Motilal M. Gupta vs Chief Commissioner Of Income-Tax ...
2007 Latest Caselaw 65 Bom

JUDGMENT

J.P. Devadhar, J.

1. Rule. Rule made returnable forthwith. By consent of parties, the petition is taken up for final hearing. In this petition, the petitioners have challenged the order dated March 20, 2006, passed by the Chief Commissioner of Income-tax, Bombay ("CCIT" for short), under Section 119(2)(a) of the Income-tax Act, 1961 ("the Act" for short). By the said order the Chief Commissioner of Income-tax has declined to grant waiver of interest levied upon the petitioner under Sections 234A, 234B and 234C of the Act for the assessment years 1989-90 to 1992-93.

2. The facts relevant for the present petition are that, on March 5, 1992, search action under Section 132 of the Act was carried out at the office premises of the petitioner. At the time of search, the assessee declared undisclosed income of Rs. 42.82 lakhs for the assessment year 1992-93. Accordingly, the assessee filed a return for the assessment year 1992-93 offering the aforesaid undisclosed income. Pursuant to the order passed by the Commissioner of Income-tax dated February 12, 1992, under Section 132(12) of the Act, the assessee was entitled to seek spread over of the undisclosed income for the assessment year 1989-90 to the assessment year 1992-93. Accordingly, the petitioner filed the revised returns for the assessment year 1989-90 to the assessment years 1992-93. In the assessment order passed thereon, the Assessing Officer levied interest under Section 234A, 234B and 234C of the Act.

3. Thereupon, the petitioner filed an application before the Chief Commissioner of Income-tax seeking waiver of interest levied upon the petitioner. By the impugned order, the Chief Commissioner of Income-tax has rejected the waiver application mainly on three grounds : (a) on adjustment of the prepaid taxes towards the interest, the outstanding tax liability is Rs. 9,06,449 (b) additional income has been offered after the notices under Section 148 of the Act on July 22, 1992, hence the returns filed cannot be said to be voluntary for waiving interest under Section 234A and (c) no cash was seized during the search and, therefore, the interest under Sections 234B and 234C cannot be waived. Challenging the aforesaid order, this petition is filed.

4. Admittedly, the tax payable by the petitioner for the assessment years in question is Rs. 14,84,635 whereas the tax paid by the petitioner is Rs. 16,53,720. As per the circular issued by the Board, the petitioner is entitled to seek waiver only if the tax payable has been paid before seeking waiver of interest. In the present case, taxes paid by the petitioner are more than the tax payable and it is only because the amount of tax paid has been adjusted towards the interest, the Chief Commissioner of Income-tax has come to the conclusion that there are outstanding tax arrears to the tune of Rs. 9,06,449. In our opinion, the proper course for the Chief Commissioner of Income-tax was to adjust the amount of tax paid by the petitioner towards the tax due and payable instead of adjusting the same towards the interest payable by the petitioner. Therefore, refusal to waive interest on the ground that the tax liability has not been discharged cannot be sustained.

5. The findings recorded by the Chief Commissioner of Income-tax that the additional income has been offered after issuance of notice under Section 148 of the Act is also unsustainable because in the present case during the course of search the assessee had made disclosure of additional income in the sum of Rs. 42.82 lakhs on March 5, 1992, and offered the same for the assessment year 1992-93. It is only after the Commissioner of Income-tax in his order dated February 2, 2005, passed under Section 132(12) of the Act permitting spread over of the undisclosed income, revised returns were filed. In these circumstances, the findings recorded by the Chief Commissioner of Income-tax to the effect that the additional income has been offered after issuance of notice under Section 148 cannot be accepted.

6. The third reason for rejecting the application for waiver of interest is that no cash was seized during the search. Under the Board circular what is to be seen is whether the assessee was incapacitated for making payment of tax immediately after the search and seizure action. In the present case admittedly, the entire stock belonging to the petitioner was seized during the course of search and seizure operation and they were not released. In these circumstances, the grievance of the petitioners that on account of seizure of the entire stock, he was not in a position to pay the taxes ought not to have been disbelieved.

7. For all the aforesaid reasons, we quash and set aside the order passed by the Commissioner of Income-tax under Section 119(2)(a) of the Act on March 20, 2006 and remit the matter back to the Chief Commissioner of Income-tax to consider the application of the petitioner in accordance with law and pass appropriate orders thereon.

8. Rule is made absolute in terms of this order with no order as to costs.

9. The writ petition stands disposed of.