Rectification Order Levying Interest Under Section 234A Struck Down as E-Verification Relates Back to Return Filing Date

ORDER

Inturi Rama Rao, Accountant Member.- This is an appeal filed by the Assessee directed against the order passed by Learned Commissioner of Income Tax(Appeal), Chennai-18 dated 18.12.2025 passed u/s.250 of the Income Tax Act, 1961 for the Assessment Year 2021-22.

2. The Assessee raised the following grounds of appeal :

“1. The Order under section 250 of the Act, dated 18/12/2025, passed by the CIT(A), Chennai -18, is contrary to the law and the facts passed without the jurisdiction, is passed in violation of the principles of Natural Justice.

2. The computation of the interest under Section 234A of the Act was never recorded either in the Assessment Order or in the computation sheet and hence this issue would not form part of the “Record” under Section 154 of the Act.

3. Since there was no record of the computation of Interest under Section 234A of the Act, such issue cannot be “apparent” as per Section 154 of the Act. The CIT(A) failed to establish as to how such error is ‘apparent’ from the ‘record’ especially when the computation for levying interest under section 234A was not record.

4. Even as stated by the Assessing officer in the notice dated 19/02/2025, this issue requires a detailed reasoning and long drawn process and hence goes beyond the scope of Section 154 of the Act.

5. The CIT(A) erred in holding that, since the Appellant had not disputed the interest under section 234A in the Assessment Order and the Computation sheet, it constitutes record and thus rectification is permissible on such apparent errors.

6. The CIT(A) erred to note that in the present case the computation of interest under section 234A is not a mechanical process rather necessitated the detailed explanation and the interpretation reliance on the CBDT Circulars.

7. The Computation of Interest u/s. 234A of the Act is erroneous and involves two possible views and hence falls beyond the scope of Section 154 of the Act.

8. The CIT(A) failed to consider the case laws relied by the Appellant in her written submissions dated 03/12/2025.

9. The CIT(A) erred in holding that the non-charging of interest for around 7 months of Rs. 1,54,520/- constitutes mistake apparent from record.

10. The appellant craves leave to raise additional grounds at the time of hearing.”

3. Briefly, the facts of the case are that the appellant is an Individual. The assessee originally filed the return of income belatedly under the provisions of section 139(4) of the Act on 23.05.2022 for the Assessment Year 2021-22 disclosing a total income at Rs.16,42,820/-. Subsequently, search and seizure operations were conducted u/s.132 of the Income Tax Act, 1961 in the case of husband of the appellant on 27.11.2020. Against the said return of income, the assessment was completed by the ACIT, Central Circle-1(4), Chennai (hereinafter called AO’) vide order dated 24.09.2022 passed u/s.143(3) of the Act at total income of Rs.46,24,465/-. While doing so, the Assessing Officer made addition of Rs.29,81,644/- on account of credits in the bank account as unexplained money of the appellant. Subsequently, the Assessing Officer issued notice u/s.154 of the Act on 19.02.2025 proposing to rectify the assessment order to correct the error in computation of interest u/s.234A of the Act. On receipt of the notice u/s.154 of the Act, the appellant filed objections for proposed rectification of the order on the ground that interest can be levied only for a period of 8 months as the actual date of filing is 30.03.2022. However, Assessing Officer rejecting the above objection proceeded with passing the rectification order u/s.154 levying of interest u/s.234A of the Act of Rs.2,20,742/- as against the original levying of interest of Rs.66,222/-.

4. Being aggrieved by the assessment order, the appellant filed an appeal before the Learned CIT(A), who vide impugned order upheld the action of the Assessing Officer by holding that non-charging of interest u/s.234A for a period of 7 months would constitute mistake apparent from the record.

5. Being aggrieved by the order of the Learned CIT(A), appellant preferred an appeal before the Tribunal. The Learned Counsel submits that the notification no.5/2022 whereby the CBDT had reduced the time limit for verification of the return of income from 120 days to 30 days cannot be applied to the appellant as the said notification was issued only on 29.07.2022 after the filing of return of income by the appellant. He further submits that the interest can only be levied for period of 8 months but not 9 months as stated by the Assessing Officer.

6. On the other hand, the Learned Sr.DR submits that the grievance of the appellant had already been addressed by the Learned CIT(A) by reducing the period of levy of interest from 10 months to 8 months. She further submits that levy of interest for shorter period u/s.234A constitute a mistake apparent from the record. The decision of the Hon’ble Delhi High Court in the case of Hotz Hotels v. CIT [2001] 118  248 ITR 647 (Delhi) is distinguishable on the facts.

7. We heard rival submissions and perused the material available on record. The issue that arises for our consideration is the reckoning of the period for which interest is leviable u/s.234A of the Income Tax Act. The assessment year involved is 2021-22 the due date for filing the return of income u/s.139(1) of the Act dated 31.07.2022. It is an undisputed fact that the appellant filed return of income on 30.03.2022. While passing the assessment order, the interest was levied for a period of only 3 months. The Assessing Officer sought to rectify the error in computation of interest u/s.234A of the Act by invoking the provisions of section 154 of the Act which was objected by the appellant. The appellant is not challenging the very levy of interest u/s.234A of the Act. The appellant is only challenging the correction of arithmetical mistakes in the calculation of interest u/s.234A of the Act. It is the contention of the Assessing Officer that since return of income was e-verified only on 23.05.2022, the return of income was considered as filed only on 23.05.2022. In our considered opinion the approach of the Assessing Officer is totally erroneous, once the return of income was e-verified, it always relates back to the date of filing of return of income. Furthermore, it should not be forgotten that we are dealing with a period when the COVID-19 pandemic was still prevalent. It is a known fact that during such time, time limits for various compliances were extended by the CBDT from time to time. So much so that even the Hon’ble Supreme Court had suo moto extended the time limits t file appeals/applications under various laws from time to time in Cognizance for Extension of Limitation, In re Suo Motu Writ Petition (C) No. 3 of 2020 – 441 ITR 722 (SC) (SC). Therefore, we are of the considered opinion that no interest can be levied u/s.234A of the Act as the return of income was filed within the time extended by the Hon’ble Supreme Court(supra). Accordingly, the order of rectification u/s.154 of the Act passed by Assessing Officer is totally illegal and unsustainable in law.

8. In the result, appeal filed by the assessee stands allowed.