2023 (2) TMI 355 - HC - Income Tax

Waiver of interest u/s 234B - interest in defaults in payment of advance tax - scope of Notification in F.No.400/234/95-IT(B), dated 23.05.1996, which sets out certain explicit situations where waiver of interest under Section 234B may be considered - as argued since capital gains has been specifically excluded under clause (c) of the above Notification, it is a conscious decision of the Legislature and of the Central Board of Direct Taxes, to exclude capital gains, as a head of income, from the ambit of waiver - HELD THAT - The above Notification is not relevant for the purposes of this case. The situation contemplated in clause (c) is one where income chargeable under a head other than capital gains , is received or has accrued after the due date of payments of the first or second instalments of advance tax. Such a situation does not arise in this matter as the entire consideration has not just been received but also offered to tax in the respective assessment years. That apart, the contents of a Notification cannot stand in the way of this Court, or limit its interpretation, of statutory provisions. Reliance upon the Notification is thus found to be misplaced and this argument rejected. Delay in payment of advance tax - It is an admitted position that the advance taxes relevant to AYs 2012-13 and 2013-14 have been paid in time, in the course of financial years 2011-12 and 2012-13 respectively. The re-assessments in this case transpired on 29.12.2017. The charge of interest under Section 234 B is mandatory and to compensate in delay in payment of advance tax as has been categorically settled in the case of CIT V. Anjum Ghaswala 2001 (10) TMI 4 - SUPREME COURT - Thus, there is no doubt in mind that the request for waiver is to be considered strictly in light of the statutory prescription. The use of the phrase or otherwise would apply to all and any payments made by an assessee, including, in this case, advance tax paid for the subsequent two assessment years. Needless to state, any delay in effecting such remittances would have to be duly compensated by the petitioner. The payments in the present case are not adhoc, and have been made specifically towards advance tax for liability towards capital gains in FYs 2011- 12 and 12-13. Moreover, the Department has been in possession of the entire amounts from FY 2011-12 and 12-13, as the assessee has long satisfied the demands for the corresponding assessment years by way of advance and selfassessment taxes. It is the aforesaid amounts that have been adjusted against the liability for AY 2011-12. The exercise is substantially revenue neutral. However, liability to advance tax commences from the financial year relevant to the assessment year in question, in this case being 2011-12. In the present case, the petitioner seeks credit in respect of the advance tax remitted during FY 2011-12 and 12- 13, relevant to AY 2012-13 and 13-14. Thus, there is a delay of one and two years respectively, as the amounts for which credit is sought ought to have been remitted in FY 2010-11, relevant to AY 2011-12. To this extent, the petitioner is liable to interest in terms of Section 234B. The impugned order rejecting the prayer for waiver of interest is set aside, to the extent as indicated above.

Issues Involved:
1. Challenge to the orders passed by the Commissioner of Income Tax (Appeals) and the Assessing Officer.
2. Determination of the year of transfer of the property for capital gains tax purposes.
3. Adjustment of advance tax payments from subsequent years to the year of transfer.
4. Waiver of interest under Section 234B of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Challenge to the Orders:
The petitioner, an individual and legal heir of the deceased assessee, challenged the orders passed by the Commissioner of Income Tax (Appeals) on 31.01.2019 and the consequential order by the Assessing Officer on 28.03.2019. The petitioner also challenged the order dated 19.12.2019 by the Chief Commissioner of Income Tax.

2. Determination of the Year of Transfer:
The property in question, measuring 23.17 acres, was sold over three assessment years (AY 2011-12, 2012-13, and 2013-14). The Assessing Officer held that the transfer of the capital asset occurred with the execution of the Memorandum of Understanding (MOU) on 12.12.2010, thus bringing the entire sale consideration to tax in AY 2011-12. The petitioner acquiesced to this assessment, confirming that the transfer took place in AY 2011-12 and agreed to the cancellation of protective assessments for the subsequent years.

3. Adjustment of Advance Tax Payments:
The petitioner sought to adjust the advance tax payments made in AYs 2012-13 and 2013-14 against the tax liability for AY 2011-12. The Assessing Officer rejected this request, stating there was no provision for adjusting tax paid in one year against the tax liability for another year, except as provided under Section 245 of the Act after determining a refund.

4. Waiver of Interest under Section 234B:
The petitioner requested a waiver of interest under Section 234B, arguing that the advance/self-assessment tax payments made for AYs 2012-13 and 2013-14 should be considered as tax paid for AY 2011-12. The officer rejected this request, citing no statutory provision for such adjustment. The petitioner relied on the phrase "or otherwise" in Section 234B(2) and relevant case law to support their argument.

Court's Analysis and Judgment:

1. Use of "or otherwise" in Section 234B:
The court analyzed the phrase "or otherwise" in Section 234B(2), referencing the Supreme Court's interpretation in the case of Smt. LilaVati Bai V. State of Bombay. The court concluded that "or otherwise" should be interpreted expansively, covering all possible payments made by an assessee, including advance tax for subsequent years.

2. Notification and Case Law:
The court found the reliance on the Notification in F.No.400/234/95-IT(B) dated 23.05.1996 to be misplaced, as it did not apply to the present case. The court also distinguished the case of Commissioner of Income-tax v. Atlas Cycle Industries, which was cited by the respondent.

3. Revenue Neutrality and Interest Liability:
The court noted that the payments made by the petitioner were not ad hoc but specifically towards advance tax for capital gains liability. The court acknowledged that the Department had been in possession of these amounts since FY 2011-12 and 2012-13. However, the court recognized a delay in remittance for AY 2011-12, making the petitioner liable for interest under Section 234B.

Final Judgment:
The court set aside the impugned order rejecting the waiver of interest to the extent indicated but upheld the appellate order dated 31.01.2019 and the consequential order dated 28.03.2019. W.P.No.950 of 2020 was allowed, and W.P.No.955 of 2020 was dismissed. No costs were awarded, and connected miscellaneous petitions were closed.

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