2024 (10) TMI 1281 - HC - Income Tax

Order passed by the Income Tax Settlement Commission to charge the interest @ 50% u/s 234A and interest u/s 234B and interest u/s 234C - Maintainability of writ petition against the order of the Income Tax Settlement - HELD THAT - The petitioners had filed the applications for settlement of their income-tax and wealth tax u/s 245-C of the Act, and after considering all the aspects, the Settlement Commission passed the orders. It also granted immunity for the prosecution and at the same time, it reduced the interest chargeable under Section 234A by 50%, while interests in terms of Section 234B and C of the Act were directed to be charged from all the five applicants. However, interest u/s 220 (2) was waived. The question regarding maintainability of the present writ petition against the order of the Income Tax Settlement Commission is no more res integra, in view of the law as settled in the case of Jyotendrasinhji v. S.I. Tripathi and others 1993 (4) TMI 1 - SUPREME COURT wherein Hon ble the Supreme Court while following its earlier judgement rendered in the case of R.B. Shreeram Durga Prasad and Fatechand Nursing Das 1989 (1) TMI 4 - SUPREME COURT thus objection raised by learned counsel for the respondents regarding non-maintainability of the present writ petition, is rejected. Whether the discretion exercised by the Settlement Commission of reducing the interest by 50% in terms of the interest chargeable u/s 234A? - We would have to examine the provisions of Section 234A of the Act for the purpose, which provides for charging of interest for defaults in furnishing return of income, interest for defaults in payment of advance tax and for interest for deferment of the advance tax, respectively. The provisions of imposing the interest is automatic, and if there is a default, interest is liable to be paid. However, by the various judgments passed Courts have taken a view that in circumstances which are beyond the control of the assessee in filing of the return in time, the interest can be waived. In the present case, the Income Tax Settlement Commission accepted the version of the petitioners that the returns for the Assessment Year 1989-90 could not been filed in time, and were delayed on account of the fact that the seized papers were not available with them, and were lying with the Department. The Settlement Commission has also noticed that the letters and requests were made by the applicants/petitioners to the Department and looking into the said circumstances, interest had been reduced. We find that while exercising the discretion by the Settlement Commission, no reasons have been assigned as to why the interest has been reduced by 50% only, and as to why the complete interest has not been waived off for the assessment year 1989-90.We, accordingly, accept the present writ petition, and waive the interest charged, in terms of Section 234-A of the Act. Interest chargeable under Section 234B and 234C - Keeping in view that the advance tax was required to be paid, wherein there has been a default, in terms of the judgment passed in the case of Gulraj Engineering Construction Co 1995 (3) TMI 428 - INCOME TAX SETTLEMENT COMMISSION we do not propose to waive the interest under Section 234B and 234C of the Act. We are also not impressed by the arguments raised by learned counsel for the petitioners in terms of the circular on waiver of interest (Annexure P-6) that the interest under Section 234B and 234C should be waived, as depositing of advance tax has nothing to do with the seizure of the books of accounts or during the course of proceedings for search, or seizure of cash. As decided in Shelly Mehta 2024 (9) TMI 220 - PUNJAB AND HARYANA HIGH COURT this Court has taken a view that the cash seized during the seizure cannot be a ground for waiver of advance tax or payment of tax for the subsequent year. In view thereto, we do not accept the contentions made by counsel for the petitioners and the present writ petition is allowed in part.

Summary

Issues:
Challenge to order of Income Tax Settlement Commission regarding imposition of interest under Section 234-A, 234-B, and 234-C of the Income Tax Act, 1961.

Analysis:
1. The petitioners challenged the order of the Income Tax Settlement Commission, which imposed interest under Section 234-A, 234-B, and 234-C of the Income Tax Act, 1961. The petitioners contended that they were prevented from filing returns on time due to the Department not providing seized papers despite requests. They argued that interest should have been waived entirely, not just reduced by 50%. The petitioners relied on various judgments to support their contention that interest can be waived in certain circumstances beyond the assessee's control.

2. The respondents supported the Settlement Commission's order, arguing that once the report is accepted, challenging part of it is not permissible. They highlighted that the Settlement Commission had applied its mind fully and reduced interest by 50% under Section 234-A, while charging full interest under Section 234-B and 234-C. They emphasized that the Commission waived interest under Section 220(2) after due deliberation, and the petitioners should not be allowed to challenge aspects of the report that they had previously accepted.

3. The High Court examined the Settlement Commission's order and the maintainability of the writ petition against it. Citing relevant Supreme Court judgments, the Court rejected the objection to the petition's maintainability. Regarding the reduction of interest under Section 234-A, the Court analyzed the automatic imposition of interest for defaults and noted that interest can be waived in certain circumstances beyond the assessee's control. The Court found that the Settlement Commission had accepted the petitioners' version of delayed filing due to unavailability of seized papers, but it had not provided reasons for reducing interest by only 50%.

4. Consequently, the Court accepted the writ petition and waived the interest charged under Section 234-A. However, the Court declined to waive interest under Section 234-B and 234-C, citing the requirement to pay advance tax and previous judgments. The Court rejected arguments for waiving interest based on circulars and previous cases, emphasizing that seizure of cash during proceedings does not justify waiving advance tax. The Court allowed the writ petition in part, disposing of any pending applications.