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TMI Blog2012 (4) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... n dated 26 June 2006. We accordingly answer the questions of law as framed in the negative - it would be open to the notified person to seek a waiver or reduction by making an application to the Chief Commissioner of Income Tax in terms of the order dated 26 June 2006 of the Central Board of Direct Taxes. - The appeal is accordingly disposed of - INCOME TAX APPEAL NO.3334 OF 2010 - - - Dated:- 7-3-2012 - DR.D.Y.CHANDRACHUD M.S. SANKLECHA, JJ. Mr. A.R. Malhotra with Ms. Padma Divakar for the Appellant. Mr. R.A. Shaikh for the Respondent. ORAL JUDGMENT (Per. DR.D.Y.CHANDRACHUD, J.) : 1. This Appeal arises from a decision of the Income Tax Appellate Tribunal dated 3 November 2009; the Assessment Year in question being Assessment Year 2005-06. The Appeal raises the following substantial questions of law : 1. Whether on the facts and in the circumstances of the case, the Tribunal, in law, was right in holding that the assessee being a notified person under the Special Court (Trial of Offences relating to Transactions in Securities) Act, 1992 is not liable to pay interest u/s. 234A, 234B, 234C of the IT Act, 1961; 2. Whether on the facts and in the cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t consider the judgment of the Supreme Court in Harshad Shantilal Mehta v. Custodian (1998) 231 ITR 871 which specifically took the view that interest or penalty for any action or default after the date of the notification would not be covered by the Special Court Act. The Special Court, according to the judgment of the Supreme Court, is required to consider this question only from the point of view of distribution of any part of the surplus assets in the hands of the custodian after the discharge of liabilities under Section11(2) (a) and 11(2)(b) of the Special Court Act. That, however, would have no bearing on the principal question as regards the liability to pay interest under Sections 234A, 234B and 234C as the case may be, which does not fall within the domain of the Special Court; (iv)The Central Board of Direct Taxes has issued a direction on 26 June 2006 in pursuance of the provisions of Section 119(2)(a) of the Income Tax Act, 1961, regarding the waiver of interest under Sections 234A, 234B and 234C by which the Chief Commissioner of Income Tax has been vested with the power to reduce or waive interest charged under those provisions in certain specified cases. Consequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statute is a code in itself for the imposition of tax, penalty or interest. Hence, the remedy of a notified person who is assessed to penalty or interest after the notified period would be to move the appropriate authority under the taxing statute in that connection. In that context the Supreme Court held as follows : If it is open to him under the relevant taxing statute to contend that he was unable to pay his taxes on account of the attachment of all his properties under the Special Court Act, and that there is a valid reason why penalty or interest should not be imposed upon him after the date of notification, the concerned authorities under the Taxing Statute can take notice of these circumstances in accordance with law for the purpose of deciding whether penalty or interest can be imposed on the notified person. The Special Court is required to consider this question only from the point of view of distributing any part of the surplus assets in thehands of the Custodian after the discharge of liabilities under Section 11(2)(a) and 11(2)(b). The Special Court has full discretion under Section 11(2)(c) to decide whether such claim for penalty or interest should be paid out o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se jurisdiction he is assessable to incometax, and as a result, he did not pay income-tax in relation to such income in any previous year, and subsequently, in consequence of any retrospective amendment of law or the decision of the Supreme Court of India, or as the case may be, a decision of a larger Bench of the jurisdictional High Court (which was not challenged before the Supreme Court and has become final), in any assessment or reassessment proceedings the advance tax paid by the assessee during such financial year is found to be less than the amount of advance tax payable on his current income, and the assessee is chargeable to interest under section 234B or section 234C, and the Chief Commissioner/ Director- General is satisfied that this is a fit case for reduction or waiver of such interest. (d) 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 Assessing Officer. The circular clarifies further that the cases referred to in paragraphs 2(a) and 2(d) are specified only for the purposes of waiver of interest under Section 23 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stand attached simultaneously with the issuance of the notification. The property attached is thereafter required to be dealt with by the Custodian in such manner as the Special Court may direct. Under Section 9A, the Special Court can exercise all the jurisdiction, power and authority as were exercisable by a Civil Court in relation to any matter or claim relating to any property standing attached under Section 3(3). Under Section 11(1) the Special Court is entrusted with the jurisdiction to make such orders as it may deem fit directing the Custodian in regard to the disposal of property under attachment. Section 11(2) provides as follows : 11(2) The following liabilities shall be paid or discharged in full, as far as may be, in the order as under - (a) All revenues, taxes, ceases and rates due from the persons notified by the Custodian under sub-section (2) of section 3 to the Central Government or any State Government or any local authority; (b) All amounts due from the person so notified by the Custodian to any bank or financial institution or mutual fund; (c) Any other liability as may be specified by the Special Court from time to time. Under Section 13 the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecial Provisions) Act 1985 are special Acts and in the event of a conflict, the later Act namely the Special Court Act would prevail. In the Tax Recovery Officer v. Custodian (supra) the Custodian in exercise of powers under Section 3(2) notified Dhanraj Mills Private Limited as a notified person. The assets of the notified person stood attached. Killick Nixon Private Limited together with its group companies owed money to the notified person and the custodian filed suits for recovery. The suits were decreed by the Special Court. In execution, the Special Court appointed a Receiver for taking charge of the assets of Killick Nixon and its group companies and thereafter certain properties were put to auction and money was realised. The Tax Recovery Officer filed an application for intervention before the Special Court with a prayer that the Custodian be directed to consider a claim for the recovery of arrears of income tax from Killick Nixon on a priority basis before the distribution of the sale proceeds to any other creditor. The intervention applications were dismissed by the Special Court. The Supreme Court observed that under clause (a) of sub-section (1) of Section 9A, on and f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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