1973 (10) TMI 12 - HC - Income Tax

The order challenged herein is an order made by the Commissioner of Income-tax under section 264 of the Income-tax Act, 1961 (the Act). By the said order, the Commissioner dismissed the two revision petitions preferred by the petitioner against the levy of interest under section 215 - The issue that minor income was not to be included in the assessee s estimate of advance tax was pending before Supreme Court, whether this can be a valid ground for waiver of interest under section 215 held that dismissal of the revision petition without considering this contention would be bad in law

Summary

Issues:
1. Challenge to the order made by the Commissioner of Income-tax under section 264 of the Income-tax Act, 1961 regarding the levy of interest under section 215 of the Act for the assessment years 1967-68 and 1968-69.
2. Interpretation of rule 40(5) of the Rules regarding the Commissioner's authority to reduce or waive interest payable under section 215 based on justifying circumstances.
3. Consideration of whether the petitioner's failure to include the income of his minor sons in the estimates of advance tax falls within the scope of rule 40(5) of the Rules.

Detailed Analysis:
The judgment in question pertains to the challenge of an order by the Commissioner of Income-tax under section 264 of the Income-tax Act, 1961, concerning the levy of interest under section 215 of the Act for the assessment years 1967-68 and 1968-69. The petitioner had not included the income of his minor sons in the advance tax estimates, which was deemed assessable in his hands. Previous legal proceedings had upheld this assessment, including a Supreme Court decision reported in C. R. Nagappa v. Commissioner of Income-tax. Subsequently, the Income-tax Officer imposed interest under section 215 as the advance tax paid was less than 75% of the tax determined by regular assessment, leading the petitioner to file revision petitions under section 264 (Income-tax Act, 1961).

During the proceedings, the petitioner cited a Supreme Court judgment in V. D. M. RM. M. RM. Muthiah Cettiar v. Commissioner of Income-tax to support the contention that including minors' income in advance tax estimates was not mandatory. However, the Commissioner rejected this argument, stating that the cited decision was not applicable. Another argument raised was the pending Supreme Court case on the same issue at the time of filing the estimates, but the Commissioner maintained that Rule 40 of the Rules did not allow for waiving interest based on such grounds. The petitioner challenged both reasons before the court.

The court analyzed rule 40(5) of the Rules, which empowers the Commissioner to reduce or waive interest under section 215 based on justifying circumstances. It was noted that the petitioner had awaited the Supreme Court decision before including minors' income in the estimates, a factor that should have been considered under rule 40(5). The court found that the Commissioner erred in dismissing this ground, indicating that it fell within the scope of the rule. Consequently, the court decided to remit the case and directed the Commissioner to reconsider the revision petitions in accordance with the law and the court's observations, without delving into the initial argument regarding the obligation to include minors' income in advance tax estimates.

In conclusion, the court allowed the petitions, set aside the impugned order, and instructed the Commissioner to review the revision petitions based on the court's directions. No costs were awarded in this matter.