Bohra Industries Ltd. V. Union of India through the Secretary, Ministry of Finance, Department of Revenue, North Block, New Delhi and The Chief Commissioner of Income Tax, 6, New Fatehpura, Udaipur

CW/7383/2015

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M/s. Bohra Industries Ltd. filed a writ petition against the Union of India and the Chief Commissioner of Income Tax, challenging the rejection of their application for waiver of interest charges due to late payment of taxes and advance tax for the Assessment Year 2011-12. The petitioner argued that the delay was caused by the government's late disbursement of subsidies under the Nutrient Based Subsidy Policy, which led to a liquidity crunch. The CCIT rejected the waiver application, stating that the petitioner had sufficient liquidity and was a habitual defaulter in tax payments. The High Court upheld the CCIT's decision, emphasizing that the petitioner's financial issues did not constitute 'unavoidable circumstances' as required by the CBDT circulars for a waiver of interest.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 701487 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 09-01-2019
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: K K BISSA
• Assessee Lawyers: ANJAY KOTHARI
• Keywords: Advance tax; Liquidity Crunch; Unavoidable circumstances; Waiver of interest; Subsidy delay
• Section: 143(1); 234B; 234A; 234C; 119(2)(a)

Judgement Text

"HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR S.B. Civil Writ No. 7383/2015 M/s. Bohra Industries Ltd., Through Sh. Lekhraj Jain S/o late Shri Prabhu Lal, Dy. General Manager (Finance & Taxation), Aged about 59 years, 301 Anand Plaza, Udaipur. ----Petitioner Versus 1. Union of India through the Secretary, Ministry of Finance, Department of Revenue, North Block, New Delhi. 2. The Chief Commissioner of Income Tax, 6, New Fatehpura, Udaipur. ----Respondents For Petitioner(s) : Mr. Anjay Kothari. For Respondent(s) : Mr. K.K. Bissa. HON'BLE MR. JUSTICE SANGEET LODHA Judgment 09/01/2019 1. By way of this writ petition, the petitioner has questioned the legality of order dated 20.5.15 passed by the Chief Commissioner of Income Tax (CCIT), Udaipur, rejecting an application preferred by the petitioner under Section 119 (2)(a) of the Income Tax Act, 1961 (for short “the Act”) for waiver of interest under Section 234A, 234B and 234C of the Act. 2. The facts relevant are that the petitioner, a Company, registered under the Indian Companies Act, 1956, submitted its return of income for the Assessment Year 2011-12 on 23.3.12 declaring total income after deductions at Rs.4,99,47,389/-. The total tax payable including surcharge, education cess, secondary (2 of 7) [CW-7383/2015] and higher education cess, was quantified at Rs.1,53,89,703/-. The return of income filed by the petitioner was processed under Section 143 (1) of the Act and thereafter, rectification order was passed on 13.6.12 wherein the interest under Section 234A for Rs.9,18,606/- , interest under Section 234B for Rs.18,25,256/- and interest under Section 234C for Rs.7,73,159/- was charged on account of delay in payment of taxes including advance tax. The petitioner preferred a petition for waiver of interest before the CCIT, Udaipur, on the ground that the delay in filing the return of income was occasioned on account of unavoidable circumstances, beyond the control of the petitioner inasmuch as, there was considerable delay in payment of substantial amount of subsidy by the Government for which the petitioner was entitled under the Nutrient Based Subsidy (NBS) Policy for Single Super Phosphate Fertilizer implemented w.e.f. 1.5.10. It was contended that the petitioner did not receive any interest on delay in disbursement of the subsidy and therefore, charging of interest for delay in payment of taxes/advance tax is unjustified. According to the petitioner company, it had become victim of two wings of the Government; one wing withholding its substantial payment for considerable time in form of subsidy and other wing by charging of interest for delay in payment of tax/advance tax. The petitioner explaining the tight liquidity position for the waiver of interest relied upon Circulars dated 23.5.96 and 26.6.06 issued by the Central Board of Direct Tax (CBDT). The petitioner claimed that clause (d) of CBDT circular dated 26.6.06 and clause (e) of circular dated 23.5.96 clearly bring out that where return could not be filed by the assessee due to circumstances beyond his control and such return is filed voluntarily by the assessee without (3 of 7) [CW-7383/2015] detection by the Assessing Officer, then the assessee is entitled to grant of waiver of interest chargeable under Section 234A, 234B and 234C of the Act. 3. After due consideration of the submission of the petitioner, the petition preferred by the petitioner seeking waiver of interest has been rejected by CCIT by the order impugned. Hence, this petition. 4. Learned counsel appearing for the petitioner contended that the petitioner had already paid the entire taxes before filing the return of income and the delay in payment of taxes occurred on account of unavoidable circumstances beyond the control of the petitioner. Learned counsel submitted that the clause (d) of circular dated 26.6.06 and clause (e) of circular dated 23.5.96 issued by the CBDT clearly provides that the waiver of interest deserves to be granted where the assessee is prevented by unavoidable circumstances from filing the return of income in time. Learned counsel submitted that in the instant case, it can reasonably be inferred that delay in filing the return had occurred on account of unavoidable circumstances, since the petitioner was facing acute liquidity crunch on account of delay in disbursement of subsidy amount by the Government of India. Learned counsel submitted that the CCIT has seriously erred in treating the fixed deposit lying with the secured creditors against lien as sufficient liquidity available with the petitioner. Learned counsel would submit that withholding of substantial amount of subsidy by the Government of India was the sole reason for the petitioner being not in position to deposit the advance tax and file the return in time and thus, the petitioner cannot be penalised for no fault on his part. (4 of 7) [CW-7383/2015] 5. On the other hand, the counsel appearing for the respondent contended that the issue regarding the petitioner company facing the financial crunch has been examined by the CCIT taking into consideration the totality of the facts and circumstances of the case and the finding arrived at regarding the availability of sufficient liquidity with the petitioner company cannot be faulted with. Learned counsel submitted that the petitioner’s case does not fall within the parameters laid down under the CBDT circular dated 26.6.06 for reduction or waiver of interest under Section 234A or Section 234B or Section 234C as the case may be and thus, the order impugned passed by the CCIT does not warrant any interference by this court in exercise of its extra ordinary jurisdiction under Article 226 of the Constitution of India. 6. I have considered the submissions of the learned counsels and perused the material on record. 7. Sections 234A, 234B and 234C of the Act provide for penal interest at the higher rates for defaults in late furnishing of return of income, defaults in payment of advance tax and for deferment of the advance tax respectively. But then, the provisions of Section 119 (2) (a), empowers the CBDT to issue directions or instructions authorizing the income tax authorities inter-alia to reduce or waive the interest charged under Section 234A, 234B and 234C of the Act. 8. Indisputably, in exercise of the power conferred under clause (a) of sub-section (2) of Section 119 of the Act, the CBDT vide circular dated 26.6.06 has empowered the Chief Commissioner of Income Tax and Director General of Income Tax to reduce or waive interest under Section 234A or Section 234B or Section 234C, as the case may be, in class of income or class of cases specified. (5 of 7) [CW-7383/2015] The petitioner claimed waiver of the interest under clause (d) of paragraph (2) of the Circular dated 26.6.06 which reads as under:- “(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 Assessing Officer.” 9. Precisely, the case of the petitioner before the CCIT was that the petitioner company has been facing acute liquidity on account of delay in disbursement of the subsidy by Government of India and therefore, the filing of its return of income was delayed and it also could not deposit the advance tax in time. The petitioner company pleaded that the delay was caused on account of unavoidable circumstances and for the reasons beyond its control and therefore, the waiver as prayed for deserves to be allowed. 10. A perusal of the order impugned passed by the CBDT reveal that while declining to grant the waiver, the matter with regard to the financial crisis as projected by the petitioner company has been taken into consideration in its entirety and objectivity. After due consideration of the material on record, the CCIT found that the petitioner company has received subsidy of Rs.2285.79 lacs during the year under consideration which includes subsidy of Rs.1044.77 lacs of earlier years. The CCIT observed that the petitioner company engaged in the business of fertilizer for last several years is receiving subsidies from the Government and thus, the delay in disbursement of the subsidy pleaded as reason for the financial crisis, is not tenable. On the basis of the material on record, the CCIT found that there is continuous increase in turn over and profits of the petitioner company and there was sufficient (6 of 7) [CW-7383/2015] surplus available with the petitioner company in the current year as well as in the preceding years. After going through the financial statement/ returns, the CCIT found that for the assessment year 2010-11 and assessment year 2011-12, there was sufficient cash balance in the hands of the company. The details of the cash balances and the continuous increase in the profit are set out in the order passed which are not disputed by the petitioner herein. It is pertinent to note here that during the relevant assessment year i.e. 2011-12, the petitioner company has earned highest profit which is much more than the profit earned by it in the preceding year as also in the subsequent year. During the assessment year 2010-11, the petitioner company earned net profit Rs.1,54,91,154/- and in the year 2012-13 it earned profit Rs. 5,19,13,276/-, whereas during the relevant assessment year 2011-12, it has earned net profit Rs.7,60,51,263/-. That apart, the CCIT has observed that the petitioner company is habitual defaulter in terms of payment of advance tax in earlier years as well as later years also. 11. Thus, on the facts and in the circumstances of the case, in the considered opinion of this Court, the findings arrived at by the CCIT that the alleged financial crunch was not the reason for delay in filing of the return and deposit of the advance tax by the petitioner company and the same cannot be considered to be an unavoidable circumstance so as to make the petitioner company entitled to claim waiver of the interest under clause (d) of paragraph (2) of circular dated 26.6.06, cannot be said to be capricious or perverse so as to warrant interference by this Court in exercise of its extra-ordinary jurisdiction under Article 226 of the Constitution of India. (7 of 7) [CW-7383/2015] 12. There is yet another aspect of the matter, as per paragraph (3) of circular dated 26.6.06, the class of cases referred to in paragraph (2) (a) and (2) (d) are specified only for the purposes of waiver of interest charged under Section 234A of the Act and thus, even otherwise, on the strength of paragraph 2 (d), the petitioner could not have claimed waiver of the interest under Sections 234B and 234C of the Act. 13. In view of the discussion above, no case for interference by this Court in exercise of its extraordinary jurisdiction under Article 226 of the Constitution of India is made out. 14. The writ petition fails, it is hereby dismissed. No order as to costs. (SANGEET LODHA),J 28-Aditya/- "