2004 (8) TMI 78 - HC - Income Tax

Waiver and/or reduction of interest under rules 40(1) and 40(5) charged under section 215 - Petitioner s applications for waiver and/or reduction of interest under rules 40(1) and 40(5) charged under section 215 of the Income-tax Act, 1961, has practically been rejected reasons assigned by respondent No. 1 that by reason of maintaining complex accounting system the deep and detailed enquiry was to be undertaken are, in my view, no basis and/or justification to refuse to grant appropriate relief under the aforesaid rules. - Held that the impugned order is not sustainable under the law and the same is accordingly set aside. I direct the present respondent No. 1 to rehear the application for waiver, and shall pass appropriate order for reduction or waiver of interest, as justice of this case would require. - this case squarely falls within the provision of rule 40 (sub-rule (1)) - Application is allowed

Issues Involved:
1. Waiver and/or reduction of interest under rules 40(1) and 40(5) of the Income-tax Rules, 1962.
2. Delay in assessment and its attribution.
3. Jurisdiction of the writ court in the presence of alternative remedies.

Issue-wise Detailed Analysis:

1. Waiver and/or Reduction of Interest under Rules 40(1) and 40(5):
The petitioner challenged an order by the Deputy Commissioner of Income-tax, denying the waiver/reduction of interest under rules 40(1) and 40(5) of the Income-tax Rules, 1962, for the period from March 1, 1986, to July 31, 1986. The petitioner contended that the interest should be waived for twelve months till July 25, 1985, instead of the five months granted. The Deputy Commissioner reasoned that the company's complex accounting necessitated deep scrutiny, which delayed the assessment. However, the court found that the reasons for refusal under rule 40(5) were not sufficiently justified, and the officer misunderstood the scope of rule 40(1).

2. Delay in Assessment and Its Attribution:
The petitioner filed the return for the assessment year 1984-85 on July 26, 1984, but the assessment commenced only on August 1, 1986, and was completed on March 24, 1987. The court noted that the delay was due to the Department's failure to complete the previous year's assessment timely, which was not attributable to the petitioner. The court emphasized that under rule 40(1), the only criterion for waiving interest is that the delay should not be attributable to the assessee, which was the case here.

3. Jurisdiction of the Writ Court in the Presence of Alternative Remedies:
The respondent argued that the writ petition should be dismissed due to the availability of alternative remedies, such as revision under section 264 of the Income-tax Act. The court, however, held that the revisional jurisdiction is not an efficacious alternative remedy as it is discretionary and does not allow the litigant to raise all points of fact and law. Citing precedents, the court stated that the existence of a revisional remedy does not bar the jurisdiction of the High Court under article 226 of the Constitution of India. Additionally, the long pendency of the writ petition (filed in 1990) justified its hearing on merits.

Conclusion:
The court concluded that the impugned order was not sustainable under the law. It directed the Deputy Commissioner to rehear the application for waiver, considering the observations made, and pass an appropriate order for reduction or waiver of interest. The court emphasized that the decision should be rendered within eight weeks, providing a hearing to the petitioner or their authorized representative, and delivering a speaking order. The application was allowed to the extent indicated, with no order as to costs.

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