Income Tax v. Anjum M. H. Ghaswala[[1

*THE HON’BLE SRI JUSTICE L.NARASIMHA REDDYAND *THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM+W.P.Nos.16179, 16183 & 16186 of 2000 % Dated 25.06.2014 Mr.S.Prasad Reddy and others. ….Petitioners $ Commissioner of Income Tax, Hyderabad. ….Respondent ! Counsel for the petitioners : Sri S.Ravi^ Counsel for respondent : Sri S.R.Ashok < GIST: > HEAD NOTE: ? Cases referred:1. AIR 2001 SUPREME COURT 38682. 259 ITR 2583. 364 ITR 190 THE HON’BLE SRI JUSTICE L.NARASIMHA REDDYAND THE HON’BLE SRI JUSTICE CHALLA KODANDA RAMW.P.Nos.16179, 16183 & 16186 of 2000 COMMON JUDGMENT: (Per LNR,J) The subject matter of these three writ petitions is similar. Hence, they are disposed of through a common judgment. The petitioners are the assessees under the Income TaxAct (for short ‘the Act’). There was some delay on their part in filing Income Tax Returns for the assessment year 1995-96. While there was default in payment of a portion of advance taxreferable to the assessment year, there was deferment ofpayment of advance tax in respect of the other portion. Ultimately, the petitioners were assessed to tax and they werealso placed under the obligation to pay the interest as providedfor under Sections 234-A, 234-B and 234-C of Act. All of themapproached the Commissioner of Income Tax, Hyderabad,respondent herein by way of revisions under Section 264 of theAct with a prayer to waive the interest payable under Sections234-A, 234-B and 234-C of the Act. One day after the revisionswere filed, the Central Government issued notification forenforcement of Kar Vivad Samadhan Scheme, 1998 (for short‘the Scheme’), which provided for termination of the proceedingson payment of 50% of the tax arrears, that are the subject matterof the appeals or revisions. The petitioners submitted applications before therespondent, before whom the revisions were pending with aprayer to extend the benefit under the Scheme. Throughseparate orders, dated 27.01.1999, the respondent declined toextend the benefit of the Scheme, observing that he does nothave the power to waive the interest leviable under Sections234-A, 234-B and 234-C of the Act. Another reason furnished byhim was that the notice issued to the petitioners under Section271(1)(c) of the Act proposing to levy penalty is also outside hispowers. The said orders are challenged in these writ petitions. Sri S.Ravi, learned senior counsel appearing for the petitioners submits that the Scheme was evolved by the CentralGovernment with a view to put an end to unnecessary litigation,even while protecting the interest of revenue. He contends thatonce an appeal or revision is pending and the assessee isprepared to pay 50% of the tax arrears, as defined under theScheme, the concerned authority has no option, but to extendthe benefit. He submits that the view taken by the respondent iscontrary to the Scheme as well as the precedents on the subject. Sri S.R.Ashok, learned senior Standing Counsel for theDepartment, on the other hand, submits that the filing of revision itself was a device invented by the petitioners to evade paymentof the mandatory interest under the relevant provision of law. Hesubmits that when the respondent does not have the power towaive the interest at all, the revision was just a perfunctoryexercise and that the revisions were presented one day beforethe Scheme became operational, discloses the absence of bonafides in the matter. He submits that the Scheme is evolved onlyto rescue the genuine assessees and not to confer the benefit,contrary to the provisions of the Act. He places reliance upon thejudgment of the Hon’ble Supreme Court in COMMISSIONER OF INCOME TAX v. ANJUM M. H. GHASWALA[[1]] Sri S.R.Ashok, learned senior Standing Counsel for theDepartment, on the other hand, submits that the filing of revision itself was a device invented by the petitioners to evade paymentof the mandatory interest under the relevant provision of law. Hesubmits that when the respondent does not have the power towaive the interest at all, the revision was just a perfunctoryexercise and that the revisions were presented one day beforethe Scheme became operational, discloses the absence of bonafides in the matter. He submits that the Scheme is evolved onlyto rescue the genuine assessees and not to confer the benefit,contrary to the provisions of the Act. He places reliance upon thejudgment of the Hon’ble Supreme Court in COMMISSIONER OF INCOME TAX v. ANJUM M. H. GHASWALA[[1]] As is too well known, the Act is a comprehensive Code notonly providing for levy of tax, interest and penalty, but also foradjudication of the disputes in relation thereto. In view of thecomplexity and fluidity of the provisions of the Act, large amountof litigation is generated over the years. It is but natural that anyassessee, who is under the obligation of payment of tax, penaltyor interest, which he feels burdensome, would avail the remediesprovided for under the Act. The pendency of matters in largevolume was certainly a matter of concern for the revenue. Methods were evolved to solve the problem, atleast to certainextent. It is in this process that the Scheme was framed. The salient feature of the Scheme is that wherever anappeal or revision filed by an assessee is pending, and theassessee is prepared to pay 50% of the tax arrears, theproceedings would be terminated in his favour. The expression“tax arrears” is defined as “ in relation to direct tax enactment, the amount of tax, penaltyor interest determined on or before the 31[st] day of March, 1998,under that enactment in respect of an assessment year asmodified in consequence of giving effect to an appellate order butremaining unpaid on the date of declaration” It is obvious that it takes in its fold not only the amount of tax due, but also the penalty, as well as the interest determined on orbefore 31.03.1998. In the instant case, the petitioners do not have any qualmsabout the levy of the tax. The subject matter of the revision filed by them is the interest, that became payable under Sections234-A, 234-B and 234-C of the Act. There again, they wantedthe waiver thereof and did not dispute the legality of the levy. The Income Tax Officer enforced the provisions, obviouslybecause he did not have the power to waive interest. Therefore,the petitioners carried the matter in the revision before theCommissioner. The Commissioner refused to extend the benefit to thepetitioners, by observing that he does not have the power towaive the interest. That in fact, is the plank of argument onbehalf of the Department, before us. The question as to whetherthe Commissioner had the power to waive interest or whether thepetitioners have made out a case for such waiver, is totallyoutside the purview of the Scheme. What all it contemplates isthat if the concerned assessee is prepared to pay 50% of the taxarrears, the benefit must be extended. In a given case, theassessees may have an excellent case on merits and there maybe every likelihood of winning the case outright; or the case is sohopeless that there is hardly any scope for any relief beinggranted to the assessee. All these are outside the scope andpurview of the Scheme. The circumstances, under which the benefits under theScheme can be extended, were explained by the Hon’bleSupreme Court in DR. MRS. RENUKA DATLA AND OTHERS v. COMMISSIONER OF INOME TAX AND ANOTHER[[2]]. Their The circumstances, under which the benefits under theScheme can be extended, were explained by the Hon’bleSupreme Court in DR. MRS. RENUKA DATLA AND OTHERS v. COMMISSIONER OF INOME TAX AND ANOTHER[[2]]. Their lordships took the view that once the subject matter of appeal orrevision is covered by the Scheme, the benefit becomesextendible without any option. This was reiterated in subsequentjudgments. Recently, a Division Bench of this Court, of whichone of us (Justice Challa Kodanda Ram) is a party, passed anorder extending the benefit in Y.V.CHANDER v. UNION OFINDIA[[3]]. In the instant case, it is not in dispute that the revisions filedby the petitioners herein were pending by the time the Schemewas made operational. The reasons mentioned by therespondent in the orders passed by him refusing to extend the benefit under the Scheme are outside the scope of the Scheme.We therefore allow the writ petitions and set aside theimpugned orders. We direct the respondent to extend the benefitof the Scheme to the petitioners, after ensuring due compliance,as to payment of the stipulated amount. The miscellaneous petitions filed in these writ petitionsshall also stand disposed of. There shall be no order as to costs. ____________________ L.NARASIMHA REDDY, J ______________________ CHALLA KODANDA RAM, J Date: 25.06.2014Note: L.R.Copy to be marked.JSU THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY AND THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM W.P.Nos.16179, 16183 & 16186 of 2000 JSU Date: 25.06.2014 [1]AIR 2001 SUPREME COURT 3868AIR 2001 SUPREME COURT 3868 [2]259 ITR 258259 ITR 258 [3]364 ITR 190364 ITR 190