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Facts
The assessee filed an updated return declaring additional income and paid tax. The CPC raised an additional demand for interest under Section 234B. The assessee argued that the interest was incorrectly calculated as it did not consider the self-assessment tax paid with the updated return.
Held
The Tribunal found force in the assessee's arguments regarding the incorrect computation of interest. It observed that CBDT guidelines on calculating interest for updated returns had not been correctly applied by the CPC.
Key Issues
Whether the interest under Section 234B was correctly computed by the CPC on the updated return, considering the payment of tax and additional income-tax.
Sections Cited
234B, 139(8A), 140B, 143(1), 208, 210, 143, 139(1), 140A, 139(8A)(4), 139(4), 139(5), 139(8A)(2), 115JAA, 115JD, 90, 90A, 91, 89, 139(8A)(4)
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Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
Before: SHRI R. K. PANDA & MS. ASTHA CHANDRA
This appeal filed by the assessee is directed against the order dated 30.09.2024 of the Ld. Addl. / JCIT(A)-3, Delhi relating to assessment year 2015- 16.
Facts of the case, in brief, are that the assessee is an individual and derives income from salary, house property, capital gain and income from other sources. He filed his return of income on 31.10.2023 declaring total income of Rs.4,14,23,740/-. Subsequently, the assessee revised his return of income on 31.01.2024 by declaring additional income of Rs.97,06,000/- and paid tax on the above amounting to Rs.33,66,040/-. The facts leading to the above additional income are that during the relevant financial year the assessee has sold shares in unlisted company for which the Fair Market Value (FMV) is more than the sale consideration by Rs.97,06,000/-. The CPC vide intimation dated 11.12.2024 raised an additional demand of Rs.3,20,650/- on account of interest u/s 234B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) (interest on Rs.2,56,520/- + 25% additional tax thereon of Rs.64,130/-).
Before the Ld. Addl. / JCIT(A) it was argued that such computation of interest u/s 234B of the Act by the CPC till date of intimation i.e. upto the month of December, 2024 without considering the self assessment tax of Rs.33,66,040/- paid while filing updated return on 30.01.2024. It was accordingly argued that such additional demand raised by the CPC should be deleted.
However, the Ld. Addl. / JCIT(A) was not satisfied with the arguments advanced by the assessee and dismissed the appeal by observing as under: “5. Discussion & decision- The intimation u/s 143(1) and submission along with documents submitted by appellant are carefully examined. The appeal has been filed against the order u/s 143(1) dated 11.12.2024 in respect of updated return filed u/s 139(8A) dated 31.01.2024 of IT Act. In the said intimation the tax liability of appellant was determined at Rs.3,20,650/- which consist of excess tax liability u/s 234B at Rs.2,56,520/- and additional tax u/s 140B for the same amounting Rs.64,130/-. The submissions of appellant are that he had paid the additional tax along with interest at the time of filing updated ITR in Jan, 2024. The appellant also cited provision of act that credit of tax payment made u/s 140B should be reduced while calculating interest u/s 234B. The submissions of appellant are considered and not found tenable on account of following legal position. The provision of act for charging interest u/s 234B is reproduced as under- 234B. (1) Subject to the other provisions of this section, where, in any financial year, an assessee who is liable to pay advance tax under section 208 has failed to pay such tax or, where the advance tax paid by such assessee under the provisions
of section 210 is less than ninety per cent of the assessed tax, the assessee shall be liable to pay simple interest at the rate of one per cent for every month or part of a month comprised in the period from the 1st day of April next following such financial year to the date of determination of total income under sub-section (1) of section 143 and where a regular assessment is made, to the date of such regular assessment, on an amount equal to the assessed tax or, as the case may be, on the amount by which the advance tax paid as aforesaid falls short of the assessed tax. Explanation 1. - in this section, "assessed tax" means the tax on the total income determined under sub-section (1) of section 143 and where a regular assessment is made, the tax on the total income determined under such regular assessment as reduced by the amount of- (i) any tax deducted or collected at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income (ia) any relief of tax allowed under section 89, (ii) any relief of tax allowed under section 90 on account of tax paid in a country outside India; (iii) any relief of tax allowed under section 90A on account of tax paid in a specified territory outside India referred to in that section; (iv) any deduction, from the Indian income-tax payable, allowed under section 91, on account of tax paid in a country outside India; and (v) any tax credit allowed to be set off in accordance with the provisions of section 115JAA or section 115JD. Section 234B(1) provides that the interest is to be charged on 'assessed tax' upto date of determination of income u/s 143(1) and explanation 1 is not applicable for updated ITR for the purpose of assessed tax as provided in section 139(8A)(4). The case of appellant is covered u/s 140B(2) as the appellant had filed original return u/s 139(1) also. The provision of section 140B(2) provide the calculation of updated tax payable as under: "(2) Where, return of income under sub-section (1) or sub-section (4) or sub- section (5) of section 139 (referred to as earlier return) has been furnished by an assessee and tax is payable on the basis of return to be furnished by such assessee under sub-section (8A) of section 139,- (a) after taking into account- 1. the amount of relief or tax referred to in sub-section (1) of section 140A, the credit for which has been taken in the earlier return; 2. ………………………………. the assessee shall be liable to pay such tax with interest payable under any provision of this Act for any default or delay in payment of advance tax along with the payment of additional income-tax, as computed in accordance with sub-section (3), as reduced by the amount of interest paid under the provisions of this Act in the earlier return, before furnishing the return and the return shall be accompanied by proof of payment of such tax, additional income-tax, Interest and fee." The above provision clearly provides how the 'assessed' tax on updated return is to be calculated. The assessed tax on updated ITR means tax on total income as per ITR u/s 139(8A) as reduced by the taxes as mentioned in subclause (a) above. The subclause (a) (i) provides that the amount of relief or tax which was given credit and claimed in the earlier return is required to be given. The earlier return in the case of appellant was return filed u/s 139(1). The tax credits including payment u/s 140A as claimed in that ITR can only be reduced for the purpose of assessed tax on updated ITR. The interest u/s 234B on the assessed tax as per provision of 139(8A) is to be calculated as per the provision of section 139(8A)(4) which is reproduced as under: "(4) Notwithstanding anything contained in Explanation 1 to section 234B, for the purposes of sub-section (2), interest payable under section 234B shall be computed on an amount equal to the assessed tax where, assessed tax" means the tax on the total income as declared in the return to be furnished under sub-section (8A) of section 139- (a) after taking into account- (i) the amount of relief or tax referred to in sub-section (1) of section 140A, the credit for which has been claimed in the earlier return [, if any): This sub-section again provides that explanation 1 to section 234B will not be applicable for the purpose of computation of interest u/s 234B on updated ITR. Further, the subclause (a)(i) again provides that the payment u/s 140A if claimed in original ITR can only be reduced for the purpose of calculation of interest u/s 234B. Section 234B(1) provides that the interest is to be charged on 'assessed tax' upto date of determination of income u/s 143(1) and explanation 1 is not applicable for updated ITR for the purpose of assessed tax, therefore, in view of legal position as discussed above, the interest u/s 234B was correctly charged in the intimation upto date of processing i.e. Dec, 2024. Therefore, the calculation of interest u/s 234B and consequential additional tax on updated ITR is confirmed.”
Aggrieved with such order of the Ld. Addl. / JCIT(A), the assessee is in appeal before the Tribunal by raising the following grounds: On facts and circumstances of the case and in law,
1. A. The Learned Assessing Officer at CPC, has erred in law while processing and passing intimation U/s143(1), while calculating interest of Rs.8,31,900.00 Under Section 234B till the month of intimation dated 11.12.2024 (instead of till the month of filing Updated return on 31.01.2024 to the tune of Rs.562993.00) and Additional tax U/s. 140B of Rs. 64,130.00 thereon as per newly inserted provisions of Updated return U/s. 140B by wrongly calculating additional interest of Rs.2,56,520.00 (u/s 234B) and thereby demanded Total Amount of Rs.3,20,650.00 while processing the updated return filed on 30.01.2024 and the ADDL/JCIT(A) - Delhi, has erred in confirming the same. B. The learned Assessing Officer at CPC, has erred in law while ignoring interest determination/calculation provisions of section 234B(2) and the ADDL/JCIT(A) - Delhi, has erred in confirming the same instead of setting aside the intimation Passed Under Section 143(1).
2. The Appellant craves leave to add, amend or alter any of the grounds of appeal.
The Ld. Counsel for the assessee at the outset filed a copy of the Frequently Asked Questions (FAQs) issued by the Income Tax Department, copy of which is placed at pages 1 to 9 of the paper book. Referring to the same, the Ld. Counsel for the assessee drew the attention of the Bench to the following parts of the relevant FAQs: “An updated return is a return of income that can be filed by a taxpayer within 24 months from the end of the relevant assessment year, even if he has not previously filed a return for that year. An amount equal to 25% or 50% as additional tax is required to be paid with such updated return. [Section 139(8A), Section 140B, Rule 12ACJ …….. Tax on updated return The provisions of section 140B provide for payment and computation of tax, interest, fee, and additional income tax on updated returns. The updated return shall be accompanied by the proof of tax payment, i.e. normal tax (if any), additional tax, interest, and fee as required under section 140B otherwise it shall be treated as a defective return. ……. Computation of tax, interest, and fee on the updated return where a return was filed earlier
Where a person has already filed the original, belated return, or revised return for the relevant assessment year, the tax payable on the updated return (self- assessment tax) shall be paid along with interest for any default or delay in payment of advance tax as reduced by the amount of interest paid in an earlier return. Further, an additional income tax shall be paid before filing an updated return. (a)…. (b)…. (c) Interest under section 234B - Where a person has already filed the original, belated, or revised return for the relevant assessment year and subsequently files an updated return, Section 140B provides that interest under section 234B at the time of furnishing of updated return shall be computed on the amount of assessed tax or on the amount by which the advance tax paid falls short of the assessed tax, as the case may be. An assessee may be liable to pay interest under Section 234B at the time of filing of updated return on the amount of assessed tax declared in the updated return for the period starting from April 1 of the relevant assessment year and ending on the date on which assessed tax (including self-assessment tax) is paid before filing of updated return. Where the taxes are paid in parts before the filing of the updated return, the interest shall be computed for the broken period considering the taxes paid in each part. However, this interest shall not be charged on the amount of additional income tax payable under section 140B. It is to be noted that the amount of interest shall be reduced by the amount of interest paid in an earlier return.”
He submitted that in the light of the above reply issued by the Department, the computation of interest u/s 234B of the Act by the CPC is incorrect. The Ld. Addl. / JCIT(A) has also erroneously upheld the action of the CPC which is not correct. He accordingly submitted that he has no objection if the matter is restored to the file of the Assessing Officer / CPC with a direction to re-compute the interest u/s 234B in the light of the guidelines issued by the Income Tax Department which is binding on the Revenue.
The Ld. DR on the other hand while supporting the order of the Addl. / JCIT(A) submitted that he has no objection if the matter is restored to the file of the Assessing Officer / CPC to verify the correctness of the computation of income.
We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. Addl. / JCIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee in the instant case has filed his original return of income on 31.10.2023 declaring total income of Rs.414,23,740/-. Subsequently the assessee filed an updated return on 31.01.2024 by declaring additional income of Rs.97,06,000/- and making payment of tax of Rs.33,66,040/-. The CPC processed the return on 11.12.2024 in respect of updated return filed u/s 139(8A) on 31.01.2024 and determined liability u/s 234B at Rs.2,56,520/-, additional tax thereon amounting to Rs.64,130/-, both totaling to Rs.3,20,650/-. It is the submission of the Ld. Counsel for the assessee that the CPC while calculating interest u/s 234B has erroneously computed the interest till the date of intimation on 11.12.2024 instead of till the month of filing updated return on 31.01.2024. It is his submission that in the light of the guidelines issued by the Income Tax Department in respect of computation of interest u/s 234B in respect of filing of updated return, such computation of tax liability u/s 234B by the CPC is erroneous and therefore, the matter should be restored to the file of the CPC / Assessing Officer with a direction to re-compute the interest liability u/s 234B of the I.T. Act, 1961.
We find some force in the above arguments of the Ld. Counsel for the assessee. The guidelines issued by the CBDT in respect of computation of interest u/s 234B on account of filing of updated return has already been reproduced in the preceding paragraphs. In the light of the above guidelines issued by the CBDT itself, we find some force in the arguments of the Ld. Counsel for the assessee that the matter be restored to the file of the CPC to re-compute the interest liability in the light of the above guidelines issued by the CBDT. We, therefore, deem it proper to restore the issue to the file of the CPC with a direction to verify the computation of interest and pass appropriate order after affording due opportunity of being heard to the assessee and in accordance with law. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 11th August, 2025.