P.P.C. Business & Products Pvt. ... vs Chief Commissioner Of Income Tax
2010 Latest Caselaw 812 Del

*           IN THE HIGH COURT OF DELHI AT NEW DELHI

+      WP(C) 3762/2007

                                         Reserved on:      8th December, 2009
%                                    Date of Decision: 11th February, 2010

P.P.C. BUSINESS & PRODUCTS PVT. LTD.                             ..... Petitioner

                             Through:    Mr. R.M. Sinha with Mr. Rajiv
                                         Saxena, Advocates.

                       versus

CHIEF COMMISSIONER OF INCOME TAX                               ..... Respondent

                             Through:    Mr. Subhash Bansal, Advocate.



CORAM:
HON'BLE MR. JUSTICE A.K. SIKRI
HON'BLE MR. JUSTICE SIDDHARTH MRIDUL

       1.         Whether reporters of local papers may be allowed
                  to see the judgment?                                   Yes.
       2.         To be referred to the Reporter or not?                 Yes.
       3.         Whether the judgment should be reported
                  in the Digest?                                         Yes.


                                   JUDGMENT

SIDDHARTH MRIDUL, J.

1. The present writ petition under Article 226 of the Constitution

of India, seeks setting aside and quashing of the order dated 7 th

March, 2006, passed by the Chief Commissioner of Income Tax under

Sections 234A, 234B and 234C of the Income Tax Act, 1961

(hereinafter referred to as „the Act‟), being violative of the circular of

the Central Board of Direct Taxes (in short „the Board‟) dated 23rd

May, 1996.

2. The brief facts as are necessary for the adjudication of the

present petition are that:

(a) A raid was conducted on the Petitioner-company by the

Central Bureau of Investigation (CBI) on 1st April, 2001

and 3rd April, 2001. The CBI froze the bank account of the

Petitioner-company on 8th April, 2001 and also seized the

books of accounts and other documents of the company.

Eventually, by an order dated 13th June 2001 the special

court permitted the Petitioner to operate the bank

account.

(b) The Petitioner submitted the tax audit report for the

assessment year 2001-02 on 31st October, 2001,

purportedly on the basis of electronic record available

with the Petitioner. The Petitioner also filed the tax audit

report in respect of the assessment year 2002-03 on 29th

October, 2002. On 31st March, 2003 the Petitioner

submitted the income tax return for the assessment years

2001-02 and 2002-03 and deposited the income tax

amounting to Rs.5,20,542/- and Rs.8,77,499/- respectively

on self assessment basis.

(c) On 22nd May, 2003, the Petitioner filed a petition for

waiver of the interest on income tax for the assessment

years 2001-02 and 2002-03, relying upon the notification

dated 23rd May, 1996 issued by the Board. The Chief

Commissioner of Income Tax rejected the petition filed by

the Petitioner vide the impugned order dated 8th March,

2006 and directed the Petitioner to pay interest on the

income tax.

3. The main contention urged on behalf of the Petitioner is that, on

account of the unavoidable circumstances, i.e. that all the books of

accounts and other documents being seized by the CBI in the raid on

1st April, 2001 and 3rd April, 2001, and also because of the freezing of

the bank account of the Petitioner on 8th April, 2001, it was not

possible for the Petitioner to deposit the advance income tax or file

the returns in time for assessment years 2001-02 and 2002-03. It is,

therefore, argued that the impugned order is erroneous in coming to a

conclusion that the account books were available with the Petitioner

who did not file the same.

4. Per contra, the Department supported the impugned order and

filed a counter affidavit.

5. In the present case it is noticed that the Petitioner relies on the

said notification dated 23rd May, 1996 issued by the Board which,

inter alia, provides as follows:

"2. The class of incomes or class of cases in which the reduction or waiver of interest under section 234A or Section 234B or as the case may be, section 234C can be considered, are as follows:

(a) Where during the course of proceedings for search and seizure under section 132 of the Income-tax Act, or otherwise, the books of account and other incriminating documents have been seized and for reasons beyond the control of the assessee, he has been unable to furnish the return of income for the previous year during which the action under section 132 has taken place, within the time specified in this behalf and the Chief Commissioner, or as the case may be, Director-

General is satisfied having regard to the facts and circumstances of the case that the delay in furnishing such return of income cannot reasonably be attributed to the assessee."

6. A plain reading of the relevant portion of the circular clearly

stipulates that, where the books of accounts and other documents

have been seized during the course of proceedings for search and

seizure under Section 132 of the Act or otherwise, and for reasons

beyond the control of the assessee, the latter has been unable to

furnish return of income for the previous year during which the

search and seizure under Section 132 of the Act has taken place,

within the period specified, the Chief Commissioner of Income Tax

may grant reduction or waiver of interest under Section 234A or

Section 234B or Section 234C, on being satisfied that the delay in

furnishing such return of income was not due to fault of the assessee.

In this behalf, it is observed that admittedly the tax audit report for

the assessment years 2001-02 and 2002-03 were filed on 31st October,

2001 and 9th October, 2002 respectively. However, the Petitioner filed

the income tax returns for the said assessment years and deposited

the income tax therefor, only on 31st March, 2003. In this behalf it is

seen that a tax audit report is mandatorily prepared by an

independent auditor based on the documents and accounts produced

by the assessee, and as such it would not have been possible for the

Petitioner to file the tax audit reports on 31st October, 2010 and 29th

October, 2002, without submitting the necessary documents for

verification by the independent auditor, who issued the tax audit

reports. Therefore, unless the books of accounts or relevant details

thereof maintained by the assessee were produced for the

examination of the tax auditor, it would not have been possible for the

independent auditor to prepare the tax audit reports. Thus, the plea of

the Petitioner that the assessee was not able to file his income tax

returns for the said years in time, is without any merit. The Petitioner

was obviously possessed of the said relevant details.

7. Further, it is seen that advance tax is paid during the relevant

financial year itself, and the raid on the Petitioner‟s premises by the

CBI took place on 1st and 3rd April, 2001, whereas the relevant

financial year for assessment year 2001-02 ended on 31st March,

2001. In other words, the appointed time for the payment of advance

tax for the assessment year 2001-02 had long since gone prior to the

date of the search and seizure by the CBI. As aforesaid, since the said

relevant details were available with the Petitioner, to enable the tax

auditor to file the report, it was always possible for the Petitioner to

pay advance tax even on estimated basis, which was not done by the

assessee. Furthermore, it is relevant to observe that for the

assessment year 2002-03 the installments of advance tax were due on

15th June, 2001, September, 2001, December, 2001 and March, 2002

and the bank account of the Petitioner had already been defrozen on

13th June, 2001. Therefore, the plea of the Petitioner that he could not

deposit the advance tax for the assessment years 2002-03 on the

ground of financial hardship also does not hold water.

8. It is also to be noticed that despite being directed to do so the

Petitioner failed to produce the Panchnama showing that the books of

accounts were seized by the CBI, before the Income Tax Department.

9. From the foregoing discussion, it is axiomatic that the Petitioner

was not prevented from furnishing the return of income and paying

the advance tax for the said assessment years, within the time

specified in that behalf, so as to be able to justify its claim of

entitlement to waiver of interest within the meaning of the said

notification dated 23rd May, 1996. In the circumstances, we do not

find any infirmity or error in the impugned order so as to warrant

interference by this Court under its extraordinary jurisdiction under

Article 226 of the Constitution of India. The petition is devoid of merit

and is, consequently, dismissed with costs quantified at Rs.10,000/-

(Rupees ten thousand).

SIDDHARTH MRIDUL, J.

A.K. SIKRI, J.

FEBRUARY 11, 2010 mk