Y.MADHAVAN NAIR vs. CHIEF COMMISSIONER OF INCOME TAX

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WP(C)/33000/2005HC KeralaKLHC01068455200530 November 2012Author: HONOURABLE MR.JUSTICE B.P.RAY5 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the Chief Commissioner had not exercised his discretion judiciously in rejecting the waiver of interest under Section 234B. The Court found the case to be peculiar and a fit one for waiving the interest levied. Consequently, the impugned order of the Chief Commissioner was quashed, and the interest levied under Section 234B was directed to be waived. The Court did not explicitly leave any issue undecided. The ratio decidendi is that when facts warrant leniency, the discretion under Section 119(2)(a) must be exercised properly, and a mechanical application of circulars without considering the peculiar circumstances can lead to an improper exercise of power.

What were the facts?

The petitioner, M. Madhavan Nair, received enhanced compensation including interest for the years 1990-91, 1991-92, and 1992-93 during the assessment year 1997-98. He filed revised returns on March 10, 1998. The Income Tax Officer (ITO), Ward 4, Division I, Calicut, issued a notice under Section 148 on January 23, 2001, to regularize these returns. Subsequently, the ITO levied interest under Sections 234A and 234B of the Income Tax Act. The petitioner petitioned the Chief Commissioner of Income Tax (CCIT) on April 5, 2001, seeking waiver of this interest. The CCIT, by order dated August 18, 2005, rejected the waiver for Section 234B interest but allowed it for Section 234A interest. This led to the present writ petition challenging the CCIT's order.

What were the issues?

1. Whether the Chief Commissioner of Income Tax properly exercised his discretion under Section 119(2)(a) of the Income Tax Act in refusing to waive interest levied under Section 234B, considering the facts of the case? Assessee's Contention: The petitioner argued that the interest income was not anticipated when filing original returns, and revised returns were filed promptly upon receipt, making the interest levy unwarranted. The petitioner's counsel emphasized that there was no delay in paying tax on the interest income after its receipt. Revenue's Contention: The revenue, through the learned Standing Counsel, relied on a CBDT circular dated May 23, 1996, contending that the Chief Commissioner could not waive the interest as it did not fall within the parameters of the said circular.

Which sections of the Income-tax Act were involved?

Section 119,Section 234A,Section 234B,Section 148

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE B.P.RAY FRIDAY, THE 30TH DAY OF NOVEMBER 2012/9TH AGRAHAYANA 1934 WP(C).No. 33000 of 2005 (C) --------------------------- PETITIONER(S) : ---------------------- M.MADHAVAN NAIR, KRISHNA NIVAS, MARIKUNNU P.O. CALICUT. BY ADV. SRI.P.BALAKRISHNAN (E) RESPONDENT(S) : ----------------------- 1. THE CHIEF COMMISSIONER OF INCOME TAX,COCHIN. 2. THE INCOMETAX OFFICER, WARD 4, DIVISION I, CALICUT. R BY ADV. JOSE JOSEPH, SC, R, BY ADV. SRI.P.K.R.MENON,SR.COUNSEL,GOI(TAXES) R, BY ADV. SRI.GEORGE K. GEORGE, SC THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 30-11-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: BP WP(C).No. 33000 of 2005 APPENDIX PETITIONER'S EXHIBITS : P1: COPY OF THE PETITION DT 5/4/2001 ADDRESSED TO THE 1ST RESPONDENT P2: COPY OF ORDER UNDER SECTION 119(2)(a) OF THE 1ST RESPONDENT DT 18/8/2005 IN FILE NO. CC.CHN/W.1/CLT.11/2001-02. RESPONDENT'S EXHIBITS : NIL. //TRUE COPY// P.A. TO JUDGE BP B.P. RAY, J. - - - - - - - - - - - - - - - - - W.P.(C) No. 33000 of 2005 - - - - - - - - - - - - - - - - Dated this the 30th day of November, 2012.

JUDGMENT Heard the learned counsel for the petitioner and the learned Standing Counsel for Income Tax Department, Shri. Jose Joseph.

2.

During the year 1997-98, the petitioner has received enhanced compensation on land acquisition which include interest for the years 1990-91, 1991-92 and 1992-93. The petitioner filed revised returns of income for the above periods on 10.03.1998. The 2nd respondent regularised the returns of income so filed by issue of notice under Section 148 of the Act on 23.01.2001. Thereafter, the 2nd respondent levied interest under Sections 234A & B of the Income Tax Act. The petitioner filed a petition dated 05.04.2001 before the 1st respondent seeking to waive the interest explaining the reason for non payment of advance tax. The 1st respondent by Ext.P2 order rejected the prayer for waiver of interest under Section 234B of the Act and allowed the waiver of interest levied under Section 234A of the Act. Hence this writ petition.

3.

The learned Standing Counsel relying on circular dated 23.05.1996 issued by the CBDT contended that the Chief Commissioner could not have waived the interest as the same does not come within the parameters of the circular.

3.

The learned counsel for the petitioner submitted that the receipt of interest income was not in the contemplation of the petitioner at the time of filing the returns and the petitioner filed revised returns and paid tax on the interest income soon after receipt of it. Hence, according to the counsel, there is no delay in paying tax on the interest income and the levy of interest is quite unwarranted.

4.

I have considered the contentions of the parties. In my considered view, having regard to the peculiar facts of this case, it is a fit case to waive the interest levied and the first respondent has not exercised his discretion in a proper or judicious manner. Accordingly, the impugned order is quashed. The interest levied in this case under Section 234B shall stand waived. This writ petition is allowed. B.P. RAY, JUDGE. rv

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