return of income for A.Y. 2014–15 on 31.08.2015. The A.O. had vide his order passed u/s 143(3) of the Act, dated 31.03.2017, determined the income of the assessee at Rs. 4,51,08,670/-. Thereafter, the A.O., taking cognizance of the fact that while finalizing the regular assessment interest u/s 234A was short levied to the tune of Rs. 13,22,337/- for a period of 26 months, i.e., from August, 2014 to September, 2016, issued notice u/s 154 of the Act, dated 23.07.2021, calling upon the assessee to explain as to why the said mistake be not rectified u/s 154 of the Act.
In reply, the assessee claimed that as the time limit for issuing the notice u/s 154 of the Act had expired on 31.03.2021, therefore, the same was time-barred and void. However, the A.O. did not find favour with the contention of the assessee and vide his order u/s 4 Jugender Reddy Ananthula.
154 of the Act, dated 17.08.2021, modified/enhanced the interest levied u/s 234A of the Act to Rs. 26,44,671/-.
Aggrieved, the assessee assailed the order passed by the A.O. u/s 154 of the Act, dated 17.08.2021 before the CIT(A), but without success. For the sake of clarity, the observations of the CIT(A) are culled out as under:
-left blank intentionally- 5 Jugender Reddy Ananthula. 6 Jugender Reddy Ananthula. 7 Jugender Reddy Ananthula. 8 Jugender Reddy Ananthula. 9 Jugender Reddy Ananthula.
The assessee, being aggrieved by the order of the CIT(A), has carried the matter in appeal before us.
We have heard the learned Authorized Representatives of both parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions.
Sri G Srinivasa Rao, C.A., the Learned Authorized Representative (for short “Ld.AR”) for the assessee, at the threshold of hearing of the appeal, submitted that the A.O. had grossly erred in levying interest u/s 234A of the Act for a period of 26 months i.e., from August, 2014 to September, 2016. Elaborating on his contention, the Ld. AR submitted that the assessee had filed his original return of income for A.Y. 2014-15 on 31.08.2015, and the same was processed as such u/s 143(1) of the Act on 24.02.2016. The Ld. AR submitted that the assessee had thereafter voluntarily filed his return of income on 28.09.2016, wherein he had offered the capital gains on the transfer of land as per the “Joint Development Agreement” (JDA)
10 Jugender Reddy Ananthula. entered into with M/s. Mahanagar Homes Pvt. Ltd. dated 07.02.2013, declaring an income of Rs. 4,51,08,670/-. Thereafter, the A.O. issued notice u/s 148 of the Act, dated 30.09.2016, wherein the assessee was called upon to file his return of income. In compliance, the assessee requested that his return of income filed on 28.09.2016, declaring an income of Rs. 4,51,08,670/-, be treated as a return of income filed in compliance to the notice u/s 148 of the Act. The A.O. acted upon the aforesaid request of the assessee and framed the assessment vide his order passed u/ss. 143(3) r.w.s. 147 of the Act, dated 31.03.2017, determining the income of the assessee as was returned by him on 28.09.2016 at Rs. 4,51,08,670/-.
Elaborating further on his contention, the Ld. AR submitted that as the assessee had originally filed his return of income u/s 139(1) of the Act on 31.08.2015, therefore, the delay, if any, in filing of the return of income in compliance to notice u/s 148 of the Act, dated 30.09.2016 could have been only subjected to levy of interest u/s 234A(3) of the Act, i.e. the period of delay, if any, that was to be reckoned from the date of the expiry of the time allowed to file the return of income in compliance to notice u/s 11 Jugender Reddy Ananthula.
148 of the Act upto the date of filing of the said return of income. The Ld. AR submitted that the A.O. has grossly erred in losing sight of the material facts involved in the present case and had grossly erred in levying interest u/s 234A(1)(a) of the Act.
Per contra, Shri Gurpreet Singh, the learned senior Departmental Representative (for short “Ld. DR”) relied upon the orders of the lower authorities.
Ostensibly, the claim of the assessee that he had initially filed his return of income u/s 139(1) of the Act on 31.08.2015 was not discernible from the record, but also quite contrary to the observations recorded by the A.O. in his order passed u/ss. 143(3)/147 of the Act, dated 31.03.2017. The A.O. had observed in the assessment order that as per the data available with his office, no return of income was filed by the assessee for A.Y. 2014- 15.
Considering the aforesaid contradiction in the claim of the assessee as against the observations of the A.O., the Ld. DR was directed to obtain a report of the A.O. Also, the Ld. AR was directed to place on record a copy of the original return of income that was 12 Jugender Reddy Ananthula. stated to have been filed by the assessee u/s 139(1) of the Act, on 31.08.2015, declaring an income of Rs. 4,19,644/-.
On the next date of hearing of the appeal, the Ld. AR has placed on our record a copy of the return of income filed by the assessee for A.Y. 2014-15 on 31.08.2015, declaring an income of Rs. 4,19,644/-. Also, the Ld. DR had placed on record the report of the DCIT, Circle-9(1), Hyderabad, dated 27.06.2015, wherein he had stated that, as verified from the AST portal, the assessee had filed his return of income for A.Y. 2014-15 on 31.08.2015, vide acknowledgment no. 694310815029426, declaring an income of Rs.4,19,644/- (gross income).
Considering the aforesaid factual position as had been clarified by both parties, we proceed on the factual premises that the assessee had filed on 31.08.2015 his return of income for A.Y. 2014-15 under Section 139(1) of the Act.
As observed hereinabove, the original return of income filed by the assessee was processed as such u/s 143(1) of the Act, on 24.02.2016. Thereafter, the assessee had voluntarily filed a return of income, wherein after including the capital gains on the transfer 13 Jugender Reddy Ananthula. of land based on the JDA, dated 07.02.2016, entered into with M/s. Mahanagar Homes Pvt. Ltd, Hyderabad, he had disclosed an income of Rs. 4,48,69,030/- on which the corresponding tax of Rs. 1,49,22,023/- was claimed to have been paid (as can be gathered from the order passed by the A.O. u/s 143(3) of the Act on 31.03.2017).
As observed hereinabove, the A.O. had issued notice u/s 148 of the Act, dated 30.09.2016. In compliance, the assessee had submitted that his return of income filed on 28.09.2016 (supra) disclosing an income of Rs. 4,51,08,670/- be treated as a return of income filed in compliance to the notice issued u/s 148 of the Act. On a perusal of the assessment order passed by the A.O. u/s 143(3) r.w.s. 147 of the Act dated 31.03.2017, we find that the A.O. had acted upon the request of the assessee, and had after treating the return of income filed by him on 28.09.2016 (supra) as the return of income filed in compliance to notice issued u/s 148 of the Act, had assessed his income at the income that was returned by him on 28.09.2016, i.e., at Rs.4,51,08,670/-.
14 Jugender Reddy Ananthula.
Considering the aforesaid facts, we shall now deal with the issue for which our indulgence has been sought by the assessee, viz. correctness of the modified/enhanced interest levied by the A.O. u/s 234A of the Act.
As observed by us hereinabove, the A.O. vide his order u/s 154 of the Act, dated 17.08.2021 rectified the order of assessment that was passed by him u/s 143(3) of the Act, dated 31.03.2017, and had saddled the assessee with interest that was stated to have been short-levied for a period of 26 months while framing the assessment by an amount of Rs. 13,22,337/- i.e., from August, 2014 to September, 2016.
We find substance in the Ld. AR's claim that as the return of income filed by the assessee u/s 139(1) of the Act, dated 31.08.2015 was initially processed as such u/s 143(1) of the Act, therefore for Section 234A of the Act, the delay, if any, involved in the filing of the return in compliance to notice u/s 148 of the Act could have been levied only for the period of the delay involved in filing of such return of income, i.e. the period that was to be reckoned from the expiry of the time allowed for filing the return 15 Jugender Reddy Ananthula. of income in response to the said notice till the date of filing of the said return of income. Ostensibly, as the assessee in compliance to the notice u/s 148 of the Act, dated 30.09.2016, had within the prescribed period allowed for filing of the said return of income, requested that the return of income filed by him on 28.09.2016 (supra) be treated as a return of income filed in compliance to the said notice, which request was accepted by the A.O., therefore, in the absence of any delay in effecting compliance to the notice u/s 148 of the Act (supra), no interest under sub-section (3) of Section 234A of the Act could have been levied upon him.
Based upon our aforesaid deliberations, we are of the firm conviction that the assessee could not have been visited with the levy of the impugned interest under Section 234A of the Act, for the following reasons:
(A). Ostensibly, the A.O. appears to have levied interest as per clause (a) of sub-section (1) of Section 234 of the Act, which does not apply to the case of the assessee. As the assessee had filed his original return of income u/s 139(1) of the Act on 31.08.2015, therefore, the same being within the “due 16 Jugender Reddy Ananthula. date” could not have been subjected to the levy of interest u/s 234A of the Act.; AND (B). Further, now when the assessee in compliance to the notice u/s 148 of the Act, had duly complied with the same, i.e. within the prescribed period had requested the A.O. for treating the return of income filed by him on 28.09.2016 (supra), as the return of income filed in compliance to the aforesaid notice, which request was accepted by the A.O., therefore, he could not have been subjected to any interest under sub-section (3) of Section 234A of the Act.
As the assessee in the present case before us has assailed the modified/enhanced interest of Rs. 13,22,337/- [Rs. 26,44,671/- (minus) Rs. 13,22,334] that was levied by the A.O. for a period of 26 months, i.e. from August 2014 to September 2016, therefore, to said extent the same in terms of our aforesaid deliberations is vacated. Resultantly, the additional ground of appeal filed by the assessee is allowed.
17 Jugender Reddy Ananthula.
As we have vacated the modified/enhanced levy of interest u/s 234A of the Act amounting to Rs. 13,22,337/-, therefore, we refrain from adverting to and adjudicating the other issues, based on which the impugned order has been assailed before us, which, thus, are left open.
In the result, the appeal filed by the assessee is allowed in terms of our aforesaid observations.
Order pronounced in the Open Court on 8th July, 2025. (श्री मधुसूदन सावडिया) (श्री रवीश सूद) (MADHUSUDAN SAWDIA) (RAVISH SOOD) लेखा सदस्य/ACCOUNTANT MEMBER न्यायिक सदस्य/JUDICIAL MEMBER Hyderabad, dated 08.07.2025. *TYNM/sps 18 Jugender Reddy Ananthula.