2014 (11) TMI 942 - HC - Income Tax

Order u/s 119(2)(a) r.w section 234B and 234C Prayer to waive interest charged on assessee Held that - Prior to commencement of the business activities, the assesses had received interest income from their investment in share capital in temporary loan and advances, which have been shown as capital receipt in the return - the assesses filed revised return in view of the decision in Tuticorin Alkali Chemicals & Fertilizers Ltd Versus Commissioner of Income-Tax 1997 (7) TMI 4 - SUPREME Court - the revised returns filed by the assesses were, though, accepted by the AO, while doing so he levied penalty on the assesses by invoking provisions of Sections 234B and 234C - the Chief Commissioner committed no error, much less any jurisdictional error in passing the orders Decided against assessee.

Summary

Issues:
Challenging order for waiver of interest under Income Tax Act, 1962 - Violation of Constitution of India - Interpretation of circulars by the Board and Commission.

Analysis:
The High Court of Gujarat heard and disposed of petitions challenging orders passed by the Revenue under the Income Tax Act, 1962 for waiver of interest. The petitions involved the assessee and the Revenue. The first set of petitions (Special Civil Application Nos. 13290 & 13291 of 2004) concerned the assessment years 1996-97 and 1997-98. The assesses had received interest income before commencing business activities, treated as capital receipts. Revised returns were filed post a Supreme Court decision, accepted by the Assessing Officer (AO) but with levied penalties under Sections 234B and 234C. The assesses sought waiver of interest under Section 119(2)(a) of the Act, which was dismissed by the Revenue, leading to the petitions.

In the second petition (Special Civil Application No. 7921 of 2006), the assessee applied for waiver of interest for assessment years 1995-96 to 1999-2000, following a Supreme Court decision. The application was dismissed by the Revenue, prompting the petition. The petitioner-assesses argued that the impugned orders were illegal and violated constitutional provisions. They contended that interest was wrongly levied post filing returns based on pre-decision circumstances. The petitioner relied on Circular No.1410 and specific clauses to support their claim for interest waiver.

On the contrary, the Revenue supported its orders, citing legal precedents. They argued that assesses were not entitled to interest waiver based on a Supreme Court ruling. The Court noted the Apex Court's observation on Circulars empowering the Board and Chief Commissioner to waive or reduce interest under specified conditions. The Court concluded that the Commission lacked the authority to waive interest statutorily payable under Sections 234A, 234B, and 234C, except as per Circulars issued under Section 119 of the Act. Consequently, the Chief Commissioner's orders were upheld, and the petitions were dismissed as lacking merit. No costs were awarded, and the rule was discharged in each petition.