2012 (4) TMI 348 - HC - Income Tax

Waiver/ Refund of interest u/s 234A and 234B - Advance Tax - revenue denied the waiver - power u/s 119 - held that - The first respondent has arrived at a conclusion that the assessee could have fairly and accurately anticipated the income pertaining to financial year 2007-08. The Commissioner has arrived at a conclusion that the majority of expenditure, as mentioned in the tabular chart below paragraph 5, is definite and ascertainable. The said expenditure has actually been incurred within the same year. The assessee maintains computerized books of accounts and they could have made provisions for anticipated expenditure in accordance with the accepted accounting principles. In these circumstances, and when the ultimate conclusion in paragraphs 7 and 8 of the impugned order cannot be said to be either irrational or arbitrary or vitiated to such an extent that no reasonable person would arrive at the same in the given facts and circumstances, that we are unable to interfere with the impugned order in writ jurisdiction. - Decided against the assessee.

Issues Involved:
1. Waiver of interest under Sections 234B and 234C of the Income Tax Act.
2. Constitutional validity of paragraph 3 of the CBDT Order dated 26/06/2006.
3. Interpretation and application of Section 119 of the Income Tax Act.

Detailed Analysis:

1. Waiver of Interest under Sections 234B and 234C:

The petitioners sought waiver of interest amounting to Rs. 44,58,258/- under Sections 234B and 234C of the Income Tax Act for the financial year 2007-2008 and assessment year 2008-2009. They argued that genuine hardships, including health issues of a director's family member and business difficulties, justified the late payment of advance taxes. They claimed that the Central Board of Direct Taxes (CBDT) Order dated 26/06/2006 was misinterpreted by the respondents, resulting in the denial of their waiver request.

The respondents countered that the petitioners failed to make provisions for tax liability despite the income being ascertainable and that the conditions for waiver under the CBDT Order were not met. The Assistant Commissioner of Income Tax highlighted that the petitioners paid only Rs. 1.75 Crores against the required Rs. 5.55 Crores as advance tax, which was inadequate.

The court found that the petitioners' application was solely for waiver, not reduction, of interest, and that the petitioners could have anticipated their tax liability based on their computerized accounts. The court concluded that the petitioners did not meet the conditions for waiver under the CBDT Order, and the denial of waiver by the Chief Commissioner of Income Tax (CCIT) was justified.

2. Constitutional Validity of Paragraph 3 of the CBDT Order:

The petitioners challenged paragraph 3 of the CBDT Order, arguing it was arbitrary and unconstitutional as it excluded the application of paragraph 2(a) and 2(d) for waiver of interest under Sections 234B and 234C, limiting it only to Section 234A.

The respondents defended the order, stating that the classification and conditions for waiver of interest under different sections were rational and within the legislative competence. The court agreed with the respondents, emphasizing that different defaults (filing returns vs. payment of advance tax) warranted different treatments. The court held that the classification in the CBDT Order was reasonable and did not violate Article 14 of the Constitution.

3. Interpretation and Application of Section 119:

The petitioners argued that their application for waiver should be considered under Section 119(2)(b) of the Income Tax Act, which allows for relief in cases of genuine hardship. They contended that the CBDT instructions were guidelines and not exhaustive.

The court clarified that the CBDT Order issued under Section 119(2)(a) was binding on the authorities and that the conditions for waiver specified in the order must be met. The court noted that the petitioners' case did not fall under the specified conditions in paragraph 2 of the CBDT Order, and thus, they were not entitled to waiver under Sections 234B and 234C.

Conclusion:

The court dismissed the petition, upholding the CCIT's decision to deny the waiver of interest. The court found no error or arbitrariness in the impugned order and concluded that the petitioners did not meet the conditions for waiver under the CBDT Order. The court also upheld the constitutional validity of paragraph 3 of the CBDT Order, affirming that the classification for waiver of interest was reasonable and did not violate Article 14 of the Constitution.

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