1995 (10) TMI 20 - HC - Income Tax

Issues Involved:
1. Quashing of revisional orders dated July 11, 1994.
2. Rejection of waiver of interest levied under sections 139(8) and 215 of the Income-tax Act, 1961.
3. Distinction between penalty and interest under the Income-tax Act.
4. Applicability of the decision in S. Govindaraju v. CIT [1982] 138 ITR 495.

Issue-wise Detailed Analysis:

1. Quashing of Revisional Orders Dated July 11, 1994:
The petitioners sought to quash the revisional orders dated July 11, 1994, passed by the Commissioner of Income-tax under section 264 of the Income-tax Act, 1961, which upheld the orders of the Income-tax Officer rejecting the applications for waiver of interest levied under sections 139(8) and 215 of the Act. The court dismissed the writ petitions, finding no infirmity in the impugned orders.

2. Rejection of Waiver of Interest Levied Under Sections 139(8) and 215 of the Income-tax Act, 1961:
The first petitioner filed his return belatedly and failed to pay advance tax, leading to interest levied under sections 139(8) and 215. His waiver application was rejected, although penalty proceedings were dropped. Similarly, the second petitioner faced interest levies for multiple assessment years, and his waiver application was also rejected. The court noted that interest under section 139(8) is levied for late filing of returns, while section 215 addresses default in advance tax payments. Both sections allow for waiver or reduction of interest under prescribed circumstances, which the petitioners failed to demonstrate.

3. Distinction Between Penalty and Interest Under the Income-tax Act:
The court emphasized the distinction between tax, interest, and penalty, referencing the Supreme Court's decisions in Associated Cement Co. Ltd. v. CTO and Central Provinces Manganese Ore Co. Ltd. v. CIT. Interest is compensatory, levied to compensate the Revenue for the period tax remains unpaid, while penalties are punitive, imposed for willful violations. The court held that the cancellation of penalties does not automatically justify waiver of interest, as the two serve different purposes.

4. Applicability of the Decision in S. Govindaraju v. CIT [1982] 138 ITR 495:
The petitioners relied on S. Govindaraju v. CIT, where the court remanded the case for reconsideration, noting that the same cause for delayed returns was accepted for penalty waiver but not for interest waiver. However, the Supreme Court in Central Provinces Manganese Ore Co. Ltd. clarified that interest is compensatory, not penal, and waiver requires demonstrating a cause beyond the taxpayer's control. The court found that the petitioners failed to show such a cause, and the reliance on S. Govindaraju was untenable.

Conclusion:
The court dismissed the writ petitions, upholding the orders rejecting the waiver of interest. It reiterated that interest is compensatory, and waiver requires a valid cause beyond the taxpayer's control, which the petitioners failed to demonstrate. The distinction between penalty and interest was emphasized, and the applicability of S. Govindaraju was found to be inapplicable based on subsequent Supreme Court rulings.

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