Is it fair to levy interest u/s. 234A of the Act,
when due date is extended u/s. 139(1)
Section 234A of the Income-tax Act, 1961 is applicable from assessment year 1989-90, seeks to levy interest on the tax due on regular assessment as reduced by advance tax paid and tax deducted or collected at source, if any, where the return of income is filed after due date or is not furnished. The period for which interest is levied begins from April 1, following the financial year and ends on the date of furnishing the return, or in case a return is not furnished on the date of completion of assessment under section 144 of the Act.
Explanations 2 to section 139 defines “due date” for furnishing return of income for various kinds of assessees. Explanation 1 to section 234A clarifies that “due date”, means the date specified in section 139(1).
Recently, the CBDT vide notification dated July 20, 2018 introduced substantial changes in the Form 3CD, made effective for Tax Audit Report furnished from August 20, 2018, which is relevant for the Assessment Year 2018-19. The amendments in the Form 3CD has made these forms far more comprehensive and detailed one. Further, due to system failures and late introduction of “Scheme” / “Utility”, due date of filing income tax return for assessees, who were not required to get their books of account audited was extended by the CBDT from July 31, 2018 to August 31, 2018. But no date was extended by the CBDT for assessees who were required to get their books of account audited. Hence, representations from various stakeholders for extension of due date from September 30, 2018 were made to the CBDT, for filing of income tax returns and various reports of audit pertaining to assessment year 2018-19.
On consideration of various representations, the CBDT vide notification dated September 24, 2018 issued order section 119 of the Act, extending due date for filing of income tax returns as well as all reports of audit (which were required to be filed by the specified date) from September 30 to October 15, 2018 and thereafter vide notification dated October 8, 2018 from October 15 to October 31, 2018, with a rider that “there shall be no extension of the due date for purpose of Explanation 1 to section 234A (Interest for default in furnishing return) of the Act and the assessee shall remain liable for payment of interest as per provisions of section 234A of the Act.
In the mean time, various Tax Bar Associations and other institutions have also approached the various High Courts for directing the CBDT to extend the due date for filing Income tax Returns and Tax Audit Reports. In pursuance to that the Rajasthan High Court in the Rajasthan Tax Consultants Association v. UOI, directed the CBDT to consider the representation of the Association and take a decision on both aspects i.e., extension of date and extension of due date for the purpose of Explanation 1 to section 234
of the Act for waiver of interest and decide the same by passing speaking order.
As seen above, the CBDT extended the “due date” for filing Income tax Returns and Tax Audit Reports up to October 31, 2018 but with a condition that assessee filing their return of income with extended due date shall liable for levy of interest as per provisions of section 234A of the Act.
Now, is it fair, that CBDT does not follow proper directions of the Court. Is it not contempt of Court? Further, there is no “due date” under the provisions of section 234A of the Act. Explanation 1 to section 234A states that “due date” means date specified in section 139(1). So, if due date is extended by the CBDT for section 139(1), it is automatically extended for Explanation 1 to section 234A of the Act. Therefore, there is no justification to state that there shall be no extension of due date for purpose of Explanation 1 to section 234A. Further, it is to be noted that when CBDT suo motu extended the date for the assessees who were not required to get their accounts audited from July 31, 2018 to August 31, 2018 there was no condition for levy of interest under section 234A of the Act, but in case of audited accounts the assessee shall be liable to pay interest under section 234A of the Act. Is this not an anomaly?