R.mani v. The Chief Commissioner Of Income Tax,Tiruchirappalli

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM W.P.No.21477 of 2004 R.Mani... Petitioner Vs. The Chief Commissioner of Income Tax,Tiruchirappalli. ... Respondent Petition filed under Article 226 of the Constitution ofIndia praying for issuance of Writ of Certiorarified Mandamus,calling for the records of the respondent in C.No.932(245)/CCIT/TRY/2001-02 dated 11.12.2003 and quash the same and furtherdirect the respondent to grant waiver of interest under Sections234A, 234B and 234C of the Income Tax Act, 1961 for theassessment years 1997-1998 and 1998-1999. For Petitioner : Mr.T.VasudevanFor Respondent : Mr.A.P.Srinivas, Senior Panel CounselO R D E R Heard Mr.T.Vasudevan, learned counsel appearing for thepetitioner and Mr.A.P.Srinivas, learned Senior Panel Counselappearing for the respondent. 2.The writ petition has been filed challenging an orderpassed by the Chief Commissioner of Income Tax, Tiruchirapallidated 11.02.2003 under Section 119(2)(a) of the Income Tax Act,1961 (hereinafter referred to as “the Act”), by which thepetitioner's application for waiver of interest payable underSections 234A, 234B and 234C of the Act for the assessment years1997-1998 and 1998-1999 was rejected. The petitioner is anassessee on the file of the Deputy Commissioner of Income Taxfor Circular I, Salem and has been assessed in the status of HUFfor nearly two decades. The petitioner's income is mainly fromthe property, sago commission income and income from a Trust.For the assessment years 1997-1998 and 1998-1999, the petitionerfiled his return of income on 20.12.2000 which was processed and https://hcservices.ecourts.gov.in/hcservices/ the petitioner was assessed to tax and interest was levied underSections 234A, 234B and 234C for both the assessment years.Hence the petitioner approached the respondent under Section 119(2)(a) of the Act for waiver of interest under Sections 234A,234B and 234C of the Act which was levied for the delay infurnishing the return of income, default in payment of advancetax and for shortfall/deferment in the payment of advance taxrespectively. The petitioner in his application for waiverstated that (1) he was under the bonafide belief that he had notaxable income and therefore not required to file a return; (2)there was a family dispute among the members with regard to theproperties and a partition suit was pending; (3) there was acase pending before the Debt Recovery Tribunal and as aconsequence of which, the petitioner was attending banks, Courtsand authorities and (4) there was slump in the sago business. 4.It has to be seen as to whether the respondent was rightin rejecting the petitioner's application for waiver ofinterest. The power for waiver granted to the respondentemanates from the guidelines framed by the Central Board in theform of a circular. The circular which held the field duringthe relevant time was Circular No.400 and in order to beentitled to the benefit of the Circular, the assessee shouldfall within one of the conditions stipulated therein. So far asthe waiver of interest under Section 234A of the Act, Clauses 2(a) and 2(e) of the Board Circular No.400 have to be fulfilledwhich are as follows:"Clause 2(a) - where the accounts and documentshave been seized u/s. 132 of the IncomeTax Act, 1961 and because of the seizureof account books, the assessee could not filethe return of income within the due dateu/s. 139(1).Clause 2(e) - the return of income could not be https://hcservices.ecourts.gov.in/hcservices/ filed by the assessee due to unavoidablecircumstances and the return of income was filedvoluntarily before detection by theAssessing Officer." https://hcservices.ecourts.gov.in/hcservices/ filed by the assessee due to unavoidablecircumstances and the return of income was filedvoluntarily before detection by theAssessing Officer." 5.So far as the waiver of interest under Sections 234B and234C of the Act is concerned, the assessee has to satisfy thefollowing conditions:i. Where there was a seizure of case u/s 132/132A andthe assessee had no other source to pay theadvance-tax other than the cash seized and the cashwas NOT allowed to be utilised to pay the advance-tax.ii.The total income (admitted/assessed) of theassessee, inter alia includes income other thanCapital Gains which accrued to or received by theassessee after the due date for the first orsubsequent instalment and the assessee has paid theadvance-tax paid the remaining instalments and theassessee could not anticipate the accrual/receiptof such income.iii.The total income of the assessee includes incomewhich is held by the High Court in his own case asnot chargeable to tax and the Supreme Court hasheld it as assessable in the assessee's own case orthe law is amended to that effect after the expiryof last date of last installment of advance-tax. 6.The respondent has rejected the petitioner's request forwaiver on the ground that he has not voluntarily filed thereturns of income but has filed after deduction by the AssessingOfficer. This appears to be the stand in the counter affidavitas well. The assessment years in question are 1997-1998 and1998-1999. Record of the proceedings shows that the petitionerhad not filed return of income for the assessment years 1994-1995, 1995-1996 and 1996-1997 and the explanation given is thathe had no taxable income during the said years. Further, theproperty continued to remain as HUF property i.e. it remainedundivided and there were serious civil disputes between thefamily members and to establish the same the petitioner hadfiled the copy of the plaint in O.S.No.200 of 2014 on the fileof the Sub Court, Salem, filed for partition in which thepetitioner was the 6[th] defendant. Thus, it is the petitioner'scase that he was under the bonafide belief that there is notaxable income and consequently not required to pay any advancetax. 7.It has to be seen as to whether the case pleaded by the petitioner could brought under Clause 2e of Board CircularNo.400 (referred supra). A survey was conducted in premises ofthe petitioner on 22.01.1999. However, the survey did not leadto any immediate issuance of notice under Section 148 of the Actwhich was issued only on 21.12.2000. However, in theinterregnum, during February 1999 itself the petitioner filedhis return of income. Thereafter the Assessing Officer hastaken up the matter and completed the assessment under Section143(2) of the Act and passed an order dated 30.03.2001 acceptingthe return filed by the petitioner with no further additions.Thus, merely because there was a survey conducted in thepremises on 22.01.1999, can it be stated that the petitioner hadnot voluntarily filed the return before deduction. In thisregard, it will be worthwhile to refer to the decision of theHon'ble Division Bench in the case of Commissioner of Income Taxvs. S.Khader Khan son reported in (2008) 300 ITR 157 (Mad).One of the substantial questions framed for consideration wasthat the Court was called upon to consider whether the materialscollected and the statement elicited during survey operationunder Section 133A of the Act had any evidentiary value. Aftertaking note of Sections 132(4) and 133A of the Act, it was heldas follows: "6.In the instant case, there was a surveyoperation conducted under Section 133A of the Actin the assessee's premises and a statement wasrecorded from one of the partner. Assuming therewere discrepancies and irregularities in the booksof accounts maintained by the assessee, an offer ofadditional income for the respective assessmentyears was made by the partner of the firm. But,such statement, in view of the scope and ambit ofthe materials collected during the course of surveyaction under Section 133A shall not have anyevidentiary value, as rightly held by theCommissioner and the Tribunal, since such statementwas not attached to the provisions of Section 133Aof the Act. It could not be said solely on thebasis of the statement given by one of the partnerof the assessee-firm that the disclosed income wasassessable as lawful income of the assessee. Sincethere was no material on record to prove theexistence of such disclosed income or earning ofsuch income in the hands of the assessee, it couldnot be said that the Revenue had lost lawful taxpayable by the assessee." 8.Further, with regard to the statement recorded during thecourse of search, the Division Bench referred to the decision ofthe Hon'ble Apex Court in the case of Pullangode Rubber ProduceCo. Ltd. vs. State of Kerala reported in (1973) 91 ITR 18, wherein the Hon'ble Apex Court held that time is an extremelyimportant piece of evidence but it cannot be said that it isconclusive and it is open to the person who made the admissionto show that it is incorrect. After noting several otherdecisions, the question of law was answered in favour of theassessee and against the revenue on the following terms: "14.From the foregoing discussion, thefollowing principles can be culled out:- (i) An admission is extremely an importantpiece of evidence but it cannot be said that it isconclusive and it is open to the person who made theadmission to show that it is incorrect and that theassessee should be given a proper opportunity toshow that the books of accounts do not correctlydisclose the correct state of facts, vide decisionof the Apex Court in Pullangode Rubber Produce Co.Ltd. v. State of Kerala (1973) 91 I.T.R. 18; (ii) In contradistinction to the power undersection 133A, section 132(4) of the Income-tax Actenables the authorised officer to examine a personon oath and any statement made by such person duringsuch examination can also be used in evidence underthe Income-tax Act. On the other hand, whateverstatement is recorded under section 133A of theIncome-tax Act it is not given any evidentiary valueobviously for the reason that the officer is notauthorised to administer oath and to take any swornstatement which alone has evidentiary value ascontemplated under law, vide Paul Mathews and Sonsv. Commissioner of Income-tax (2003) 263 I.T.R. 101 (Ker); 9.In the light of the above referred decision, it cannotbe stated that the material collected at the time of survey canbe any evidentiary value. In fact well before the issuance ofnotice under Section 148 of the Act, the petitioner had filedthe return of income as early as in February 1999. Therefore,the survey conducted in the premises cannot be treated to be oneof circumstances to show that there was a deduction of anyincome which has escaped assessment to tax. Therefore, thisCourt is of the view that the petitioner's case would squarelyfall under Section Clause 2(e) of the Board Circular. Further,the Central Board of Direct Taxes by circular issued aNotification in F.No.286/2/2003-IT (Inv) dated 10.03.2003 withregard to the confessions recorded during the survey, search andseizure operations and it was held that while recording thestatement during the course of search, seizure and surveyoperations, no attempt should be made to obtain confession as tothe non-disclosed income. The above circular would add to the interpretation given by this Court to show that a survey cannottantamount to deduction by the Assessing Officer as referred toClause 2(E) of the Act. Thus, this Court is fully satisfiedthat the assessee due to unavoidable circumstances did not filereturn of income and had done so before issuance of notice underSection 148 of the Act which at best can be treated to be adeduction by the Assessing Officer. If the petitioner is tosucceed on the request for waiver of interest under Section 234of the Act, it has to be seen as to whetherthe petitioner would be entitled for waiver under Section 234Band 234C of the Act. 10.Learned counsel appearing for the revenue would stronglycontend that there are separate conditions to be adhered to bythe assessee to be entitled for waiver of interest underSections 234B and 234C of the Act. As pointed out earlier, thepetitioner's case was that he had no taxable income. This pleahad not been controverted by the revenue and this is evidentfrom the conduct of the assessee in not filing returns forearlier three years, i.e. 1994-1995 to 1996-1997. That apart,the petitioner has been able to establish that the property inquestion still remains undivided and no definite share inproperty or share to any co-parcener has been allotted and thesuit for partition was pending. Apart from that, returns filedby the petitioner has been accepted and assessment has beencompleted with no further additions. The consistent case ofthe assessee is that the property continues to remain undividedand no income arose from the property to the petitioner and asthere was no taxable income, returns were not filed. Thepetitioner established his bonafides by referring to the suitfor partition, which was pending trial, in which thepetitioner/assessee is arrayed as 6[th] defendant. Thus, when theproperty continues to remain undivided, the assessee cannotanticipate the accrual/receipt of such income. The circularissued by the Board empowering the Chief Commissioner toconsider the waiver petition for waiver of interest underSection 234A as well as 234B would show that even in casescovered by Section 234B and even though these provisions arecompensatory in nature, special orders for grant of relaxationcould be passed. Thus, this Court is convinced that the disputewith regard to the division of property was a bonafide disputewhich directly relates to the assessbility of the petitioner totax. Therefore, if the petitioner is entitled for waiver ofinterest under Section 234A of the Act for the reasons set outabove, the question of payment of advance tax nor a portionthereof will not arise and therefore, the petitioner is entitledfor waiver of interest under Sections 234B and 234C of the Act.The above observations have been made by this Court consideringthe facts and circumstances of the case much of which has notbeen disputed by the revenue. Thus, for the above reasons the petitioner is entitled to succeed. 11.Accordingly, the writ petition is allowed, the impugnedorder is set aside and it is held that the petitioner isentitled for waiver of interest under Sections 234A, 234B and234C of the Act. No costs. Sd/-Assistant Registrar(CCC) //True copy//Sub Assistant RegistrarcseToThe Chief Commissioner of Income Tax,Tiruchirappalli.+1cc to Mr.Quadir Husain, Advocate SR.No.85977+1cc to Mr.A.P.Srinivas, Advocate SR.No.85994W.P.No.21477 of 2004PVS(CO)GN(27/12/2017)