Wp(C)/37788/2015 Of Sri.ambadi Krishna Menon v. The Principal Chief Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE AMIT RAWAL TUESDAY, THE 19 DAY OF SEPTEMBER 2023 / 28TH BHADRA, 1945WP(C) NO. 37788 OF 2015 PETITIONER: SRI.AMBADI KRISHNA MENONAGED 73 YEARS 'AMBADI RETREAT', CHILAVANNOOR ROAD, KADAVANTHRA, KOCHI - PIN 682 020. BY ADV SRI.DALE P.KURIEN RESPONDENTS: 1THE PRINCIPAL CHIEF COMMISSIONER OF INCOME TAXCENTRAL REVENUE BUILDINGS, I.S.PRESS ROAD, KOCHI - 682 018. CENTRAL REVENUE BUILDINGS, I.S.PRESS ROAD, 2INCOME TAX OFFICERI.S.PRESS ROAD, KOCHI - 682 018. WARD-I, RANGE-I, CENTRAL REVENUE BUILDINGS, 3THE COMMISSIONER OF INCOME TAXCENTRAL REVENUE BUILDINGS, I.S.PRESS ROAD, KOCHI - 682 018. 4THE CENTRAL BOARD OF DIRECT TAXESNEW DELHI - 400 001, REPRESENTED BY ITSEX-OFFICIO MEMBER SECRETARY. 5UNION OF INDIAREPRESENTED BY ITS SECRETARY TO MINISTRY OF FINANCE, SHASTRI BHAVAN, NEW DELHI -110 001. BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES)SRI.JOSE JOSEPH, SC, FOR INCOME TAX DEPARTMENT THIS WRIT PETITION (CIVIL) HAVING BEEN HEARD ON 19.09.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C) NO. 37788 OF 2015 JUDGMENT 1. Order Ext.P8 of the Principal Chief Commissionerof Income Tax, Kerala dated 22.09.2015 passed under theprovisions of Section 119 of the Income Tax Act, 1961rejecting the claim of the petitioners for granting waiverof interest as per provisions of Section 234A, 234B and234C of the IT Act pertaining to assessment year 2011-12is under challenge in the present writ petition. 2. Petitioner is an assessee under the Income TaxAct and has been filing returns from assessment year1989-90 onwards on the basis of the income frombusiness or profession. During the financial year 2010-11the income considerably increased on account of sale of14,25,200 equity shares of Ambadi Infrastructures Pvt.Ltd. on 10.03.2010. The aforementioned transactionwould fall under the 'income from capital gain' for thepurpose of taxation. By mistake it was taken into accountas also the cost of bonus shares and could not file the WP(C) NO. 37788 OF 2015 -3- advance tax as required under Section 207 and 208 of theIncome Tax Act. The inadvertent omission was not due toany willful default or intentional neglect or latches but onaccount of fact that no professional advice was taken.Later on the said mistake came to be noticed andrectified the same and voluntarily offered the amount oftaxable income for the assessment year 2011-2012 andfiled an application under Section 273A(4) with theCommissioner of Income Tax (Administrative) as per theprevailing law. It has been dismissed on the ground thatthe explanation given by the petitioner did not suffice therequirement of law. 3.Learned counsel appearing on behalf of thepetitioner submitted that the impugned order is notsustainable in the eyes of law for, Commissioner has nottaken into consideration the provisions of Section 234Band C of the Act. The case of the petitioner squarelywithin the aforementioned provision and similarlysituated persons have been granted exemption. There was no criminal intent or mens rea or willful neglect butthe mistake was absence of any legal advice. 4.On the other hand, learned Standing Counselappearing on the Income Tax Department supported theimpugned order and submitted that none of thearguments as sought to be projected has been providedunder Section 234B and C of the Income Tax Act, 1961and urged this Court for dismissal of the writ petition. 5.I have heard learned counsel for the partiesand appraised the paper book. 6.Petitioner seeking waiver under Section 234Band 234C of the Income Tax Act, 1961 before thePrincipal Chief Commissioner of Income Tax, Keralapleaded as under:- “xxxxxxxxxxxxxxxxx 3.The main grounds mentioned in the petitionare briefed as follows: A.The long term capital gains was computed was no criminal intent or mens rea or willful neglect butthe mistake was absence of any legal advice. 4.On the other hand, learned Standing Counselappearing on the Income Tax Department supported theimpugned order and submitted that none of thearguments as sought to be projected has been providedunder Section 234B and C of the Income Tax Act, 1961and urged this Court for dismissal of the writ petition. 5.I have heard learned counsel for the partiesand appraised the paper book. 6.Petitioner seeking waiver under Section 234Band 234C of the Income Tax Act, 1961 before thePrincipal Chief Commissioner of Income Tax, Keralapleaded as under:- “xxxxxxxxxxxxxxxxx 3.The main grounds mentioned in the petitionare briefed as follows: A.The long term capital gains was computed by the assessee himself and he was ignorant of the prevailing laws incomputation of the cost of bonus shares. B. On detection of the mistake in FY 2013-14, the applicant voluntarily filed a revised return, returning the correct long term capital gains.the applicant voluntarily filed a revised return, returning the correct long term capital gains. C. The assessment was completed u/s 143(3) r.w. s. 147 of the IT Act, 1961 adopting the figures as per the revised return and hence, no appeal was preferred against the assessmentr.w. s. 147 of the IT Act, 1961 adopting the figures as per the revised return and hence, no appeal was preferred against the assessment D.The petitioner has been a regular filer of tax retum since 1989-90 and has never been subjecttopenalty/prosecutionproceedingstax retum since 1989-90 and has never been subjecttopenalty/prosecutionproceedings E.The tax of Rs 342 crores was paid in full before filing the returnbefore filing the return F. Interest u/s 234B will not apply to the assessee in the light of section 207 (2) clauses (a) and (b) as he was above 60 and had no business income during the yearassessee in the light of section 207 (2) clauses (a) and (b) as he was above 60 and had no business income during the year G.The capital gain accrued only on 10/03/2011 and the petitioner had not anticipated the incomeand the petitioner had not anticipated the income H. The instances (a) to (d) cited in the 2006 Notification of the CBDT are only illustrative and hardship is also to be considered as a criterion for waiver 4.The submissions made on behalf of thepetitioner have been considered. The interest inthe case was levied u/s 234B and 234C onaccount of failure on the part of the assessee topay advance tax As such the submissions atitems A and E above have no relevance to theissue. As regards the claim of immunity fromremittance of advance tax u/s 207(2) of the Act,the provisions are applicable only from the AY2012-13, hence the claim is not tenable. 5. The assessee has not shown that he wasprevented by circumstances beyond his controlfrom payment of advance tax due from him. Theinterest levied for non payment of advance tax isnot penal but compensatory in nature. As suchthe petition is devoid of merits. None of groundsraised by the petitioner is covered by any of theclauses (a) to (e) of the CBDT notification in FNo 400/29/2002-IT (B) dated 26/06/2006. Asregards levy of interest under section 234B ofthe Income Tax Act, 1961, it is a consequence ofthe additions and waiver cannot be consideredas it does not fall in clause (b) of the abovenotification. The assessee also does not get theexemption from liability for advance tax under proviso to section 234C of the Income Tax Act1961 as the tax on capital gains has not beenpaid within 31[st] March of the Financial Year. 6. Hence, the petition is rejected. Sd/- (PR Ravikumar) (i/c) Principal Chief Commissioner of Income Tax, Kerala 7.Section 234B and C of the Income Tax Actreads as under: “234B. Interest for defaults in payment ofadvance tax.— proviso to section 234C of the Income Tax Act1961 as the tax on capital gains has not beenpaid within 31[st] March of the Financial Year. 6. Hence, the petition is rejected. Sd/- (PR Ravikumar) (i/c) Principal Chief Commissioner of Income Tax, Kerala 7.Section 234B and C of the Income Tax Actreads as under: “234B. Interest for defaults in payment ofadvance tax.— (1) Subject to the other provisions of thissection, where, in any financial year, an assesseewho is liable to pay advance tax under section208 has failed to pay such tax or, where theadvance tax paid by such assessee under theprovisions of section 210 is less than ninety percent. of the assessed tax, the assessee shall beliable to pay simple interest at the rate of [oneper cent.] for every month or part of a monthcomprised in the period from the 1st day of Aprilnext following such financial year [to the date ofdetermination of total income under sub-section(1) of section 143 [and where a regularassessment is made, to the date of such regular assessment, on an amount]] equal to theassessed tax or, as the case may be, on theamount by which the advance tax paid asaforesaid falls short of the assessed tax. [Explanation 1.—In this section, “assessedtax” means the tax on the total incomedetermined under sub-section (1) of section 143and where a regular assessment is made, the taxon the total income determined under suchregular assessment as reduced by the amountof,— (i) any tax deducted or collected at source inaccordance with the provisions of Chapter XVIIon any income which is subject to suchdeduction or collection and which is taken intoaccount in computing such total income; [(ia) any relief of tax allowed under section 89;] (ii) any relief of tax allowed under section 90 onaccount of tax paid in a country outside India; (iii)any relief of tax allowed under section 90A on account of tax paid in a specified territory outside India referred to in that section;on account of tax paid in a specified territory outside India referred to in that section; (iv)any deduction, from the Indian income-tax payable, allowed under section 91, on account of tax paid in a country outside India;payable, allowed under section 91, on account of tax paid in a country outside India; and (v)any tax credit allowed to be set off in accordance with the provisions of section 115JAA [or section 115JD].] Explanation 2.—Where, in relation to anassessment year, an assessment is made for thefirst time under section 147 [or section 153A],the assessment so made shall be regarded as aregular assessment for the purposes of thissection. [Explanation 3.—In Explanation 1 and in sub-section (3) “tax on the total income determinedunder sub-section (1) of section 143” shall notinclude the additional income-tax, if any, payableunder section 143.] (2) Where, before the date of [determinationof total income under sub-section (1) of section143 or] completion of a regular assessment, taxis paid by the assessee under section 140A orotherwise,— (i) interest shall be calculated inaccordance with the foregoing provisions ofthis section up to the date on which the taxis so paid, and reduced by the interest, if any,paid under section 140A towards the interest chargeable under this section; (ii) thereafter, interest shall be calculated atthe rate aforesaid on the amount by which the tax so paid together with the advance tax paid falls short of the assessed tax. [(2A) (a) where an application under sub-section (1) of section 245C for any assessmentyear has been made, the assessee shall be liableto pay simple interest at the rate of one per cent.for every month or part of a month comprised inthe period commencing on the 1st day of April ofsuch assessment year and ending on the date ofmaking such application, on the additionalamount of income-tax referred to in that sub-section; interest chargeable under this section; (ii) thereafter, interest shall be calculated atthe rate aforesaid on the amount by which the tax so paid together with the advance tax paid falls short of the assessed tax. [(2A) (a) where an application under sub-section (1) of section 245C for any assessmentyear has been made, the assessee shall be liableto pay simple interest at the rate of one per cent.for every month or part of a month comprised inthe period commencing on the 1st day of April ofsuch assessment year and ending on the date ofmaking such application, on the additionalamount of income-tax referred to in that sub-section; (b) where as a result of an order of theSettlement Commission under sub-section (4) ofsection 245D for any assessment year, theamount of total income disclosed in theapplication under sub-section (1) of section 245Cis increased, the assessee shall be liable to paysimple interest at the rate of one per cent. forevery month or part of a month comprised in theperiod commencing on the 1st day of April ofsuch assessment year and ending on the date ofsuch order, on the amount by which the tax onthe total income determined on the basis of suchorder exceeds the tax on the total incomedisclosed in the application filed under sub-section (1) of section 245C; (c) where, as a result of an order under sub-section (6B) of section 245D, the amount onwhich interest was payable under clause (b) hasbeen increased or reduced, as the case may be,the interest shall be increased or reducedaccordingly;] [(3) where, as a result of an order ofreassessment or recomputation under section147 or section 153A, the amount on whichinterest was payable in respect of shortfall inpayment of advance tax for any financial yearunder sub-section (1) is increased, the assesseeshall be liable to pay simple interest at the rateof one per cent. for every month or part of amonth comprised in the period commencing onthe 1st day of April next following such financialyear and ending on the date of the reassessmentor recomputation under section 147 or section153A, on the amount by which the tax on thetotal income determined on the basis of thereassessment or recomputation exceeds the taxon the total income determined under sub-section (1) of section 143 or on the basis of theregular assessment as referred to in sub-section(1), as the case may be;] (4) where, as a result of an order undersection 154 or section 155 or section 250 orsection 254 or section 260 or section 262 or section 263 or section 264 [***], the amount onwhich interest was payable under sub-section (1)or sub-section (3) has been increased orreduced, as the case may be, the interest shallbe increased or reduced accordingly, and— (i)in a case where the interest is increased, the Assessing Officer shall serve on the assessee a notice of demand in theprescribed form specifying the sumpayable and such notice of demand shall be deemed to be a notice under section 156and the provisions of this Act shall applyaccordingly; (ii) in a case where the interest is reduced,the excess interest paid, if any, shall be refunded; (5) the provisions of this section shall apply inrespect of assessments for the assessment yearcommencing on the 1st day of April, 1989 andsubsequent assessment years.] 234C. Interest for deferment of advance tax. [(1) Where in any financial year,— [(a) an assessee, other than [the assesseereferred to in clause (b)], who is liable to payadvance tax under section 208 has failed to paysuch tax or— (ii) in a case where the interest is reduced,the excess interest paid, if any, shall be refunded; (5) the provisions of this section shall apply inrespect of assessments for the assessment yearcommencing on the 1st day of April, 1989 andsubsequent assessment years.] 234C. Interest for deferment of advance tax. [(1) Where in any financial year,— [(a) an assessee, other than [the assesseereferred to in clause (b)], who is liable to payadvance tax under section 208 has failed to paysuch tax or— (i)the advance tax paid by such assessee on its current income on or before the 15th day of June is less than fifteen per cent. of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of September is less than forty-five per cent. of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of December is less than seventy-five per cent. of the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate of one per cent. per month for a period of three months on the amount of the shortfall from fifteen per cent or forty-five per cent. or seventy-five per cent., as the case may be, of the tax due on the returned income; months on the amount of the shortfall from fifteen per cent or forty-five per cent. or seventy-five per cent., as the case may be, of the tax due on the returned income; (ii) the advance tax paid by the assessee on the current income on or before the 15th day of March is less than the tax due on thethe current income on or before the 15th day of March is less than the tax due on thereturned income, then, the assessee shallbeliable to pay simple interest at the rate of oneper cent. on the amount of the shortfall from thetax due on the returned income:]liable to pay simple interest at the rate of oneper cent. on the amount of the shortfall from thetax due on the returned income:] Provided that if the advance tax paid by theassessee on the current income, on or before the15th day of June or the 15th day of September, is not less than twelve per cent or, as the casemay be, thirty-six per cent. of the tax due on thereturned income, then, the assessee shall not beliable to pay any interest on the amount of theshortfall on those dates;] (b) [an assessee who declares profits and gainsin accordance with the provisions of sub-section(1) of section 44AD or sub-section (1) of section44ADA, as the case may be], who is liable to payadvance tax under section 208 has failed to paysuch tax or the advance tax paid by the assesseeon its current income on or before the 15th dayof March is less than the tax due on the returnedincome, then, the assessee shall be liable to paysimple interest at the rate of one per cent on theamount of the shortfall from the tax due on thereturned income:] [Provided that nothing contained in this sub-section shall apply to any shortfall in thepayment of the tax due on the returned incomewhere such shortfall is on account of under-estimate or failure to estimate— (a) the amount of capital gains; or (b) income of the nature referred to in sub-clause (ix) of clause (24) of section 2; [orclause (ix) of clause (24) of section 2; [or (c) income under the head “Profits and gains of business or profession” in cases where the business or profession” in cases where the income accrues or arises under the said headfor the 9 [first time; or]] [(d) income of the nature referred to in sub-section (1) of section 115BBDA,] section (1) of section 115BBDA,] [Provided that nothing contained in this sub-section shall apply to any shortfall in thepayment of the tax due on the returned incomewhere such shortfall is on account of under-estimate or failure to estimate— (a) the amount of capital gains; or (b) income of the nature referred to in sub-clause (ix) of clause (24) of section 2; [orclause (ix) of clause (24) of section 2; [or (c) income under the head “Profits and gains of business or profession” in cases where the business or profession” in cases where the income accrues or arises under the said headfor the 9 [first time; or]] [(d) income of the nature referred to in sub-section (1) of section 115BBDA,] section (1) of section 115BBDA,] and the assessee has paid the whole of theamount of tax payable in respect of incomereferred to in clause (a) or clause (b) or clause(c) [or clause (d)]], as the case may be, had suchincome been a part of the total income, as partof the [remaining instalments of advance taxwhich are due or where no such instalments aredue], by the 31st day of March of the financialyear:] [Provided further that nothing contained inthis sub-section shall apply to any shortfall in thepayment of the tax due on the returned incomewhere such shortfall is on account of increase inthe rate of surcharge under section 2 of theFinance Act, 2000 (10 of 2000), as amended bythe Taxation Laws (Amendment) Act, 2000 (1 of2001), and the assessee has paid the amount ofshortfall, on or before the 15th day of March,2001 in respect of the instalment of advance taxdue on the 15th day of June, 2000, the 15th dayof September, 2000 and the 15th day ofDecember, 2000:] [Provided also that nothing contained in this sub-section shall apply to any shortfall in thepayment of the tax due on the returned incomewhere such shortfall is on account of increase inthe rate of surcharge under section 2 of theFinance Act, 2000 (10 of 2000) as amended bythe Taxation Laws (Amendment) Act, 2001 (4 of2001) and the assessee has paid the amount ofshortfall on or before the 15th day of March,2001 in respect of the instalment of advance taxdue on the 15th day of June, 2000, the 15th dayof September, 2000 and 15th day of December,2000.] [Explanation.—In this section, “tax due on thereturned income” means the tax chargeable onthe total income declared in the return ofincome furnished by the assessee for theassessment year commencing on the 1st day ofApril immediately following the financial year inwhich the advance tax is paid or payable, asreduced by the amount of,— (i) any tax deductible or collectible atsource in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income; [(ia) any relief of tax allowed under section 89;] (ii) any relief of tax allowed under section90 on account of tax paid in a country outsideIndia; (iii) any relief of tax allowed under section90A on account of tax paid in a specifiedterritory outside India referred to in thatsection; (iv) any deduction, from the Indian income-tax payable, allowed under section 91, onaccount of tax paid in a country outside India; and (v) any tax credit allowed to be set off inaccordance with the provisions of section115JAA 7 [or section 115JD].] (2) The provisions of this section shall apply inrespect of assessments for the assessment yearcommencing on the 1st day of April, 1989 andsubsequent assessment years.” 8.On reading of the provisions extracted above,the grounds taken by the petitioner are not covered. Thefinding of the Principal Chief Commissioner of IncomeTax, Kerala, in my view, do not require any differentinterpretation as the payment of advance tax is not penal WP(C) NO. 37788 OF 2015 -18- but compensatory. No ground for interference is made out. Writ petition is accordingly dismissed. Sd/-AMIT RAWALJUDGE vv and (v) any tax credit allowed to be set off inaccordance with the provisions of section115JAA 7 [or section 115JD].] (2) The provisions of this section shall apply inrespect of assessments for the assessment yearcommencing on the 1st day of April, 1989 andsubsequent assessment years.” 8.On reading of the provisions extracted above,the grounds taken by the petitioner are not covered. Thefinding of the Principal Chief Commissioner of IncomeTax, Kerala, in my view, do not require any differentinterpretation as the payment of advance tax is not penal WP(C) NO. 37788 OF 2015 -18- but compensatory. No ground for interference is made out. Writ petition is accordingly dismissed. Sd/-AMIT RAWALJUDGE vv APPENDIX OF WP(C) 37788/2015 PETITIONER EXHIBITS EXHIBIT P 1EXT.P-1: TRUE COPY OF THE RETURN OF INCOME DATED 30.7.2011 EXHIBIT P 2 EXT.P-2: TRUE COPY OF APPLICATION DATED23.6.2014, ATTACHING DETAILED WORKINGS ON ARRIVAL OF ADDITIONAL TAX AMOUNT, SUBMITTED BY THE PETITIONER BEFORE THE 3RD RESPONDENT EXHIBIT P 3 EXT.P-3: TRUE COPY OF THE DECISION REPORTED IN 140 ITR 652REPORTED IN 140 ITR 652 EXHIBIT P 4 EXT.P-4: TRUE COPY OF THE NOTICE U/S.148 OF THE I.T.ACTU/S.148 OF THE I.T.ACT EXHIBIT P 4(A) EXT.P-4(A): TRUE COPY OF THE REVISED RETURN DATED 10.7.2014RETURN DATED 10.7.2014 EXHIBIT P 4(B) EXHIBIT P 5 EXT.P-4(B): TRUE COPY OF THE CHALAN RECEIPT DATED 10.7.2014RECEIPT DATED 10.7.2014 EXT.P-5: TRUE COPY OF THE ASSESSMENT ORDER DATED 30.1.2015ORDER DATED 30.1.2015 EXHIBIT P 6 EXT.P-6: TRUE COPY OF THE DEMAND NOTICEDATED 30.1.2015, ISSUED BY THE THIRD RESPONDENT, THE JURISDICTIONAL COMMISSIONER OF INCOME TAX. EXHIBIT P 7 EXT.P-7: TRUE COPY OF THE WAIVER APPLICATION UNDER SEC.119 DATED 15.7.2015 SUBMITTED BY THE PETITIONER BEFORE THE FIRST RESPONDENT, THE PRL.CHIEF COMMISSIONER OF INCOME TAX. EXHIBIT P 8 EXT.P-8: TRUE COPY OF THE ORDER IN WAIVER APPLICATION DATED 22.9.2015 OF THE FIRST RESPONDENT EXHIBIT P 9 EXHIBIT P 10 EXHIBIT P 11 EXT.P-9: TRUE COPY OF THE CBDT'S CIRCULAR NO.400/129/2002 IT (B) DATED 26.6.2006 EXT.P-10: TRUE COPY OF THE AMENDMENT SEC.207(2) EXT.P-11: TRUE COPY OF THE DELHI HIGH COURT DECISION REPORTED IN (2009) 316 ITR 141 (DEL) CITED CIT VS. ANAND PRAKASH AND MAHA MAYA GENERAL FINANCE LTD.