I filed my return on time and paid the self-assessment tax; the officer then added a disputed item in a best-judgment assessment and charged s.234A interest because I did not comply with a s.142(1) notice. Is that right?
The Patna High Court said no. Where the return was filed within time with proof of payment, the mere issue of a s.142(1) notice calling for accounts or information does not attract s.234A, because the s.142(1) notice that s.234A speaks of is the notice to FURNISH A RETURN issued to a person who has not filed one — not the notice under clauses (ii) and (iii) calling for accounts or particulars.
Decided by the High Court (Sachchidanand Jha J and Pramod Kumar Sarin J) on 1995-11-13, reported as [1996] 217 ITR 72 (Patna). It bears on section 234A, section 234B, section 142(1), section 139(1), section 139(4), section 144, section 140A, section 156, section 147, section 148 of the Income Tax Act 1961, in Assessment & Scrutiny, How Tax Law Is Read and Demand, Recovery & Stay matters.
The clause-splitting point is the durable part of this judgment and it is still worth taking: s.142(1) contains two different notices, and only one of them is a return-filing default that s.234A is aimed at. The judgment also disposes of the constitutional challenge — ss.234A and 234B are not penal, so no question of arbitrariness or of a hearing arises. Be careful with the rest of it. The Court also held, relying on the then Explanation and on J.K. Synthetics, that interest is chargeable on the tax on the income AS DECLARED IN THE RETURN and not as assessed. The Explanation it rested that on has since been changed, and by the time the Delhi High Court reproduced s.234A in December 2001 (in Dr. Prannoy Roy) no such deeming Explanation appeared in the section. Do not advise on the returned-income limb without checking the current text of s.234A for the year in hand.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The petitioner club filed its return for assessment year 1991-92 on 19 August 1992 declaring income of Rs.9,080, accompanied by proof of payment of self-assessed/advance tax of Rs.5,418 and by a written statement that a sum of Rs.1,58,000 received as entrance fee from new members was not includible in taxable income on the principle of mutuality, a dispute running since assessment year 1981-82. A notice under s.147 read with s.148 was issued, in response to which the club took the stand that its return was already on record and the assessment pending, so no fresh return arose. A notice under s.142(1) followed, which was said not to have been complied with. The assessment was completed under s.144, including the Rs.1,58,000 as entrance fee. The assessment order itself said nothing about interest; the s.156 demand notice showed Rs.78,322 as interest on tax due of Rs.69,434, and did not state under which provision it was levied. The club challenged the levy by writ petition and also challenged the vires of ss.234A and 234B, while its appeal against the assessment on the merits remained pending.
The writ application was allowed and the demand of interest of Rs.78,322 was quashed. The challenge to the vires of ss.234A and 234B failed: they are not penal but compensatory (para 2). On the merits, no default within s.234A or s.234B was made out where the return was filed in time with the tax paid and the only dispute was the includibility of an item, and the s.142(1) notice referred to in s.234A means the notice to furnish a return in a case of non-filing, not a notice calling for accounts or information (paras 10 and 13).
On vires, the Court held that ss.234A and 234B merely require interest from an assessee who fails to furnish a return or to pay advance tax; the amount on which interest is levied is public revenue that the assessee has withheld and used, so the levy is compensatory and not penal and no question of arbitrariness or natural justice arises (para 2). On the merits, the Court found as a fact that there was no default in filing the return or in paying the self-assessed tax, that the mutuality plea had been taken in a written statement filed with the return itself, and that this could not be called suppression or concealment (para 10). It read s.142(1) as containing two distinct notices — one to a person who has already filed a return, to produce accounts or furnish information, and one to a person who has not filed within the time allowed under s.139(1), to furnish the return — and held that when s.234A refers to a s.142(1) notice it obviously means the latter, because the object of s.234A is to create an additional liability for default in furnishing the return, not to penalise an assessee who has filed and merely not produced documents (para 13). On the amount, the Court relied on the then Explanation 4 to s.234A and on the Supreme Court's reasoning in J.K. Synthetics Ltd. v. CTO — that so long as the assessee pays the tax due on the basis of the information in his own return there is no default, and the law does not expect him to predict the final assessment — to hold that interest is chargeable on the tax on the income as declared and not as determined (paras 6, 10, 11 and 12). It rejected the objection that the pending appeal barred the writ, since the levy of interest would stand if the assessment stood (para 9).
In my considered opinion, therefore, the necessary conditions as required under Section 234A are not made out in the instant case and, therefore, the levy of interest is not justified.
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Handle my notice → Ask a CA on WhatsAppThe Patna High Court said no. Where the return was filed within time with proof of payment, the mere issue of a s.142(1) notice calling for accounts or information does not attract s.234A, because the s.142(1) notice that s.234A speaks of is the notice to FURNISH A RETURN issued to a person who has not filed one — not the notice under clauses (ii) and (iii) calling for accounts or particulars. This was decided by the High Court (Sachchidanand Jha J and Pramod Kumar Sarin J) and bears on section 234A, section 234B, section 142(1), section 139(1), section 139(4), section 144, section 140A, section 156, section 147, section 148 of the Income Tax Act 1961. It is reported as [1996] 217 ITR 72 (Patna). The clause-splitting point is the durable part of this judgment and it is still worth taking: s.142(1) contains two different notices, and only one of them is a return-filing default that s.234A is aimed at. The judgment also disposes of the constitutional challenge — ss.234A and 234B are not penal, so no question of arbitrariness or of a hearing arises. Be careful with the rest of it. The Court also held, relying on the then Explanation and on J.K. Synthetics, that interest is chargeable on the tax on the income AS DECLARED IN THE RETURN and not as assessed. The Explanation it rested that on has since been changed, and by the time the Delhi High Court reproduced s.234A in December 2001 (in Dr. Prannoy Roy) no such deeming Explanation appeared in the section. Do not advise on the returned-income limb without checking the current text of s.234A for the year in hand. If it applies to you, the first step is this: Identify precisely which limb of s.142(1) the notice you were served was issued under — clause (i) (furnish a return) or clause (ii)/(iii) (produce accounts or furnish information); ask for the notice itself, not the officer's description of it.
The petitioner club filed its return for assessment year 1991-92 on 19 August 1992 declaring income of Rs.9,080, accompanied by proof of payment of self-assessed/advance tax of Rs.5,418 and by a written statement that a sum of Rs.1,58,000 received as entrance fee from new members was not includible in taxable income on the principle of mutuality, a dispute running since assessment year 1981-82. A notice under s.147 read with s.148 was issued, in response to which the club took the stand that its return was already on record and the assessment pending, so no fresh return arose. A notice under s.142(1) followed, which was said not to have been complied with. The assessment was completed under s.144, including the Rs.1,58,000 as entrance fee. The assessment order itself said nothing about interest; the s.156 demand notice showed Rs.78,322 as interest on tax due of Rs.69,434, and did not state under which provision it was levied. The club challenged the levy by writ petition and also challenged the vires of ss.234A and 234B, while its appeal against the assessment on the merits remained pending. The matter was decided on 1995-11-13 by the High Court (Sachchidanand Jha J and Pramod Kumar Sarin J). On those facts the High Court held as follows. The writ application was allowed and the demand of interest of Rs.78,322 was quashed. The challenge to the vires of ss.234A and 234B failed: they are not penal but compensatory (para 2). On the merits, no default within s.234A or s.234B was made out where the return was filed in time with the tax paid and the only dispute was the includibility of an item, and the s.142(1) notice referred to in s.234A means the notice to furnish a return in a case of non-filing, not a notice calling for accounts or information (paras 10 and 13).
On vires, the Court held that ss.234A and 234B merely require interest from an assessee who fails to furnish a return or to pay advance tax; the amount on which interest is levied is public revenue that the assessee has withheld and used, so the levy is compensatory and not penal and no question of arbitrariness or natural justice arises (para 2). On the merits, the Court found as a fact that there was no default in filing the return or in paying the self-assessed tax, that the mutuality plea had been taken in a written statement filed with the return itself, and that this could not be called suppression or concealment (para 10). It read s.142(1) as containing two distinct notices — one to a person who has already filed a return, to produce accounts or furnish information, and one to a person who has not filed within the time allowed under s.139(1), to furnish the return — and held that when s.234A refers to a s.142(1) notice it obviously means the latter, because the object of s.234A is to create an additional liability for default in furnishing the return, not to penalise an assessee who has filed and merely not produced documents (para 13). On the amount, the Court relied on the then Explanation 4 to s.234A and on the Supreme Court's reasoning in J.K. Synthetics Ltd. v. CTO — that so long as the assessee pays the tax due on the basis of the information in his own return there is no default, and the law does not expect him to predict the final assessment — to hold that interest is chargeable on the tax on the income as declared and not as determined (paras 6, 10, 11 and 12). It rejected the objection that the pending appeal barred the writ, since the levy of interest would stand if the assessment stood (para 9). In the words reproduced by the source cited on this page: "In my considered opinion, therefore, the necessary conditions as required under Section 234A are not made out in the instant case and, therefore, the levy of interest is not justified." The decision followed or applied J.K. Synthetics Ltd. v. CTO, AIR 1994 SC 2393 ; [1994] 94 STC 422 (SC) — applied; CIT v. Ranchi Club Ltd. [1992] 196 ITR 137 (Patna) (FB) — relied on by the assessee on mutuality.
It was decided by the High Court on 1995-11-13 and is reported as [1996] 217 ITR 72 (Patna). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 234A, section 234B, section 142(1), section 139(1), section 139(4), section 144, section 140A, section 156, section 147, section 148, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The writ application was allowed and the demand of interest of Rs.78,322 was quashed. The challenge to the vires of ss.234A and 234B failed: they are not penal but compensatory (para 2). On the merits, no default within s.234A or s.234B was made out where the return was filed in time with the tax paid and the only dispute was the includibility of an item, and the s.142(1) notice referred to in s.234A means the notice to furnish a return in a case of non-filing, not a notice calling for accounts or information (paras 10 and 13). It arises in Assessment & Scrutiny, How Tax Law Is Read and Demand, Recovery & Stay matters, on section 234A, section 234B, section 142(1), section 139(1), section 139(4), section 144, section 140A, section 156, section 147, section 148 of the Income Tax Act 1961, and was decided by Sachchidanand Jha J and Pramod Kumar Sarin J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. If you filed under s.139(1) or s.139(4) within time, plead that no s.234A default exists at all, because the section is directed at the failure to furnish the return. Record on the file, at the return stage, the specific ground on which a disputed receipt is excluded — here the club's mutuality claim was set out in a written statement filed with the return, and that is what let the Court say there was no suppression. Do not run the 'interest only on returned income' argument for s.234A without first reading the section and its Explanations as they stood for your assessment year; the position has moved since 1995. Remember interest is not appealable as such — this case came up on a writ petition, and the Court held that the pendency of a merits appeal against the assessment did not bar the writ.
Overruled. DO NOT RELY ON THIS JUDGMENT. The citedby search returns only 2 documents, which badly understates its fate, because the decisive treatment is of the Supreme Court judgment that affirmed it rather than of the Patna judgment itself. In Mansarovar Commercial Pvt Ltd v CIT (Supreme Court, 10 April 2023) the Court said in terms: 'the decision of the Patna High Court in the case of Ranchi Club Ltd. (supra) is held to be not good law, in view of the Constitution Bench decision of this Court in the case of Anjum M.H. Ghaswala (supra).' The Constitution Bench in CIT v Anjum M.H. Ghaswala held the levy of interest under ss.234A, 234B and 234C to be mandatory, which removes the foundation of this judgment and of CIT v Ranchi Club Ltd (2001) 247 ITR 209 (SC) that had affirmed it. The Patna High Court itself had already lost confidence in it much earlier: in Uday Mistanna Bhandar and Complex v CIT (2 July 1996) a Bench of that Court, after hearing 'a great deal of arguments... on the correctness of the decision of this court in Ranchi Club Ltd. v. CIT [1996] 217 ITR 72', held at para 22 'We are, therefore, inclined to agree with Mr. Debi Prasad that the decision of this court in Ranchi Club Limited v. CIT [1996] 217 ITR 72 needs reconsideration' and referred the question to a larger Bench. What survives is only the part of Ranchi Club that upheld the vires of ss.234A and 234B, which the same Court treated as settled in Uday Mistanna Bhandar (2 March 1996): 'Mr. Moitra did not challenge the vires of ss. 234A and 234B as the validity had been upheld in the earlier Bench decision of this Court in the case of Ranchi Club.' The proposition that interest cannot be levied without the Assessing Officer applying his mind, or that it runs only on returned income, is gone. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Two cautions. First, this is NOT the Patna decision usually cited for the proposition that the assessment order must name the section under which interest is charged. That proposition comes from Ranchi Club Ltd. v. CIT reported at (1996) 222 ITR 44, a different judgment, which the Allahabad High Court in CIT v. Oswal Exports (1 July 2014) describes as the one affirmed by the Supreme Court in CIT v. Ranchi Club Ltd. (2001) 247 ITR 209. The judgment set out here is reported at [1996] 217 ITR 72 and was delivered on 13 November 1995. The 222 ITR 44 judgment is not set out here at all, so do not take anything about it from this entry. Second, the Supreme Court order of 1 August 2000 (Bharucha, Quadri and Santosh Hegde JJ) dismissing the Revenue's civil appeals against "Ranchi Club Ltd." is two sentences long and does not identify which High Court judgment was under appeal, so it cannot be said from that order alone that THIS judgment was affirmed. The order is reported at [2001] 247 ITR 209 (SC), which is the reference by which it is conventionally cited; what it does not carry is any identification of the High Court judgment appealed from. The judgment set out here is written in the first person singular by Sachchidanand Jha J with Pramod Kumar Sarin J concurring in one line at paragraph 15 — note that the report's own author and bench lines name only Pramod Kumar Sarin J, which is wrong: Sachchidanand Jha J's name appears in the body immediately above the concurrence. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The writ application was allowed and the demand of interest of Rs.78,322 was quashed. The challenge to the vires of ss.234A and 234B failed: they are not penal but compensatory (para 2). On the merits, no default within s.234A or s.234B was made out where the return was filed in time with the tax paid and the only dispute was the includibility of an item, and the s.142(1) notice referred to in s.234A means the notice to furnish a return in a case of non-filing, not a notice calling for accounts or information (paras 10 and 13).
TaxSphere, “Ranchi Club Ltd v CIT (Patna)”, https://taxnotice.vittsphere.com/caselaw/case/ranchi-club-patna-234a-142-1-notice-to-file-return/ (validity last checked 2026-09-08)
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