The income tax (I-T) department issued numerous demand notices to advance taxpayers concerning interest payments. The notices require taxpayers to settle interest charges up until the processing date of their Income Tax Return (ITR). The Gujarat Chamber of Commerce and Industry (GCCI) addressed this matter through a letter to the Central Board of Direct Taxes (CBDT).
The GCCI’s direct tax committee chairman said, “As per Section 140B(1), tax, interest, and fees must be paid before filing updated returns, and under normal circumstances, no demand notices should be issued. However, recent notices for interest under Section 234B were sent to several taxpayers, despite the taxes being settled before filing, causing confusion and unnecessary burden.”
Sources indicate that Section 234B of the Income Tax Act requires interest payment for inadequate or non-payment of advance tax. Section 140(1) stipulates that assessees must clear income tax, interest, and fees before submitting updated returns, accompanied by payment evidence.
Additionally, Section 140B(3) requires extra income tax — 25% of tax and interest for returns filed within 12 months, or 50% if filed within 24 months from the assessment year’s end. Updated ITR submissions necessitate payment of interest under Sections 234A to 234C and additional income tax.
“The issue at hand does not challenge the validity of the rate of additional income tax or the manner in which it is computed but rather focuses on the calculation of interest under Section 234B. Recent concerns have arisen as taxpayers, who filed updated returns after settling their full tax liabilities—including income tax, additional income tax, fees, and interest—are receiving demand notices following the processing of these returns,” he said. These notices were issued due to a discrepancy between the interest calculation methods, he added.
According to him, the updated return filing utility calculates interest under Section 234B only up to the date the return is filed. However, the intimation issued under Section 143(1) calculates interest under Section 234B up to the date of processing of the updated return. “As a result, taxpayers who met their full tax and interest obligations before filing the updated return are now being asked to pay additional amounts due to delays in the processing of their returns. This has led to confusion and undue financial burden on the affected taxpayers.”
He suggested incorporating a new sub-section within Section 234B of the Income Tax Act through an amendment to specifically address interest computation for updated returns (ITR-U).
Source #TOI
