C.I.T vs. HERO CYCLE

ITR/93/1997HC Punjab & HaryanaPHHC01035470199730 October 2013Author: MR. JUSTICE DR. BHARAT BHUSHAN PARSOON,MR. JUSTICE RAJIVE BHALLA6 pages
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What were the facts?

This case involves an appeal by the Commissioner of Income Tax (Central), Ludhiana, against an order of the Income Tax Appellate Tribunal (ITAT). The ITAT had allowed the assessee, M/s Hero Cycles Limited, to waive interest charged under Section 215 of the Income Tax Act, 1961. The revenue's contention was that since the assessee did not deposit advance tax and the advance tax paid was less than 75% of the assessed tax, interest was rightly imposed. The assessee argued that the ITAT had valid reasons for waiving the interest and that the appeal did not raise a question of law. The dispute centers on the ITAT's discretion to waive interest under Section 215 read with Rule 40(5) of the Income Tax Rules, 1962.

What did the High Court hold?

The High Court held that the question of law referred by the ITAT was whether the Tribunal had correctly held that no interest under Section 215 is chargeable. The revenue's argument was not that the Tribunal lacked the power to waive interest under Section 215 read with Rule 40(5), but rather that the discretion exercised by the Tribunal was flawed. The Court noted that Section 215(4) empowers the Assessing Officer to reduce or waive interest in prescribed circumstances, and Rule 40(5) allows waiver in any case where the Deputy Commissioner considers it justified. The Court emphasized that this power, though broad, must be exercised with judicial discretion, involving a bonafide appraisal of facts and a perceptible process of reasoning. Upon reviewing the ITAT's order, the Court found that the Tribunal's decision to waive interest was based on a considered appraisal of facts, including the assessee's bonafide belief regarding certain deductions claimed, and the pendency of related matters before the High Court. The Tribunal's reasoning that a disallowed claim does not automatically imply mala fide intent or a wrong estimate was found to be sound. Therefore, the discretion exercised by the Tribunal was neither arbitrary nor perverse. The question of law was answered in favor of the assessee.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal has correctly held that no interest under Section 215 of the Income Tax Act, 1961, is chargeable. Assessee's contentions: The assessee argued that the ITAT recorded clear and cogent reasons for waiving the interest. Furthermore, the assessee contended that the appeal did not give rise to any question of law, nor did it question the Tribunal's power under Section 215 of the Act read with Rule 40(5) of the Income Tax Rules, 1962. Therefore, the question of law should be answered against the revenue. Revenue's contentions: The revenue submitted that as the assessee admittedly did not deposit advance tax, the Assessing Officer was correct in imposing interest. It was further argued that since the advance tax paid was less than 75% of the amount eventually paid by the assessee, the ITAT erred in entertaining and allowing the plea for waiver of interest levied under Section 215 of the Act. The revenue asserted that an infraction of any provision of the Act invites automatic payment of interest and urged that the impugned order be set aside.

Which sections of the Income-tax Act were involved?

Section 215,Section 215(4)

AI-generated summary — verify with the full judgment below

[ 1 ] IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Decided on: 30.10.2013

Commissioner of Income Tax, (Central), Ludhiana ..... Appellant

VERSUS M/s Hero Cycles Limited ..... Respondent

CORAM: HON'BLE MR. JUSTICE RAJIVE BHALLA

HON'BLE MR. JUSTICE DR. BHARAT BHUSHAN PARSOON Present: Ms.Savita Saxena, Advocate, for the appellant. Mr.Akshay Bhan, Advocate, and Mr.Alok Mittal, Advocate, for the respondent.

******* RAJIVE BHALLA, J. (ORAL) The question of law referred by the Income Tax Appellate Tribunal, Chandigarh Bench (hereinafter referred to as the 'Tribunal'), reads as follows: - “Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal has correctly held that no interest u/s.215 is chargeable in this case?” Counsel for the revenue submits that as admittedly, the appellant did not deposit advance tax, the Assessing Officer rightly imposed interest. It is further

The order continues below.

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