The assessment has charged me s.234A, s.234B and s.234C, withdrawn the refund I was paid at processing and charged interest on that too - what can I actually fight, and where do I take it?
The client is an individual running a steel fabrication business as a proprietor at a circle in Nagpur, accounts audited under s.44AB, so the due date for AY 2023-24 was 31 October 2023. He paid nothing in the June, September and December advance tax instalments and Rs 2,00,000 on 14 March 2023. TDS for the year was Rs 11,80,000. He paid self-assessment tax of Rs 4,60,000 on 26 October 2023, five days before the due date, and then filed the return late, on 27 January 2024, declaring Rs 58,40,000. That figure included a long-term capital gain of Rs 16,00,000 on a flat sold on 9 March 2023, claimed exempt under s.54F. An intimation under s.143(1) dated 14 June 2024 allowed a further TDS credit of Rs 3,20,000 which had appeared in the annual information statement after the return went in, determined a refund of Rs 3,20,000 and paid it with s.244A interest of Rs 27,200 on 9 August 2024. The assessment under s.143(3) dated 21 March 2026 added Rs 26,00,000 under s.68 on four unsecured loans and denied the s.54F claim. The body of the order says only: issue notice of demand and challan, charge interest as per law. Form ITNS 150 attached to it charges s.234A Rs 39,300, s.234B Rs 4,71,700, s.234C Rs 38,900 and s.234D Rs 30,400, withdraws the Rs 27,200 already paid as s.244A interest, and raises a demand of Rs 18,58,000. The portal shows the AY 2025-26 refund of Rs 5,90,000 already adjusted against it.
Download Form ITNS 150 and the interest computation annexure the same week and rebuild all four figures from the challans and the dates, before drafting a single ground. Three of the four charges are arithmetic on a liability and one of them, the s.234A charge, is a liability question on its own facts. The two go to different places: a denial that interest is chargeable at all travels with the appeal against the assessment and dies when that window closes, while pure computation can be taken under s.154 at any time. Deciding which is which after the appeal period has run is how the interest, which here is a quarter of the demand, stops being arguable.
The three interests charge different defaults on different bases and overlap in time. s.234A charges the return being late, at one per cent a month on the tax on the assessed income reduced by prepaid taxes, for the months between the due date and the date of filing. s.234B charges the failure to pay at least ninety per cent of the assessed tax as advance tax, at one per cent a month from 1 April of the assessment year to the date of the assessment. s.234C charges each instalment shortfall separately at one per cent a month. Liability to advance tax only arises at all where the estimated liability for the year is Rs 10,000 or more after credit for TDS and TCS, and the instalment dates and percentages are fixed by s.211, with a single instalment by 15 March for a presumptive assessee. Until each figure is reconstructed you do not know whether you are arguing about a levy or about a mistake.
A High Court has held that a general direction to charge interest as per rules or as per law is not a specific order, that the direction must name the section so that the assessee can see the officer applied his mind, and that no interest can be levied on such a direction. That decision is marked in this library as no later treatment found, which is weaker than good law and matters because the point is a pure technicality that a Bench can decline to apply. Against it, a Tribunal has upheld exactly this combination, holding that where interest is leviable under s.234B or s.234C the levy is mandatory and compensatory and the assessee cannot escape it because the body of the order is silent while ITNS 150 charges it. That is a Tribunal order and binds nobody, but it is the answer the Department will give.
A High Court has held that s.234A creates a compensatory levy and not a penalty, so where the tax was deposited before the due date of filing the return the Revenue has suffered no loss and no s.234A interest is payable, whatever the delay in filing. That decision is good law in this library. On these facts the TDS of Rs 11,80,000, the advance tax of Rs 2,00,000 and the self-assessment tax of Rs 4,60,000 were all with the Revenue before 31 October 2023, so no s.234A can run on the tax on the returned income. It does not follow that the charge disappears. The tax on the s.68 addition and on the denied exemption was not in hand on that date, and s.234A on that incremental tax survives the argument. Check separately that the date of filing used in the computation is right, because a Tribunal has deleted s.234A and the s.234F fee where the processing centre ignored an on-time original return and counted from the revised one.
The Supreme Court has held that s.234B and s.234C are payable on failure to pay advance tax even where the company only knew it fell under the minimum alternate tax once the accounts were audited, because neither section makes any exception for that tax. That is the general answer and it is good law. Two narrower escapes exist and both are fact-bound. A High Court held no s.234B where the liability arose only because a retrospective amendment took away a deduction the assessee could not have known would go, and a Tribunal directed deletion of s.234B and s.234C on income that crystallised only on an advance pricing agreement. Both rest on the income being incapable of estimation at the instalment dates, and both are marked no later treatment found; the Tribunal order gave its direction in one sentence. Neither reaches a cash credit addition. What is worth checking on these facts is sequence: the Supreme Court has held that credit admissible under the minimum alternate tax provisions must be set off against the tax payable before s.234B and s.234C are computed, not after, and the same logic is what you apply to any credit the officer has given late.
The first proviso to s.234C(1) disapplies the sub-section where the shortfall is on account of under-estimate or failure to estimate capital gains and certain other items, on condition that the tax due on that amount is paid in the remaining instalments or by 31 March. Separately, a High Court has held that the liability to pay advance tax on a capital gain arises only once the gain has accrued, so s.234C on the shortfall attributable to that gain can run only from the date the advance tax on it became payable and not from any earlier instalment. The flat was sold on 9 March 2023, after the December instalment, so on that reasoning the June, September and December instalments cannot carry any s.234C referable to the gain at all. That leaves the March instalment, and there the proviso's own condition is not met, because the exemption was claimed and no tax on the gain was paid by 31 March 2023.
The refund of Rs 3,20,000 was not wrongly granted when it was granted; it was granted on a credit that existed and then wiped out by an assessment that raised the tax above it. The statute attaches two consequences to that, and they are different things. Interest under s.234D runs on the excess refund from the date it was granted to the date of the regular assessment, and the s.244A interest already allowed on it is reduced and the excess recovered. This collection holds no case entry and no concept page on s.234D at all; the section appears only in the section list of the concept page on the three interests. So this step is written from the statutory scheme and not from authority, and the note to the client should say so. The nearest thing the library has is the movement in the other direction, where a High Court held that when an appellate order that had wiped out a demand is itself reversed, the original demand revives from inception and s.220(2) runs from the expiry of the original thirty days.
Nothing in s.244A or in ss.234A to 234C nets one against the other. They are separate charges, on different sums, for different years, and the only mechanism that moves money across years is a set-off under s.245, which needs a prior intimation in writing of the action proposed. Where an appeal is pending before the first appellate authority the Board's memoranda permit adjustment of not more than twenty per cent of the disputed demand, and a High Court has held that once an appellate order or the effect order fixes a refund the right to it is vested and no part may be withheld except by an order actually passed under s.245. That matters here because the whole of the AY 2025-26 refund of Rs 5,90,000 has been taken. No appeal lies against the set-off itself; the list of appealable orders is exhaustive and does not include s.245, and the remedy the courts have used is a writ. On the interest itself, an exclusion period under s.244A(2) can be decided only by the Commissioner-level authority and not by the Assessing Officer; additional interest under s.244A(1A) runs where the order giving effect is not passed within three months of the appellate order; the statutory interest on an appeal-effect refund can be refused only for delay attributable to the assessee; and where the interest component has become part of the sum refundable, withholding it is simply non-payment, on which interest arises.
Most of the interest here is arithmetic on a liability: all three sections take the tax on the assessed income as their base, so if the s.68 addition and the s.54F denial go, the interest goes with them without a separate ground. What does not follow the quantum is the head of argument that the levy was not authorised at all, which on these facts is the absence of a direction in the order and the tax having been in the Revenue's hands before the due date. Those have to be pleaded as grounds. Waiver is not an alternative: the Supreme Court has held the levy under ss.234A, 234B and 234C mandatory and automatic, and that even the Settlement Commission cannot reduce or waive it, the only route being a circular issued by the Board under s.119. The separate waiver power the library describes is for s.220(2) interest under s.220(2A), not for these three. And a rectification cannot be used to reopen a head the appeal has taken up: a High Court has held that s.154(1A) reaches only a mistake apparent from the record and cannot be used to override an appellate order.
The s.234A ground on the returned tax is the one that usually succeeds, and it is the smallest figure on the sheet. The s.234C split on the capital gain succeeds on the three earlier instalments and fails on the March one, which again is small money. The s.234B charge of Rs 4,71,700, which is most of the interest, almost always stands or falls with the s.68 addition and the s.54F claim, so the real fight is the quantum appeal and the interest grounds are there to make sure nothing survives the win. The absence of a direction in the body of the order produces a remand more often than a deletion. The refund adjustment is the piece most likely to move quickly, because the twenty per cent norm is documentary and a writ against an over-adjustment is a short petition, but getting the money back does not decide the demand.
