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2012 (12) TMI 819 - HC - Income TaxRe opening of assessment - treating the assessee as an Association Of Persons instead of partnership firm - interest levied under section 234B & 234C - Held that - It can be seen that the petitioner was assessed with the status as a Firm and that subsequently, following the judgment of this Court in Narayanan & Company v. Commissioner of Income Tax (1996 (3) TMI 81 - KERALA HIGH COURT), assessment was re-opened and the tax was re-assessed treating the petitioner as an Association Of Persons. Therefore, situation as contemplated in paragraph 2 clause (d) of notification dated 23.5.1995 was not available to the petitioner to claim the benefit thereof. As held in Hazi Anwar & Others v. Competent Authority (2001 (1) TMI 915 - APPELLATE TRIBUNAL ) interest u/s 234A, B & C is mandatory. It is also settled that unless the claim for waiver or reduction come within the four corners of the conditions specified by the Central Government, interest levied under the aforesaid provisions cannot be waived (see Universal Trades Corporation v. Chief Commissioner of Income Tax & Ors. (2000 (11) TMI 65 - KERALA HIGH COURT) - the assessee could not have claimed waiver of interest.
Issues:
1. Reopening of assessment under Section 147 of the Income Tax Act. 2. Determination of taxable income for assessment years 1995-1996 and 1996-1997. 3. Application for waiver of interest under Rule 119(2) of the Income Tax Rules. 4. Rejection of the waiver application under Ext.P2 order. 5. Interpretation of the notification dated 23.5.1995, specifically paragraph 2 clause (d). 6. Legal validity of the rejection of the waiver application. Analysis: 1. The petitioner, a partnership firm, initially filed returns showing taxable income for the assessment years 1995-1996 and 1996-1997. However, based on a Full Bench judgment, the assessment was reopened under Section 147 of the Income Tax Act, treating the petitioner as an Association Of Persons instead of a partnership firm, leading to a higher taxable income determination. 2. The petitioner sought waiver of interest levied under Section 234B and C of the Act by filing an application under Rule 119(2) of the Income Tax Rules, citing a notification dated 23.05.1996. The rejection of this application through Ext.P2 order is the subject of challenge in the writ petition. 3. The crux of the matter lies in the interpretation of paragraph 2 clause (d) of the notification dated 23.5.1995. The clause specifies conditions for waiver of interest, including the scenario where income becomes taxable due to a retrospective amendment of law or a decision of the Supreme Court, based on a High Court order. The rejection of the waiver application was based on the absence of such conditions being met in the petitioner's case. 4. The court analyzed that the petitioner's status was changed from a Firm to an Association Of Persons following a specific court judgment, which did not align with the conditions outlined in the notification for interest waiver. Citing legal precedents, including the mandatory nature of interest under Section 234A, B & C, the rejection of the waiver application was deemed valid as it did not meet the specified conditions for waiver as per the Central Government guidelines. 5. Ultimately, the court dismissed the writ petition, upholding the rejection of the waiver application, as the petitioner did not fulfill the criteria outlined in the notification for interest waiver. The decision was based on a thorough analysis of the legal provisions and precedents governing interest waiver under the Income Tax Act.
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