2017 (11) TMI 1757 - HC - Income Tax

Levying of interest u/s 215 - advance tax - entitlement for waiver of interest - discretion to the authority to decide whether waiver or reduction has to be granted - Held that - The authorities having exercised their discretion with relevant material it is beyond the scope of this court to sit upon their wisdom. It is to be noted that rule 40 is only an enabling provision and the assessee cannot as a matter of right claim waiver of interest or reduction. The guidelines as referred to under rule 40 have to be understood in the mandate of levying of interest under section 215 of the Income-tax Act. Therefore merely because there is an observation that delay cannot be attributed to the assessee itself that will not result in waiver of interest. Taking note of the over all facts involved the authority had given 50 per cent. of reduction of interest. - Petition dismissed.

Summary

Issues:
1. Challenge against the order passed under section 154 of the Income-tax Act, 1961.
2. Claim for waiver of interest under section 264 of the Income-tax Act.
3. Interpretation of rule 40 of the Income-tax Rules, 1962 regarding waiver or reduction of interest.
4. Discretion of authorities in granting waiver or reduction of interest.
5. Applicability of guidelines under rule 40 in levying interest under section 215 of the Income-tax Act.

Analysis:

1. The writ petition was filed by the assessee challenging the interest levied following an order passed under section 154 of the Income-tax Act for the assessment year 1988-1989. The court had previously upheld the rectification order, concluding the matter.

2. Subsequently, the assessee sought waiver of interest, which was partially granted at 50%. Dissatisfied, the assessee approached the Commissioner of Income-tax under section 264 of the Income-tax Act, but the Commissioner upheld the previous decision. This led to the petitioner approaching the court again.

3. The petitioner argued for full waiver of interest citing rule 40 of the Income-tax Rules, 1962, emphasizing that the delay in assessment was not solely due to the assessee's actions. The petitioner contended that no interest should be levied when the delay is not attributable to them.

4. On the other hand, the Income-tax Department's counsel relied on the judgment in Deputy CIT v. P. M. Antony, stating that rule 40 provides discretionary power to authorities regarding waiver or reduction of interest. The discretion lies with the authority to decide on granting such relief based on relevant material.

5. The court held that rule 40 is an enabling provision, and the authority has the discretion to decide on waiver or reduction of interest. Merely because the delay cannot be attributed to the assessee does not automatically result in a waiver of interest. The court emphasized that the guidelines under rule 40 must be understood in the context of levying interest under section 215 of the Income-tax Act. Considering all facts, the authority had already granted a 50% reduction in interest. Therefore, the court found no grounds to interfere with the impugned orders and dismissed the writ petition.