S. Pankajam vs Chief Commissioner of Income Tax and Another

B. Rajendran, J.—A batch of writ petitions have been filed by the family members and partners of a group of organisations having different partnership firms and companies and businesses in respect of their assessments for the years 1990-91, 1991-92, 1992-93 and 1993-94.

The short facts, for consideration, are that there were disputes among the partners and family members. They were all partners in various partnership concerns as well as directors in the companies, shareholders in the companies and as there were two groups in respect of business concerns, there were loggerheads between them and as the accounts were not finalised the returns for the partnership organisations were not finalised and filed. Consequently, as per the then provision available, without the contribution from the partnership firms, the accounts of the individual could not also be finalised nor the returns filed. Therefore, they have failed to file the returns in time. Pending these disturbances and non-filing of the returns in February 1992, there was a surprise raid in respect of both these groups and the account books were seized, and thereafter, since the account books were also under the custody of the Income Tax Department, they could not further file returns for the year 1993-94, which was the contention raised by the petitioners. Subsequently after raid, they have sought for notice u/s 148 of the Act and as per notice, they have submitted their returns and the returns have been accepted, assessments completed and no penalty was levied. Naturally, in view of the delay in filing returns, they were bound to pay interest under sections 234A, 234B and 234C of the Act. As far as the claim made by the Income Tax Department is concerned, they had to pay, but, as per the provisions under the Central Board of Direct Taxes (CBDT) Circular F. No. 400/234/95/IT(B) dated May 23,1996, they applied for the waiver of payment of interest under Sections 234A, 234B and 234C of the Act. As the petitioners would claim that they were for the reasons beyond their control, they were prohibited from finalising the accounts, and hence, waiver should have been given to them. These writ petitions have been filed on the rejection made by the authority concerned from the levy of interest under Sections 234A, 234B and 234C of the Act. All the writ petitions are commonly filed on the same ground in respect of all the petitioners.

Mr. R. Sathiamoorthy, learned senior standing counsel appearing for the Income Tax Department has filed detailed counters in all the cases and specifically pleaded that the petitioners are not entitled to the relief as claimed by them as waiver of interest will be only attracted if the conditions prescribed in the circular are followed and if it is available to the concerned petitioners, and, therefore, they have no case at all for challenging the order. At the same time, the learned senior standing counsel appearing for the Income Tax Department fairly brought to the notice of this Court the subsequent order dated June 26, 2006 under Order F. No. 400/129/2002-IT(B), wherein it has been held that earlier orders u/s 119(2)(a), dated May 23,1996 and January 30,1997, 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 in accordance with the orders u/s 119(2)(a) dated May 23, 1996 and January 30, 1997, such orders allowing waiver should not be reopened/revised as per the guidelines contained in this order. As per the new circular, it has superseded all the earlier circulars, and, therefore, they claimed the order under the earlier circular is not maintainable. Therefore, the writ petitions are liable to be dismissed.

Heard the learned senior counsel appearing for the petitioners and the learned senior standing counsel appearing for the respondents.

The learned senior counsel appearing for the petitioners even at the time of argument brought to the notice of this Court that there was a difference of opinion in respect of the two groups of partners, persons, relatives in respect of companies and partnership concerns and that each group separately filed their returns, and ultimately, it was concluded and the other group also filed for a waiver of interest under Sections 234A, 234B and 234C of the Act. But, insofar as the waiver application filed by the other group in seven cases much prior to the impugned order passed in the case of this group, the Chief Commissioner, Chennai, by his proceedings C. No. CCA/105(14)/CBE/1998-99, dated October 31, 2000, in respect of other group interpreting the Board''s Order F. No. 400/234/95-IT(B), dated May 23,1996, and ordered it is applicable and did not waive the total interest under Sections 234A, 234B and 234C of the Act, but they have reduced the interest under sections 234A and 234B restricted to the extent of 10 per cent. for all the assessment years and in so far as the claim u/s 234C was rejected.

But, it was also clearly submitted by the learned senior counsel appearing for the petitioners that this order was not brought to the notice of the Joint Chief Commissioner when the impugned order was passed. He would further plead that between the petitioners and the other parties for whom the concession was given or on the same footing and in respect of the very same assessment year as the entire assessment was only based on the assessment in respect of the partnership firms are concerned, similar concession should have been granted. But as rightly pointed out by the learned senior counsel appearing for the Income Tax Department that this was not brought to the notice of the concerned officer at that point of time. Therefore, it could not have been taken into consideration at all. But, even otherwise, at this point of time, both the learned senior counsel appearing for the petitioners as well as the Income Tax Department brought to the notice of the subsequent development of the order in the Central Board of Direct Taxes order regarding waiver of interest and the latest position subsequent to the filing of the petition on June 26, 2006 whereby the earlier waiver procedures have been superseded. Therefore, they cannot claim under the original waiver order in F. No. 400/234/95-IT(B), dated May 23, 1996. The learned senior counsel appearing for both sides brought to the notice of this Court clause 4 which reads as follows:

Earlier orders u/s 119(2)(a) dated May 23, 1996, and January 30,1997, 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 in accordance with the orders u/s 119(2)(a) dated May 23, 1996, and January 30, 1997, such orders allowing waiver should not be reopened/revised as per the guidelines contained in this order.

On a reading of clause 4, it is very clear that if any petition in that case has been rejected because the Board has not issued a direction, the earlier such petition may be reconsidered and decided in accordance with this order, Therefore, where a case for waiver of interest has been rejected by the officer prior to the coming into force of this Central Board of Direct Taxes order, it is always open for an assessee to bring to the notice of the concerned Chief Commissioner for a revision pursuant to the implementation of this Central Board of Direct Taxes order. But, inasmuch as the petitioners'' case is now pending before this Court challenging the original order of rejection and also in view of the fact that in all those circumstances in respect of the very same group companies another Chief Commissioner even as per the earlier order has granted a limited waiver the senior counsel pleaded that the matter may be remitted back to the first respondent for fresh consideration in view of the Department''s latest order dated June 26, 2006.

Considering the limited prayer of the learned senior counsel appearing for the parties and taking into consideration the very order itself clearly states that when there is a rejection such petition may be reconsidered and decided in accordance with the new order dated June 26, 2006, no harm could be caused to the Department in reconsidering the very same issue especially when in identical matter between the same parties waiver had been given to the other group.

Hence, without going into the merits of the case at all, leaving it open to the Chief Commissioner to decide afresh on the merits, if the petitioners are entitled under law to decide the question whether they are entitled to waiver under Sections 234A, 234B and 234C. Hence, the impugned order dated March 21, 2003, is set aside and the matter is remitted back to the first respondent to reconsider the matter afresh in the light of the Central Board of Direct Taxes order dated June 26, 2006, and pass orders in accordance with law after giving an opportunity to the petitioners to substantiate their case on the merits. These writ petitions are allowed to the extent indicated above by remitting the matter to the first respondent to decide afresh. No costs. Consequently, connected miscellaneous petitions are closed.