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Facts
The assessee's income tax return for AY 2017-18 was assessed under Section 143(3), and a refund was initially granted, including interest under Section 244A. Subsequently, the AO discovered that mandatory interest under Section 234D was not levied and initiated rectification proceedings under Section 154, which was confirmed by the CIT(A).
Held
The Tribunal held that interest under Section 234D is automatic and mandatory, and the AO's failure to levy it in the original assessment constituted a rectifiable mistake apparent from the record under Section 154. Therefore, the AO was justified in levying the interest under Section 234D using Section 154 proceedings.
Key Issues
Whether the Assessing Officer was justified in levying mandatory interest under Section 234D by invoking rectification proceedings under Section 154 of the Income Tax Act.
Sections Cited
143(3), 244A, 234D, 154
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI SOUNDARARAJAN K., JM
O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)], dated 27.12.2023 for Assessment Year (AY) 2017-18.
Brief facts of the case are that the appellant is an individual. The return of income for AY 2017-18 was filed on 06.11.2017 declaring income of Rs. 18,00,000/-. Against the said return of income, the assessment was completed by the ACIT, Ward -1, Thriuvalla (hereinafter called "the AO") vide order dated 24.12.2019 passed u/s. 143(3) of the Income Tax Act, 1961 (the Act). While Jacob Thomas doing so, the appellant was granted refund of Rs. 40,52,550/- including interest of Rs. 2,65,120/- u/s. 244A of the Act. Subsequently, the AO noticed that interest leviable u/s. 234D of the Act was not charged. Accordingly, a notice u/s. 154, of the Act proposing to levy interest u/s. 234D of the Act was issued on 03.06.2021. In response to the notice u/s. 154 the appellant filed objections before the AO. However, the AO rejected the objections filed by the assessee and levied interest u/s. 234D of the Act vide order dated 05.10.2021.
Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order confirmed the action of the AO.
Being aggrieved, the appellant is in appeal before us in the present appeal.
It is contended that the AO ought not have exercised jurisdiction u/s. 154 of the Act to levy interest u/s. 234D of the Act.
On the other hand, the learned CIT-DR objected the above submissions.
We have heard the rival contentions and perused the material available on record. The only issue that arises for our determination is whether the AO was justified in charging interest u/s. 234D of the Act by resorting to the provisions of section 154 of the Act. Admittedly, the appellant was granted refund along with interest u/s. Jacob Thomas 234A of the Act. However, in the assessment made u/s. 143(3) of the Act, the returned income was enhanced on account of additions made in the assessment. Consequently there was no refund due to him, as the assessed tax liability is more than the tax liability determined u/s. 143(3) of the Act. Consequently the amount refunded to the assessee is liable to be refunded with interest u/s. 234D of the Act. The levy of interest u/s. 234D is automatic and mandatory at the rate stipulated therein as held by the Hon'ble Supreme Court in the case of CIT v. Anjum MH Ghaswala [2001] 119 Taxman 352. Therefore, the failure of the AO to charge interest u/s. 234D in the original assessment order, does give rise to a mistake apparent from record, which is capable of being rectified under the provisions of section 154 of the Act, therefore, the AO was justified in levying interest u/s. 234D of the Act by resorting to the provisions of section 154 of the Act. Thus, we do not find merit in the present appeal filed by the assessee.
In the result, appeal filed by the assessee stands partly allowed.
Order pronounced in the open court on 14th May, 2025.