2003 (11) TMI 31 - HC - Income Tax

Waiver of interest, charged u/s 234A the petitioners did not file their returns before the last date for filing the returns. But even thereafter, they could not file the returns from May 19, 1992, till October, 1992, as they were not having the books of account, which had been seized by the income-tax authorities AS per Circular No. 400/234/95-IT(B), in such cases, Chief Commissioners and Directors-General (Investigation) are empowered to reduce or waive the penal interest Thus it is directed that the payment of interest in respect of the period commencing from May 19,1992, till the date on which the copies of the books of account had been given to the petitioners, shall be waived by the respondent.

Summary

Issues involved:
Petitioners aggrieved by interest charges under section 234A of the Income-tax Act, 1961. Whether interest waiver justified due to search and seizure operations affecting filing of returns. Interpretation of Circular No. 400/234/95-IT(B) empowering Chief Commissioners to reduce or waive penal interest. Justifiability of interest waiver applications filed under section 119(2)(a). Legal validity of impugned order rejecting interest waiver requests.

Analysis:
The judgment by the High Court of Gujarat, delivered by A.R. Dave J., consolidated several petitions challenging interest charges under section 234A of the Income-tax Act, 1961. The petitioners were affected by an order from the Chief Commissioner of Income-tax, Surat, refusing to waive interest levied for late filing of returns. The core issue revolved around the impact of search and seizure operations on the petitioners' ability to file returns timely. The petitioners' books of account were seized on May 19, 1992, after the deadline for filing returns, leading to a delay in filing due to unavailability of necessary documents.

The judgment analyzed Circular No. 400/234/95-IT(B), issued by the Central Board of Direct Taxes, empowering Chief Commissioners to reduce or waive penal interest in specific cases. The circular aimed to provide relief to taxpayers unable to file returns due to circumstances beyond their control. The court emphasized that the petitioners, despite missing the initial filing deadline, were prevented from filing returns during the period when their books of account were held by tax authorities post the search and seizure operations.

The court found that the petitioners were entitled to benefit under the circular as they were unable to file returns from May 19, 1992, when the books were seized, until October 1992 when copies were returned. The judgment highlighted the importance of considering the period when essential documents were unavailable to the taxpayers, leading to a justifiable delay in filing returns. The court ruled in favor of the petitioners, directing the waiver of interest for the period from May 19, 1992, to the date of receiving copies of the books of account.

The impugned orders rejecting interest waiver requests were quashed, and the Assessing Officer was instructed to recalculate the interest payable by the petitioners. Any excess interest collected was to be refunded promptly. The judgment concluded by allowing the petitions, absolving the petitioners from interest liability for the period when their books of account were inaccessible, and no costs were imposed on the petitioners.