Court directs Chief Commissioner to reconsider interest waiver request under Income Tax Act, citing exceptional circumstances

The Court set aside the order denying waiver or reduction of interest under Section 234B of the Income Tax Act, instructing the Chief Commissioner of Income Tax to reconsider the matter. The petitioner's situation fell under the category in a notification allowing for waiver or reduction in cases of unavoidable circumstances, such as the delay caused by a BIFR order. The Chief Commissioner was directed to review the case and make a decision on interest waiver within three months, leading to the disposal of the writ petition.

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Issues:
1. Impugning an order rejecting waiver or reduction of interest under Section 234B of the Income Tax Act, 1961.

Analysis:
The petitioner, a Government of Kerala undertaking, challenged an order by the Chief Commissioner of Income Tax denying a claim for waiver or reduction of interest under Section 234B of the Income Tax Act, 1961. The petitioner cited a notification by the Central Board of Direct Taxes allowing certain classes of income for waiver or reduction under Sections 234A or 234B. The petitioner invoked category (d) of the notification, which pertains to situations where a return of income could not be filed due to unavoidable circumstances and was voluntarily filed later. The petitioner's case involved the sale of capital assets in 2001-02, with the sale proceeds deposited in a 'No Lien' account as per BIFR's direction. The petitioner failed to remit tax on time as the funds were with the bank, but upon the lifting of BIFR's direction, the tax was immediately paid. While interest under Section 220(2) was waived, the claim for waiver under Section 234B was rejected, leading to the petitioner approaching the Court.

The impugned order, as per Exhibit-P3, did not consider the petitioner's claim for interest reduction on its merits, stating it did not fall under any category mentioned in the notification issued by the Central Board of Direct Taxes. However, the Court observed that the petitioner's inability to remit tax on time was due to the BIFR's order, which was lifted later, prompting immediate tax payment. The Court noted that category (d) in the notification covers cases where an assessee fails to file a return due to unavoidable circumstances, which aligns with the petitioner's situation. Consequently, the Court set aside the impugned order for the Chief Commissioner of Income Tax to reconsider the matter. The petitioner was directed to present the BIFR order before the Chief Commissioner, who was tasked to make a decision on granting full waiver or reduction in interest within three months.

In conclusion, the writ petition was disposed of, allowing for a fresh consideration by the Chief Commissioner of Income Tax based on the circumstances and the relevant provisions under Section 234B of the Income Tax Act, 1961.

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