Sri. Ambadi Krishna Menon V. The Principal Chief Commissioner of Income Tax and Income Tax Officer Ward-I, Range-I and The Commissioner of Income Tax and The Central Board of Direct Taxes and Union of India

WP(C)/37788/2015

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The case revolves around Sri. Ambadi Krishna Menon, who challenged the order of the Principal Chief Commissioner of Income Tax, Kerala, which denied his request for a waiver of interest on advance tax under Sections 234B and 234C of the Income Tax Act, 1961. The petitioner had reported a significant capital gain in the financial year 2010-11 from the sale of equity shares, which he inadvertently failed to account for correctly in his advance tax payments. Although he rectified the mistake and paid the due taxes, his request for a waiver of the interest charged for the late payment was rejected. The court's decision emphasized that the interest for non-payment of advance tax is compensatory, aimed at covering the loss of revenue to the government, and not punitive.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 798001 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 19-09-2023
• Assessment Year: misc
• Other Referred Cases: CIT vs. Anand Prakash and Maha Maya General Finance Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: P K R MENON; JOSE JOSEPH
• Assessee Lawyers: DALE KURIEN
• Keywords: Advance tax; Assessment Year 2011-12; Capital Gains; Income from business or profession; Waiver of interest
• Section: 147; 143(3); 119; 208; 234B; 207; 234A; 234C; 273A(4)

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE AMIT RAWAL TUESDAY, THE 19TH DAY OF SEPTEMBER 2023 / 28TH BHADRA, 1945 WP(C) NO. 37788 OF 2015 PETITIONER: SRI.AMBADI KRISHNA MENON AGED 73 YEARS 'AMBADI RETREAT', CHILAVANNOOR ROAD, KADAVANTHRA, KOCHI - PIN 682 020. BY ADV SRI.DALE P.KURIEN RESPONDENTS: 1 THE PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX CENTRAL REVENUE BUILDINGS, I.S.PRESS ROAD, KOCHI - 682 018. 2 INCOME TAX OFFICER WARD-I, RANGE-I, CENTRAL REVENUE BUILDINGS, I.S.PRESS ROAD, KOCHI - 682 018. 3 THE COMMISSIONER OF INCOME TAX CENTRAL REVENUE BUILDINGS, I.S.PRESS ROAD, KOCHI - 682 018. 4 THE CENTRAL BOARD OF DIRECT TAXES NEW DELHI - 400 001, REPRESENTED BY ITSEX-OFFICIO MEMBER SECRETARY. 5 UNION OF INDIA REPRESENTED BY ITS SECRETARY TO MINISTRY OF FINANCE, SHASTRI BHAVAN, NEW DELHI -110 001. BY ADVS. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX DEPARTMENT THIS WRIT PETITION (CIVIL) HAVING BEEN HEARD ON 19.09.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C) NO. 37788 OF 2015 -2- JUDGMENT 1. Order Ext.P8 of the Principal Chief Commissioner of Income Tax, Kerala dated 22.09.2015 passed under the provisions of Section 119 of the Income Tax Act, 1961 rejecting the claim of the petitioners for granting waiver of interest as per provisions of Section 234A, 234B and 234C of the IT Act pertaining to assessment year 2011-12 is under challenge in the present writ petition. 2. Petitioner is an assessee under the Income Tax Act and has been filing returns from assessment year 1989-90 onwards on the basis of the income from business or profession. During the financial year 2010-11 the income considerably increased on account of sale of 14,25,200 equity shares of Ambadi Infrastructures Pvt. Ltd. on 10.03.2010. The aforementioned transaction would fall under the 'income from capital gain' for the purpose of taxation. By mistake it was taken into account as also the cost of bonus shares and could not file the WP(C) NO. 37788 OF 2015 -3- advance tax as required under Section 207 and 208 of the Income Tax Act. The inadvertent omission was not due to any willful default or intentional neglect or latches but on account of fact that no professional advice was taken. Later on the said mistake came to be noticed and rectified the same and voluntarily offered the amount of taxable income for the assessment year 2011-2012 and filed an application under Section 273A(4) with the Commissioner of Income Tax (Administrative) as per the prevailing law. It has been dismissed on the ground that the explanation given by the petitioner did not suffice the requirement of law. 3. Learned counsel appearing on behalf of the petitioner submitted that the impugned order is not sustainable in the eyes of law for, Commissioner has not taken into consideration the provisions of Section 234B and C of the Act. The case of the petitioner squarely within the aforementioned provision and similarly situated persons have been granted exemption. There WP(C) NO. 37788 OF 2015 -4- was no criminal intent or mens rea or willful neglect but the mistake was absence of any legal advice. 4. On the other hand, learned Standing Counsel appearing on the Income Tax Department supported the impugned order and submitted that none of the arguments as sought to be projected has been provided under Section 234B and C of the Income Tax Act, 1961 and urged this Court for dismissal of the writ petition. 5. I have heard learned counsel for the parties and appraised the paper book. 6. Petitioner seeking waiver under Section 234B and 234C of the Income Tax Act, 1961 before the Principal Chief Commissioner of Income Tax, Kerala pleaded as under:- “xxxxx xxxxxx 3.The main grounds mentioned in the petition are briefed as follows: A.The long term capital gains was computed WP(C) NO. 37788 OF 2015 -5- by the assessee himself and he was ignorant of the prevailing laws in computation of the cost of bonus shares. B. On detection of the mistake in FY 2013-14, the applicant voluntarily filed a revised return, returning the correct long term capital gains. C. The assessment was completed u/s 143(3) r.w. s. 147 of the IT Act, 1961 adopting the figures as per the revised return and hence, no appeal was preferred against the assessment D.The petitioner has been a regular filer of tax retum since 1989-90 and has never been subject to penalty/prosecution proceedings E.The tax of Rs 342 crores was paid in full before filing the return F. Interest u/s 234B will not apply to the assessee in the light of section 207 (2) clauses (a) and (b) as he was above 60 and had no business income during the year G.The capital gain accrued only on 10/03/2011 and the petitioner had not anticipated the income H. The instances (a) to (d) cited in the 2006 WP(C) NO. 37788 OF 2015 -6- Notification of the CBDT are only illustrative and hardship is also to be considered as a criterion for waiver 4. The submissions made on behalf of the petitioner have been considered. The interest in the case was levied u/s 234B and 234C on account of failure on the part of the assessee to pay advance tax As such the submissions at items A and E above have no relevance to the issue. As regards the claim of immunity from remittance of advance tax u/s 207(2) of the Act, the provisions are applicable only from the AY 2012-13, hence the claim is not tenable. 5. The assessee has not shown that he was prevented by circumstances beyond his control from payment of advance tax due from him. The interest levied for non payment of advance tax is not penal but compensatory in nature. As such the petition is devoid of merits. None of grounds raised by the petitioner is covered by any of the clauses (a) to (e) of the CBDT notification in F No 400/29/2002-IT (B) dated 26/06/2006. As regards levy of interest under section 234B of the Income Tax Act, 1961, it is a consequence of the additions and waiver cannot be considered as it does not fall in clause (b) of the above notification. The assessee also does not get the exemption from liability for advance tax under WP(C) NO. 37788 OF 2015 -7- proviso to section 234C of the Income Tax Act 1961 as the tax on capital gains has not been paid within 31st March of the Financial Year. 6. Hence, the petition is rejected. Sd/- (PR Ravikumar) (i/c) Principal Chief Commissioner of Income Tax, Kerala 7. Section 234B and C of the Income Tax Act reads as under: “234B. Interest for defaults in payment of advance tax.— (1) Subject to the other provisions of this section, where, in any financial year, an assessee who is liable to pay advance tax under section 208 has failed to pay such tax or, where the advance tax paid by such assessee under the provisions of section 210 is less than ninety per cent. of the assessed tax, the assessee shall be liable to pay simple interest at the rate of [one per cent.] for every month or part of a month comprised in the period from the 1st day of April next following such financial year [to the date of determination of total income under sub-section (1) of section 143 [and where a regular assessment is made, to the date of such regular WP(C) NO. 37788 OF 2015 -8- assessment, on an amount]] equal to the assessed tax or, as the case may be, on the amount by which the advance tax paid as aforesaid falls short of the assessed tax. [Explanation 1.—In this section, “assessed tax” means the tax on the total income determined under sub-section (1) of section 143 and where a regular assessment is made, the tax on the total income determined under such regular assessment as reduced by the amount of,— (i) any tax deducted or collected at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income; [(ia) any relief of tax allowed under section 89;] (ii) any relief of tax allowed under section 90 on account of tax paid in a country outside India; (iii)any relief of tax allowed under section 90A on account of tax paid in a specified territory outside India referred to in that section; (iv)any deduction, from the Indian income-tax payable, allowed under section 91, on account of tax paid in a country outside India; and WP(C) NO. 37788 OF 2015 -9- (v)any tax credit allowed to be set off in accordance with the provisions of section 115JAA [or section 115JD].] Explanation 2.—Where, in relation to an assessment year, an assessment is made for the first time under section 147 [or section 153A], the assessment so made shall be regarded as a regular assessment for the purposes of this section. [Explanation 3.—In Explanation 1 and in sub- section (3) “tax on the total income determined under sub-section (1) of section 143” shall not include the additional income-tax, if any, payable under section 143.] (2) Where, before the date of [determination of total income under sub-section (1) of section 143 or] completion of a regular assessment, tax is paid by the assessee under section 140A or otherwise,— (i) interest shall be calculated in accordance with the foregoing provisions of this section up to the date on which the tax is so paid, and reduced by the interest, if any, paid under section 140A towards the interest chargeable under this section; (ii) thereafter, interest shall be calculated at the rate aforesaid on the amount by which WP(C) NO. 37788 OF 2015 -10- the tax so paid together with the advance tax paid falls short of the assessed tax. [(2A) (a) where an application under sub- section (1) of section 245C for any assessment year has been made, the assessee shall be liable to pay simple interest at the rate of one per cent. for every month or part of a month comprised in the period commencing on the 1st day of April of such assessment year and ending on the date of making such application, on the additional amount of income-tax referred to in that sub- section; (b) where as a result of an order of the Settlement Commission under sub-section (4) of section 245D for any assessment year, the amount of total income disclosed in the application under sub-section (1) of section 245C is increased, the assessee shall be liable to pay simple interest at the rate of one per cent. for every month or part of a month comprised in the period commencing on the 1st day of April of such assessment year and ending on the date of such order, on the amount by which the tax on the total income determined on the basis of such order exceeds the tax on the total income disclosed in the application filed under sub- section (1) of section 245C; WP(C) NO. 37788 OF 2015 -11- (c) where, as a result of an order under sub- section (6B) of section 245D, the amount on which interest was payable under clause (b) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly;] [(3) where, as a result of an order of reassessment or recomputation under section 147 or section 153A, the amount on which interest was payable in respect of shortfall in payment of advance tax for any financial year under sub-section (1) is increased, the assessee shall be liable to pay simple interest at the rate of one per cent. for every month or part of a month comprised in the period commencing on the 1st day of April next following such financial year and ending on the date of the reassessment or recomputation under section 147 or section 153A, on the amount by which the tax on the total income determined on the basis of the reassessment or recomputation exceeds the tax on the total income determined under sub- section (1) of section 143 or on the basis of the regular assessment as referred to in sub-section (1), as the case may be;] (4) where, as a result of an order under section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or WP(C) NO. 37788 OF 2015 -12- section 263 or section 264 [***], the amount on which interest was payable under sub-section (1) or sub-section (3) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and— (i)in a case where the interest is increased, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly; (ii) in a case where the interest is reduced, the excess interest paid, if any, shall be refunded; (5) the provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989 and subsequent assessment years.] 234C. Interest for deferment of advance tax. [(1) Where in any financial year,— [(a) an assessee, other than [the assessee referred to in clause (b)], who is liable to pay advance tax under section 208 has failed to pay such tax or— WP(C) NO. 37788 OF 2015 -13- (i)the advance tax paid by such assessee on its current income on or before the 15th day of June is less than fifteen per cent. of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of September is less than forty-five per cent. of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of December is less than seventy-five per cent. of the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate of one per cent. per month for a period of three months on the amount of the shortfall from fifteen per cent or forty-five per cent. or seventy-five per cent., as the case may be, of the tax due on the returned income; (ii) the advance tax paid by the assessee on the current income on or before the 15th day of March is less than the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate of one per cent. on the amount of the shortfall from the tax due on the returned income:] Provided that if the advance tax paid by the assessee on the current income, on or before the 15th day of June or the 15th day of September, WP(C) NO. 37788 OF 2015 -14- is not less than twelve per cent or, as the case may be, thirty-six per cent. of the tax due on the returned income, then, the assessee shall not be liable to pay any interest on the amount of the shortfall on those dates;] (b) [an assessee who declares profits and gains in accordance with the provisions of sub-section (1) of section 44AD or sub-section (1) of section 44ADA, as the case may be], who is liable to pay advance tax under section 208 has failed to pay such tax or the advance tax paid by the assessee on its current income on or before the 15th day of March is less than the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate of one per cent on the amount of the shortfall from the tax due on the returned income:] [Provided that nothing contained in this sub- section shall apply to any shortfall in the payment of the tax due on the returned income where such shortfall is on account of under- estimate or failure to estimate— (a) the amount of capital gains; or (b) income of the nature referred to in sub- clause (ix) of clause (24) of section 2; [or (c) income under the head “Profits and gains of business or profession” in cases where the WP(C) NO. 37788 OF 2015 -15- income accrues or arises under the said head for the 9 [first time; or]] [(d) income of the nature referred to in sub- section (1) of section 115BBDA,] and the assessee has paid the whole of the amount of tax payable in respect of income referred to in clause (a) or clause (b) or clause (c) [or clause (d)]], as the case may be, had such income been a part of the total income, as part of the [remaining instalments of advance tax which are due or where no such instalments are due], by the 31st day of March of the financial year:] [Provided further that nothing contained in this sub-section shall apply to any shortfall in the payment of the tax due on the returned income where such shortfall is on account of increase in the rate of surcharge under section 2 of the Finance Act, 2000 (10 of 2000), as amended by the Taxation Laws (Amendment) Act, 2000 (1 of 2001), and the assessee has paid the amount of shortfall, on or before the 15th day of March, 2001 in respect of the instalment of advance tax due on the 15th day of June, 2000, the 15th day of September, 2000 and the 15th day of December, 2000:] [Provided also that nothing contained in this WP(C) NO. 37788 OF 2015 -16- sub-section shall apply to any shortfall in the payment of the tax due on the returned income where such shortfall is on account of increase in the rate of surcharge under section 2 of the Finance Act, 2000 (10 of 2000) as amended by the Taxation Laws (Amendment) Act, 2001 (4 of 2001) and the assessee has paid the amount of shortfall on or before the 15th day of March, 2001 in respect of the instalment of advance tax due on the 15th day of June, 2000, the 15th day of September, 2000 and 15th day of December, 2000.] [Explanation.—In this section, “tax due on the returned income” means the tax chargeable on the total income declared in the return of income furnished by the assessee for the assessment year commencing on the 1st day of April immediately following the financial year in which the advance tax is paid or payable, as reduced by the amount of,— (i) any tax deductible or collectible at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income; [(ia) any relief of tax allowed under section 89;] WP(C) NO. 37788 OF 2015 -17- (ii) any relief of tax allowed under section 90 on account of tax paid in a country outside India; (iii) any relief of tax allowed under section 90A on account of tax paid in a specified territory outside India referred to in that section; (iv) any deduction, from the Indian income- tax payable, allowed under section 91, on account of tax paid in a country outside India; and (v) any tax credit allowed to be set off in accordance with the provisions of section 115JAA 7 [or section 115JD].] (2) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989 and subsequent assessment years.” 8. On reading of the provisions extracted above, the grounds taken by the petitioner are not covered. The finding of the Principal Chief Commissioner of Income Tax, Kerala, in my view, do not require any different interpretation as the payment of advance tax is not penal WP(C) NO. 37788 OF 2015 -18- but compensatory. No ground for interference is made out. Writ petition is accordingly dismissed. Sd/- AMIT RAWAL JUDGE vv WP(C) NO. 37788 OF 2015 -19- APPENDIX OF WP(C) 37788/2015 PETITIONER EXHIBITS EXHIBIT P 1 EXT.P-1: TRUE COPY OF THE RETURN OF INCOME DATED 30.7.2011 EXHIBIT P 2 EXT.P-2: TRUE COPY OF APPLICATION DATED 23.6.2014, ATTACHING DETAILED WORKINGS ON ARRIVAL OF ADDITIONAL TAX AMOUNT, SUBMITTED BY THE PETITIONER BEFORE THE 3RD RESPONDENT EXHIBIT P 3 EXT.P-3: TRUE COPY OF THE DECISION REPORTED IN 140 ITR 652 EXHIBIT P 4 EXT.P-4: TRUE COPY OF THE NOTICE U/S.148 OF THE I.T.ACT EXHIBIT P 4(A) EXT.P-4(A): TRUE COPY OF THE REVISED RETURN DATED 10.7.2014 EXHIBIT P 4(B) EXT.P-4(B): TRUE COPY OF THE CHALAN RECEIPT DATED 10.7.2014 EXHIBIT P 5 EXT.P-5: TRUE COPY OF THE ASSESSMENT ORDER DATED 30.1.2015 EXHIBIT P 6 EXT.P-6: TRUE COPY OF THE DEMAND NOTICE DATED 30.1.2015, ISSUED BY THE THIRD RESPONDENT, THE JURISDICTIONAL COMMISSIONER OF INCOME TAX. EXHIBIT P 7 EXT.P-7: TRUE COPY OF THE WAIVER APPLICATION UNDER SEC.119 DATED 15.7.2015 SUBMITTED BY THE PETITIONER BEFORE THE FIRST RESPONDENT, THE PRL.CHIEF COMMISSIONER OF INCOME TAX. EXHIBIT P 8 EXT.P-8: TRUE COPY OF THE ORDER IN WAIVER APPLICATION DATED 22.9.2015 OF THE FIRST RESPONDENT WP(C) NO. 37788 OF 2015 -20- EXHIBIT P 9 EXT.P-9: TRUE COPY OF THE CBDT'S CIRCULAR NO.400/129/2002 IT (B) DATED 26.6.2006 EXHIBIT P 10 EXT.P-10: TRUE COPY OF THE AMENDMENT SEC.207(2) EXHIBIT P 11 EXT.P-11: TRUE COPY OF THE DELHI HIGH COURT DECISION REPORTED IN (2009) 316 ITR 141 (DEL) CITED CIT VS. ANAND PRAKASH AND MAHA MAYA GENERAL FINANCE LTD. "