E.O. Lawrence (Legal Heir) and Thankamma Lawrence and Lemin Lawrence and Lenil Lawrence and Leril Lawrence V. Union of India and Central Board of Direct Taxes and Principal Chief Commissioner of Income Tax and Tax Recovery Officer

WA/85/2018

AI Insights

The case involves E.O. Lawrence, the appellant, who challenged the demand of interest on delayed tax payments following a settlement with the Income Tax Department. The interest was demanded under Sections 158BFA and 245D(6A) of the Income Tax Act, 1961. The appellant argued that the Central Board of Direct Taxes (CBDT) erred in rejecting his waiver application for the interest under Section 158BFA, claiming the Settlement Commission did not have the authority to grant such waivers. The court, however, upheld the interest demand, stating that the levy was automatic post-assessment and the CBDT's discretion to waive interest applies only to classes of cases, not individually.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 813500 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 10-08-2023
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax, Mumbai v. Anjum M.H. Ghaswala and Others, Commissioner of Income Tax and Ors. v. B. Nagendra Baliga, Mahavir Manakchand Bhansali v. Commissioner of Income Tax, Precot Mills Lts. v. Central Board of Direct Taxes and Ors., Sant Lal v. Union of India and Ors., Sivanandiia Steels Ltd. v. Central Board of Direct Taxes & Ors., The Commissioner of Income Tax v. Mesco Airlines Ltd., Commissioner of Income Tax, Mumbai v. Anjum M.H. Ghaswala and Others, Commissioner of Income Tax v. Sant Ram Mangat Ram Jewellers and Others, Union of India and Another v. Azadi Bachao Andolan and Another, Union Home Products Ltd. v. Union of India and another
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: JOSE JOSEPH; P K MENON
• Assessee Lawyers: P R VENKATESH; P C CHACKOPARATHANAM; G KEERTHIVAS
• Keywords: Income Tax; Interest demand; Settlement commission; Waiver of interest; Writ Appeal
• Section: 119; 158BC; 158BFA; 220(2); 245D; 245D(6A); 119(2)(a)

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR & THE HONOURABLE MR.JUSTICE MOHAMMED NIAS C.P. THURSDAY, THE 10TH DAY OF AUGUST 2023 / 19TH SRAVANA, 1945 WA NO. 85 OF 2018 AGAINST THE JUDGMENT DATED 14.11.2017 IN WPC 25817/2017 OF HIGH COURT OF KERALA APPELLANT/PETITIONER: 1 E.O. LAWRENCE(Legal Heir) EDAKKALATHUR HOUSE, WELCOME VILLA, GURUVAYOOR ROAD,POONKUNNAM, THRISSUR DISTRICT.680002. [DIED ON 23.04.2018](ADDL. APPELLANTS 2 TO 5 ARE IMPLEADED AS ADDL. APPELLANTS 2 TO 5 AS PER THE ORDER DATED 24.06.2019 IN I.A.NO.1/2019 IN W.A.NO.85/2018) 2 THANKAMMA LAWRENCE W/O.LATE E.O. LAWRENCE, EDAKKALATHUR HOUSE, WELCOME VILLA, GURUVAYOOR ROAD, POONKUNNAM, THRISSUR DISTRICT-680 002. 3 LEMIN LAWRENCE S/O.LATE E.O. LAWRENCE, EDAKKALATHUR HOUSE, WELCOME VILLA, GURUVAYOOR ROAD, POONKUNNAM, THRISSUR DISTRICT-680 002. 4 LENIL LAWRENCE S/O.LATE E.O. LAWRENCE, EDAKKALATHUR HOUSE, WELCOME VILLA, GURUVAYOOR ROAD, POONKUNNAM, THRISSUR DISTRICT-680 002. 5 LERIL LAWRENCE S/O.LATE E.O. LAWRENCE, EDAKKALATHUR HOUSE, WELCOME VILLA, GURUVAYOOR ROAD, POONKUNNAM, THRISSUR DISTRICT-680 002. BY ADVS. SRI.P.R.VENKATESH SRI.P.C.CHACKOPARATHANAM SRI.G.KEERTHIVAS RESPONDENTS/RESPONDENTS: 1 UNION OF INDIA REPRESENTED BY ITS SECRETARY, DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, W.A. No. 85 of 2018 2 NORTH BLOCK, NEW DELHI - 110 001. 2 CENTRAL BOARD OF DIRECT TAXES, MINISTRY OF FINANCE, DEPARTMENT OF REVENUE, NORTH BLOCK, NEW DELHI – 110 001. 3 PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX, REVENUE BUILDINGS, I.S.PRESS ROAD, KOCHI-682 018. 4 TAX RECOVERY OFFICER, OFFICE OF THE PRINCIPAL COMMISSIONER OF INCOME TAX, AAYKAR BHAVAN, S.T.NAGAR, THRISSUR - 680 001. BY ADVS. SRI.JOSE JOSEPH, SC, FOR INCOME TAX SRI.P.K.RAVINDRANATHA MENON SR. THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 10.08.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.A. No. 85 of 2018 3 Dr. A.K. JAYASANKARAN NAMBIAR & MOHAMMED NIAS C.P., JJ …................................................... W.A. No. 85 of 2018 ….............................................................. Dated this the 10th day of August, 2023 JUDGMENT Dr. A.K.Jayasankaran Nambiar.J The petitioner in W.P.(C) No. 2581/2017 is the appellant before us, aggrieved by the judgment dated 14.11.2017 of the learned Single Judge. 2. The brief facts necessary for disposal of this Writ Appeal are as follows: The writ petition was preferred by the appellant herein impugning Exts.P11 and P16 orders. Ext.P11 was an order passed by the Central Board of Direct Taxes (for brevity, CBDT) in an application filed by the appellant under Section 119 of the Income Tax Act, 1961 (for brevity, 'the Act'). Ext.P16 was the demand notice issued by the Income Tax Authorities based on the settlement arrived at before the Settlement Commission in Ext.P5 order. The essential grievance of the appellant as projected in the writ petition was with regard to the demand of interest under Section 158BFA of the Act, as also under Section 245D(6A) of the said Act. While out of the total demand of Rs.29,97,692/- mentioned in Ext.P16 demand notice dated 29.05.2017, an amount of Rs.16,29,669/- represented the interest under Section 158BFA of the Act demanded from the appellant for the period from 08.01.1999, the date on W.A. No. 85 of 2018 4 which the notice under Section 158BC was issued to him calling upon him to file return the income for the block period 1988 to 1998 to 01.05.2000, the date on which he eventually filed rerun of income for the said block period, the balance amount was towards the interest under Section 245D(6A) of the Act for delayed payment of tax found due and payable by the appellant before the Settlement Commission. 3. The challenge of the appellant against the aforesaid demand was essentially on the ground that in respect of the demand of interest under Section 158BFA he had preferred an application before the CBDT, (Ext.P10), by invoking the provisions of Section 119(2)(a) of the Act. The CBDT had by Ext.P11 order dated 01.09.2010 rejected the application for waiver by citing the reason that the exclusive jurisdiction to grant waiver of interest was vested absolutely with the Settlement Commission and not with the CBDT. The reasoning in Ext.P11 order, according to the appellant was incorrect in as much as it was evident from the decision of the Supreme Court in Commissioner of Income Tax, Mumbai v. Anjum M.H. Ghaswala and Others [(2002) 1 SCC 633] that the Settlement Commission did not have the power to grant relief of waiver of interest under Section 119(2)(a) and the said power to grant waiver of interest lay only with the CBDT. As regards the demand of interest under Section 245D(6A), the appellant had erroneously assumed that the interest under this provision was levied in terms of Section 220(2) of the Act, and therefore, had approached the Principal Chief Commissioner of Income Tax with Ext.P17 petition under Section 220(2A) of the Act seeking waiver of interest and the said authority had not passed any W.A. No. 85 of 2018 5 order thereon. 4. The learned Single Judge who considered the matter rejected the contentions of the appellant inter alia on the finding that the levy of interest under Section 158BFA was automatic once the quantum of tax payable by the appellant was determined finally by the Settlement Commission. The learned Judge also found that in as much as the appellant had not impugned the order of the Settlement Commission at any stage, the interest under Section 158BFA for the period from 08.01.1999 to 01.05.2000 (when he actually filed returns in response to the notice under Section 158BC of the Act) was automatic. With regard to the contention regarding the erroneous reasoning cited by the CBDT while rejecting the appellant's claim for waiver of interest under Section 158BFA, the learned Single Judge found that Section 119 of the Act did not contemplate a situation where a waiver of interest could be granted in individual cases and in so far as there was no general or specific circular issued by the CBDT in relation to a class of cases to which the appellant could fit, the CBDT could not be directed to exercise its power of waiver of interest in favour of the appellant. The learned Single Judge also took note of the fact that the appellant had approached the CBDT after almost a decade from the orders of the Settlement Commission and that aspect also weighed with the Single Judge in denying relief to the appellant and dismissing the writ petition. 5. Before us, it is the submission of Sri. Keerthivas. G, the learned counsel for the appellant that the learned Single Judge did not take into W.A. No. 85 of 2018 6 account the circumstances under which the appellant was forced to file only a belated return pursuant to a notice under Section 158BC of the Act. He specifically adverts to Ext.P3 and similar representations preferred by him before the Income Tax Department seeking extension of time to file return stating therein that the documents, on the basis of which a true and complete return could be filed, had been seized by the Sales Tax Department and thereafter requisitioned by the Income Tax Department under Section 132A of the Act. In substance, the contention of the appellant is that for the delay occasioned by the Income Tax Authorities in furnishing the required documents that were in their possession to him, he could not be penalized with the demand of interest for the said delay. It is also his contention that as regards the demand under Section 245D(6A) of the Act, the default in payment of the tax amount determined as payable by the Settlement Commission was occasioned only because the family of the appellant was facing insurmountable financial problem consequent to the properties being attached by various Revenue Departments. In support of the his contention with regard to the powers of the CBDT to grant waiver of interest under Section 158BFA of the Act, he would place reliance on the following decisions; Commissioner of Income Tax and Ors. v. B. Nagendra Baliga [MANU/KA/0996/2014], Mahavir Manakchand Bhansali v. Commissioner of Income Tax [MANU/MH/1848/2017], Precot Mills Lts. v. Central Board of Direct Taxes and Ors. [MANU/TN/0261/2010], Sant Lal v. Union of India (UOI) and Ors. [MANU/PH/0121/1996], Sivanandiia Steels Ltd. v. Central Board of Direct Taxes & Ors. [MANU/TN/0593/1993], The Commissioner of Income Tax v. Mesco Airlines Ltd. W.A. No. 85 of 2018 7 [MANU/DE/2696/2010], Commissioner of Income Tax, Mumbai v. Anjum M.H. Ghaswala and Others [(2002) 1 SCC 633], Commissioner of Income Tax v. Sant Ram Mangat Ram Jewellers and Others [(2003) 9 SCC 285], Union of India and Another v. Azadi Bachao Andolan and Another [(2004) 10 SCC 1], Union Home Products Ltd. v. Union of India and another [MANU/KA/0154/1995]. 6. Per contra, it is the submission of Sri. Jose Joseph, the learned Standing Counsel for the Income Tax Department that the Writ Appeal is wholly misconceived because it is trite that the levy of interest under Section 158 BFA of the Act for the period in question was automatic once it was found that the returns that led to the finalisation of the assessment were filed only on 01.05.2000, well beyond the period provided under statute for filing the said return. It is further pointed out that in terms of Section 119(2)(a) of the Act the exercise of discretion to waive interest under Section 158BFA can be only in relation to a class of cases and not to individual cases since it would go against the expressed provisions of the statute and also against the object behind those provisions that are designed to prevent interference by the Board with the discretion of quasi-judicial authorities engaged in assessment of individual cases. With regard to the contentions regarding the demand of interest under Section 245D(6A) of the Act, it is his submission that the said interest being leviable for delayed payment of taxes determined as payable by the Settlement Commission and falling under Chapter XIX-A of the Act which is a code in itself, neither the Settlement Commission nor the CBDT has the power to waive the said interest. W.A. No. 85 of 2018 8 7. On a consideration of the rival submissions, we find that for the reasons that are to follow, this Writ Appeal must fail. As regards the contention of the appellant regarding the reasons cited in the order of the CBDT rejecting his claim for waiver of the interest demanded under Section 158BFA of the Act, we find that while it may be a fact that the CBDT in the impugned order had cited an erroneous reason, that by itself does not persuade us to take a different view in the matter since we find that the return filed by the appellant in response to the Section 158BC notice was only on 01.05.2000, well beyond the time prescribed under the Act for filing the said return. As already noticed, the levy of interest under the said provision is automatic and the power to waive the said interest while lies with the CBDT under Section 119 (2)(a) of the Act, the said power can be exercised only in relation to a class of cases and not to individual cases. Thus, even if we were persuaded to remit the matter to the CBDT for a fresh consideration, taking note of the erroneous reason furnished by them in the impugned order, we are of the view that it would be an exercise of futility for the appellant does not fall under any class of cases in respect of which alone the CBDT can exercise its discretion to grant waiver of the interest demanded. As regards the demand of interest under Section 245D(6A), we find that the said interest is levied for the delayed payment of the tax determined as payable by the Settlement Commission, which was a forum chose by the appellant himself for settlement of the dispute with the Income Tax Department. The provision being part of the Code under Chapter XIX-A of the Act, the interest levied thereunder cannot be waived since it has to be seen as forming an integral W.A. No. 85 of 2018 9 part of the Settlement that resulted pursuant to the appellant approaching the Settlement Commission of his own volition. Thus in any view of the matter, we see no reason to interfere with the judgment of the learned Judge. The Writ Appeal therefore, fails and it is accordingly dismissed. Before parting with this case, and taking note of the submission of the learned counsel for the appellant that certain amounts have been paid since the institution of the writ petition in 2017, as also his belief that certain amounts that were paid earlier have not been duly credited by the Department, we would direct the respondents to issue a fresh demand notice in view of Ext.P16 that was impugned in the writ petition, after giving credit to the payments, if any made by the appellant at any point in time. The revised demand notice shall be furnished to the appellant after considering the evidence of payment produced by the appellant before the Department within a period of six weeks from the date of receipt of copy of this judgment, so as to enable the appellant to make the payments demanded therein. Sd/- Dr. A.K. JAYASANKARAN NAMBIAR, JUDGE Sd/- MOHAMMED NIAS C.P. JUDGE rps/ "