2013 (8) TMI 707 - HC - Income Tax

Waiver of interest u/s 215 of the Income Tax Act Up to 12.01.1987, and, in fact, up to 09.06.1987 the assessing officer did nothing. It is only on 09.06.1987 which is much beyond one year after 13.01.1986 that the assessing officer issued the notice under section 143(2) of the said Act. Therefore, within the period of one year with effect from 13.01.1986, no delay could be attributable to the petitioner - Held that - Relying upon the principle of law laid down in J.K. Synthetics Ltd v. CIT 2003 (10) TMI 34 - DELHI High Court , it is held if delay is not attributable to the assessee, interest can not be charged on them. In the facts of the present case we find that after the issuance of the notice under section 143(2) the assessment has been completed within a little over eight months. Therefore, had the assessing officer been diligent enough and issued the notice under section 143(2) immediately or shortly after 13.01.1986, when the petitioner filed the first revised return, the assessment could have been completed by 12.01.1987 i.e., within one year. It is obvious that under the provisions, the assessing officer is granted a normal period of one year to complete the assessment and, if he does so, there can be no waiver of interest during that period. However, if the assessing officer is not diligent enough and does not complete the assessment within the said period of one year, any interest liability for the period beyond that one year cannot be foisted on the assessee unless the delay in not completing the assessment within the period of one year is clearly attributable to the assessee. In the present case, the period of one year which is available to the assessing officer for completing the assessment ended on 12.01.1987. For the delay beyond that date, there has to be waiver of interest unless part of that delay is attributable to the assessee. Here, the delay from 18.01.1988 to 18.02.1988 is clearly attributable to the assessee as it chose to file the second revised return on 18.01.1988. - There shall be waiver of interest under section 215 of the said Act in favour of the petitioner for the period 12.01.1987 to 18.01.1988. - Decided partly in favor of assessee.

Summary

Issues Involved:
1. Waiver of interest under Section 215 of the Income-tax Act, 1961.
2. Validity of Circular No. 492 dated 21.07.1987 issued by the Central Board of Direct Taxes.

Issue-Wise Detailed Analysis:

1. Waiver of Interest under Section 215 of the Income-tax Act, 1961:

The petitioner sought waiver of interest levied under Section 215 of the Income-tax Act, 1961, through an application under Rule 40 of the Income-tax Rules, 1962. This application was rejected by the Deputy Commissioner of Income-tax, and a subsequent revision petition under Section 264 was partly allowed by the Commissioner of Income-tax, granting a waiver for four months.

The petitioner filed its original return for the assessment year 1985-86 on 29.07.1985, followed by a revised return on 13.01.1986, and a second revised return on 18.01.1988. The assessment was completed on 18.02.1988, with interest charged under Section 215 for the entire period from 01.04.1985 to 18.02.1988.

The Commissioner of Income-tax considered the waiver under Rule 40(1) and Rule 40(5). Rule 40(1) allows waiver if the assessment is completed more than one year after the return submission, provided the delay is not attributable to the assessee. Rule 40(5) permits waiver in exceptional circumstances at the discretion of the Deputy Commissioner.

The Commissioner concluded that the petitioner's reasons for the difference between the assessed income and the income shown in the estimates, such as disallowances and accounting mistakes, did not justify a waiver under Rule 40(5). However, under Rule 40(1), the Commissioner granted a waiver for the period from 12.01.1987 to 09.06.1987, attributing the delay beyond this period to the petitioner.

The court found that the Commissioner correctly took the date of the first revised return (13.01.1986) as the starting point for the one-year period under Rule 40(1). The court agreed that the delay from 12.01.1987 to 09.06.1987 was not attributable to the petitioner. However, the court extended the waiver period to 18.01.1988, the date of the second revised return, concluding that the delay from 18.01.1988 to 18.02.1988 was attributable to the petitioner.

2. Validity of Circular No. 492 dated 21.07.1987:

The petitioner challenged Circular No. 492, which clarifies the procedure for waiver of interest under Rule 40(1). The circular states that waiver should be given from the end of the first year to the period where the delay is attributable to the assessee, extending up to the date of assessment completion.

The court did not find the circular ultra vires of the Act or the Rules. It emphasized that the assessing officer must complete the assessment within the stipulated one-year period, and any delay beyond this period, not attributable to the assessee, should lead to a waiver of interest.

Conclusion:

The writ petition was partly allowed. The court ordered a waiver of interest under Section 215 for the period from 12.01.1987 to 18.01.1988, acknowledging that the delay in this period was not attributable to the petitioner. The court upheld the validity of Circular No. 492, emphasizing the assessing officer's responsibility to complete assessments within the specified period. There was no order as to costs.