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TMI Blog1996 (5) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 3,71,000 and gold ornaments/bullion worth Rs. 55,65,852 were recovered during the search and seizure operations. Out of this, the petitioner-Sant Lal had a share of Rs. 2 lakhs in the cash and Rs. 4,00,140 in the jewellery, etc. Gold worth Rs. 12,64,743 was released and the rest was seized. The petitioner says that immediately after the seizure was done he made an application to the Assistant Commissioner to adjust the amount of tax due from the assessee. Further allegation of the petitioner is that in order to file a return of income for the year 1988-89, he had made requests, vide annexures "P-2" to "P-7" to the Departmental authorities to make available all the copies of the statements recorded during the search operation and also to supply the copies of books/documents seized by the Department, but, respondent No. 3 did not pay any heed to the request made by the petitioner. Not only this, opportunity of inspection was also not given to the petitioner. Photostat copies of the material seized were made available in the year 1990, but, those were also incomplete. At the time of filing of the return, the petitioner is said to have given a detailed note indicating reasons for hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration have been retained in the custody of the Revenue and the same cannot be adjusted towards advance tax. The allegation of the petitioner regarding alleged high-handedness on the part of the Departmental authorities has been contested. The respondents have pleaded that the request of the petitioner for return of documents could not be accepted because the proceedings were pending against him and others. It has also been pleaded by the respondents that there is no requirement of applying the principles of natural justice before passing orders under sections 234A to 234C of the Act and, therefore, the orders passed by the authorities cannot be termed as arbitrary or unreasonable. In his replication, the petitioner has denied the assertion of the respondents that the appeal of the petitioner is pending before the appellate authority against charging of interest. According to the petitioner, the appeal has been filed against the deletion made by the Assessing Officer on other issues. The petitioner also says that pendency of settlement proceedings cannot be treated as an alternative remedy. The first contention urged by Shri Aggarwal, learned counsel appearing for the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilure of the assessee to furnish the return by the specified date, but, the proviso to that section empowered the Assessing Officer to reduce or waive the interest payable by the assessee under sub-section (8) of section 139. Section 215 also provided for levy of interest at the rate of 15 per cent. per annum where the advance tax paid by the assessee was found to be less than seventy-five per cent. of the assessed tax. Section 216 provided for levy of simple interest at the rate of 15 per cent. per annum in the cases covered by sections 209 or 212 or 213 of the Act. Sections 234A to 234C replaced the old provisions as is evident from the Direct Tax Laws (Amendment) Bill, 1987. A plain reading of the Statement of Objects and Reasons incorporated in the Bill shows that a Committee was constituted by Parliament for simplification and rationalisation of direct taxes. The Committee took into consideration the views of Members of Parliament, economists and industrialists apart from those expressed by new taxpayers. On the basis of the recommendations of the Committee, the Bill was introduced with a view to provide mechanism for simplification of the law and procedure relating to direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form part of the recovery machinery provided in a taxing statute. It is for the State to provide by what means payment of tax is to be enforced and a person who does not pay the amount of tax lawfully and admittedly due by him can hardly complain of the measures adopted by the State to compel him to pay such amount. It neither lies in the defaulter's mouth to protest against the rate of interest charged to him nor is it open to him to dictate to the State the methods which it should adopt for recovering the amount of tax due by him. " In Central Provinces Manganese Ore Co. Ltd. v. CIT [1986] 160 ITR 961, the Supreme Court was considering the nature of the levy of interest under sections 139(8) and 215 of the Act. It was held that even though called penal interest, the levy under these two provisions was only compensatory in nature. The following passage from the judgment speaks out the logic behind that view : " At the very outset, it is necessary to consider the nature of the levy of interest under sub-section (8) of section 139 and under section 215. It is not correct to refer to the levy of such interest as a penalty. The expression 'penal interest' has acquired usage, but i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 86] 160 ITR 961, we hold that the charging of interest did not become transformed into penalty. " In Union Home Products Ltd. v. Union of India [1995] 215 ITR 758, a learned single judge of the Karnataka High Court examined various facets of contentions raised on behalf of the assessee to challenge the constitutional validity of sections 234A to 234C of the Act. The learned single judge held : " The question whether the provision making interest payable on the happening of any event is a provision which is compensatory in character will have to be answered in the context of the language and the purpose behind the provision and not by reference to other provisions of similar or analogous nature. Viewed thus, it is not possible to hold that the provisions of sections 234A, 234B and 234C are provisions of a penal nature simply because, in actual application of these provisions there may be situations where an assessee may render himself liable to payment of interest under each one of these provisions simultaneously for the same period nor can the compensatory nature of the provisions be deemed to have been lost simply because in a given situation, the provisions may, on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessing authority to waive or reduce interest and, therefore, the provisions impugned are unreasonable. It is well-settled that the Legislature is presumed to be aware of the needs of the time and the measures to be adopted for collection of revenue and the courts cannot interfere with the legislative instrument merely because there does not exist a provision in the statute giving some discretion to the authorities constituted under the Act. It is also well-settled that mere hardship to a particular party cannot be a ground for holding that the statute is unreasonable. Under the taxing statutes, greater degree of latitude vests with the Legislature. The choice of the Legislature in matters pertaining to taxes as well as the mode and manner of recovery of taxes cannot ordinarily be interfered with by the court. In R. K. Garg v. Union of India [1982] 133 ITR 239, a Constitution Bench of the Supreme Court examined the degree of discretion vesting in the Legislature in taxing statutes and held : " Another rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Reig Refining Co. [1950] 94 L. Ed. 381, be converted into Tribunals for relief from such crudities and inequities. There may even be possibilities of abuse, but that too cannot of itself be a ground for invalidating the legislation, because it is not possible for any Legislature to anticipate as if by some divine prescience, distortions and abuses of its legislation, which may be made by those subject to its provisions, and to provide against such distortions and abuses. Indeed, howsoever great may be the care bestowed on its framing, it is difficult to conceive of a legislation which is not capable of being abused by perverted human ingenuity. The court must, therefore, adjudge the constitutionality of such legislation by the generality of its provisions and not by its crudities or inequities or by the possibilities of abuse of any of its provisions. If any crudities, inequities or possibilities of abuse come to light, the Legislature can always step in and enact suitable amendatory legislation. That is the essence of the pragmatic approach which must guide and inspire the Legislature in dealing with complex economic issues. " The above passage provides a complete answe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejudice to the generality of the foregoing power,---- (a) the Board may, if it considers it necessary or expedient so to do, for the purpose of proper and efficient management of the work of assessment and collection of revenue, issue, from time to time (whether by way of relaxation of any of the provisions of sections 139, 143, 144, 147, 148, 154, 155, sub-section (1A) of section. 201, section 210, 211, 234A, 234B, 234C, 271 and 273 or otherwise), general or special orders in respect of any class of incomes or class of cases, setting forth directions or instructions (not being prejudicial to assessees) as to the guidelines, principles or procedures to be followed by other income-tax authorities in the work relating to assessment or collection of revenue or the initiation of proceedings for the imposition of penalties and any such order may, if the Board is of opinion that it is necessary in the public interest so to do, be published and circulated in the prescribed manner for general information ; (b) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorise any income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluding sections 234A to 234C of the Act. Whether in a given case or a class of cases, the Board may or may not provide relief is one thing but there can be no manner of doubt that the Board has been vested with the power to issue general directions to give relief in a class of cases. Shri Sawhney may be right in contending that the plain language employed in section 119(2) of the Act does not in so many words refer to an individual case, but, it is not possible to hold that mere absence of the expression "in any case" before the words "any class of incomes or class of cases" means that the Board can under no circumstances deal with an individual case. In our opinion, in a given case of an individual assessee or a group of assessees, the Board can, if it considers appropriate, exercise the power of granting relief from the rigours of sections 234A to 234C of the Act. In a given situation, a single case may constitute a class or a particular type of cases may constitute a special category. The Board may in a given case issue an order for treating an individual case as a class unto itself for the purpose of relieving an assessee of hardship. This view of ours finds support from th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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