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TMI Blog2012 (4) TMI 348X X X X Extracts X X X X X X X X Extracts X X X X ..... . 205 of 2011 - - - Dated:- 29-3-2012 - S.C. DHARMADHIKARI and U.V. BAKRE, JJ. JUDGMENT U.V. Bakre, J. Heard Shri Mahesh Sonak, learned Counsel for the petitioners and Mrs. Asha Dessai, learned Counsel for the respondent. 2. Rule. Advocate Mrs. Dessai waives service on behalf of the respondents. 3. Heard forthwith with the consent of learned Counsel for the parties. 4. By this petition, filed under Articles 226 and 227 of the Constitution of India, the petitioners pray as under : "(A) This Hon'ble Court be pleased to issue a writ of certiorari or a writ or a writ in the nature of certiorari or any other appropriate writ, order or direction, calling for the records of the case from the Respondent No.1 and upon perusing the same, to quash and set aside the Impugned Order dated 12/7/2010 (ANNEXURE "A" TO THE PETITION); (B) This Hon'ble Court be pleased to issue a declaration that Paragraph 3 of the Order dated 26/6/2006 (ANNEXURE "B" TO THE PETITION), is ultra vires, illegal, null and void; and for an appropriate writ, order or direction to strike down Paragraph 3 of the Order dated 26/6/2006 (ANNEXURE "B" TO THE PETITION); (C) This Hon'ble Court a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year 2008-2009 as assessed by the respondents. However, there was justifiable and genuine reason for late payment of advance taxes for the financial year 2007-2008 and the consequent assessment year 2008-2009. Petitioner no. 1 has paid income tax of approximately Rs.6,06,21,700/- which includes interest components as follows : "Interest under Section 234B =Rs.19,02,740/- (Rupees Nineteen lakhs two thousand seven hundred forty only). Interest under Section 234C=Rs.25,55,518/- (Rupees twenty five lakhs fifty five thousand five hundred eighteen only)" 6. The present petition concerns waiver/refund of the said total interest in the sum of Rs.44,58,258/- paid by petitioner no. 1 under Section 234B and 234C of the Income Tax Act, 1961(said Act). The petitioners say as follows: They have made out a case for grant of waiver/refund and the same has been declined by misinterpretation and/ or narrow interpretation of the order F. No. 400/29/2002-IT(B), dated 26/06/2006(said Order) issued by the Central Board of Direct Taxes (CBDT). In the alternative, paragraph 3 of the said Order, to the extent it declines the benefit of waiver of interest charged under Section 234B and 23 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, which was required to be taken into consideration for grant of waiver of interest under Sections 234B and 234C of the said Act. ( d ) The advance tax of Rs.1 Crore 50 lakhs came to be paid at the quarter ended 15/03/2008. As per the tax paid on 30/09/2008, 25% percentage thereof and payable as advance tax would correspond to Rs.1 Crore 39 Lakhs. Thus, there was a short fall which again is clearly attributable to the same reasons set out in preceding paragraphs. The ultimate buyer (Unitech Private Ltd.) was interested in setting up a Hotel Project and as such, the contiguous property was required to be acquired and thereafter sold. Considerable infrastructure expenses were required to be incurred. In the circumstances, there was no justification for denial of waiver of interest" 7. The petitioners have further alleged as follows : When the final returns for the financial year 2007-2008 and the consequent assessment year 2008-2009 came to be filed by 30/09/2008, as a matter of abundant caution, the profits came to be declared as Rs.16,52,35,104/- which includes the interest component of Rs.44,58,258/- and the taxes of Rs.6,06,21,700/- again paid under Sections 234B and 23 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, etc. Since the income had already accrued during the financial year 2007-2008, the assessee cannot plead that this expenditure should have been considered for estimating the profits. It was further noticed that the assessee had not made any provision for payment of income tax liability though the same was quantified and ascertainable. The extract of the note on accounts vide items (2) and (3) of the schedule 15 indicates that the provisions for deferred tax liability has not been done since the amount required to be provided was not material. It is, therefore, that the CCIT rejected the petition under Section 119 of the said Act as the case of the assessee did not fall under the prescribed conditions as laid down in the said Order of CBDT and for other reasons mentioned in the order. The interest under Section 234A is charged for delayed filing of returns whereas the interests under Sections 234B and 234C are charged for short payment of advance tax or deferment of advance tax installments. The conditions stipulated for waiver of altogether different types of defaults ought to be in variance, for the said reason. In so far as the constitutional validity of the said Order is con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) NIL 100% II Installment on 15/09/2007 167 lakhs (30%) NIL 100% III Installment on 15/12/2007 166 lakhs (30%) 25 lakhs 141 lakhs IV Installment on 15/03/2008 139 lakhs (100%) 150 lakhs 380 lakhs (cumulative) Total tax payable (excluding TDS) 555 lakhs 175 lakhs 380 lakhs The assessee is bound to diligently estimate tax liability on the income declared and pay taxes within the prescribed period to avoid payment of interest which is only compensatory in nature. The assessee was required to pay Rs. 5.55 Crores (excluding TDS) as against which only a sum of Rs. 1.75 Crores was paid as advance tax on the ground of health/ financial hardship/ non-estimation of infrastructure expenses, etc. which do not entitle to waiver of interest. Break up of expenses claimed clearly indicates that majority of expenditure is ascertained and quantifiable. The assessee ought to have paid taxes on the income already accrued during the financial year on the basis of computerised accounts. The assessee is liable to pay the taxes including interest thereof, on income voluntarily d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee or his legal heirs, without detection by the Assessing Officer, the reduction or waiver of interest can be considered. He further pointed out that in terms of paragraph 3 of the said instructions, the class of cases referred to in paragraphs 2(a) to 2(d) are specified only for the purpose of waiver of interest charged under Section 234A of the Income Tax Act. He pointed out that the petitioners have asked for reduction of the interest charged under Sections 234B and 234C. The learned counsel also contended that the said Order does not cover all other eventualities covered under sections 234B and 234C of the said Act. 12. On the contrary, Mrs. A. Dessai, learned Counsel for the respondents, argued that Sections 234A, 234B and 234C of the said Act are all mandatory provisions and that the respondents are bound by the said Order which has been issued in the exercise of the powers under Section 119(2)(a) of the said Act. The difficulties mentioned by the assessee have no relation with quantifying further expenditure on the land purchased. She argued that the petitioners were required to make arrangement for payment of advance tax and not having done so, they are bound to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16. The said Order has been issued under Section 119(2)(a) of the said Act. Under the above Order, the Chief Commissioner of Income Tax and the Director-General of Income Tax may reduce or waive interest charged under section 234A, or section 234B or section 234C of the said Act in the classes of cases or classes of income specified in paragraph 2 of the said Order, for the period and to the extent, the Chief Commissioner of Income Tax/ Director General of Income Tax may deem fit. However, no reduction or waiver of such interest shall be ordered unless the assessee has filed the return of income tax for the relevant assessment year and paid the entire income tax (principle component of demand) due on the income as assessed. The Chief Commissioner of Income Tax or the Director General of Income Tax may also impose any other conditions as deemed fit for the said reduction or waiver of interest. Under clause (d) of paragraph 2 of the said Order, the reduction or waiver of interest under section 234A or section 234B or as the case may be section 234C, can be considered where a return of income could not be filed by the assessee due to unavoidable circumstances and such return of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany who are brothers, had faced difficulties on family front as their mother was sick and subsequently hospitalized which prevented the visits of the Directors to the sites at District Sindhudurg, where they had ventured into a new project of acquiring properties admeasuring about 2000 acres for the purpose of sale to Unitech Private Limited. Then, they have explained their difficulties to get proper feed backs about the sales, purchases and development activities at Sindhudurg, which is about 150 kilometres away from Calangute. They say that they had contacted another developer by name "Dantas Estates Pvt. Ltd." for acquiring the lands from farmers which lands were at scattered places which required heavy expenditure and further to buy places between two lands for having connectivity so that ownership would be on a continuous stretch of land for developing a Hotel Project by said "Unitech Pvt. Ltd." According to the petitioners, on account of the above income earned during the relevant year could not be anticipated in view of non-quantification/ estimation of expenses of development pertaining to land and other difficulties of sickness of mother. In this regard, the learned CCIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 234A, 234B and 234C of the said Act are concerned, a perusal thereof would be enough to indicate that Section 234A provides for interest for defaults in furnishing return of income. This provision falls in Chapter XVII which is entitled "COLLECTION AND RECOVERY INTEREST CHARGEALE". Section 234B provides for interest for defaults in payment of advance tax. Section 234C deals with interest for deferment of advance tax. A bare perusal of these provisions would indicate that the interest under Sections 234A, 234B and 234C is to cover cases of default in furnishing return of income, interest for defaults in payment of advance tax and lastly for deferment of advance tax. 22. In this light, if the said Order is construed, it provides as under : "In exercise of the powers conferred under clause ( a ) of sub-section (2) of section 119 of Income-tax Act, 1961, Central Board of Direct Taxes, hereby directs that the Chief Commissioner of Income-tax and Director General of Income-tax may reduce or waive interest charged under section 234A or section 234B or section 234C of the Act in the classes of cases or classes of income specified in paragraph 2 of this Order for the period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allenged 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. 3. The class of cases referred to in paragraphs 2( a ) and 2( d ) are specified only for the purposes of waiver of interest charged under section 234A of the Income-tax Act. 4. Earlier Orders under section 119(2)( a ) dated 23-5-1996 and 30-1-1997 on the subject stand superseded by this Order. If any petition in the past has been rejected because the Board had not issued this direction earlier, such petition may be reconsidered and decided in accordance with this Order. If any petition in the past was allowed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e interest charged under these three provisions alone and that too for specified classes of cases. Therefore, when they impose conditions while refusing or waiving interest in their discretion, what they have to do is to impose them only after they are satisfied that the case or class before them falls within paragraph 2 of this order and not otherwise. Ultimately, the Assessee cannot claim a vested right in seeking concessions and reductions or waiver of interest. 24. As far as paragraph 2 of the said Order is concerned, that should be read in its entirety. If this paragraph, together with other clauses, are read together, it would be apparent that in paragraph 2(a) what is dealt with is delay in furnishing return of income and, therefore, the waiver of interest, if there is a satisfactory and reasonable explanation for the delay and particularly when there is a clear case of search and seizure proceedings in which books of account and other incriminating documents have been seized. As far as clause (b) of paragraph 2 is concerned, that is with reference to Section 234C where interest is leviable for deferment of advance tax, if the Chief Commissioner or the Director General i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 234A of the said Act. The reason for this, is obvious because the interest charged under Section 234A is on account of default in furnishing return of income. 27. Mr. Sonak could not explain to us as to how two cases of default could be equated. One is a default in furnishing return of income and interest being charged for the same. In other cases, the interest chargeable is for default in payment of advance tax and deferred advance tax. The Assessee is obliged to file return of his income and that is how the default visits him with payment of interest. The Assessee is also liable to pay advance tax in cases covered by the Act and when there is default in payment of advance tax or there is a payment of advance made, but by deferring it, then, also the interest is leviable and chargeable. This interest is for distinct default and cannot be equated with default in filing of return of income tax. There is no substance in the contention of Shri Sonak that equals have been treated unequally. There is fallacy in the argument inasmuch as para 2 covers class of cases or classes of income. The cases themselves are enlisted and referable to distinct provisions, as has been pointed out ab ..... 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