[Section 234A (3)]: Interest for Default in Furnishing Return of Income Under Section 148

Section 234A(3) of the Income Tax Act, 1961, deals with interest payable when an assessee fails to file a return of income in response to a notice issued under Section 148 (reassessment) or Section 153A (search cases). This provision ensures compliance with tax filing obligations even in cases where the Income Tax Department reopens assessments or conducts searches.

Key Provisions of Section 234A(3)

1. Applicability

Interest under Section 234A(3) applies when:

• • The Assessing Officer (AO) issues a notice under Section 148(for reassessment) or Section 153A (for search cases).
  • The assessee fails to furnish the returnwithin the time specified in the notice.

2. Rate of Interest

• • 1% per month(or part of a month) on the unpaid tax amount.

3. Period of Interest Calculation

Interest is charged from:

• • The day immediately after the due date specified in the notice(under Section 148/153A).
  • Until:
    • The date of filing the return, or
    • The date of completion of assessment(if no return is filed).

4. Amount on Which Interest is Calculated

Interest is levied on:

Tax on total income determined in reassessment (Section 147/153A)
Minus:

• • Tax already determined in the original assessment (Section 143(1)/143(3)/144/147).

5. Example Scenario

Suppose:

• • The AO issues a Section 148 noticerequiring a return by 30th June 2025.
  • The assessee files the return on 15th October 2025(3 months and 15 days late).
  • The additional tax liabilityafter reassessment is ₹50,000.

Interest Calculation:

• • Delay:4 months (since part of a month counts as a full month).
  • Interest:₹50,000 × 1% × 4 = ₹2,000.

Comparison with Section 234A(1)

Key Points

1. Section 234A(3) applies only in reassessment/search caseswhere the department issues a notice.
2. Interest is 1% per monthand applies even if the delay is partial (e.g., 15 days = 1 full month).
3. No interest if no additional tax is foundin reassessment.
4. Filing on time avoids penalties, even if the return is filed belatedly under Section 148.