2017 (6) TMI 922 - HC - Income Tax

Court allows appeals, sets aside judgments. Chief Commissioner lacked power to waive interest. Pending applications closed.

The appeals were allowed, setting aside the judgments of the learned Single Judge. The Court concluded that the respondent's case did not fall within the ... Waiver or reduction of interest under Sections 234A, 234B and 234C - delegation of powers by CBDT to Chief Commissioner/Director General for waiver of interest - scope and ambit of CBDT Circular dated 26.06.2006 - circumstances specified in paragraph 2(a) to 2(d) of the Circular - discretion of the delegatee subject to prescribed conditionsScope and ambit of CBDT Circular dated 26.06.2006 - delegation of powers by CBDT to Chief Commissioner/Director General for waiver of interest - circumstances specified in paragraph 2(a) to 2(d) of the Circular - Whether the Chief Commissioner has power under the Circular dated 26.06.2006 to reduce or waive interest in cases not falling within paragraph 2(a) to 2(d) of the Circular - HELD THAT: - The Court examined Circular No.400/29/2002 IT(B) dated 26.06.2006 and held that the CBDT has delegated power to the Chief Commissioner/Director General to reduce or waive interest under Sections 234A, 234B and 234C only in the classes of cases or classes of incomes specified in paragraph 2 of the Circular. The extent of reduction or waiver is left to the delegatee's discretion, subject to the Circular's conditions, including that the assessee must have filed the return for the relevant AY and paid the entire income tax. The Circular also permits the delegatee to impose additional conditions. Consequently, unless an assessee's case falls within the circumstances enumerated in paragraphs 2(a)-2(d), the Chief Commissioner lacks power under the Circular to order reduction or waiver of interest. [Paras 11]The Circular confines the power to reduce or waive interest to cases falling within paragraph 2(a)-2(d); the Chief Commissioner cannot grant waiver outside those circumstances.Waiver or reduction of interest under Sections 234A, 234B and 234C - application of the Circular to the assessee's facts - judicial review of administrative order and remand - Whether the Single Judge correctly set aside the Chief Commissioner's reasoned order and remitted the matter for fresh consideration, and whether the respondent's case falls within the Circular's scope - HELD THAT: - The Court found that the Chief Commissioner had considered the waiver petitions on merits and concluded that the circumstances of the respondent did not fall within paragraph 2(a)-2(d) of the Circular. The factual matrix showed that the respondent had claimed a Section 80HHC deduction for local sales to an SEEPZ entity, assessments were reopened under Section 148, reassessed tax and interest were paid, and, in respect of AY 2001-02, the deduction had already been denied and the CIT(A) had confirmed the denial. Given these findings, the Court agreed with the view (expressed by the Bombay High Court in De Souza) that the delegatee has no power to waive interest unless the case falls within the Circular's enumerated circumstances. The Single Judge's order remitting the matter for reconsideration was therefore unnecessary and unwarranted because the Chief Commissioner had already adjudicated on the merits within the confines of the Circular. [Paras 11, 12]The Single Judge erred in setting aside and remitting the Chief Commissioner's reasoned order; on the facts the respondent's case does not fall within the Circular's scope, and the Chief Commissioner's rejection of waiver was sustainable.Final Conclusion: Appeals allowed; the impugned judgments of the Single Judge setting aside the Chief Commissioner's reasoned order and remitting the matters were set aside because the Circular dated 26.06.2006 confines the power to waiver/reduce interest to cases falling within paragraphs 2(a)-2(d), and the respondent's circumstances did not fall within those provisions. Pending applications closed; no order as to costs. Issues Involved:1. Validity of the orders passed by the learned Single Judge setting aside the order dated 04.01.2010.2. Entitlement of the respondent to a waiver of interest under Sections 234A, 234B, and 234C of the Income Tax Act, 1961.3. Applicability and interpretation of the Circular dated 26.06.2006 issued by the Central Board of Direct Taxes (CBDT).Issue-wise Detailed Analysis:1. Validity of the Orders Passed by the Learned Single Judge:The appeals were preferred by the Revenue against five identical orders dated 22.07.2010, passed by the learned Single Judge, which set aside the order dated 04.01.2010 by the first appellant. The learned Single Judge remitted the matter to the first appellant to consider the respondent's application for waiver of interest on merits, in accordance with the law.2. Entitlement of the Respondent to Waiver of Interest:The respondent, engaged in the manufacture, sale, and export of diamond jewellery, claimed deductions under Section 80HHC of the Income Tax Act for local sales made to a company in SEEPZ, Mumbai, treating them as deemed exports. The Revenue reopened assessments for the relevant periods, issuing notices under Section 148 of the Act. The respondent paid the reassessed tax and interest as demanded under Sections 234A, 234B, and 234C. The Chief Commissioner rejected the waiver petitions, stating that the deduction claimed was not based on relevant statutory provisions and the respondent did not voluntarily withdraw the claim before the completion of original assessments.3. Applicability and Interpretation of the Circular Dated 26.06.2006:The respondent filed petitions for waiver of interest based on the Circular No.400/29/2002 IT(B) dated 26.06.2006, issued by the CBDT under Section 119(2)(a) of the Act. The Chief Commissioner rejected the waiver petitions, stating that the circumstances did not fall within the provisions of clauses 2(a) to 2(d) of the Circular. The learned Single Judge set aside this order, remitting the matter for reconsideration.Upon appeal, it was argued that the Chief Commissioner had exhaustively dealt with the merits of the waiver petitions and concluded that the circumstances did not fall within the Circular's provisions. The Circular delegates power to the Chief Commissioner/Director General of Income Tax to reduce or waive interest charged under Sections 234A, 234B, and 234C, only if the case falls within the classes of cases or incomes specified in paragraph 2 of the Circular. The respondent's case did not fall within these specified circumstances.The Court agreed with the view of the Bombay High Court in De Souza Hotels Private Limited V. Chief Commissioner of Income Tax, which held that unless the case falls within the Circular's specified circumstances, the Chief Commissioner has no power to reduce or waive interest. The Court found that the learned Single Judge's judgment was not warranted, as the Chief Commissioner had already dealt with the waiver petitions on merits.Conclusion:The appeals were allowed, setting aside the judgments of the learned Single Judge. The Court concluded that the respondent's case did not fall within the circumstances specified in the Circular dated 26.06.2006, and thus, the Chief Commissioner had no power to waive the interest under Sections 234A, 234B, and 234C. The pending applications were closed, with no order as to costs.