Delhi High Court
J.K. Synthetics Ltd. vs Commissioner Of Income Tax on 23 October, 2003
Equivalent citations: (2003)185CTR(DEL)453
Author: D.K. Jain
Bench: D.K. Jain, Madan B. Lokur
JUDGMENT
D.K. Jain, J.
1. Challenge in his writ petition is to the validity of the order, dt. 10th Sept., 1987, passed by the CIT, Delhi(Central)-I, New Delhi (hereinafter referred to as “the CIT”), affirming the order passed by the ITO on 6th May, 1985, declining to waive/reduce interest charged from the petitioner (hereinafter referred to as ‘the assessed’), under Section 215 of the IT Act, 1961 (for short ‘the Act’), because of shortfall in the payment of advance tax.
2. Shorn of unnecessary details, the background facts, relevant for the present purpose are as follows :
The petitioner, a public limited multi-unit company is engaged in the business of manufacture of yarn, cement, etc. For the asst, yr. 1975-76, for which the relevant previous year ended on 31st Dec., 1974, the assessed filed its return of income on 1st Oct., 1975, declaring a total income of Rs. 3,88,63,416. Assessment for the said assessment year was completed on 23rd Sept., 1978. Since the ITO was of the view that there was default on the part of the assessed in paying the requisite amount of advance tax, he levied interest under Section 215(1) of the Act for the period from 1st April, 1975 to 31st Aug., 1978. The interest so charged vide order dt. 23rd Sept., 1978, was Rs. 52,84,145. However, on account of appeal effect, the said amount of interest was reduced to Rs. 6,14,226. Subsequently, by virtue of orders passed by the ITO, the amount of interest was enhanced in the first instance from Rs. 6,14,226 to Rs. 9,93,582 and, thereafter to Rs. 14,43,468 and finally to Rs. 40,65,131.
3. On or about 19th Sept., 1981, the assessed moved an application before the ITO under Rule 40 of the IT Rules, 1962 (for short ‘the Rules’), praying for waiver of the interest so charged vide orders dt. 6th May, 1985, and 5 Feb., 1987, the ITO rejected assessed’s application on the ground that since the return was filed on 1st Oct., 1975, the interest attributable to the period beyond one year from the date of submission of the return only qualifies for waiver and further the interest having been charged for the period from 1st April, 1975 to 13th Nov., 1975, it is less than one year from the date of the submission of the return. Aggrieved, the assessed preferred a revision petition before the CIT but without any success. Hence the present petition.
4. No reply-affidavit, in opposition, has been filed on behalf of the respondents. The writ petition has been pending for over a decade. We have accordingly heard Mr. P.N. Monga, learned counsel for the petitioner, and Mr. R.C. Pandey, learned senior standing counsel for the Revenue.
5. It is strenuously urged by Mr. Monga that none of the authorities below has found the delay in completion of the assessment as attributable to the assessed and, therefore, the said authorities should have exercised their power under Rule 40 and waived the interest charged under section 215 of the Act. It is asserted that there is no even an allegation against the assessed that he did not co-operate in the assessment proceedings, which resulted in the delay in completion of the assessment for the relevant assessment year. It is thus, submitted that the ITO as well as the CIT have failed to exercise the discretion vested in them under the said rule judiciously. Mr. R.C. Pandey, on the other hand, would submit that since the question of waiver of interest is purely a discretionary matter, this Court may not like to interfere with the impugned orders in judicial review.
6. We are unable to agree with learned counsel for the Revenue.
7. Section 215(4) of the Act empowers the AO (up to 31st March, 1988) to waive or reduce the amount of interest chargeable under section 215, under five circumstances enumerated in Rule 40 of the Rules. As all the five sub-rules deal with different situations, and are independent of each other, it is unnecessary to refer to all of them. For the present purpose, Sub-rule (1) is relevant, which reads thus :
“40. The AO may reduce or waive the interest payable under Section 215 or Section 217 in the cases and under the circumstances mentioned below, namely :
(1) When the relevant assessment is completed more than one year after the submission of the return, the delay in assessment not being attributable to the assessed.
xxxxxx”
8. From a bare reading of Sub-rule (1) of Rule 40, it is clear that the twin conditions necessary for reduction or waiver of interest under Section 215 are : (i) that the assessment should have been completed more than one year after the submission of the return, and (ii) the delay in the assessment is not attributable to the assessed. The discretion vested in the AO, under Section 215(4) of the Act, r/w Rule 40 is undoubtedly quasi judicial and is coupled with a duty to consider whether circumstances of the case warrant waiver or reduction of interest. He is under an obligation to objectively consider the circumstances and find out whether the applicant is entitled to the waiver or reduction. A mechanical consideration of the application defeats the very purpose and object of the legislation to grant relief to an assessed against the rigour of the provisions for charging interest under Section 215, in the circumstances prescribed in Rule 40. The language of Rule 40(5), which is couched in wide terms, leaves little doubt that the provisions contained in Sub-section (4) of Section 215 are benevolent. Therefore, when an assessment is completed after the expiry of one year from the date of filing of return and an assessed applies for waiver/reduction of interest charged under Section 215 of the Act, what is required to be seen is as to whether the assessed is responsible for causing delay in completion of the assessment, If it is found that it was on account of his conduct that the assessment could not be completed within the said period of one year, the interest charged under Section 215 may not be waived.
9. Thus, the short question which arises for our consideration is as to whether in the instant case, the ITO exercised the discretion vested in him under Rule 40, keeping in view the aforementioned principles, by taking into consideration all the relevant facts.
10. Having given our serious consideration to the facts in hand, we find that both the authorities have failed to consider the assessed’s application in its correct perspective. In both the orders, we do not find even a whisper indicating that the delay in completion of the assessment within a period of one year was attributable to the assessed. The ITO had declined to waive/reduce interest on the ground that : (i) since the return was filed on 1st Oct., 1975, delay up to this date is attributable to the assessed and the interest for the period beyond one year form the date of submissions of return qualifies for waiver, and (ii) the interest has been charged for the period 1st April, 1975, to 13th Nov., 1975, which period is less than one year from the date of submission of the return. Laying emphasis on a circular issued by the CBDT, on 9th June, 1965, the CIT has affirmed the view taken by the ITO that the interest beyond the period of one year from the date of filing of return may be waived. As regards the waiver of interest for the period from 1st Oct., 1976 to 23rd Sept., 1978, though the CIT has observed that the details/statement asked for were furnished in piecemeal yet it falls short of a finding that delay in making assessment was attributable to the assessed. We have no hesitation in holding that in the absence of such a finding, dismissal of assessed’s application for waiver of interest cannot be said to be in accordance with law. In this view of the matter, the impugned orders cannot be sustained.
11. Consequently, we allow the writ petition; set aside the impugned orders and remit the matter back to the CIT for consideration of assessed’s application for waiver/reduction of interest charged under Section 215 of the Act afresh. Rule is made absolute. However, in the facts and circumstances of the case, there will be no order as to costs.