Not specified in the document and Not specified in the document V. Not specified in the document and Not specified in the document

WP/5218/2000

AI Insights

The case revolves around a writ petition filed by a petitioner engaged in the business of processing and exporting leather, challenging the rejection of his application for waiver of interest under Sections 234A and 234B of the Income Tax Act, 1961. The petitioner had filed belated tax returns for the assessment years 1991-92 and 1992-93, which led to the imposition of substantial interest penalties. The primary contention was whether the returns, filed after receiving a notice under Section 148 of the Act, could be considered voluntary, thereby qualifying for a waiver under the specified conditions of the C.B.D.T notification. The court found that the delays were due to unavoidable circumstances related to internal disputes among the partners of the firm, which were resolved through arbitration, and not merely in response to the notice under Section 148.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 796137 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 25-06-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Applicant
• Court: HIGH COURT
• Department Lawyers: S R ASHOK
• Assessee Lawyers: J V PRASAD
• Keywords: Advance tax; Arbitration award; Belated return filing; Unavoidable circumstances; Waiver of interest
• Section: 148; 142(1); 234B; 44AB; 133A; 234A; 119(2)(a)

Judgement Text

"HON’BLE SRI JUSTICE L. NARASIMHA REDDY AND HON’BLE SRI JUSTICE CHALLA KODANDA RAM WRIT PETITION No.5218 OF 2000 ORDER:- (per Hon’ble Sri Justice Challa Kodanda Ram) This writ petition is filed questioning the order dated 08.01.1999 of the 1st respondent rejecting an application filed by the petitioner seeking waiver of interest, levied under Section 234A, 234B of the Income Tax Act, 1961 (for short, “the Act). 2) Petitioner is an assessee on the rolls of the 2nd respondent and is in the business of purchase of raw skins, and processing them into finished leather, and/or converting them into garments and exporting of the product to other countries. For the assessment years 1991-92, 1992-93, the petitioner filed returns belatedly on 15.12.1995 and on 9.1.1996 duly complying with the procedure of audit and filing audit report under Section 44AB of the Act. After making the assessment through order dated 29.3.1996, the 2nd respondent levied interest of Rs.17,37,300/- under Section234A and Rs.20,80,860/- under Section 234B of the Act. In the appeals filed by the petitioner, substantial relief was granted with respect to tax interest levied under Section 234A and 234B of the Act and it came to be reduced to Rs.4,36,400/- and Rs.4,79,496/- respectively. 3) The petitioner approached the 1st respondent through his letter dated 18.11.1997, seeking waiver of the interest levied under Sections 234A and 234B of the Act. Petitioner had set out in detail the reasons for the delayed filing of the returns and also for the delayed payment of advance tax. The application was rejected by the 1st respondent through order dated 8.1.1999 on the short ground that the assessee had been issued notice under Section 148 of the Act on 5.8.1993 and therefore, the returns filed by him were not voluntary in nature. 4) Sri J.V. Prasad, learned senior counsel appearing on behalf of the petitioner contends that the 1st respondent had failed to exercise the discretion vested with him in considering the application for waiver. He further submits that the reasoning of the first respondent that the return was filed only after receipt of notice under Section148 of the Act, in the facts of the case, is not correct inasmuch as the notice was issued on 5.8.1993 whereas the returns were filed on 15.12.1993, 9.1.1996 i.e., after a lapse of almost 2 to 3 years. According to him, the delay in filing the returns was on account of the fact that the disputes between the partners of the firm, and because of which there was a total deadlock in the affairs of the firm and that on the disputes being settled by virtue of an award dated 31.08.1985 of the Arbitrator, the returns were filed promptly and without any further delay. Learned counsel would further submit that the 1st respondent failed to appreciate this subtle distinction. 5) On the other hand, Sri S.R. Ashok, learned senior counsel for the department submits that it is only after receipt of the notice issued under Section148 of the Act, that the returns were filed and that record would reveal that after repeated notices were issued under Section 142(1) on 16.9.1993, 9.12.1993, 3.5.1994 and 10.10.1995 which yielded no response. It is pleaded that a search under Section 133A of the Act was conducted on the business premises of the assessee and it is only after these efforts, that the petitioner filed the returns and as such it cannot be said that the returns filed voluntarily. He contends that the conditions stipulated in the notification dated 23.5.1996 issued by the C.B.D.T in exercise of its powers under Section 119(2)A of the Act, were not satisfied by the petitioner and as such the rejection of the wavier petition is in order and does not need any interference by this Court. 6) It is true that there was delay in filing of return by the petitioner. However, in his application dated 15.01.1997 he explained in detail about various disputes that have arisen between the partners and the reference of the said disputes to the arbitrator as well as to the award dated 31.9.1995. Even the said award was under challenge by one of the parties. It is only after the award that there was some amount of coordination and cooperation between the partners which enabled the firm to get the accounts of the firm audited and thereafter, to file the returns. The delay is caused on account of these circumstances which squarely fall within the conditions stipulated in Clause (e) of para No.2 of the notification dated 23.5.1996 of C.B.D.T. We may refer to the Clause (e) of para No.2 of the notification. “2………… (e) 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 the Assessing Officer.” 7) The circumstances mentioned by the petitioner squarely fall under the expression “due to unavoidable circumstances”. Further, the notice under Section 148 of the Act which was issued in normal course on 5.8.1993, cannot be said to be basis for the returns filed by the petitioner. The filing of the returns was not merely on account of the said notice, but only on account of the settlement reached between the parties by virtue of the arbitration award dated 31.08.1985. In other words, the returns filed can be said to be voluntary and that would entitle the petitioner to the benefit under para No.2(e) of the notification and thereby, the waiver of interest, is levied under Sections 234A and 234B of the Act. 8) For the above reasons, the writ petition is allowed. It is directed that the Commissioner of Income Tax shall take necessary steps in the light of our findings. There shall be no order as to costs. Miscellaneous Petitions, if any pending in this writ petition shall stand closed. ___________________________ L. NARASIMHA REDDY, J ____________________________ CHALLA KODANDA RAM, J Date:25.06.2014. Gk HON’BLE SRI JUSTICE L. NARASIMHA REDDY AND HON’BLE SRI JUSTICE CHALLA KODANDA RAM WRIT PETITION No.5218 OF 2000 Date:25.06.2014. Gk "