2010 (2) TMI 20 - HC - Income Tax

Waiver of interest u/s 234A, 234B and 234C power of the chief commissioner to waive - where the books of accounts and other documents have been seized during the course of proceedings for search and seizure held that - it is observed that admittedly the tax audit report for the assessment years 2001-02 and 2002-03 were filed on 31st October, 2001 and 9th October, 2002 respectively. However, the Petitioner filed the income tax returns for the said assessment years and deposited the income tax therefor, only on 31st March, 2003. In this behalf it is seen that a tax audit report is mandatorily prepared by an independent auditor based on the documents and accounts produced by the assessee, and as such it would not have been possible for the Petitioner to file the tax audit reports on 31st October, 2010 and 29th October, 2002, without submitting the necessary documents for verification by the independent auditor, who issued the tax audit reports. Therefore, unless the books of accounts or relevant details thereof maintained by the assessee were produced for the examination of the tax auditor, it would not have been possible for the independent auditor to prepare the tax audit reports. Thus, the plea of the Petitioner that the assessee was not able to file his income tax returns for the said years in time, is without any merit. The Petitioner was obviously possessed of the said relevant details - , the appointed time for the payment of advance tax for the assessment year 2001-02 had long since gone prior to the date of the search and seizure by the CBI. interest not to be waived

Summary

Issues:
1. Challenge to order passed by Chief Commissioner of Income Tax under Sections 234A, 234B, and 234C of the Income Tax Act, 1961.
2. Interpretation of circular issued by the Central Board of Direct Taxes dated 23rd May, 1996 regarding reduction or waiver of interest under specified sections.
3. Claim of waiver of interest on income tax due to unavoidable circumstances of seized documents and frozen bank account.
4. Failure to produce Panchnama showing seizure of books of accounts by CBI.
5. Justification for not filing income tax returns and paying advance tax within specified timeframes.

Analysis:

1. The petition challenged the order of the Chief Commissioner of Income Tax under Sections 234A, 234B, and 234C of the Income Tax Act, 1961, claiming it violated a circular issued by the Central Board of Direct Taxes. The petitioner argued that due to circumstances beyond their control, including a raid by the CBI resulting in seized documents and a frozen bank account, they were unable to file returns and pay taxes on time for the relevant assessment years.

2. The interpretation of the circular dated 23rd May, 1996 was crucial in determining whether the petitioner was entitled to a reduction or waiver of interest under the specified sections. The circular allowed for such relief in cases where documents were seized and the assessee was unable to furnish returns within the specified time due to reasons beyond their control. The court analyzed the timing of filing tax audit reports and income tax returns in relation to the seizure of documents to assess the validity of the petitioner's claim.

3. The petitioner's contention of being unable to file returns and pay advance tax on time was examined in detail. The court found that the petitioner had the necessary details to file tax audit reports and pay advance tax, even on an estimated basis. The failure to do so, despite the bank account being defrozen and installments due, weakened the argument of financial hardship preventing timely tax payments.

4. The court noted the petitioner's failure to produce the Panchnama demonstrating the seizure of books of accounts by the CBI, which was a crucial piece of evidence to support their claims. This omission further weakened the petitioner's case and raised doubts about the validity of their reasons for delayed filings and payments.

5. Ultimately, the court concluded that the petitioner had not been prevented from fulfilling their tax obligations within the specified timeframes, thereby discrediting their claim for waiver of interest under the circular. The petition was dismissed, with costs imposed on the petitioner, emphasizing the importance of timely compliance with tax requirements and the need for substantial evidence to support claims of exceptional circumstances.