1998 (9) TMI 4 - HC - Income Tax

Interest advance tax - The petitioner has challenged the rejection of the application filed by it before the CBDT for waiver of interest on the sum of Rs. 3,62,042 being the amount by which the first instalment of advance tax paid by it fell short of 20 per cent. of the tax liability - petitioner, submitted that the order of the Central Board Direct Taxes is illegal and arbitrary and requires to be set aside. It was submitted that under section 119(2)(a), the Board is bound to consider the case put forth by the assessee and after affording such opportunity as may be necessary to the assessee, make a reasoned order Held that no relief can be granted to the writ petitioner. The petitioner like all other assessees to whom these provisions are applicable has to pay the interest required to be paid thereunder.

Issues Involved:
1. Rejection of application for waiver of interest under section 234C of the Income-tax Act.
2. Interpretation of the powers of the Central Board of Direct Taxes (CBDT) under section 119(2)(a) of the Income-tax Act.
3. Consideration of individual cases as a class under section 119(2)(a).

Detailed Analysis:

1. Rejection of Application for Waiver of Interest:
The petitioner, a textile mill, challenged the rejection of its application by the CBDT for waiver of interest on Rs. 3,62,042 due to a shortfall in the first instalment of advance tax paid on September 14, 1989. The petitioner argued that since it paid Rs. 60 lakhs on December 14, 1989, which was 50% in excess of the required second instalment, the government benefited from this larger amount. Despite this, the petitioner was asked to pay interest for the period from September 14, 1989, to December 13, 1989, under section 234C of the Income-tax Act. The CBDT, in its communication dated January 7, 1991, declined the request without providing any reasons.

2. Interpretation of Powers under Section 119(2)(a):
The petitioner argued that under section 119(2)(a) of the Act, the CBDT is bound to consider the case put forth by the assessee and make a reasoned order after affording necessary opportunities. The petitioner contended that this power is quasi-judicial and that individual cases can constitute a class for the purposes of granting relief. Reliance was placed on various judicial precedents, including the Supreme Court's decision in Lachhman Das v. State of Punjab and the Punjab and Haryana High Court's decision in Sant Lal v. Union of India, which supported the view that individual cases could be treated as a class for granting relief.

3. Consideration of Individual Cases as a Class:
The court examined section 119, which allows the CBDT to issue orders, instructions, and directions for the proper administration of the Act. Section 119(2) has three clauses: (a), (b), and (c). Clause (a) permits the CBDT to issue general or special orders for the proper and efficient management of assessment and collection of revenue, including relaxation of provisions like sections 234A, 234B, and 234C. Clauses (b) and (c) allow the CBDT to avoid genuine hardship by extending deadlines or relaxing requirements for claiming deductions. The court noted that the power under clause (a) is not meant to be exercised solely on the grounds of undue hardship to an individual assessee but for the efficient management of assessment and collection of revenue. The court distinguished this from the powers under clauses (b) and (c), which are quasi-judicial and can be invoked by individual assessees.

Judgment:
The court concluded that section 119(2)(a) does not confer a right on individual assessees to compel the CBDT to exercise its power in their favor. The power under this clause is meant for the proper and efficient management of assessment and collection of revenue and not for addressing individual grievances of undue hardship. The court did not agree with the proposition that the CBDT has a duty to consider individual grievances under section 119(2)(a). The court held that the CBDT had considered the petitioner's representation and informed them that relief could not be granted. The payment of a larger sum in the later instalment was voluntary and did not exempt the petitioner from paying interest for the shortfall in the earlier instalment. The court dismissed the writ petition, stating that the petitioner, like all other assessees, must pay the interest as required under the provisions. The writ petition was dismissed with no order as to costs, and the connected miscellaneous petition was also dismissed.

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