2003 (10) TMI 34 - HC - Income Tax

Waiver/reduction of the interest charged from the petitioner u/s 215 because of shortfall in the payment of advance tax - both the authorities have failed to consider the assessee s application in its correct perspective - dismissal of the assessee s application for waiver of interest cannot be said to be in accordance with law.

Summary

Issues:
Challenge to the validity of the order declining to waive/reduce interest under section 215 of the Income-tax Act, 1961 due to shortfall in advance tax payment.

Analysis:
The judgment concerns a writ petition challenging the validity of an order passed by the Commissioner of Income-tax, affirming the decision of the Income-tax Officer to decline waiver/reduction of interest charged under section 215 of the Income-tax Act, 1961. The petitioner, a public limited multi-unit company, filed its return of income for the assessment year 1975-76 on October 1, 1975, declaring a total income of Rs. 3,88,63,416. The Income-tax Officer levied interest under section 215(1) for a period due to a shortfall in advance tax payment. The interest amount was initially Rs. 52,84,145 but was later reduced and subsequently increased to Rs. 40,65,131. The petitioner applied for waiver of the interest, which was rejected by the Income-tax Officer and the Commissioner based on the timing of the return filing and the period for which interest was charged. The petitioner argued that the delay in assessment completion was not attributable to them, and therefore, the interest should be waived.

The court analyzed the provisions of section 215(4) of the Act and rule 40 of the Income-tax Rules, which empower the Assessing Officer to waive or reduce interest under specific circumstances. The court highlighted that for waiver or reduction of interest under section 215, two conditions must be met: the assessment should be completed more than one year after return submission, and the delay should not be attributable to the assessee. The court emphasized that the discretion vested in the Assessing Officer is quasi-judicial and requires an objective consideration of the circumstances to determine if the applicant is entitled to waiver or reduction. The court noted that a mechanical consideration defeats the purpose of providing relief to the assessee against interest charges. The court emphasized that if the delay in assessment completion was due to the assessee's conduct, interest may not be waived.

The court found that the authorities failed to consider the assessee's application properly. Both orders lacked any indication that the delay in assessment completion was attributable to the assessee. The Income-tax Officer and the Commissioner focused on the timing of return filing and the period for which interest was charged but failed to establish the assessee's responsibility for the delay. The court held that the dismissal of the application for waiver of interest was not in accordance with the law due to the absence of a finding attributing the delay to the assessee. Consequently, the court allowed the writ petition, set aside the impugned orders, and remitted the matter back to the Commissioner for a fresh consideration of the assessee's application for waiver/reduction of interest charged under section 215 of the Act. No costs were awarded in the case.