2020 (1) TMI 1062 - HC - Income Tax

Waiver of interest u/s 234B - application u/s 119 (2) (b) filled - HELD THAT - The Central Board of Direct Taxes has issued the circular in the exercise of powers vested under Section 119 (2) (a) of the Income Tax Act, 1961. The circular has to be read strictly. Normally, these cannot be any addition or substitution by the authority concerned while entertaining the application for waiver of interest under Section 234 A, B or C of the Income Tax Act, 1961. Since, during the Assessment Years 1992-93 to 1994-95 there were no decisions of this court, the respondent was justified in not granting waiver of interest as per the above circular. Petitioner can legitimately state that it was entitled to take a bonafide view that it was eligible for exemption from payment of tax and/or claim deductions under Section 80HHC of the Income Tax Act, 1961 provided there were decisions of Tribunal though not of the jurisdictional Tribunal or the High Court as the case may be to entertain such a view. The Central Board of Direct Taxes perhaps could to have considered these factors and such eventualities while issuing the said circular. However, it has restricted to specified instances for grant of waiver. Since, the respondent is bound by the circular, I find no fault in the impugned orders of the respondent in refusing to grant waiver to the petitioner in terms of the said circular. Waiver of interest under Section 234B of the Income Tax Act, 1962 for the assessment years 1992-93, 1993-94, 1994-95, 2002-03 and 2004-05 can be directed to be given to the petitioner if there were decisions of the Tribunal or High Court though not of the jurisdictional Tribunal/High Court which would have allowed the petitioner to entertain such belief. The impugned orders are liable to be set aside and the cases be remitted back to the respondent to re-examine the issue afresh. In case the petitioner is able to show existence of any judgment of the Tribunal/High Court though not necessarily of the jurisdictional Tribunal/High Court at the time of filing of return, respondent can grant waiver/exemption to the petitioner by liberally construing the Circular. Accordingly, the impugned orders are set aside and the cases are remitted back to the respondent to pass a fresh order.

Summary

Issues Involved:
Challenge to impugned orders rejecting waiver of interest under Section 234B of the Income Tax Act, 1961 based on Circular F-No. 400/129/2002-IT (B), 2006 for assessment years 1992-93 to 1994-95 and 2002-03 to 2004-05.

Analysis:

Issue 1: Challenge to Impugned Orders
The petitioner challenged the impugned orders passed by the Chief Commissioner of Income Tax under Section 119 (2) (a) in conjunction with Section 234B of the Income Tax Act, 1961. The orders rejected the petitioner's prayer for waiver of interest based on non-compliance with the conditions specified in Circular F No.400/129/2002-IT(B) dated 26/6/2006. The rejection was primarily due to the petitioner's failure to demonstrate voluntary compliance or payment of tax, leading to the denial of interest waiver.

Issue 2: Claim for Deduction under Section 80HHC
The petitioner, an exporter of leather products, claimed exemption under Section 80HHC of the Income Tax Act, 1961, for assessment years 1992-93 to 1994-95 and 2002-03 to 2004-05. The petitioner argued that previous decisions by authorities supported their view that they were entitled to the deduction. However, subsequent reversals by the Supreme Court altered the tax liability, prompting the petitioner to seek waiver of interest under Section 234B.

Issue 3: Interpretation of Circular for Interest Waiver
The court analyzed the Central Board of Direct Taxes circular issued under Section 119 (2) (a) of the Income Tax Act, 1961, regarding waiver of interest. It emphasized strict adherence to the circular's provisions and noted that waiver could only be granted under specific circumstances, such as non-chargeability of income tax based on court orders or retrospective amendments. The court upheld the denial of interest waiver in the absence of supporting court decisions during the relevant assessment years.

Issue 4: Consideration of Tribunal and High Court Decisions
The judgment highlighted the significance of decisions by Tribunals and High Courts in determining tax liabilities. It emphasized that such decisions have persuasive and precedential value, binding lower authorities. The court acknowledged that the petitioner's bona fide belief in tax exemption could be justified if supported by non-jurisdictional court decisions, warranting a re-examination of interest waiver by the tax authorities.

Conclusion:
The court set aside the impugned orders and remitted the cases back to the Chief Commissioner of Income Tax for fresh examination. It directed reconsideration of interest waiver under Section 234B based on the existence of Tribunal or High Court judgments supporting the petitioner's position. The judgment underscored the importance of court decisions in shaping tax liabilities and the need for a liberal interpretation of the circular for appropriate cases.