Wp v. Chief Commissioner Of Income Tax-Iii, A.p., Aayakar

THE HON'BLE SRI JUSTICE DILIP B. BHOSALEANDTHE HON'BLE SRI JUSTICE A.RAMALINGESWARA RAO WRIT PETITION Nos.4668 and 4669 of 2004 COMMON ORDER:(Per Hon’ble Sri Justice A.Ramalingeswara Rao) Heard the learned Counsel for the petitioner and the learned StandingCounsel for the respondents. These two Writ Petitions are being disposed of by this common order inview of the common point of law involved in both the cases. The petitioner inboth the cases is also the same. The petitioner is engaged in the business of running holiday resorts. Asurvey operation was conducted under Section 133A of the Income Tax Act,1961 (for short, the Act), on 27.01.2000. During the course of surveyoperations, the respondents pointed out that the method of accountingfollowed by the company wherein it accounted only 30% of the time shareconsideration as the year’s income was not correct and it should havereturned 100% of the amounts in the year of receipts itself. The petitionerexplained to them that it adopted the same procedure as was followed byother resort companies. The petitioner did not file any return of income for theassessment year 1997-98, but filed returns for the assessment years 1998-99and 1999-00. It filed revised returns for the years 1998-99 and 1999-00 on30.03.2000. The assessing officer determined the total income accepting theincome filed by the assessee and charged interest under Sections 234A,234B and 234C of the Act. The petitioner submitted an application to theChief Commissioner of Income Tax-III on 07.11.2001 for waiver of interest onthe ground that the tax liability arose only due to the change in the accountingpolicy of the time share receipts. The accounting procedure was changedsubsequently and revised statements of accounts were filed only to purchasepeace with the department. The petitioner paid the entire tax, but did not paythe interest. The said application was rejected by the first respondent on11.11.2003. Challenging the said order, the present Writ Petitions were filed. The first respondent rejected the application of the petitioner on theground that non-filing of return of income for the assessment year 1997-98was not proper and it ought to have been filed before the due date and thereturns of income have been revised for the assessment years 1998-99 and1999-00, subsequent to the survey of returns under Section 133A of the Actconducted on 27.01.2000. Therefore, it cannot be held that the assesseewas prevented by unavoidable circumstances from filing returns of incomewithin the time for all the three assessment years. He further held that evenassuming that return of income was voluntary, the four conditions prescribedby the CBDT in the circular dated 23.05.1996 are not applicable to theassessee’s case. In respect of the fifth condition in para 2(e), the Board hasclarified by circular No.783 dated 18.11.1999 that waiver of interest for non-payment of advance tax based on press note dated 21.05.1996 is notsustainable since para 2(e) of the order dated 23.05.1996 contains no suchstipulation. He ultimately rejected the application on the ground that theassessee’s case does not fulfill any of the conditions laid down by the orderunder Section 119(2)(a) of the Act, dated 23.05.1996. We have noticed that Sections 234A, 234B and 234C of the Act wereintroduced by the Direct Tax Laws (Amendment) Act, 1987 from theassessment year 1989-1990 and there was no provision for reduction orwaiver of penal interest unlike Section 273A of the Act, which provides forwaiver and reduction of penalty. But, the Central Board of Direct Taxesissued a circular in exercise of powers conferred under Section 119(2)(a) ofthe Act on 23.05.1996, providing for reduction or waiver of interest. In theabsence of a specific provision in the Act, the only source of power is thenotification dated 23.05.1996 in F.No.400/234/95-IT(B). In the saidnotification a direction was issued to the Chief Commissioner of Income Taxand the Director General of Income Tax to reduce or waive interests chargedunder Section 234A or 234B or 234C of the Act in the classes of incomespecified in paragraph 2 of the said order. Paragraph 2 of the saidnotification reads as follows: “2. The class of incomes or class of cases in which thereduction or waiver of interest under section 234A or section 234B, or, as the case may be, section 234C can be considered, are as follows: (a) Where during the course of proceedings for search and seizureunder section 132 of the Income Tax Act, or otherwise, thebooks of account and other incriminating documents havebeen seized and for reasons beyond the control of theassessee, he has been unable to furnish the return of incomefor the previous year during which the action under section132 has taken place, within the time specified in this behalfand the Chief Commissioner or, as the case may be,Director-General is satisfied having regard to the facts andcircumstances of the case that the delay in furnishing suchreturn of income cannot reasonably be attributed to theassessee.under section 132 of the Income Tax Act, or otherwise, thebooks of account and other incriminating documents havebeen seized and for reasons beyond the control of theassessee, he has been unable to furnish the return of incomefor the previous year during which the action under section132 has taken place, within the time specified in this behalfand the Chief Commissioner or, as the case may be,Director-General is satisfied having regard to the facts andcircumstances of the case that the delay in furnishing suchreturn of income cannot reasonably be attributed to theassessee. (b) Where during the course of search and seizure operation undersection 132 of the Income Tax Act, cash is seized which isnot allowed to be utilized for payment of advance taxinstalment or instalments as they fall due after the seizure ofcash and the assessee has not paid fully or partly advancetax on the current income and the Chief Commissioner or theDirector General is satisfied that the assessee is unable topay the advance tax.section 132 of the Income Tax Act, cash is seized which isnot allowed to be utilized for payment of advance taxinstalment or instalments as they fall due after the seizure ofcash and the assessee has not paid fully or partly advancetax on the current income and the Chief Commissioner or theDirector General is satisfied that the assessee is unable topay the advance tax. (b) Where during the course of search and seizure operation undersection 132 of the Income Tax Act, cash is seized which isnot allowed to be utilized for payment of advance taxinstalment or instalments as they fall due after the seizure ofcash and the assessee has not paid fully or partly advancetax on the current income and the Chief Commissioner or theDirector General is satisfied that the assessee is unable topay the advance tax.section 132 of the Income Tax Act, cash is seized which isnot allowed to be utilized for payment of advance taxinstalment or instalments as they fall due after the seizure ofcash and the assessee has not paid fully or partly advancetax on the current income and the Chief Commissioner or theDirector General is satisfied that the assessee is unable topay the advance tax. (c) Where any income chargeable to income tax under any head ofincome, other than “capital gain” is received or accrues afterthe due date of payment of the first or subsequent installmentsof advance tax which was neither anticipated nor was in thecontemplation of the assessee and the advance tax on suchincome is paid in the remaining installment or installments andthe Chief Commissioner or Director General is satisfied on thefacts and circumstances of the case that this is a fit case forreduction or waiver of interest chargeable under section 234Cof the Income Tax Act.income, other than “capital gain” is received or accrues afterthe due date of payment of the first or subsequent installmentsof advance tax which was neither anticipated nor was in thecontemplation of the assessee and the advance tax on suchincome is paid in the remaining installment or installments andthe Chief Commissioner or Director General is satisfied on thefacts and circumstances of the case that this is a fit case forreduction or waiver of interest chargeable under section 234Cof the Income Tax Act. (d) Where any income which was not chargeable to income tax onthe basis of any order passed in the case of an assessee bythe High Court within whose jurisdiction he is assessable toincome tax, and as a result, he did not pay income tax inrelation to such income in any previous year andsubsequently, in consequence of any retrospectiveamendment of law or, as the case may be, the decision of theSupreme Court in his own case, which event has taken placeafter the end of any such previous year, in any assessment orreassessment proceedings the advance tax paid by theassessee during the financial year immediately preceding therelevant assessment year is found to be less than the amountof advance tax payable on his current income, the assesseeis chargeable to interest under section 234B or section 234Cand the Chief Commissioner or Director General is satisfiedthe basis of any order passed in the case of an assessee bythe High Court within whose jurisdiction he is assessable toincome tax, and as a result, he did not pay income tax inrelation to such income in any previous year andsubsequently, in consequence of any retrospectiveamendment of law or, as the case may be, the decision of theSupreme Court in his own case, which event has taken placeafter the end of any such previous year, in any assessment orreassessment proceedings the advance tax paid by theassessee during the financial year immediately preceding therelevant assessment year is found to be less than the amountof advance tax payable on his current income, the assesseeis chargeable to interest under section 234B or section 234Cand the Chief Commissioner or Director General is satisfied that this is a fit case for reduction or waiver of such interest. (e) Where a return of income could not be filed by the assessee dueto unavoidable circumstances and such return of income isfiled voluntarily by the assessee or his legal heirs withoutdetection by the Assessing Officer.”to unavoidable circumstances and such return of income isfiled voluntarily by the assessee or his legal heirs withoutdetection by the Assessing Officer.” that this is a fit case for reduction or waiver of such interest. (e) Where a return of income could not be filed by the assessee dueto unavoidable circumstances and such return of income isfiled voluntarily by the assessee or his legal heirs withoutdetection by the Assessing Officer.”to unavoidable circumstances and such return of income isfiled voluntarily by the assessee or his legal heirs withoutdetection by the Assessing Officer.” We have elaborately considered the said issue of nature of a returnconsequent to survey and effect of circular in our order in W.P.No.14088 of2004, dated 22.01.2015, and dismissed the case of the petitioner in thatcase. In the above cases also, the first respondent has considered the effectof the circular dated 23.05.1996 and its non-application to the facts of thepetitioner’s case. We find that the first respondent had not omitted to consider the relevantaspects while coming to the conclusion. On the other hand, he has takenrelevant factors into consideration while rejecting the applications. Thediscretionary order of the first respondent does not suffer from any error. Accordingly, the Writ Petitions are dismissed. The miscellaneouspetitions, if any, stand disposed of. No costs. ______________________ (DILIP B. BHOSALE, J) ________________________________ (A.RAMALINGESWARA RAO, J) 27.01.2015 vs