Facts of the Case

The assessee, Hasmukhbhai Mohanlal Shah, filed his original return of income for Assessment Year 2017-18 on 29.11.2017 declaring total income of ₹27,35,910. Subsequently, a search and seizure action was conducted on 23.01.2020 in the Avani Group of Vadodara, during which incriminating documents pertaining to the assessee were found and seized. Based on these documents, proceedings under Section 153C were initiated on 29.04.2021, and the assessee filed a return in response on 08.05.2021 declaring the same income.

The assessment under Section 153C was completed on 26.03.2022 determining total income at ₹58,93,410. While completing the assessment, interest under Sections 234A, 234B, 234C and 234D was charged; however, interest under Section 234A was inadvertently levied at Nil. Subsequently, the Assessing Officer passed a rectification order under Section 154 dated 19.06.2024 levying interest of ₹92,153 under Section 234A for delay in filing the original return. The CIT(A), NFAC dismissed the assessee’s appeal against the rectification order. Aggrieved, the assessee preferred an appeal before the Tribunal.

Issues Involved

Whether interest under Section 234A could be levied through rectification under Section 154 where the return in response to notice under Section 153C was filed within time, but there was delay in filing the original return under Section 139(1), and whether assessment under Section 153C is to be treated as a regular assessment for the purpose of Section 234A.

Petitioner’s Arguments

The assessee argued that interest under Section 234A is leviable only for delay in filing the return in response to notice under Section 153C and since such return was filed within the time allowed, no interest could be charged. It was further contended that at the time of filing the original return there was no tax payable due to refund position and therefore interest under Section 234A was not chargeable.

Respondent’s Arguments

The Revenue supported the orders of the Assessing Officer and the CIT(A), contending that interest under Section 234A was chargeable for delay in filing the original return under Section 139(1) and that assessment under Section 153C is deemed to be a regular assessment by virtue of Explanation 3 to Section 234A.

Court Order / Findings

The ITAT Ahmedabad observed that interest under Section 234A is levied for delay in filing the original return of income and not the return filed in response to notice under Section 153C. The Tribunal noted that the due date for filing the original return for Assessment Year 2017-18 was 05.08.2017, whereas the return was filed on 29.11.2017, resulting in a delay of four months.

The Tribunal further held that Explanation 3 to Section 234A provides that where an assessment is made for the first time under Section 153A, such assessment shall be regarded as a regular assessment for the purposes of Section 234A. Since an assessment under Section 153C is required to be completed in accordance with Section 153A, the assessment in the present case was deemed to be a regular assessment. Accordingly, interest under Section 234A was correctly computed on the tax determined in the assessment under Section 153C. The Tribunal held that the rectification order under Section 154 levying interest of ₹92,153 was in accordance with law.

Important Clarification

The Tribunal clarified that interest under Section 234A is attracted by delay in filing the original return under Section 139(1), and assessment completed under Section 153C is deemed to be a regular assessment for this purpose by virtue of Explanation 3 to Section 234A, irrespective of timely filing of return in response to notice under Section 153C.

Final Outcome

The appeal filed by the assessee was dismissed. The levy of interest of ₹92,153 under Section 234A through rectification under Section 154 was upheld as valid and in accordance with the provisions of the Income-tax Act.

 Link to download order

https://www.mytaxexpert.co.in/uploads/1769063478_HASMUKHBHAIMOHANLALSHAHVADODARA.pdf

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