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2017 (6) TMI 922 - HC - Income TaxWaiver of interest claimed under Sections 234A, 234B and 234C - Held that - The Division Bench of the Bombay High Court in De Souza Hotels Private Limited V. Chief Commissioner of Income Tax and Others(2012 (4) TMI 348 - BOMBAY HIGH COURT) has come to the conclusion, with which, we are in complete agreement, that unless the Assessee s case comes within the ambit and scope of the Circular dated 26.06.2006, the Chief Commissioner would have no power to reduce or waive interest under Sections 234A, 234B and 234C. In so far as the judgment in N.Haridas & Co. V. Chief Commissioner of Income Tax and another, (2007 (2) TMI 211 - MADRAS High Court) is concerned, it was passed in peculiar facts and circumstances of the case. In that case, waiver/reduction of interest was sought on the ground that the tax, which was required to be paid under the Voluntary Disclosure of Income Scheme 1997, could not be paid, in time, by the Managing Partner, even though, he had made a declaration as required, since, he was diagnosed with blood cancer, and to which, he succumbed shortly thereafter. It appears that the order was perfunctory, which is why, the Division Bench in paragraph 7 observed that the impugned order of the Chief Commissioner merely observed that the condition prescribed in Notification dated 23.05.1996 was not satisfied. We may indicate herein that the notification/circular dated 23.05.1996 precedes the circular in issue, i.e., Circular dated 26.06.2006. Circular dated 26.06.2006 supersedes the earlier circular dated 23.05.1996. We are, thus, concerned only with Circular dated 26.06.2006. For all these reasons, we are of the view that the judgment in the matter of N.Haridas & Co. (cited supra) cannot help the cause of the respondent in this case. Therefore, the appeal will have to be allowed.
Issues Involved:
1. Validity of the orders passed by the learned Single Judge setting aside the order dated 04.01.2010. 2. Entitlement of the respondent to a waiver of interest under Sections 234A, 234B, and 234C of the Income Tax Act, 1961. 3. Applicability and interpretation of the Circular dated 26.06.2006 issued by the Central Board of Direct Taxes (CBDT). Issue-wise Detailed Analysis: 1. Validity of the Orders Passed by the Learned Single Judge: The appeals were preferred by the Revenue against five identical orders dated 22.07.2010, passed by the learned Single Judge, which set aside the order dated 04.01.2010 by the first appellant. The learned Single Judge remitted the matter to the first appellant to consider the respondent's application for waiver of interest on merits, in accordance with the law. 2. Entitlement of the Respondent to Waiver of Interest:The respondent, engaged in the manufacture, sale, and export of diamond jewellery, claimed deductions under Section 80HHC of the Income Tax Act for local sales made to a company in SEEPZ, Mumbai, treating them as deemed exports. The Revenue reopened assessments for the relevant periods, issuing notices under Section 148 of the Act. The respondent paid the reassessed tax and interest as demanded under Sections 234A, 234B, and 234C. The Chief Commissioner rejected the waiver petitions, stating that the deduction claimed was not based on relevant statutory provisions and the respondent did not voluntarily withdraw the claim before the completion of original assessments. 3. Applicability and Interpretation of the Circular Dated 26.06.2006:The respondent filed petitions for waiver of interest based on the Circular No.400/29/2002 IT(B) dated 26.06.2006, issued by the CBDT under Section 119(2)(a) of the Act. The Chief Commissioner rejected the waiver petitions, stating that the circumstances did not fall within the provisions of clauses 2(a) to 2(d) of the Circular. The learned Single Judge set aside this order, remitting the matter for reconsideration. Upon appeal, it was argued that the Chief Commissioner had exhaustively dealt with the merits of the waiver petitions and concluded that the circumstances did not fall within the Circular's provisions. The Circular delegates power to the Chief Commissioner/Director General of Income Tax to reduce or waive interest charged under Sections 234A, 234B, and 234C, only if the case falls within the classes of cases or incomes specified in paragraph 2 of the Circular. The respondent's case did not fall within these specified circumstances. The Court agreed with the view of the Bombay High Court in De Souza Hotels Private Limited V. Chief Commissioner of Income Tax, which held that unless the case falls within the Circular's specified circumstances, the Chief Commissioner has no power to reduce or waive interest. The Court found that the learned Single Judge's judgment was not warranted, as the Chief Commissioner had already dealt with the waiver petitions on merits. Conclusion:The appeals were allowed, setting aside the judgments of the learned Single Judge. The Court concluded that the respondent's case did not fall within the circumstances specified in the Circular dated 26.06.2006, and thus, the Chief Commissioner had no power to waive the interest under Sections 234A, 234B, and 234C. The pending applications were closed, with no order as to costs.
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