CHAPTER XVII - COLLECTION AND RECOVERY OF TAX | F.—INTEREST CHARGEABLE IN CERTAIN CASES
CHAPTER XVII - COLLECTION AND RECOVERY OF TAX | F.—INTEREST CHARGEABLE IN CERTAIN CASES
Section 234A — Interest for Defaults in Furnishing Return of Income
Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise
Status: Live; inserted by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1-4-1989.
Finance Act, 2026: Not amended by the Finance Act, 2026. The new section 234-I (FA 2026) is a fee in Part G, outside this Part.
Mechanism: Simple interest @ 1% p.m. (or part) on tax on total income (143(1)/regular assessment) less prepaid taxes and reliefs, for delay between the section 139(1) due date and furnishing of the return / completion of assessment under section 144.
Section 234A is the first of the three interest charges grouped under Part F of Chapter XVII, headed "Interest chargeable in certain cases". It was inserted by the Direct Tax Laws (Amendment) Act, 1987 with effect from 1 April 1989, replacing the discretionary interest regime of the old sections 139(8) and 217 with a uniform, formula-driven levy. The trinity — 234A (default in furnishing the return), 234B (default in payment of advance tax) and 234C (deferment of advance-tax instalments) — operates automatically and cumulatively; a single default may attract more than one of them. Section 234A specifically compensates the revenue for the delay between the statutory due date for filing the return and the date the return is actually furnished (or, where none is furnished, the date the best-judgment assessment is completed).
2. The charge and its computation
Under sub-section (1), where the return under section 139(1)/(4)/(8A) or in response to a notice under section 142(1) is furnished after the "due date" or not furnished at all, the assessee is liable to simple interest at one per cent for every month or part of a month of delay. The base is the tax on the total income determined under section 143(1), or on regular assessment, reduced by advance tax paid, TDS/TCS, and reliefs under sections 89, 90, 90A and 91, and any MAT/AMT credit under section 115JAA/115JD. "Due date" is defined by Explanation 1 to mean the date under section 139(1) applicable to the assessee — not any extended date the assessee may claim. Part of a month is treated as a full month, so even a single day's delay into a new month attracts a full month's interest.
3. Compensatory, not penal — the Pranoy Roy principle
Although the levy is mandatory in form, the Supreme Court in CIT v. Prannoy Roy (2009) 309 ITR 231 held that section 234A interest is compensatory in character: it compensates the revenue for being kept out of tax that was actually due and unpaid. Where the assessee has already paid the tax due (by way of advance tax and/or self-assessment tax) before the due date of filing, no revenue is lost by the late return, and interest under section 234A cannot be charged on tax already in the exchequer — interest runs, if at all, only on the unpaid component. The CBDT accepted this in Circular No. 2/2015 dated 10 February 2015, directing that no section 234A interest be charged on self-assessment tax paid before the due date. The practitioner must therefore distinguish a late return where tax stood paid (no 234A) from a late return where tax remained outstanding (234A runs on the shortfall).
4. Mandatory levy and the limits of waiver
The compensatory rationale does not make the charge discretionary. In CIT v. Anjum M.H. Ghaswala (2002) 252 ITR 1, a Constitution Bench held that the use of "shall" in sections 234A/234B/234C makes the levy mandatory; even the Settlement Commission cannot waive or reduce it except to the extent permitted by a circular issued by the Board under section 119. The only avenue for relief is the CBDT's order under section 119(2)(a) (F.No. 400/234/95-IT(B) dated 23 May 1996, as later modified), which empowers the Chief Commissioner/Director-General to reduce or waive 234A interest in defined classes of hardship — seizure of books or cash in a search, unanticipated retrospective amendments, income made taxable by a later court ruling, and similar unavoidable circumstances. An Assessing Officer has no independent power to waive.
5. Reassessment, rectification and the terminal point
Sub-section (3) carries the charge into reassessment: where a return called for by notice under section 148 or section 153A — issued after a section 143(1) intimation or a completed assessment — is furnished late or not furnished, interest runs on the incremental tax determined on reassessment over the earlier determination. Sub-section (4) provides for consequential increase or reduction of 234A interest when the underlying tax is varied by an order under sections 154, 155, 250, 254, 260, 262, 263, 264 or a Settlement Commission order under section 245D(4); an increase is collected by a section 156 demand, an excess is refunded. In Settlement proceedings the Constitution Bench in Brij Lal v. CIT (2010) 328 ITR 477 fixed the terminal point: 234A runs only up to the date of the section 245D(1) order, not the final 245D(4) order. Sub-section (2) ensures no double counting by reducing the charge by interest already paid under section 140A.
6. Finance Act, 2026
The Finance Act, 2026 does not amend section 234A, nor any provision of Part F (sections 234A to 234D). The amendments touching the "234" series in the Finance Act, 2026 lie in Part G ("Levy of fee in certain cases"): a new section 234-I is inserted after section 234H (deemed inserted w.e.f. 1 April 2026) and a revised return under the substituted section 139(5) is now made "subject to the provisions of section 234-I". That is a fee on revised returns, distinct from the interest charge in section 234A, and falls outside this Part. Section 234A therefore continues in its post-Finance Act, 2025 form, and the Pranoy Roy / Circular 2/2015 reading of it remains good law.
B. STATUTORY TEXT (verbatim)
Reproduced verbatim from the Income-tax Act, 1961 (as amended up to and including the Finance Act, 2025; unaffected by the Finance Act, 2026). Section 234A, Part F, Chapter XVII.
Interest for defaults in furnishing return of income.
234A. (1) Where the return of income for any assessment year under sub-section (1) or sub-section (4) or sub-section (8A) of section 139, or in response to a notice under sub-section (1) of section 142, is furnished after the due date, or is not furnished, 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 commencing on the date immediately following the due date, and,—
(a) where the return is furnished after the due date, ending on the date of furnishing of the return; or—
(b) where no return has been furnished, ending on the date of completion of the assessment under section 144, on the amount of the tax on the total income as determined under sub-section (1) of section 143, and where a regular assessment is made, on the amount of the tax on the total income determined under regular assessment, as reduced by the amount of,—
(iii)any relief of tax allowed under section 90 on account of tax paid in a country outside India;
(iv) any relief of tax allowed under section 90A on account of tax paid in a specified territory outside India referred to in that section;
(v) any deduction, from the Indian income-tax payable, allowed under section 91, on account of tax paid in a country outside India; and
(vi) any tax credit allowed to be set off in accordance with the provisions of section 115JAA or section 115JD.
Explanation 1.—In this section, "due date" means the date specified in sub-section (1) of section 139 as applicable in the case of the assessee.
Explanation 2.—In this sub-section,—
(i) "tax on total income as determined under sub-section (1) of section 143" shall not include the additional income-tax, if any, payable under section 140B or section 143; and
(ii) tax on the total income determined under regular assessment shall not include the additional income-tax payable under section 140B.
Explanation 3.—Where, in relation to an assessment year, an assessment is made for the first time under section 147 or section 153A, the assessment so made shall be regarded as a regular assessment for the purposes of this section.
Explanation 4.—[* * *]
(2) The interest payable under sub-section (1) shall be reduced by the interest, if any, paid under section 140A towards the interest chargeable under this section.
(3) Where the return of income for any assessment year, required by a notice under section 148 or section 153A issued after the determination of income under sub-section (1) of section 143 or after the completion of an assessment under sub-section (3) of section 143 or section 144 or section 147, is furnished after the expiry of the time allowed under such notice, or is not furnished, 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 commencing on the day immediately following the expiry of the time allowed as aforesaid, and,—
(a) where the return is furnished after the expiry of the time aforesaid, ending on the date of furnishing the return; or
(b) where no return has been furnished, ending on the date of completion of the reassessment or recomputation under section 147 or reassessment under section 153A, on the amount by which the tax on the total income determined on the basis of such reassessment or recomputation exceeds the tax on the total income determined under sub-section (1) of section 143 or on the basis of the earlier assessment aforesaid.
(4) of section 245D, the amount of tax on which interest was payable under sub-section (1) or sub-section
(3) of this section has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and—
(i) in a case where the interest is increased, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly;
(ii) in a case where the interest is reduced, the excess interest paid, if any, shall be refunded.
(5) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989 and subsequent assessment years.
C. AUTHORITIES
The authorities below are arranged by issue-cluster. Apex-court decisions on the compensatory character and the mandatory nature of the levy anchor the section; High Court and Tribunal decisions illustrate the self-assessment-tax defence, the reassessment charge under sub-section (3), and the limits of waiver.
(i) Compensatory character — tax paid before due date
CIT v. Prannoy Roy (Supreme Court)
Citation: (2009) 309 ITR 231 (SC); 179 Taxman 53.
Holding: Interest under section 234A is compensatory, not penal. Where the tax due was paid before the due date for filing the return (self-assessment tax paid well before the return was filed nearly a year late) and was not less than the tax on the returned income, no interest under section 234A is exigible on the tax already paid; interest, if any, runs only on the amount not deposited by the due date. Affirms the Delhi High Court below.
Use: The foundational authority distinguishing late filing simpliciter from late payment; basis of CBDT Circular 2/2015.
Dr. Prannoy Roy v. CIT (Delhi High Court)
Citation: (2002) 254 ITR 755 (Del).
Holding: Section 234A interest is compensatory; if the tax due stands paid before the due date, the revenue suffers no loss by the late return and interest cannot be levied on tax already received. The order affirmed by the Supreme Court in 309 ITR 231.
CBDT Circular No. 2/2015, dated 10-2-2015
Nature: Board instruction under section 119, F.No. 385/03/2015-IT(B).
Effect: Implementing Prannoy Roy, the Board directed that no interest under section 234A is chargeable on the amount of self-assessment tax paid by the assessee on or before the due date of filing the return. Binding on all Assessing Officers.
(ii) Mandatory levy; no discretionary waiver
CIT v. Anjum M.H. Ghaswala (Supreme Court, Constitution Bench)
Citation: (2002) 252 ITR 1 (SC) [5 Judges].
Holding: The word "shall" in sections 234A/234B/234C makes the levy of interest mandatory. The Settlement Commission, though vested with wide powers under section 245D(4), cannot waive or reduce such statutory interest except to the extent of relief permitted by circulars issued by the Board under section 119; it may only regulate the terms and manner of payment.
Use: Lead authority on the mandatory character of the Part F interest charges.
Holding: Following Ghaswala, levy of interest under sections 234A/234B is mandatory and a specific recital by the Assessing Officer directing the charge is not a precondition. As neither the Tribunal nor the High Court had examined the applicability of the CBDT circular permitting reduction/waiver of penal interest, the Court remitted the matter to the Tribunal for that limited consideration.
CIT v. Hindustan Bulk Carriers (Supreme Court)
Citation: (2003) 259 ITR 449 (SC) [5 Judges].
Holding: Reaffirmed that interest under sections 234A/234B/234C is mandatory and the Settlement Commission has no power of waiver or reduction. (On the terminal point in settlement proceedings, later refined by Brij Lal.)
(iii) Charge on returned income; settlement terminus; demand
CIT v. Ranchi Club Ltd. (Supreme Court)
Citation: (2001) 247 ITR 209 (SC), affirming the Patna High Court.
Holding: Interest under sections 234A and 234B is leviable with reference to the tax on the income declared in the return / determined, in the manner the statute prescribes. (Note: the broader proposition that interest cannot be charged without a specific direction has since been read down by Ghaswala and, on the ITNS-150 point, by Bhagat Construction (2016) 383 ITR 9 (SC); cite Ranchi Club as historically important rather than as current law on that sub-issue.)
Brij Lal v. CIT (Supreme Court, Constitution Bench)
Citation: (2010) 328 ITR 477 (SC) [5 Judges].
Holding: Sections 234A/234B/234C apply to proceedings before the Settlement Commission, but for section 234A interest is chargeable only up to the date of the order under section 245D(1); it cannot be levied for the period thereafter, nor recomputed by resort to section 154. Refines Hindustan Bulk Carriers on the terminal point.
(iv) Reassessment charge under sub-section (3); illustration
Dhirendra Narbheram Sheth v. ITO (ITAT, Rajkot)
Citation: ITAT Rajkot Bench, order of 2023 (AY 2011-12).
Holding: Applying Prannoy Roy in a section 147/148 reassessment, the Tribunal held that interest under section 234A could not run beyond the date on which the assessee had paid self-assessment tax (with interest) on the income ultimately accepted; the compensatory principle governs even the sub-section (3) reassessment charge. Persuasive (Tribunal) authority on the self-assessment-tax defence in reassessment.
CBDT Order F.No. 400/234/95-IT(B), dated 23-5-1996 (as modified)
Nature: Order under section 119(2)(a) enabling reduction/waiver of 234A/234B/234C interest.
Effect: Empowers the Chief Commissioner/Director-General to reduce or waive interest (AY 1989-90 onward) in defined classes — books or assets seized in a search and delaying filing, income made taxable by retrospective amendment or by a later court decision, and other unavoidable circumstances — subject to the return being filed and the assessed tax paid. The sole route to relief from the otherwise mandatory charge.
CHAPTER XVII - COLLECTION AND RECOVERY OF TAX | F.—INTEREST CHARGEABLE IN CERTAIN CASES
Section 234A — Interest for Defaults in Furnishing Return of Income
Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise
Status: Live; inserted by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1-4-1989.
Finance Act, 2026: Not amended by the Finance Act, 2026. The new section 234-I (FA 2026) is a fee in Part G, outside this Part.
Mechanism: Simple interest @ 1% p.m. (or part) on tax on total income (143(1)/regular assessment) less prepaid taxes and reliefs, for delay between the section 139(1) due date and furnishing of the return / completion of assessment under section 144.
Litigation profile: Heavily litigated — compensatory character (Pranoy Roy), mandatory nature (Ghaswala), settlement terminus (Brij Lal).
A. COMMENTARY
1. Place in the scheme
Section 234A is the first of the three interest charges grouped under Part F of Chapter XVII, headed "Interest chargeable in certain cases". It was inserted by the Direct Tax Laws (Amendment) Act, 1987 with effect from 1 April 1989, replacing the discretionary interest regime of the old sections 139(8) and 217 with a uniform, formula-driven levy. The trinity — 234A (default in furnishing the return), 234B (default in payment of advance tax) and 234C (deferment of advance-tax instalments) — operates automatically and cumulatively; a single default may attract more than one of them. Section 234A specifically compensates the revenue for the delay between the statutory due date for filing the return and the date the return is actually furnished (or, where none is furnished, the date the best-judgment assessment is completed).
2. The charge and its computation
Under sub-section (1), where the return under section 139(1)/(4)/(8A) or in response to a notice under section 142(1) is furnished after the "due date" or not furnished at all, the assessee is liable to simple interest at one per cent for every month or part of a month of delay. The base is the tax on the total income determined under section 143(1), or on regular assessment, reduced by advance tax paid, TDS/TCS, and reliefs under sections 89, 90, 90A and 91, and any MAT/AMT credit under section 115JAA/115JD. "Due date" is defined by Explanation 1 to mean the date under section 139(1) applicable to the assessee — not any extended date the assessee may claim. Part of a month is treated as a full month, so even a single day's delay into a new month attracts a full month's interest.
3. Compensatory, not penal — the Pranoy Roy principle
Although the levy is mandatory in form, the Supreme Court in CIT v. Prannoy Roy (2009) 309 ITR 231 held that section 234A interest is compensatory in character: it compensates the revenue for being kept out of tax that was actually due and unpaid. Where the assessee has already paid the tax due (by way of advance tax and/or self-assessment tax) before the due date of filing, no revenue is lost by the late return, and interest under section 234A cannot be charged on tax already in the exchequer — interest runs, if at all, only on the unpaid component. The CBDT accepted this in Circular No. 2/2015 dated 10 February 2015, directing that no section 234A interest be charged on self-assessment tax paid before the due date. The practitioner must therefore distinguish a late return where tax stood paid (no 234A) from a late return where tax remained outstanding (234A runs on the shortfall).
4. Mandatory levy and the limits of waiver
The compensatory rationale does not make the charge discretionary. In CIT v. Anjum M.H. Ghaswala (2002) 252 ITR 1, a Constitution Bench held that the use of "shall" in sections 234A/234B/234C makes the levy mandatory; even the Settlement Commission cannot waive or reduce it except to the extent permitted by a circular issued by the Board under section 119. The only avenue for relief is the CBDT's order under section 119(2)(a) (F.No. 400/234/95-IT(B) dated 23 May 1996, as later modified), which empowers the Chief Commissioner/Director-General to reduce or waive 234A interest in defined classes of hardship — seizure of books or cash in a search, unanticipated retrospective amendments, income made taxable by a later court ruling, and similar unavoidable circumstances. An Assessing Officer has no independent power to waive.
5. Reassessment, rectification and the terminal point
Sub-section (3) carries the charge into reassessment: where a return called for by notice under section 148 or section 153A — issued after a section 143(1) intimation or a completed assessment — is furnished late or not furnished, interest runs on the incremental tax determined on reassessment over the earlier determination. Sub-section (4) provides for consequential increase or reduction of 234A interest when the underlying tax is varied by an order under sections 154, 155, 250, 254, 260, 262, 263, 264 or a Settlement Commission order under section 245D(4); an increase is collected by a section 156 demand, an excess is refunded. In Settlement proceedings the Constitution Bench in Brij Lal v. CIT (2010) 328 ITR 477 fixed the terminal point: 234A runs only up to the date of the section 245D(1) order, not the final 245D(4) order. Sub-section (2) ensures no double counting by reducing the charge by interest already paid under section 140A.
6. Finance Act, 2026
The Finance Act, 2026 does not amend section 234A, nor any provision of Part F (sections 234A to 234D). The amendments touching the "234" series in the Finance Act, 2026 lie in Part G ("Levy of fee in certain cases"): a new section 234-I is inserted after section 234H (deemed inserted w.e.f. 1 April 2026) and a revised return under the substituted section 139(5) is now made "subject to the provisions of section 234-I". That is a fee on revised returns, distinct from the interest charge in section 234A, and falls outside this Part. Section 234A therefore continues in its post-Finance Act, 2025 form, and the Pranoy Roy / Circular 2/2015 reading of it remains good law.
B. STATUTORY TEXT (verbatim)
Reproduced verbatim from the Income-tax Act, 1961 (as amended up to and including the Finance Act, 2025; unaffected by the Finance Act, 2026). Section 234A, Part F, Chapter XVII.
Interest for defaults in furnishing return of income.
234A. (1) Where the return of income for any assessment year under sub-section (1) or sub-section (4) or sub-section (8A) of section 139, or in response to a notice under sub-section (1) of section 142, is furnished after the due date, or is not furnished, 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 commencing on the date immediately following the due date, and,—
(a) where the return is furnished after the due date, ending on the date of furnishing of the return; or—
(b) where no return has been furnished, ending on the date of completion of the assessment under section 144, on the amount of the tax on the total income as determined under sub-section (1) of section 143, and where a regular assessment is made, on the amount of the tax on the total income determined under regular assessment, as reduced by the amount of,—
(i)advance tax, if any, paid;
(ii)any tax deducted or collected at source;
(iia) any relief of tax allowed under section 89;
(iii)any relief of tax allowed under section 90 on account of tax paid in a country outside India;
(iv) any relief of tax allowed under section 90A on account of tax paid in a specified territory outside India referred to in that section;
(v) any deduction, from the Indian income-tax payable, allowed under section 91, on account of tax paid in a country outside India; and
(vi) any tax credit allowed to be set off in accordance with the provisions of section 115JAA or section 115JD.
Explanation 1.—In this section, "due date" means the date specified in sub-section (1) of section 139 as applicable in the case of the assessee.
Explanation 2.—In this sub-section,—
(i) "tax on total income as determined under sub-section (1) of section 143" shall not include the additional income-tax, if any, payable under section 140B or section 143; and
(ii) tax on the total income determined under regular assessment shall not include the additional income-tax payable under section 140B.
Explanation 3.—Where, in relation to an assessment year, an assessment is made for the first time under section 147 or section 153A, the assessment so made shall be regarded as a regular assessment for the purposes of this section.
Explanation 4.—[* * *]
(2) The interest payable under sub-section (1) shall be reduced by the interest, if any, paid under section 140A towards the interest chargeable under this section.
(3) Where the return of income for any assessment year, required by a notice under section 148 or section 153A issued after the determination of income under sub-section (1) of section 143 or after the completion of an assessment under sub-section (3) of section 143 or section 144 or section 147, is furnished after the expiry of the time allowed under such notice, or is not furnished, 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 commencing on the day immediately following the expiry of the time allowed as aforesaid, and,—
(a) where the return is furnished after the expiry of the time aforesaid, ending on the date of furnishing the return; or
(b) where no return has been furnished, ending on the date of completion of the reassessment or recomputation under section 147 or reassessment under section 153A, on the amount by which the tax on the total income determined on the basis of such reassessment or recomputation exceeds the tax on the total income determined under sub-section (1) of section 143 or on the basis of the earlier assessment aforesaid.
Explanation.—[* * *]
(4) Where as a result of an order under section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub-section
(4) of section 245D, the amount of tax on which interest was payable under sub-section (1) or sub-section
(3) of this section has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and—
(i) in a case where the interest is increased, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly;
(ii) in a case where the interest is reduced, the excess interest paid, if any, shall be refunded.
(5) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989 and subsequent assessment years.
C. AUTHORITIES
The authorities below are arranged by issue-cluster. Apex-court decisions on the compensatory character and the mandatory nature of the levy anchor the section; High Court and Tribunal decisions illustrate the self-assessment-tax defence, the reassessment charge under sub-section (3), and the limits of waiver.
(i) Compensatory character — tax paid before due date
CIT v. Prannoy Roy (Supreme Court)
Citation: (2009) 309 ITR 231 (SC); 179 Taxman 53.
Holding: Interest under section 234A is compensatory, not penal. Where the tax due was paid before the due date for filing the return (self-assessment tax paid well before the return was filed nearly a year late) and was not less than the tax on the returned income, no interest under section 234A is exigible on the tax already paid; interest, if any, runs only on the amount not deposited by the due date. Affirms the Delhi High Court below.
Use: The foundational authority distinguishing late filing simpliciter from late payment; basis of CBDT Circular 2/2015.
Dr. Prannoy Roy v. CIT (Delhi High Court)
Citation: (2002) 254 ITR 755 (Del).
Holding: Section 234A interest is compensatory; if the tax due stands paid before the due date, the revenue suffers no loss by the late return and interest cannot be levied on tax already received. The order affirmed by the Supreme Court in 309 ITR 231.
CBDT Circular No. 2/2015, dated 10-2-2015
Nature: Board instruction under section 119, F.No. 385/03/2015-IT(B).
Effect: Implementing Prannoy Roy, the Board directed that no interest under section 234A is chargeable on the amount of self-assessment tax paid by the assessee on or before the due date of filing the return. Binding on all Assessing Officers.
(ii) Mandatory levy; no discretionary waiver
CIT v. Anjum M.H. Ghaswala (Supreme Court, Constitution Bench)
Citation: (2002) 252 ITR 1 (SC) [5 Judges].
Holding: The word "shall" in sections 234A/234B/234C makes the levy of interest mandatory. The Settlement Commission, though vested with wide powers under section 245D(4), cannot waive or reduce such statutory interest except to the extent of relief permitted by circulars issued by the Board under section 119; it may only regulate the terms and manner of payment.
Use: Lead authority on the mandatory character of the Part F interest charges.
Karanvir Singh Gossal v. CIT (Supreme Court)
Citation: (2012) 349 ITR 692 (SC); 25 taxmann.com 488.
Holding: Following Ghaswala, levy of interest under sections 234A/234B is mandatory and a specific recital by the Assessing Officer directing the charge is not a precondition. As neither the Tribunal nor the High Court had examined the applicability of the CBDT circular permitting reduction/waiver of penal interest, the Court remitted the matter to the Tribunal for that limited consideration.
CIT v. Hindustan Bulk Carriers (Supreme Court)
Citation: (2003) 259 ITR 449 (SC) [5 Judges].
Holding: Reaffirmed that interest under sections 234A/234B/234C is mandatory and the Settlement Commission has no power of waiver or reduction. (On the terminal point in settlement proceedings, later refined by Brij Lal.)
(iii) Charge on returned income; settlement terminus; demand
CIT v. Ranchi Club Ltd. (Supreme Court)
Citation: (2001) 247 ITR 209 (SC), affirming the Patna High Court.
Holding: Interest under sections 234A and 234B is leviable with reference to the tax on the income declared in the return / determined, in the manner the statute prescribes. (Note: the broader proposition that interest cannot be charged without a specific direction has since been read down by Ghaswala and, on the ITNS-150 point, by Bhagat Construction (2016) 383 ITR 9 (SC); cite Ranchi Club as historically important rather than as current law on that sub-issue.)
Brij Lal v. CIT (Supreme Court, Constitution Bench)
Citation: (2010) 328 ITR 477 (SC) [5 Judges].
Holding: Sections 234A/234B/234C apply to proceedings before the Settlement Commission, but for section 234A interest is chargeable only up to the date of the order under section 245D(1); it cannot be levied for the period thereafter, nor recomputed by resort to section 154. Refines Hindustan Bulk Carriers on the terminal point.
(iv) Reassessment charge under sub-section (3); illustration
Dhirendra Narbheram Sheth v. ITO (ITAT, Rajkot)
Citation: ITAT Rajkot Bench, order of 2023 (AY 2011-12).
Holding: Applying Prannoy Roy in a section 147/148 reassessment, the Tribunal held that interest under section 234A could not run beyond the date on which the assessee had paid self-assessment tax (with interest) on the income ultimately accepted; the compensatory principle governs even the sub-section (3) reassessment charge. Persuasive (Tribunal) authority on the self-assessment-tax defence in reassessment.
CBDT Order F.No. 400/234/95-IT(B), dated 23-5-1996 (as modified)
Nature: Order under section 119(2)(a) enabling reduction/waiver of 234A/234B/234C interest.
Effect: Empowers the Chief Commissioner/Director-General to reduce or waive interest (AY 1989-90 onward) in defined classes — books or assets seized in a search and delaying filing, income made taxable by retrospective amendment or by a later court decision, and other unavoidable circumstances — subject to the return being filed and the assessed tax paid. The sole route to relief from the otherwise mandatory charge.