AI Structured Summary
Not yet generated for this judgment
Judgment
S.J. Mukhopadhaya, J.—This appeal has been preferred by the CIT, Central-I, Madras and 2 others (hereinafter referred to as the
''Revenue'') against the order dt. 17th July, 1998, passed by the learned single Judge in Writ. Petn. No. 8779 of 1989. By the said judgment,
learned single Judge held that the respondent/writ petitioner (hereinafter referred to as the ''assessee'') has made out a case for waiver of interest,
as was levied u/s 217 of the IT Act (hereinafter referred to as the ''Act'') and set aside the impugned decision dt. 6th Dec, 1988 in C. No.
1511/4(2 & 3)87-88/Cent-I and also directed the Revenue to waive interest as was levied on the assessee u/s 220(2) of the Act, amounting to Rs.
1,29,061.
The questions that arise for determination in this case are:
(i) Whether the assessee was entitled for waiver of interest as was levied u/s 217 of the Act for the asst. yr. 1982-83 and 1983-84; and
(ii) Whether the assessee has made out a case for waiver of interest as was levied u/s 220(2) of the Act.
For determination of the issues, it is desirable to notice the relevant facts as mentioned hereunder:
For the asst. yr. 1982-83, the assessee ought to have filed return by 31st July, 1982, but actually he filed return on 6th Oct., 1983, followed by
revised return filed on 8th Jan., 1985. The assessing authority made assessment on 17th March, 1986.
For the asst. yr. 1983-84, the assessee ought to have filed return by 31st July, 1983, but he filed return on 6th Oct., 1983, followed by revised
return filed by the assessee on 18th March, 1986. The assessment was made on 29th Sept., 1986. After the assessments, the assessing authority
levied interest both under Sections 139(8) and 217 of the Act, as shown hereunder:
1982-83 1983-84
Interest u/s 139(8) Rs. 1,52,432 Rs. 11,658
Interest u/s 217 Rs. 6,24,482 Rs. 2,31,840
The assessee preferred two applications, both under Rule 117A of the Income Tax Rules, 1962 (hereinafter referred to as the ''Rules'') for waiver
of interest as was levied u/s 139(8) of the Act. Two separate applications were also preferred under Rule 40 for waiver of interest as were levied
u/s 217 of the Act. Apart from the other plea, the assessee pleaded that he could not anticipate the various additions made by the ITO and he was
prevented by sufficient cause from making a higher estimate of income level for the purpose of payment of higher advance tax. Further plea was
taken that the assessment having not been made within time, i.e., within one year from the date of filing of return, he was entitled for waiver.
The ITO rejected all the applications for waiver of interest. Against such order, the assessee moved before the Dy. CIT, Central Range-I,
Madras, who, vide order dt. 19th Dec, 1987, ordered to waive total interest as was levied u/s 139(8) of the Act. So far as waiver of interest as
was levied u/s 217 of the Act is concerned, it was partially waived for the period beyond 5th Oct., 1984, but interest upto 5th Oct., 1984 was
assessed for both the assessment years.
In view of the aforesaid order passed by the Dy. CIT, Central Range-I, Madras, the assessing authority, the ITO, issued order on 19th Jan.,
1988, and waived total interest as was levied u/s 139(8). So far as the interest u/s 217 for the asst. yr. 1982-83 is concerned, the ITO waived
interest amounting to Rs. 1,85,173 and the balance amount of interest i.e., Rs. 2,83,572 was assessed. In respect of the asst. yr. 1883-84, after
waiving interest levied u/s 217 for the period beyond 5th Oct., 1984, the rest of the interest amount of Rs. 87,946 was assessed. The two revision
applications, thereafter, preferred by the assessee, were dismissed by the CIT(Central-I), Madras, by impugned order dt. 6th Dec, 1988, vide C.
No. 1511/4(2&3) 87-88/Cent-I.
The ITO, thereafter, vide demand letter dt. 12th Dec, 1988, made the following outstanding demand for the asst. yrs. 1982-83 and 1983-84:
(i) Interest levied u/s 217 Rs. 1,72,996
(ii) Interest levied u/s 220(2) charged upto date of
certificate u/s 222, i.e., upto 2nd Dec, 1986. Rs. 1,23,063
According to the counsel for the Revenue, the assessment was made within one year from the date of submission of the return and thus the
assessee was not entitled for waiver of interest under Rule 40(1). On the other hand, according to the counsel for the assessee, the return for the
assessment years having been filed on 6th Oct., 1983, and the assessments having been made after more than one year, the assessee was entitled
for waiver of interest as was levied u/s 217. It was further submitted on behalf of the assessee that there cannot be a partial waiver of interest, as
has been done vide the impugned order.
Learned Counsel for the assessee further contended that there being no intentional delay on the part of the assessee to file return, such plea
having been accepted while waiving interest under Rule 117A, the assessee was entitled for waiver of interest under Rule 40(1) on the same
ground. Learned single Judge accepted the submission as was made on behalf of the assessee and held that the assessments were made about 2-
1/2 years of filing of return and ground as taken by the assessee having been accepted for waiving interest under Rule 117A, the assessee was
entitled for relief as claimed for. By impugned judgment dt. 17th Jan., 1990, learned single Judge not only set aside the impugned order dt. 6th
Dec, 1988, passed by the revisional authority vide C. No. 1511/4 (2 & 3) 87-88/Cent-I, but also directed the Revenue to waive interest as was
levied u/s 220(2) of the Act.
It will be evident from the order that interest as were levied u/s 217 for both the assessment years for the period beyond 5th Oct., 1984 was
waived, but the interest levied upto 5th Oct., 1984 was sustained. To know the nexus of putting a cut-off date of 5th Oct., 1984 in levying interest
u/s 217, when confronted,, learned Counsel for the Revenue submitted that the original return for both the assessment years were submitted on 5th
Oct., 1983 and for that interest u/s 217 was levied for a period of one year, i.e., 5th Oct., 1984.
From a bare reading of Section 217 of the Act, it will be evident that the Revenue is empowered to levy interest if the assessee failed to submit
his advance tax in time. No period has been specified for levying such interest for such specified period.
Rule 40 provides condition precedent for waiver of interest levied u/s 217, which reads as follows:
The ITO may reduce or waive interest payable u/s 215 or Section 217 in the cases and under the circumstances mentioned below, namely:
(1) When the relevant assessment is completed more than one year after the submission of the return, the delay in assessment not being attributable
to the assessee.
(2) Where a person is u/s 163 treated as an agent of another person and is assessed upon the latter''s income.
(3) Where the assessee has income from an unregistered firm assessed under the provisions of Clause (b) of Section 183.
(4) Where the previous year is the financial year or any year ending about the close of the financial year and large profits are made after the 1st
March (or the 15th March in cases where the proviso to Section 211 applies), in circumstances which could not be foreseen.
(5) Any case, in which the IAC considers that the circumstances are such that a reduction or waiver of the interest payable u/s 217 is justified.
(6) Nothing contained in this rule shall apply in respect of any assessment for the assessment year commencing on the first day of April, 1989, or
any subsequent assessment year.
As per the aforesaid rule, waiver is determined on the basis of the period of assessment, if delay is not attributable to the assessee.
Admittedly, the assessee filed return on 5th Oct., 1983 for both the assessment years, followed by revised return filed on 8th Jan., 1985 for
the asst. yr. 1982-83 and 18th March, 1986 for the asst. yr. 1983-84. Both the assessments were made taking into consideration the original as
also the revised return filed by the assessee.
The word ""return"" has not been defined under the IT Act nor under the Rules framed thereunder. The question raised as to what should be the
date of return for calculating the period of one year for the purpose of Rule 40 if a return is followed by a revised return filed by assessee and
taken into consideration for the purpose of assessment. This depends on the question whether the delay in assessment is attributable to the
assessee or the Revenue.
In the present case, the returns were filed after much delay, but it was not acted upon and no assessment was made on the basis of the original
return. It is only when the revised returns were filed, they were taken into consideration along with the original returns for assessment. The
assessee, thus having taken advantage of the revised returns for the purpose of assessment, for the purpose of waiver of interest under Rule 40(1),
he cannot take advantage of his delay in filing the return and revised return and, thereby, cannot claim benefit by counting the period from the date
of original return. The assessee, in the present case, not only submitted his return much beyond the period by which he ought to have filed such
return, but filed revised return after 2 to 2-1/2 years from the date he ought to have filed such return. Therefore, he cannot take advantage of
waiver of interest under Rule 40(1) by giving the reference of filing of the original return for the purpose of counting the period as prescribed under
the said rule.
The condition precedent for waiver of interest under Rule 117A is different from the condition precedent for waiver of interest under Rule
40(1). While absence of intentional delay in filing the return could be accepted for waiver of interest under Rule 117A, for waiver of interest under
Rule 40, no such ground is available except the ground of delay in assessment of more than one year, if not attributable to the assessee. Thus, the
benefit of waiver of interest allowed under Rule 117A cannot be relied upon for the purpose of waiver of interest under Rule 40(1).
So far as waiver of partial interest levied u/s 217 is concerned, Rule 40 prescribes reduction or waiver of interest. If a case is made out and it
is seen that there was a delay in assessment for more than one year of submission of return, and not attributable to the assessee, or if any of the
ground is satisfied as mentioned under Clause (2) to (16) of Rule 40, then reduction or waiver of interest could be made in appropriate cases.
While total waiver of interest could be made, in a particular situation, the ITO may reduce the interest to the extent as permissible under the law.
But such determination cannot be arbitrary and must have a nexus with the period and reduction so made. It has already been mentioned that no
limitation has been prescribed u/s 217 for limiting interest to be levied under the said provision. In this background, it was not open to the authority
to reduce interest levied u/s 217 to a period upto 5th Oct., 1984. However, as the order passed by the Dy. CIT, Central Range-I, Madras, dt.
19th Dec, 1987, was not challenged by the Revenue, this Court is not interfering with the order to the extent such waiver has been allowed in
favour of the assessee for the period beyond 5th Oct., 1984.
Learned single Judge has failed to notice the aforesaid facts and also failed to make the distinction between Rules 117A and 40 and without
taking into consideration the delay in filing the return attributable to the assessee, passed the impugned order dt. 17th Jan., 1990 (sic) and allowed
the writ petition.
So far as interest u/s 220(2) is concerned, such interest was levied upto the date of certificate issued u/s 222 amounting to Rs. 1,22,060 for the
asst. yr. 1982-83 by letter dt. 12th Dec, 1988. Admittedly, the aforesaid letter was not challenged by the assessee in the writ petition, though he
claimed waiver of interest as levied u/s 220(2), relevant portion of which reads as follows:
(1) Any amount, otherwise than by way of advance tax, specified as payable in a notice of demand u/s 156 shall be paid within (thirty) days
of the service of the notice at the place and to the person mentioned in the notice.
(2) If the amount specified in any notice of demand u/s 156 is not paid within the period limited under Sub-section (1), the assessee shall be liable
to pay simple interest at one per cent for every month or part of a month comprised in the period commencing from the day immediately Mowing
the end of the period mentioned in Sub-section (1) and ending with the day on which the amount is paid.
(2A) Notwithstanding anything contained in Sub-section (2), the Chief CIT of CIT may reduce or waive the amount of interest paid or] payable by
an assessee under the said sub-section if he is satisfied that-
(i) payment of such amount has caused or would case genuine hardship to the assessee;
(ii) default in the payment of the amount on which interest has been paid or was payable under the said sub-section was due to circumstances
beyond the control of the assessee; and
(iii) the assessee has co-operated in any inquiry relating to the assessment of any proceeding for the recovery of any amount due from him.
It has already been noticed that the assessee had not paid advance tax within the prescribed time, though he tried to explain his conduct. There
is nothing on the record to suggest that any application was filed by the assessee u/s 220(2A) for reduction or waiver of interest as was levied u/s
220(2). In absence of such challenge to order dt. 12th Dec, 1988, and in absence of any such application u/s 220(2A) for reduction or waiver of
interest, and further in absence of any such pleading made in the writ petition, it was not open to the learned single Judge to direct the Revenue to
waive such interest levied u/s 220(2) and for that the impugned judgment cannot be upheld.
For the discussions as made above and reasons aforesaid, we set aside the impugned judgment dt. 17th July, 1998, passed by the learned
single Judge in Writ. Petn. No. 8779 of 1989 a nd allow the Revenue to recover the interest as demanded in accordance with law. The writ appeal
is allowed with the aforesaid observations. But in the facts and circumstances, there shall be no order as to costs.