1997 (8) TMI 40 - HC - Income Tax

Summary

Issues:
Challenge to order of Commissioner of Income-tax under section 264 of the Income-tax Act, 1961 regarding waiver of interest under rule 40(5) of the Income-tax Rules.

Analysis:
The case involved a writ petition challenging the Commissioner's order under section 264 of the Income-tax Act, 1961. The petitioner had deposited a sum of Rs. 11,49,946 with the District Magistrate during the assessment year 1972-73, which was refunded during the assessment year 1975-76. The petitioner sought waiver of interest under section 215 on this amount, showing it as profit for the year 1972-73. The Income-tax Assistant Commissioner partially waived the interest under rule 40(1) of the Rules, but the petitioner sought further waiver under rule 40(5). The Commissioner, however, dismissed the application under section 264, stating that the circumstances did not warrant reduction or waiver of interest.

The petitioner contended that the Commissioner should have exercised discretion under rule 40(5) of the Rules, as it was a genuine case where advance tax could not be paid on the refunded amount. The petitioner argued that if the money had been available as profit in 1972-73, advance tax would have been paid. The petitioner believed that offering the money for tax during that assessment year was done in good faith. The petitioner emphasized that waiver under rule 40(1) did not preclude waiver under rule 40(5), citing the decision in CIT v. Bennet Coleman and Co. Ltd. The petitioner urged that the Commissioner should have considered the waiver of interest promptly.

The court, after considering the arguments, held that the case warranted remand to the Commissioner for exercising discretion under rule 40(5) of the Rules. The court found that the conditions under rule 40(5) were satisfied, and the authorities should have considered the waiver of interest in light of the circumstances presented. The court allowed the writ petition, remanded the matter back to the Commissioner, quashed the previous order, and ruled no costs to be awarded.