Accepted Return, ₹73 Crore Fresh Claim: Can a Section 234A Ground Keep the Appeal Alive?
Case Law: Ajay Jaisinghani v. DCIT, Central Circle 5(2), Mumbai
Citation: ITA No. 972/Mum/2025, Assessment Year 2020-21
Court: Income Tax Appellate Tribunal, Mumbai “A” Bench
Date of Order: 19 June 2025
Introduction: When an Accepted Return Becomes the Starting Point of Litigation
Can an assessee challenge an income-tax return that has been accepted by the Centralised Processing Centre (CPC) under Section 143(1) of the Income-tax Act, 1961?
More importantly, can a dispute concerning interest under Section 234A provide a valid basis for maintaining an appeal before the Commissioner of Income Tax (Appeals), thereby enabling the assessee to pursue a substantial additional claim relating to capital gains?
These interesting questions came up for consideration before the Mumbai Bench of the Income Tax Appellate Tribunal in the case of Ajay Jaisinghani v. DCIT, Central Circle 5(2), Mumbai (ITA No. 972/Mum/2025).
The case involved capital gains of approximately ₹73.85 crore arising from the sale of shares of Polycab India Ltd. through an Offer for Sale (OFS) associated with its Initial Public Offering (IPO).
While the returned income was accepted under Section 143(1), the assessee sought to raise a substantial additional legal claim challenging the taxability of the capital gains. The assessee also disputed the levy of interest under Section 234A.
The Tribunal examined the interplay between appellate jurisdiction, the appealability of interest and the admissibility of an additional claim after processing of the return.
Facts of the Case
The assessee, Mr. Ajay Jaisinghani, was one of the promoters of Polycab India Ltd., whose shares were listed on the National Stock Exchange and Bombay Stock Exchange in connection with its IPO.
During the IPO process in April 2019, the promoters offered a portion of their shareholding for sale through an Offer for Sale mechanism.
The assessee participated in the OFS and sold 20,71,965 shares for a total consideration of approximately ₹111.39 crore.
The capital gain arising from the transaction was computed at approximately ₹73.85 crore and was offered to tax in the return of income for Assessment Year 2020-21.
The assessee filed his return of income on 23 December 2020, declaring total income of approximately ₹100.59 crore.
The return was processed by CPC under Section 143(1) on 23 March 2021. The returned income was accepted without any adjustment. However, interest of approximately ₹1,06,335 was levied under Section 234A.
Subsequently, the assessee filed a rectification application dated 30 September 2021 seeking recomputation of the interest. Since the rectification application was not given effect to, the assessee preferred an appeal before the CIT(A).
The Additional Claim of ₹73.85 Crore
Apart from challenging the interest under Section 234A, the assessee raised an additional legal claim that the capital gains arising from the OFS transaction were not chargeable to tax.
The contention was based on the computation mechanism prescribed under Section 55(2)(ac), particularly the Explanation dealing with the determination of fair market value as on 31 January 2018.
According to the assessee, the shares had been transferred to escrow before listing, and the prescribed fair market value mechanism failed to provide an appropriate basis for determining the cost of acquisition.
The assessee therefore contended that the capital gains could not be computed under the applicable statutory mechanism.
Without prejudice, the assessee also raised alternative claims concerning the adoption of fair market value as on 31 January 2018 and the computation of the cost of acquisition of bonus shares.
Thus, the additional claim was not merely a request for a different computation of tax. It involved a substantive legal challenge to the chargeability of the capital gains itself.
Decision of the CIT(A)
The CIT(A) dismissed the appeal on the ground that the CPC had accepted the returned income under Section 143(1) and had not made any adjustment.
According to the CIT(A), the assessee had failed to establish a valid grievance against the intimation.
The additional claim, having been raised after the processing of the return, was also not entertained.
The CIT(A) further treated the interest levied under Section 234A as mandatory and consequential in nature.
Aggrieved by the order, the assessee preferred an appeal before the Mumbai Tribunal.
Issues Before the ITAT Mumbai
The principal issues before the Tribunal were:
1. Whether an appeal against an intimation under Section 143(1) could be maintained when the returned income had been accepted without adjustment.
2. Whether the levy of interest under Section 234A was appealable where the assessee disputed the chargeability of interest itself.
3. Whether the CIT(A) could entertain an additional legal claim concerning the non-taxability of capital gains of approximately ₹73.85 crore.
4. Whether the CIT(A) had erred in dismissing the appeal without examining the nature of the grievance raised against the interest levy.
Observations and Findings of the Tribunal
1. Acceptance of Returned Income Does Not Automatically Resolve the Question of Appealability
The Tribunal observed that the assessee’s returned income had been accepted by CPC under Section 143(1).
There was no adjustment to the returned income, and the assessee’s case had not been selected for scrutiny assessment under Section 143(3).
In such circumstances, the Tribunal noted that the existence of a valid subject matter of appeal was an important consideration.
An additional claim cannot automatically be admitted merely because it is raised before the appellate authority. The assessee must first establish that there is a valid appeal and an appropriate grievance against the order under challenge.
2. Appealability of Interest Under Section 234A
The Tribunal referred to the decision of the Punjab and Haryana High Court in PCIT v. Shri Krishan Gopal (HUF), ITA No. 253 of 2015, dated 15 September 2015.
The High Court, relying upon the Supreme Court decision in Central Provinces Manganese Ore Co. Ltd. v. CIT [1986] 160 ITR 961 (SC), had explained the distinction between disputing the chargeability of interest and seeking waiver or reduction of interest.
The principle is that interest forms part of the process of assessment and can be challenged in appeal where the assessee disputes liability to interest itself.
However, where the assessee merely seeks waiver or reduction of interest, the appropriate remedy may lie in the revisional jurisdiction of the Commissioner, subject to applicable provisions.
The Tribunal accordingly considered whether the assessee’s ground under Section 234A constituted a genuine appealable grievance.
3. CIT(A) Must Examine the Nature of the Interest Grievance
The Tribunal observed that the assessee had challenged the interest levied under Section 234A and had also filed a rectification application seeking recomputation.
The CIT(A), however, had dismissed the interest-related grounds by treating them as consequential without adequately examining the nature of the grievance.
The Tribunal held that the CIT(A) ought to have examined whether the ground raised by the assessee was admissible in law.
This examination was crucial because the answer would determine whether the appeal could be maintained and whether the additional legal claim relating to capital gains could be considered.
4. Additional Claim Cannot Be Examined Without Establishing a Valid Appeal
The Tribunal also discussed the statutory remedies available to an assessee seeking to raise a fresh claim after processing of the return.
These may include:
– Filing a revised return under Section 139(5), within the prescribed time.
– Filing a rectification application under Section 154, where the issue falls within its scope.
– Raising an additional claim before the CIT(A) in a valid appeal, subject to the applicable legal principles.
– Seeking revision under Section 264, where appropriate.
The Tribunal referred to the principles laid down in Goetze (India) Ltd. v. CIT [2006] 284 ITR 323 (SC), concerning claims made before the Assessing Officer otherwise than through a revised return.
However, the Tribunal did not finally decide whether the assessee’s additional claim regarding the capital gains was admissible or whether the gains were taxable.
Final Verdict of ITAT Mumbai
The Tribunal set aside the matter to the CIT(A) for reconsideration.
The CIT(A) was directed to:
– Re-examine the issue of whether the interest levied under Section 234A was appealable in the facts of the case.
– Consider the relevant judicial precedents.
– Pass a speaking order after granting the assessee sufficient opportunity of hearing.
– If the appealable ground is admissible, examine the additional claim in accordance with law.
The Tribunal expressly clarified that it had not adjudicated the merits of the capital gains issue.
Accordingly, the appeal was allowed for statistical purposes.
The Tribunal did not hold that the ₹73.85 crore capital gain was exempt or that the assessee’s additional claim was automatically admissible. The matter was remanded for examination of the preliminary issue of maintainability and consequential adjudication, if permissible.
Practical Implications for Taxpayers
The decision has important implications for taxpayers whose returns are processed under Section 143(1) without adjustments.
1. An Accepted Return May Still Give Rise to an Appealable Grievance
Acceptance of the returned income does not necessarily mean that every aspect of the intimation is beyond challenge.
Where a genuine dispute exists regarding the levy of interest or another appealable aspect of the intimation, an appellate remedy may be available.
However, the existence of a valid grievance must be carefully established.
2. Interest Disputes Must Be Properly Framed
A taxpayer seeking to challenge Section 234A interest must distinguish between:
– A dispute regarding the legal chargeability of interest; and
– A request for waiver, reduction or correction of interest.
The nature of the grievance can determine whether an appeal is maintainable.
A mere assertion that interest has been incorrectly computed may not, by itself, establish that the assessee is not liable to interest at all.
3. Fresh Claims After Processing Require Careful Procedural Planning
Where a taxpayer discovers that income offered in the return is not chargeable to tax, the appropriate procedural remedy should be evaluated promptly.
The possibility of filing a revised return, seeking rectification, invoking revisionary jurisdiction or raising an additional claim in a valid appeal must be examined in light of the applicable statutory provisions and limitation periods.
An appeal should not be treated as an automatic substitute for a revised return.
4. Maintainability Can Become a Preliminary Litigation Issue
The case illustrates that even a substantial substantive claim may remain unexamined if the appellate authority concludes that the appeal itself is not maintainable.
Therefore, appellate submissions should separately address:
– The statutory basis for filing the appeal.
– The precise grievance arising from the intimation.
– The appealability of the interest levy.
– The legal basis for admitting an additional claim.
Conclusion
The decision in Ajay Jaisinghani v. DCIT highlights an important procedural principle in income-tax litigation: before an appellate authority examines a substantial additional claim, the existence of a valid and maintainable appeal must first be established.
The Mumbai ITAT did not decide the taxability of the capital gains arising from the Polycab India Ltd. OFS transaction. Instead, it directed the CIT(A) to examine whether the Section 234A ground was admissible and whether the additional claim could thereafter be considered.
For taxpayers and tax professionals, the judgment reinforces the importance of distinguishing between a substantive tax claim and the procedural route available for pursuing it.
An appeal against an intimation under Section 143(1) cannot be maintained merely to introduce a fresh claim. At the same time, where a genuine appealable grievance exists, the appellate authority must examine it in accordance with law rather than dismissing the appeal mechanically.
The lesson is clear: a valid grievance may keep the appellate door open, but it does not automatically establish the merits of the claim waiting behind it.
Case Citation: Ajay Jaisinghani v. DCIT, Central Circle 5(2), Mumbai, ITA No. 972/Mum/2025, Assessment Year 2020-21, ITAT Mumbai “A” Bench, order dated 19 June 2025.
The copy of the order is as under:
