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Issues: Challenge against order of Commissioner under section 264 of the Income-tax Act for levying interest under section 217 for non-filing of advance tax estimate, interpretation of section 80J on borrowed capital, exercise of discretion by Commissioner for waiving interest, comparison with waiver of penalty, and remand for reconsideration.
Analysis: The High Court judgment addressed a writ petition challenging the Commissioner's order under section 264 of the Income-tax Act, which levied interest under section 217 due to the petitioner's failure to file an estimate of advance tax. The petitioner, a public limited company, filed its return for the assessment year 1984-85 after the due date, claiming losses under section 80J on borrowed capital. The judgment highlighted the retrospective amendment in 1980 that disallowed the benefit of section 80J on borrowed capital, as upheld by the Supreme Court in Lohia Machines Ltd. v. Union of India [1985] 152 ITR 308. This clarification impacted the petitioner's entitlement to carry forward losses, leading to interest levied by the assessing authority for non-filing of the advance tax estimate. The petitioner contended that the pendency of the issue regarding section 80J's application on borrowed capital before the Supreme Court created a bona fide belief in its favor, supported by previous appellate orders setting aside assessments pending the Supreme Court's decision. The Commissioner's dismissal of the petitioner's application for waiving interest under section 154 and rule 40 was deemed flawed by the High Court due to the non-consideration of relevant circumstances, particularly the appellate orders related to prior assessment years. The judgment emphasized the necessity for the Commissioner to reconsider the petitioner's revision petition, taking into account all pertinent facts and circumstances. Moreover, the petitioner highlighted the Commissioner's allowance of waiver for penalty levied for the same default, arguing that the grounds for waiving penalty and interest were identical. The High Court directed the Commissioner to consider this argument, subject to its relevance and evidentiary value, during the reconsideration of the petitioner's revision petition. Ultimately, the writ petition was allowed, the Commissioner's order was set aside, and the matter was remanded for fresh consideration in accordance with the law, without any costs being awarded. In conclusion, the judgment delved into the intricacies of section 80J's application on borrowed capital, the exercise of discretion by the Commissioner in waiving interest, and the need for a comprehensive review of all relevant circumstances before making such determinations. The High Court's decision highlighted the importance of considering all material facts and ensuring consistency in decisions related to penalty and interest waivers, ultimately emphasizing the principles of fairness and due process in tax assessments and appeals.
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