HC stays penalty on I-T returns filed till extended Nov 30 deadline

The Madras high court has granted an interim stay on imposing penal interest on taxpayers who are required to file their income tax (I-T) returns by the extended due date of November 30. Please read this news paper report:-

TOI had reported on September 26 that the Central Board of Direct Taxes (CBDT) had extended the due date for filing the I-T returns by two months to November 30 for the assessment year 2014-15 (fiscal ending March 31, 2014). However, the CBDT had not exempted taxpayers from penal interest ­ which would be levied if the return was filed after the original due date of September 30.

Business entities (including companies) whose sales, turnover or gross receipts exceed Rs 1 crore and professionals such as advocates or doctors whose gross revenue is more than Rs 25 lakh are covered by the tax audit provisions. These taxpayers were given the extension for filing their I-T returns.

The CBDT had issued the notification extending the due date to comply with the judgments of various high courts, such as Gujarat, Bombay , Hyderabad and Madras.

The high courts had recognized that the taxpayers would be put to difficulties as details contained in Form 3CD, which is the tax audit report form, would be the basis for filing the I-T return. As the due date for filing of the tax audit report was extended till November 30 (owing to several changes introduced in Form 3CD), it was logical to also extend the due date for filing of the I-T return.

However, the Gujarat high court, in its September 22 judgment, had directed the CBDT to extend the due date for furnishing the I-T return till November 30, except for the purpose of charging of interest under section 234A of the I-T Act for the delay in filing. This section levies a simple interest at 1% for every month or part of the month from the due date of filing the I-T return till the date it is actually filed. The CBDT chose to rely primarily on Gujarat high court’s order when it retained the interest penalty .

Anita Sumanth, advocate, representing the All India Federation of Tax Practitioners, and an individual petitioner, G Baskar, submitted to the Madras high court that the levy of interest under section 234A was unreasonable. If the penalty was levied, the purpose of extending the due date of filing the I-T return itself was defeated. She submitted that the Gujarat high court order relating to levy of interest under section 234A was only a suggestion or a concession, it was not an interpretation of law and it was opposed to statutory provisions.

Based on the submissions, the Madras high court granted an interim stay on the levy of interest. It held, “I-T returns shall be accepted by tax authorities without insisting upon any payment of interest under section 234A.“

“One hopes that the CBDT would appreciate the issue fairly and issue a clarification along the same lines as the Madras high court has indicated in its order,“ Sumanth told TOI. The CBDT is expected to review the order and may take suitable steps.