The Chief Commissioner Of Income Tax, Chennai-18. 2. The Assistant Commissioner Of Income Tax, Business Range.xv, Nungambakkam, Chennai.34 v. M/S.rajanikant And Sons, New

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 06.06.2017 CORAM THE HONOURABLE MR.JUSTICE RAJIV SHAKDHERAndTHE HONOURABLE MR.JUSTICE R.SURESH KUMAR W.A.Nos.2020 to 2024 of 2010 andMP.NOS 1 to 2010 1.The Chief Commissioner of Income Tax, Chennai-18.2. The Assistant Commissioner of Income Tax, Business Range.XV, Nungambakkam, Chennai.34...Appellants in both the W.AsVs.M/s.Rajanikant and Sons,New No.528, Anna Salai,3rd Floor, Teynampet,Chennai-600 018. ... Respondent in all theW.As. Prayer : Appeals filed under Section 15 of the Letters Patentpraying to set aside the orders dated 22.07.2010 passed inW.P.Nos.15183/2010, 15180/2010, 15181/2010, 15182/2010 and15184/2010. Common Prayer in W.P.No.15183/2010, 15180/10 WP.15181/2010,15182/2010 and WP.15184/10:Writ petitions filed under Article226 of the Constitution of India praying for the issuance ofWrit of Certiorarified mandamus to call for the records andquash the proceedings of the 1st respondent in the impugnedorder dated 04.01.2010 bearing No.F.No.C.C.V/24(5) 1997-98 to2000-2001 & 2003-2004 issued by the 1st respondent and directthe respondent not to recover the interest amount so far paid. For Appellants in: Ms.Hema Muralikrishnan all the Appeals For Respondent in: Mr.S.V.Jayakumar all the Appeals https://hcservices.ecourts.gov.in/hcservices/ C O M M O N J U D G M E N T (Judgment of the Court was delivered by RAJIV SHAKDHER, J.) 1. These are appeals preferred by the Revenue against five(5) orders of even date, i.e., 22.07.2010, passed by the learnedSingle Judge. These orders, though, identical, are passedseparately, in the writ petitions preferred by the respondentherein. 1.1. The Revenue is aggrieved by the impugned orders, in asmuch as they set aside the order dated 04.01.2010, passed by thefirst appellant. 1.2. Pertinently, the learned Single Judge, after settingaside the order dated 04.01.2010, remitted the matter to thefirst appellant to consider the respondent's application forwaiver of interest on merits, albeit, in accordance with law. 2. It may be pertinent to note that in the captionedappeals, the period involved is Assessment Years (AY) 1997-1998to 2000-2001 and 2003-2004. 3. The brief facts, which are required to be noticed, inorder to adjudicate upon the captioned appeals, are as follows : 3.1. The respondent is in the business of manufacture, saleand export of diamond jewellery. In respect of the relevantperiods, to which we have made a reference above, the respondenthad made local sales to another company, namely, Rosy JewelleryExports Limited; a company situated in Santacruz ElectronicsExport Processing Zone (in short 'SEEPZ') at Mumbai. 3.2. The respondent was under the impression that, since,these were “deemed exports”, it would be entitled to deductionunder Section 80 HHC of the Income Tax Act, 1961 (in short 'the1961 Act'). 3.3. We are informed by the counsel for the respondent; afact, is not disputed by the learned counsel for the Revenue,that the returns, in the usual and normal course, were filed inrespect of the aforementioned period, wherein, deduction underSection 80HHC of the 1961 Act, had been claimed qua local salesmade to Rosy Jewellery Exports Limited. 3.4. We are further informed that the Revenue reopened theassessments for the aforementioned period, by issuing noticesunder Section 148 of the 1961 Act. 3.5. Pertinently, in so far as AY 2001-2002 was concerned,though, the respondent had claimed deduction under Section 80HHCof the 1961 Act, qua sales made to Rosy Jewellery ExportsLimited, the said deduction was denied by the Assessing Officer. 3.6. Being aggrieved, the respondent carried the matter inappeal to the Commissioner of Income Tax (Appeals), whoconfirmed the assessment order passed by the Assessing Officer,vide order dated 27.08.2004. https://hcservices.ecourts.gov.in/hcservices/ 3.4. We are further informed that the Revenue reopened theassessments for the aforementioned period, by issuing noticesunder Section 148 of the 1961 Act. 3.5. Pertinently, in so far as AY 2001-2002 was concerned,though, the respondent had claimed deduction under Section 80HHCof the 1961 Act, qua sales made to Rosy Jewellery ExportsLimited, the said deduction was denied by the Assessing Officer. 3.6. Being aggrieved, the respondent carried the matter inappeal to the Commissioner of Income Tax (Appeals), whoconfirmed the assessment order passed by the Assessing Officer,vide order dated 27.08.2004. https://hcservices.ecourts.gov.in/hcservices/ 3.7. We are further informed by the counsel for therespondent that pursuant to the reassessment carried by theRevenue qua the period in issue, the respondent not only paidthe reassessed tax, but also interest, as demanded underSections 234A, 234B and 234C of the 1961 Act. 4. The record shows that the respondent filed separatepetitions of even date, 19.06.2006, qua the aforementionedperiod, before the Chief Commissioner of Income Tax-V, Chennai-34, (hereafter referred to as 'the Chief Commissioner'), forwaiver of interest claimed under Sections 234A, 234B and 234C ofthe 1961 Act. These petitions for waiver of interest werepivoted on the Circular issued by the Central Board of DirectTaxes (in short 'CBDT') being : Circular No.400/29/2002 IT(B),dated 26.06.2006. 4.1. The said Circular has been issued by the CBDT, inexercise of powers conferred under Section 119(2)(a) of the 1961Act. 4.2. The Chief Commissioner, by a reasoned order, rejectedthe prayer made by the respondent for waiver of interest for thefollowing reasons, which are set out in paragraphs 5 to 8 of theorder dated 04.01.2010 : “..... 5. I have carefully considered the factsand circumstances of the case and the writtensubmissions filed by the A.R. present. I have alsoperused the records of the case and have taken duenote of the various judgements relied upon by theA.R. before me. However, I am not at all convincedwith the reasons given by the A.R. for waiver ofinterest charged u/s 234A, 234B, 234C of the Act inthis case in view of the discussion being made inthe succeeding paragraphs. 6. In the first place, the deduction claimed bythe assesses u/s 80HHC in respect of the local salesmade to certain concerns, situated in the ExportPromotion Zones (EPZ) by treating the same as'Deemed Exports' is not at all based upon therelevant statutory provisions in this regard. Anymisreading of the provisions or misinterpretationthereof cannot confer any benefit on the assesses.Neither the same can be treated as a bona fideclaim. The assesses has not been able to justify hisclaim in the above matter by relying upon any directdecision of the jurisdictional High Court or Hon'bleSupreme Court. Neither the assesses can take shelterbehind the mistake, if any, committed by theAssessing Officer in this regard, as such mistakescannot confer any vested right in the assesses. 7. The most important and relevant fact in this 7. The most important and relevant fact in this case is that the claim of deduction u/s 80HHC on thealleged 'Deemed Exports' had been made by theassesses in the original returns and it was neverwithdrawn voluntarily by the assesses by filingrevised returns before the completion of theoriginal assessments. As a matter of fact, theassesses has neither filed revised returns of incomesuo motto (sic “suo motu”) within a reasonable time,withdrawing its claim for deduction u/s 80HHC on thealleged deemed exports, even after the appellateorder was passed by the CIT(A) in the assessee's owncase for the Assessment year 2001-02 on 27.08.2004.It is found that the assessee waited for the receiptof the notice u/s 148 from the Assessing Officer inthe above matter. Hence, the income offered by theassessee in the returns filed in response to thenotice issued u/s 148 by withdrawing the deductionu/s 80HHC to certain extent cannot be said to be avoluntary act on the part of the assessee. It is aclear case of detection of income escapingassessment owing to the wrong claim by the assessee.The payment of tax by the assessee in respect of thefiling of the returns of income consequent upon thenotice u/s 148 of the Act cannot be treated at parwith Advance-tax. The judgement relied upon by theAR in the case of Dr.Prannoy Roy and Another -vs-CIT and Another 254 ITR 755 (SC) is clearlydistinguishable on the facts of the present case, asin the above judgement, it was held by the Hon'bleSupreme Court that interest would be payable in acase, where tax has not been deposited prior to thedue date of filing of the income-tax return. Theincrease in the quantum of interest charged u/s234A, 234B, 234C of the Act in this case is mainlydue to the increase in the total income finallyassessed as per the reassessment orders. Thecontention of the assessee that since he has paidthe tax, no interest is chargeable in this case isnot in conformity with the provisions of the IT Act.The other case laws relied upon by the AR, asmentioned above, are, therefore, found to be notapplicable on the facts of the present case. In viewof the aforesaid facts, such as, detection ofconcealment of income by the Assessing Officer, non-submission of voluntary returns before the abovedetection and non-disclosure of true and correctincome in the original returns are the relevantissues, wherein the assessee has totally failed toestablish its case within the four comers of theCBDT'S Circular in F.N.400/29/2002-IT (B) dated26.06.2006. 8. Under the circumstances, I am constrained tohold that the assessee's petitions seeking waiver ofinterest charged u/s 234A, 234B and 234C of the Actfor all the assessment years cannot be entertainedby me and hence the same are liable to be rejected." (emphasis is ours) 5. The respondent, being aggrieved, preferred five (5) writpetitions under Article 226 of the Constitution, against theorder dated 04.01.2010. 6. As indicated right at the outset, the learned SingleJudge set aside the order dated 04.01.2010, and remitted thematter to the Chief Commissioner for adjudicating upon thewaiver petitions on merits, albeit, in accordance with law. 7. The Revenue, in these circumstances, has preferred thecaptioned appeals. 8. On behalf of the Revenue, Ms.Hema Muralikrishnan, hasadvancedsubmissions,whileonbehalfoftherespondent/Assessee, submissions have been advanced byMr.V.S.Jayakumar. (emphasis is ours) 5. The respondent, being aggrieved, preferred five (5) writpetitions under Article 226 of the Constitution, against theorder dated 04.01.2010. 6. As indicated right at the outset, the learned SingleJudge set aside the order dated 04.01.2010, and remitted thematter to the Chief Commissioner for adjudicating upon thewaiver petitions on merits, albeit, in accordance with law. 7. The Revenue, in these circumstances, has preferred thecaptioned appeals. 8. On behalf of the Revenue, Ms.Hema Muralikrishnan, hasadvancedsubmissions,whileonbehalfoftherespondent/Assessee, submissions have been advanced byMr.V.S.Jayakumar. 9. It is the submission of Ms.Muralikrishnan that the orderof the learned Single Judge would have to be set aside, as notonly was the order dated 04.01.2010, a reasoned order andtherefore, required no interference, but also, for the reasonthat in the facts and circumstances obtaining in the instantcase, the respondent had failed to establish the provisions ofthe Circular dated 26.06.2006 were applicable. It was, thus,submitted that the learned Single Judge had erred in coming tothe conclusion that the order dated 04.01.2010, was passedwithout bearing in mind the provisions of the Circular dated26.06.2006. 10. On the other hand, Mr.Jayakumar, who appears for therespondent, submits that the respondent was under a bona fidebelief that, since, the local sales, which were made to acompany situate in SEEPZ, could be treated as a “deemed export”,it would further be entitled to deduction under Section 80 HHCof the 1961 Act. 10.1. Learned counsel further submitted that, since, thenecessary discretion was available to the Chief Commissioner, interms of the Circular dated 26.06.2006, he ought to have takeninto account, the said circumstances, which were obtaining inthe matter and then, come to a conclusion one way or the other,as to whether or not, interest ought to be waived under Sections234A, 234B and 234C of the 1961 Act. 10.2. In other words, according to Mr.Jayakumar, thedirection issued by the learned Single Judge, ought not to be https://hcservices.ecourts.gov.in/hcservices/ interfered with, as all that it does is to remand the matter tothe Chief Commissioner for reconsideration of the case in thelight of the Circular dated 26.06.2006. 10.3. In support of this submissions, learned counsel reliedupon a Division Bench judgement of this Court in the matter :N.Haridas & Co. Vs. Chief Commissioner of Income Tax andanother, (2008) 296 ITR 246 (Mad.). 10.4. We must also indicate that Mr.Jayakumar has displayedexemplary fairness in the matter, by bringing to our notice ajudgement of the Division Bench of the Bombay High Court in thematter of : De Souza Hotels Private Limited V. ChiefCommissioner of Income Tax, (2012) 253 CTR 0541, which takes acontra view. 10.5. This judgment of the Bombay High Court, evidently,takes the view that the discretion available to the ChiefCommissioner for waiving interest under Sections 234A, 234B and234C, is confined to the circumstances, adverted to, inparagraphs 2(a) to 2(d) of the said Circular. According to theCourt, the circumstances set out therein are exhaustive, andthat, no waiver of interest can be granted in case, it does notfall within the circumstances set out therein. 10.6. We may also indicate that we had put to Mr.Jayakumaras to whether or not the present circumstance would fall in anyof the clauses referred to in paragraphs 2(a) to 2(d) of theCircular dated 26.06.2006. Once again Mr.Jayakumar, with usualcandour, stated, that, strictly speaking, the respondent's casewould not fall in any of the circumstances set out therein. 10.6. We may also indicate that we had put to Mr.Jayakumaras to whether or not the present circumstance would fall in anyof the clauses referred to in paragraphs 2(a) to 2(d) of theCircular dated 26.06.2006. Once again Mr.Jayakumar, with usualcandour, stated, that, strictly speaking, the respondent's casewould not fall in any of the circumstances set out therein. 11. Having heard the learned counsel for the parties andperused the record, what emerges, in nutshell is that, thisCourt is required to look at the contents of the Circular dated26.06.2006, in order to come to a conclusion, in one way or theother, as to whether or not, the respondent would be entitled toseek waiver of interest. 11.1. We may also note herein that the learned counsel forthe Revenue, Ms.Muralikrishnan, is right in her submission thatthe Chief Commissioner in his order dated 04.01.2010, hadexhaustively dealt with merits of the waiver petitions and,then, come to a conclusion that the circumstances obtaining inthe case did not fall within the provisions of clauses 2(a) to 2(d) of the Circular. 11.2. Therefore, what is required to be seen is what is thescope and ambit of the Circular dated 26.06.2006. A bare perusalof the Circular would show that the CBDT has delegated its powerto the Chief Commissioner and/or the Director General of IncomeTax to reduce or waive interest charged under Section 234A orunder Section 234B or under Section 234C of the 1961 Act, in the https://hcservices.ecourts.gov.in/hcservices/ classes of cases or classes of incomes specified in paragraph 2of the said Circular. 11.3. The extent to which the said delegatees, i.e., ChiefCommissioner/Director General of Income Tax, may waive or reducethe interest has been left to their discretion. 11.4. Furthermore, the Circular makes it clear that noreduction or waiver of interest under the provisions referred toabove shall be ordered, unless the assessee has filed a returnof income for the relevant AY and paid the entire income tax(principal component of demand due on the income, as assessed). 11.5. In addition thereto, the Chief Commissioner/DirectorGeneral of Income Tax has been empowered to impose any othercondition, as it may deem fit, while granting reduction orwaiver of interest. 11.6. Therefore, what emanates upon perusal of the Circularis that, unless the Assessee's case falls under thecircumstances set out in paragraph 2(a) to 2(d) of the Circulardated 26.06.2006, which includes classes of cases and/or classesof incomes, the Chief Commissioner/Director General of IncomeTax has no power to reduce or waive interest. 11.7. In the instant case, as indicated in the narration offacts above, though returns were filed for the subject periods,the assessment made in the usual and normal course, was reopenedunder Section 148 of the 1961 Act. The reassessed tax was paidonly after the Revenue had passed the reassessment order. Asnoted above, the assessee, at that stage, as advised, itappears, has also paid interest under Sections 234A, 234B and234C of the 1961 Act. 11.8. However, what emerges from the record, is also, thatin so far as AY 2001-2002 is concerned, at the assessment stageitself, the deduction claimed under Section 80HHC qua the localsales was denied to the respondent. The matter was carried inappeal, which was sustained by CIT(A), in his order dated27.08.2004. 11.9. Therefore, in a sense, at that stage itself, therespondent was made aware that Section 80HHC deduction was notavailable. 12. Be that as it may, given the facts and circumstancesemerging in the present appeals, and those found by the ChiefCommissioner in his order dated 04.01.2010, it is quite clearthat the instant case does not fall in any of the circumstances,adverted to in paragraph 2(a) to 2(d) of the Circular dated26.06.2006. 11.8. However, what emerges from the record, is also, thatin so far as AY 2001-2002 is concerned, at the assessment stageitself, the deduction claimed under Section 80HHC qua the localsales was denied to the respondent. The matter was carried inappeal, which was sustained by CIT(A), in his order dated27.08.2004. 11.9. Therefore, in a sense, at that stage itself, therespondent was made aware that Section 80HHC deduction was notavailable. 12. Be that as it may, given the facts and circumstancesemerging in the present appeals, and those found by the ChiefCommissioner in his order dated 04.01.2010, it is quite clearthat the instant case does not fall in any of the circumstances,adverted to in paragraph 2(a) to 2(d) of the Circular dated26.06.2006. 12.1. As indicated above, the Division Bench of the BombayHigh Court in De Souza Hotels Private Limited V. ChiefCommissioner of Income Tax and Others, (2012) 253 CTR 0541, hascome to the conclusion, with which, we are in completeagreement, that unless the Assessee's case comes within the https://hcservices.ecourts.gov.in/hcservices/ ambit and scope of the Circular dated 26.06.2006, the ChiefCommissioner would have no power to reduce or waive interestunder Sections 234A, 234B and 234C. 12.2. In our view, the order dated 01.04.2010, passed by thefirst appellant deals with waiver petitions on merits, andtherefore, the judgements of the learned Single Judge settingaside the same and remitting the matter for reconsideration wasnot called for. Furthermore, we may also indicate that in so faras the judgment of the Division Bench of this Court in N.Haridas& Co. V. Chief Commissioner of Income Tax and another, (2008)296 ITR 246 (Mad) is concerned, it was passed in peculiar factsand circumstances of the case. In that case, waiver/reduction ofinterest was sought on the ground that the tax, which wasrequired to be paid under the Voluntary Disclosure of IncomeScheme 1997, could not be paid, in time, by the ManagingPartner, even though, he had made a declaration as required,since, he was diagnosed with blood cancer, and to which, hesuccumbed shortly thereafter. 12.3. Furthermore, what is not evident upon a perusal of thesaid judgment as to the what were the contents of the order oftheChiefCommissioner,whereby,therequestforwaiver/reduction of interest was rejected. It appears that theorder was perfunctory, which is why, the Division Bench inparagraph 7 observed that the impugned order of the ChiefCommissioner “merely observed that the condition prescribed inNotification dated 23.05.1996 was not satisfied”. 12.4. We may indicate herein that the notification/circulardated 23.05.1996 precedes the circular in issue, i.e., Circulardated 26.06.2006. Circular dated 26.06.2006 supersedes theearlier circular dated 23.05.1996. We are, thus, concerned onlywith Circular dated 26.06.2006. 12.5. For all these reasons, we are of the view that thejudgment in the matter of : N.Haridas & Co. (cited supra) cannothelp the cause of the respondent in this case. Therefore, theappeal will have to be allowed. 13. Accordingly, the the impugned judgements are set aside.The appeals are, accordingly, allowed. Resultantly, pendingapplications shall stand closed. There shall, however, be noorder as to costs.gg Sd/- Assistant Registrar(CS VIII) //True Copy// Sub Assistant Registrar TO 1.The Chief Commissioner of Income Tax, No.121, Mahatma Gandhi Road, Chennai-18. No.121, Mahatma Gandhi Road, Chennai-18. 2. The Assistant Commissioner of Income Tax, Business Range.XV, Chennai.34. Income Tax, Business Range.XV, Chennai.34. +1cc to Mr.Hema Muralirishnan, Advocate SR.No.40230 +1cc to Mr.V.S.JayaKumar, Advocate SR.No.40587 W.A.Nos.2020 to 2024 of 2010PPA(CO)GN(13/09/2017)