2000 (10) TMI 24 - HC - Income Tax

Summary

Issues Involved:
1. Waiver of interest under section 217(1)(a) of the Income-tax Act.
2. Consideration of relevant factors by the Commissioner for waiver of interest.
3. Requirement of prior notice before levying interest.
4. Validity of reasons given by the Commissioner for rejecting the waiver petition.

Issue-wise Detailed Analysis:

1. Waiver of Interest under Section 217(1)(a) of the Income-tax Act:
The petitioner, a deemed public limited company, filed a return of income for the assessment year 1985-86 and paid advance tax based on an estimate. Due to directions from the Commissioner of Income-tax (Appeals) for an earlier assessment year, the petitioner revised its income, resulting in a shortfall in advance tax payment. The Income-tax Officer levied interest under section 217(1)(a) for this shortfall. The petitioner sought waiver of this interest under rule 40 of the Income-tax Rules, arguing that the revisions were unforeseen at the time of filing the advance tax estimate and were made voluntarily based on appellate directions.

2. Consideration of Relevant Factors by the Commissioner for Waiver of Interest:
The Commissioner of Income-tax rejected the petition for waiver, stating that the levy of interest was due to the variation between the estimated and assessed income and that the petitioner did not file a revised return but only a revised statement of income. The Commissioner also noted that the petitioner did not pay tax under section 140A. The court found these reasons irrelevant for considering the waiver under rule 40, emphasizing that the voluntary act of revising income should be considered and that the filing of a revised return was not necessary for waiver eligibility.

3. Requirement of Prior Notice Before Levying Interest:
The petitioner argued that the levy of interest violated natural justice principles as no prior notice was given. However, the court referred to the decision in Salem Co-operative Sugar Mills Ltd. v. CIT, which held that prior notice is not required for levying interest under the Income-tax Act, thus rejecting the petitioner's argument.

4. Validity of Reasons Given by the Commissioner for Rejecting the Waiver Petition:
The court found both reasons given by the Commissioner for rejecting the waiver petition irrelevant. The first reason, that the voluntary act of filing a revised statement is only relevant for penalty waiver, was dismissed as it would negate any possibility of interest waiver. The second reason, that the petitioner did not file a revised return, was also dismissed as the interest for the period after the revised statement was already waived, making the revised statement's filing date irrelevant. The court emphasized that the Commissioner should have considered whether the petitioner could have anticipated the appellate order at the time of filing the advance tax estimate.

Conclusion:
The court set aside the Commissioner's order, directing a fresh consideration of the waiver petition, taking into account relevant factors such as the petitioner's ability to anticipate the appellate order and other circumstances. The writ petition was allowed, and the matter was remitted to the Commissioner of Income-tax for a fresh decision, with no order as to costs.