The income tax department can charge penalties for persons who fail to file their return of income by the due date. Under section 234A the assessee can be charged a late penalty of 1% interest for every month of delay in filing. Furthermore, under section 234B individuals who have failed to pay their advance tax are also liable for the same late penalty on the payment shortfalls.
Recently, an amendment was made to this rule in the case against the ITO and M/S Heritage Project. The ITAT dismissed the appeal filed by revenue, which was trying to collect penalty charges by way of demand notice. However, when the assesse had originally filed their return on 31/03/2012 and the assessing officer’s AO dated 23/12/2012, failed to mention any penalty payment due, they could not order payment to be made u/s 154. As the assessee was late by six months in the filing of his return, under section 234, he can be charged penalty for the six months. But the AO had failed to mention the penalty payment, therefore no payment could be sought by revenue by issuing a demand notice. This ruling brings to the forefront of assessing officers to be more thorough in all their reviews and assessments of returns.