2024 (3) TMI 106 - HC - Income Tax

Waiver of interest u/s 234A, 234B and 234C - Interest assessed on account of non-payment of advance tax - prayer for waiver of Interest declined as that late assessee (Husband of the Petitioner) had furnished incorrect particulars in Form 15-H in order to avoid the payment of taxes - application u/s 119(2)(a) rejected for seeking waiver of interest in terms of circular of Central Board of Direct Taxes ( CBDT ) dated 23.05.1996 - legal heirs of late Megh Raj who have come in second round of litigation before this Court - department has submitted that as the returns of the income were filed by the concerned assessee only after he was informed of non-filing of the returns, the same would amount to have been detected by the AO and therefore, the benefit of the notification issued by the CBDT dated 23.05.1996 cannot be applied - whether it is the case of filing of returns voluntarily without detection? HELD THAT - CBDT circular dated 23.05.1996 which provides class of incomes or class of cases in which the reduction or waiver of interest u/s 234A or 234B or as the case may be 234C of the Act of 1961, can be considered. Merely where a return of income could not be filed by the assessee due to unavoidable circumstances and such return of income is filed voluntarily by the assessee or his legal heirs without detection by the AO. Filing of returns voluntarily without detection. The word detection would have to be understood in terms of the provisions of the Income Tax Act while in layman knowledge the detection would be coming to know of a particular aspect alone, but in terms of Income Tax Act, the provisions of Sections 142 and 148 of the Act of 1961 would come into play i.e. where there is a evasion on the part of any assessee which comes to the knowledge of the AO and he initiates proceedings by issuing notice under Section 142(1) of the Act of 1961 that it can be said that the AO has detected such an action of evasion of tax. It is also noticed and admitted position that till the date, petitioner Megh Raj filed his returns and deposited the tax, no notice under Section 142 of the Act of 1961 was issued nor any notice u/s 148 was issued as has been noticed in the impugned order also. In the present case interestingly, AO came to know about the Form 15-H and information mentioned therein which admittedly was signed by the assessee on dotted lines. Having come to know about such information and that the assessee had not filed his returns for several years and letters seem to have been sent by the AO to the assessee on 30.01.2000. Upon receiving the same, the assessee has filed his returns on 03.02.2000 i.e. within a period of four days. He thereafter has also sent a letter and he has also deposited the taxable income. In view thereof, it cannot be said that the income tax return was not filed voluntarily without detection of the Assessing Officer. Second condition relating to the assessee having not filed return of income due to unavoidable circumstances though on the face of it cannot be said to be a situation available on record but as has already been observed by this Court an earlier the old age and illiteracy of assessee are important factors. The same therefore can be said to be relevant and treated as unavoidable circumstances. In view thereof, the order passed by the Chief Commissioner holding the said circumstances as not sufficient for waiver of tax are found to be unjustified and misinterpretation of CBDT notification. The notification appears to have been issued by the CBDT especially to deal with the cases like the one in hand. Once the citizen is ready to deposit and immediately deposit the tax upon coming to know of his liability, it cannot be said that he has deliberately or willfully evaded the depositing of tax and the interest in terms of Section 234A of the Act of 1961 can be waived. Writ petition deserves to be allowed and the contents of the petitioners are sustained. We make the order absolute and waive the interest as demanded and subsequent proceedings u/s 140 also stands quashed.

Summary

Issues involved:
The issues involved in the judgment are waiver of interest under Section 234A, 234B, and 234C of the Income Tax Act, 1961, for non-submission of assessment of income tax returns, consideration of old age and illiteracy of the assessee, interpretation of CBDT circular dated 23.05.1996, and whether the returns were filed voluntarily without detection by the Assessing Officer.

Waiver of Interest - First Round of Litigation:
The petitioners, as legal heirs of late Megh Raj, filed a writ petition seeking waiver of interest charged under Section 234A, 234B, and 234C of the Income Tax Act, 1961. The High Court remanded the case to the authority for fresh consideration, emphasizing that the old age and illiteracy of the assessee were crucial factors that should have been taken into account. The Court directed the authority to decide the application for waiver of interest afresh.

Waiver of Interest - Second Round of Litigation:
After the Chief Commissioner, Income Tax confirmed the earlier order rejecting the application for waiver of interest, the matter was brought before the High Court again. The Court noted that the authority failed to consider the observations of the High Court and misinterpreted the CBDT circular dated 23.05.1996. It was emphasized that the circumstances satisfied the conditions for waiver as per the circular, especially regarding the voluntary filing of returns without detection by the Assessing Officer.

Interpretation of CBDT Circular and Detection by Assessing Officer:
The High Court analyzed the CBDT circular dated 23.05.1996, which allows for waiver of interest under certain conditions. The Court deliberated on the concept of "detection" by the Assessing Officer, highlighting that the filing of returns voluntarily without detection is a key criterion for consideration. It was clarified that mere knowledge of certain information by the Assessing Officer does not constitute detection unless formal proceedings are initiated under relevant sections of the Income Tax Act.

Decision and Outcome:
The High Court found that the circumstances, including the old age and illiteracy of the assessee, could be considered as unavoidable circumstances justifying the waiver of interest. The Court held that the order of the Chief Commissioner was unjustified and a misinterpretation of the CBDT notification. Consequently, the Court allowed the writ petition, quashed the previous order, and waived the interest as demanded. Additionally, subsequent proceedings under Section 140 of the Income Tax Act were also quashed.

This summary provides a detailed overview of the judgment, highlighting the key issues, arguments presented, and the ultimate decision rendered by the High Court.