2018 (7) TMI 1483 - HC - Income Tax

Claim for waiver or reduction of interest charged u/s 234B rejected - power of CBDT to waive the interest - Held that - As seen from Exhibit-P3 impugned order, the claim of the petitioner for reduction of interest was not considered on merits for the simple reason that according to Chief Commissioner of Income Tax, the petitioner s case is not referable to any of the categories referred in Exhibit P4 notification, dated 26/6/2006, issued by the Central Board of Direct Taxes. Having adverted to the notification, this Court is of the view that the petitioner could not remit tax within time on account of Exhibit-P2 order passed by the BIFR. It is to be noted that the petitioner remitted tax immediately after the direction was lifted. Category (d) referred in Exhibit P4 notification clearly refers to the case that where an assessee fails to file a return of income due to unavoidable circumstances . If that be so, this Court is of the view that the petitioner s case falls squarely within category (d). It is for the Chief Commissioner of Income Tax to decide whether full waiver in interest or reduction in interest can be granted to the petitioner. However, certainly, the petitioner s case would fall within category (d). Therefore, the impugned order is set aside for paving way for reconsideration of the matter by the Chief Commissioner of Income Tax.

Summary

Issues:
1. Impugning an order rejecting waiver or reduction of interest under Section 234B of the Income Tax Act, 1961.

Analysis:
The petitioner, a Government of Kerala undertaking, challenged an order by the Chief Commissioner of Income Tax denying a claim for waiver or reduction of interest under Section 234B of the Income Tax Act, 1961. The petitioner cited a notification by the Central Board of Direct Taxes allowing certain classes of income for waiver or reduction under Sections 234A or 234B. The petitioner invoked category (d) of the notification, which pertains to situations where a return of income could not be filed due to unavoidable circumstances and was voluntarily filed later. The petitioner's case involved the sale of capital assets in 2001-02, with the sale proceeds deposited in a 'No Lien' account as per BIFR's direction. The petitioner failed to remit tax on time as the funds were with the bank, but upon the lifting of BIFR's direction, the tax was immediately paid. While interest under Section 220(2) was waived, the claim for waiver under Section 234B was rejected, leading to the petitioner approaching the Court.

The impugned order, as per Exhibit-P3, did not consider the petitioner's claim for interest reduction on its merits, stating it did not fall under any category mentioned in the notification issued by the Central Board of Direct Taxes. However, the Court observed that the petitioner's inability to remit tax on time was due to the BIFR's order, which was lifted later, prompting immediate tax payment. The Court noted that category (d) in the notification covers cases where an assessee fails to file a return due to unavoidable circumstances, which aligns with the petitioner's situation. Consequently, the Court set aside the impugned order for the Chief Commissioner of Income Tax to reconsider the matter. The petitioner was directed to present the BIFR order before the Chief Commissioner, who was tasked to make a decision on granting full waiver or reduction in interest within three months.

In conclusion, the writ petition was disposed of, allowing for a fresh consideration by the Chief Commissioner of Income Tax based on the circumstances and the relevant provisions under Section 234B of the Income Tax Act, 1961.