Gem Sanitary Appliances P. Ltd. vs Chief Commissioner Income Tax ...
2012 Latest Caselaw 826 Del

$~R-36&37.
*IN THE HIGH COURT OF DELHI AT NEW DELHI

+       W.P.(C) Nos. 5621/2008 & 5649/2010

        GEM SANITARY APPLIANCES P. LTD. ..... Petitioner
                     Through Mr. O.B. Bajpai, Sr. Advocate
                     with Mr. V.N. Jha & Ms. Manasmini
                     Bajpai, Advocates.
                           versus
        CHIEF COMMISSIONER INCOME TAX DELHI -IV AND
        OTHERS                  ..... Respondents
                     Through Mr. N.P. Sahni & Mr. Ruchesh
                     Sinha, Advocates.
                     Counsel for Mr. Kamal Sawhney, Sr.
                     Standing Counsel.

         CORAM:
         HON'BLE MR. JUSTICE SANJIV KHANNA
         HON'BLE MR. JUSTICE R.V.EASWAR

                     ORDER

% 07.02.2012

These two writ petitions by Gem Sanitary Appliances

Private Limited impugn a consolidated order dated 7th April,

2008 passed by the Chief Commissioner, Income Tax, Delhi-IV

rejecting their application for waiver of interest under Section

234A of the Income Tax Act, 1961 (Act, for short). The writ

petitions relate to assessment years 1993-94 and 1994-95.

2. The impugned order has been passed pursuant to

circular/notification dated 23rd May, 1996 under Section

119(2)(a) of the Act passed by the Central Board of Direct Taxes

empowering Chief Commissioner to waive interest under

Section 234A, 234B and 234C of the Act in specified cases

mentioned in paragraph 2 thereof.

3. The total interest charged under Section 234A for

assessment years 1993-94 and 1994-95 is Rs.6,59,946/- and

Rs.50,768/-, respectively. For these two assessment years, the

due date of filing of the return of income was 31st December,

1993 and 30th November, 1994. The returns of income in fact

were filed on 18th May, 1995 and 28th July, 1995. It is an

accepted case that the petitioner assessee was searched under

Section 132 on 24th/25th August, 1993 (i.e. before the due dates

for filing returns) and books of accounts and documents were

seized. These included books of accounts and documents

pertaining to the two assessment years in question. It is also

accepted that account books, documents and material pertaining

to 28 related parties were also seized at the time of the said

search. Accounts in the case of the petitioner and some other

parties had to be audited and an audit report had to be

submitted under Section 44AB along with the income tax

returns.

4. The Chief Commissioner in the impugned order while

rejecting the request for waiver of interest has recorded as

under:-

" As is evident, the assessee applied for inspection of books and other documents and for supply of photocopies. The assessee was given sufficient opportunity to take photocopies of the seized materials in the first week of September 1993 as is evident from the correspondence between the assessee and the Department. The relevant portion of the letter dated; 23.10.1993 addressed to Shri D C Aggarwal, Dy. CIT(Inv.) Unit-II, Jhandewalan Extn, New Delhi by the AR of the assessee is as under:

"....You were kind enough to give us the photocopy of some of the documents for the current year. You are well aware that we have to file the Balance -sheet and Profit and Loss account with the Income Tax Department alongwith returns as well as we have to file the Balance-sheet with the Registrar of Companies also......

......Under the circumstances, we request you to kindly hand over the books of accounts and other relevant documents to the assessee so that audit can be carried out and the account could be finalized for the earlier years...."

Further, the relevant portion of the letter dated:07.10.1994 addressed to the assessee by the Assistant Commissioner of Income Tax, Central Circle-18, New Delhi is as under:

"...it may please be noted that you have already been given enough opportunity to take photo-copies of all the seized

materials and you installed your photo copy machine right from 08.02.1994 to 25.03.1994 to take the photocopies of all the necessary seized materials which are required by you for finalization of your balance-sheet and other connected material..."

In view of the above, it is amply clear that the delay in filing the returns of income for the Assessment Years 1993-94 and 1994-95 is attributable to the assessee as the assessee was given sufficient opportunities right from September 1993 allowing it to obtain photo copies of the seized books of accounts and documents i.e. much before the due dates of filing the returns of income.

As such, the assessee was not prevented to file its returns of income for the AYs 1993-94 and 1994-95 due to non- availability of books of accounts and other documents."

5. The relevant portion of the circular dated 23rd May, 1996

reads as under:-

"2. The class of income 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, 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 Sectioin 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 regards 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. The Chief Commissioner in his order has referred to

installation of a photocopy machine at the behest of the

petitioner and the fact that photocopies of documents/papers

were taken from 1st February, 1994 to 25th March, 1994. It is,

therefore, seen that photocopies of documents/material had

continued for about 50 days. This period reflects and indicates

the number of books/documents which were seized and which

were required to be examined and of which photocopying was

required before the audit could be completed and the returns of

income could be filed. We may note that it is a contention of the

petitioner that even then they were unable to complete the

photocopying as they were not permitted and allowed to operate

the photocopying machine throughout the working hours and

that the photocopying machine was allowed to operate for one

or two hours each day depending upon the convenience and

availability of the officers. The petitioner has placed on record

copy of a chart indicating that the photocopying process had

continued from 3rd September, 1993 to 6th July, 1995 in respect

of assessment year 1994-95 and from 9th February, 1994 to 4th

July, 1995 for the assessment year 1993-94.

7. By 25th March, 1994 the due date for filing of the return for

the assessment year 1993-94 had expired on 31st December,

1993. It is not disputed that in the two assessment years in

question, the assessee had to get the accounts audited and then

only the return of income could have been filed. The very fact

that the inspections were permitted and photocopy was allowed

to be taken during this period shows that the Assessing

Officer/authorities concerned were conscious of the fact, aware

and had acknowledged that documents/books of accounts were

relevant and required before the petitioner assessee could file or

submit their return of income.

8. One more aspect may be noticed that the assessee had

initially filed number of applications for waiver of interest before

the Director General of Income Tax (Investigation). There was

no response and reply to these applications. With effect from 1 st

January, 2004 the petitioner started writing and made prayer for

waiver of interest to the Commissioner of Income Tax (Central).

These applications were disposed of after a long delay vide

impugned order dated 7th April, 2008. The said order refers to

an application dated 3rd October, 2006. The delay in disposing

of the application is not indicated and explained.

9. Learned counsel for the respondents has submitted that

the petitioner has not paid the tax due and, therefore, the

application of waiver has been rightly rejected. In the counter

affidavit it is alleged that as per the records, demand of

Rs.40,612/- and Rs.8,918/- was due and payable for the

assessment years 1994-95 and 1993-94 respectively. We are

not inclined to accept the said contention of the respondents for

two reasons. Firstly, this is not mentioned in the impugned order

passed by the Chief Commissioner of Income Tax dated 7th

April, 2008. The impugned order has to be read and can be

defended on the ground and reasons stated therein (Refer M.S.

Gill versus Chief Election Commissioner, (1978) 1 SCC 405).

Secondly, it is apparent that the petitioner has been making

payment to the respondents from time to time. Interest under

Section 234A of the Act mentioned in the impugned order for the

two years is Rs.6,59,946/- (AY 1993-94) and Rs.50,768/- (AY

1994-95). The amounts paid, it appears have been adjusted

first towards the interest due and then towards the principal

amount.

10. At the same time, it is not possible to accept the

contention of the petitioner that they have been able to show

and establish that the entire delay in filing of the returns can be

attributed to failure to permit inspection and photocopy of

documents/records. It may be noticed that the audit for the

assessment year 1993-94 was completed on 30th March, 1995

and the return of income for the said year was filed after nearly

two months on 18th May, 1995. In respect of assessment year

1994-95, the delay has been rather abnormal as the return of

income was filed on 28th July, 1995 after more than two months

from the date of filing of the return for the assessment year

1993-94. The aforesaid lapses and delay on the part of the

petitioner is indicative of the casual and lackadaisical approach.

Further, subsequent photocopying of material/records may be

for purposes of answering questions raised in the assessment

proceedings.

11. We were initially inclined to remit the matter to the Chief

Commissioner for fresh adjudication. However, we notice that

the matter pertains to the assessment years 1993-94 and

1994-95 and an order of remit at this stage may not be

appropriate. It would cause further delay and not subserve

cause of justice. In view of the factual matrix, we are inclined to

direct that the petitioner will be entitled to waiver of interest to

the extent of 30% in the two assessment years. The impugned

order to this extent is modified.

The writ petitions are disposed of.

SANJIV KHANNA, J.

R.V. EASWAR, J.

FEBRUARY 07, 2012 VKR