2014 (7) TMI 603 - HC - Income Tax

Default in payment of advance tax Waiver of interest u/s 234-A, 234-B and 234-C - Kar Vivad Samadhan Scheme, 1998 (KVSS) Whether the Commissioner had the power to waive interest or whether the petitioners have made out a case for such waiver, is totally outside the purview of the Scheme Held that - The circumstances, under which the benefits under the Scheme can be extended, were explained by the Honble Supreme Court in DR. MRS. RENUKA DATLA AND OTHERS v. COMMISSIONER OF INOME TAX AND ANOTHER 2002 (12) TMI 6 - SUPREME Court - the revisions filed by the assessee were pending by the time the Scheme was made operational - reasons mentioned by the revenue in the orders passed by him refusing to extend the benefit under the Scheme are outside the scope of the Scheme thus, the revenue is directed to extend the benefit to the assessee after ensuring due compliance, as to payment of the stipulated amount Decided in favour of Assessee.

Summary

Issues:
1. Whether the Commissioner of Income Tax has the power to waive interest under Sections 234-A, 234-B, and 234-C of the Income Tax Act.
2. Whether the petitioners are entitled to the benefit of the Kar Vivad Samadhan Scheme, 1998.
3. Whether the Commissioner's refusal to extend the benefit under the Scheme was justified.

Analysis:
1. The petitioners, assessees under the Income Tax Act, filed revisions under Section 264 of the Act seeking waiver of interest under Sections 234-A, 234-B, and 234-C. The Commissioner declined to extend the benefit of the Kar Vivad Samadhan Scheme, stating he lacked the power to waive interest and that the notice for penalty was beyond his authority. The petitioners argued that the Scheme required the benefit to be extended if the assessee is willing to pay 50% of tax arrears. The court noted that the Act provides for tax, interest, and penalty, leading to extensive litigation. The Scheme aimed to resolve disputes by allowing termination of proceedings upon payment of 50% of tax arrears.

2. The Scheme defines tax arrears as tax, penalty, or interest determined on or before March 31, 1998, remaining unpaid. The petitioners did not contest the tax but sought waiver of interest under Sections 234-A, 234-B, and 234-C. The Commissioner's refusal to waive interest was based on his lack of authority to do so. The court emphasized that the Scheme's scope is limited to payment of 50% of tax arrears and does not involve the waiver of interest. The court cited precedents where the benefit under the Scheme was extended when the subject matter of appeal or revision fell within its purview.

3. The court held that the Commissioner's reasons for denying the benefit under the Scheme were beyond its scope. As the revisions were pending when the Scheme became operational, the petitioners were entitled to its benefits upon compliance with the payment requirements. The court allowed the writ petitions, set aside the Commissioner's orders, and directed the respondent to extend the Scheme's benefit to the petitioners. The court emphasized that the Scheme aims to resolve disputes and provide relief to genuine assessees, irrespective of the merits of their cases.