2018 (3) TMI 476 - HC - Income Tax

Request for waiver of interest made upon the reopening of assessment - Held that - The petitioner disputed his liability to pay income tax on capital gains. The interest levied giving effect to capital gains based on receipt of compensation would not absolve the petitioner from paying tax on capital gains. Further, the circular is only a guideline and it cannot have an overriding effect on the statutory provision. In such situation, this Court is of the view that there is no merit in the writ petition. The Chief Commissioner of Income Tax has rightly rejected the petitioner s request for waiver of interest.

Summary

Issues Involved:
Challenge against reopening of assessment, rejection of waiver of interest request, interpretation of circular provisions, applicability of statutory provisions versus circular guidelines.

Analysis:
1. Challenge against Reopening of Assessment:
The petitioner challenged the reopening of assessment, which was ultimately affirmed by the court. The dispute arose when the assessee did not disclose income from capital gains after receiving compensation for land acquired. Subsequently, re-assessment was completed, leading to a demand for capital gains and the imposition of interest. This issue sets the background for the rejection of the waiver of interest request by the Chief Commissioner of Income Tax.

2. Rejection of Waiver of Interest Request:
The petitioner filed an application seeking waiver of interest, contending that the capital gains accrued in 1987 should not be subject to interest as income tax on such gains was levied only from 1991 onwards. The petitioner relied on a Supreme Court judgment and a circular (Ext.P4) to support the claim. However, the court found that the interest levied based on the receipt of compensation for capital gains does not absolve the petitioner from the liability to pay tax on those gains. The court emphasized that the circular is merely a guideline and cannot override statutory provisions. Consequently, the Chief Commissioner's decision to reject the waiver request was upheld.

3. Interpretation of Circular Provisions:
The petitioner's claim for waiver of interest was primarily based on clause 2(c) of the circular, which provides for reduction or waiver of interest in specific circumstances. However, the court determined that this clause did not apply to the facts of the case since the petitioner disputed the liability to pay income tax on capital gains. The court clarified that the circular serves as guidance and cannot supersede statutory provisions. Therefore, the court concluded that the petitioner was not entitled to the waiver of interest as sought.

4. Applicability of Statutory Provisions versus Circular Guidelines:
In analyzing the case, the court emphasized the distinction between statutory provisions and circular guidelines. While the petitioner relied on the circular to support the waiver request, the court highlighted that statutory provisions regarding the payment of tax on capital gains prevail over circular guidelines. The court concluded that the rejection of the waiver request by the Chief Commissioner was justified based on the statutory framework, and the petitioner's argument based on the circular was not tenable.

In summary, the court dismissed the writ petition, ruling in favor of the Chief Commissioner of Income Tax and upholding the decision to reject the petitioner's request for waiver of interest. The judgment underscores the primacy of statutory provisions in tax matters and the limited scope of circular guidelines in determining tax liabilities.