2017 (3) TMI 733 - HC - Income Tax

Waiver of interest under Section 234C - Whether the final conclusion recorded by the learned Single Judge that the explanation of the petitioner was acceptable so as to falling in category of paragraph-2(b) of the notification dated 26.06.2006 Annexure B can be sustained or not? - Held that - Single Judge made a final observation that the assessee s explanation is acceptable calling for exercise of discretion under pargraph-2(b) of the notification dated 26.06.2006. Thereafter, the learned Single Judge has remitted the matter to the Chief Commissioner for consideration of the case for extent of waiver of interest in terms of the notification dated 26.06.2006. In our considered view, recording of final conclusion for acceptance of the explanation of the respondent was not called for or rather can be said to be exceeding the jurisdiction inasmuch as observed by us hereinabove while exercising the power under Article 226 of the Constitution against the order of the lower authority and after having interfered in the decision making process, the matter was required to be remanded keeping the rest of the aspects open, of course, by excluding the aspects which are already considered by the High Court under Article 226 of the Constitution of India. In our view, such an exercise of jurisdiction of accepting the explanation of the assessee is at par with the appellate power which in normal circumstances would not be available in the scope of judicial review under Article 226 of the Constitution. We do not find that any abnormal circumstances are recorded to make a departure from the normal principles of relegating the matter to the authority for consideration afresh in accordance with law. Hence, the opinion recorded i n the impugned order of acceptability of the explanation of the assessee cannot be sustained. Hence the point referred to hereinabove needs to be answered in a manner that the finding could not have been recorded of accepting the explanation of the assessee and the observations made in the impugned order at paragraph- 24 which are underlined in the above referred reproduced portion deserves to be set aside. Once the aforesaid observations are set aside, the consequence would be for reconsideration of the case for waiver of interest under Section 234C of the Act in terms of the notification dated 26.06.2006 and the other aspects so observed in the impugned order in paragraph-24 would also not be required. Observations and the directions issued by the learned Single Judge in the impugned order at paragraph-24 are set aside and modified to the extent that the matter shall be reconsidered afresh by the Chief Commissioner for waiver of interest charged under Section 234C of the Act in terms of the notification dated 26.06.2006, in light of the observations made by the learned Single Judge upto paragraph-23 of the impugned order. The Chief Commissioner shall examine the matter and pass appropriate order preferably within a period of eight weeks from the date of receipt of a certified copy of the order of this Court after giving opportunity of hearing to the respondent-assessee.

Summary

Issues:
1. Interpretation of notification dated 26.06.2006 for waiver of interest under Section 234C of the Income Tax Act.
2. Judicial review of lower authority's decision-making process under Article 226 of the Constitution.

Analysis:
1. The case revolved around the interpretation of the notification dated 26.06.2006 for waiver of interest under Section 234C of the Income Tax Act. The respondent-assessee filed a return of income for the assessment year 2010-2011 and subsequently filed a petition for waiver of interest under Section 234C based on the notification. The Chief Commissioner initially rejected the application, leading to a legal challenge. The High Court, in an earlier order, found that the Commissioner's consideration was incorrect and directed a fresh consideration. However, upon reconsideration, the Chief Commissioner again rejected the waiver application, prompting another challenge by the respondent. The Single Judge, in the impugned order, found the Chief Commissioner's consideration improper, accepted the assessee's explanation, and remanded the matter for further review.

2. The High Court, upon hearing both parties, delved into the scope of judicial review under Article 226 of the Constitution concerning the decision-making process of lower or quasi-judicial authorities. It was established that while judicial review is available, it does not equate to acting as a Court of Appeal. The Court emphasized that if grounds considered by the lower authority are extraneous or non-germane, the decision may be struck down. However, in cases where a decision is set aside and remanded, the authority cannot revisit aspects already concluded by the Court but can consider other relevant factors. The Court highlighted the purpose of remanding a matter for reconsideration in accordance with the law.

3. The High Court analyzed the Single Judge's order in detail, finding that the observations made until paragraph 23 were reasonable and not perverse. However, the Court noted an issue with the final conclusion at paragraph 24, where the Single Judge accepted the assessee's explanation and directed the Chief Commissioner to exercise discretion for waiver of interest. The Court held that such a final conclusion exceeded the jurisdiction of judicial review, akin to an appellate power not typically available under Article 226. Consequently, the Court set aside the acceptance of the explanation and directed the Chief Commissioner to reconsider the waiver application in line with the notification dated 26.06.2006, excluding the aspects already considered by the Court.

4. Ultimately, the High Court partly allowed the appeal, modifying the directions issued by the Single Judge. The Chief Commissioner was instructed to reconsider the waiver application within a specified timeframe, considering the observations made by the Single Judge until paragraph 23. The Court emphasized the need for a fresh review in accordance with the law, excluding the aspects already concluded by the Court. The appeal was allowed partially, with no order as to costs, and an incidental application was disposed of accordingly.