Court grants partial relief waiving interest for petitioner facing financial hardship. Case remitted for recalculating interest.

The court granted partial relief to the petitioner by waiving interest for a specified period due to financial and legal difficulties. The case was remitted for recalculating the interest payable, excluding the waived period, with instructions for timely communication and payment.

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Issues Involved:
1. Waiver of interest under Sections 234A, 234B, and 234C of the Income Tax Act, 1961.
2. Financial difficulties and legal incapacitation of the petitioner company.
3. Applicability of CBDT’s Circular dated 26.06.2006.
4. Jurisdiction and power of the Chief Commissioner of Income Tax and the Court under Article 226.

Issue-wise Detailed Analysis:

1. Waiver of Interest under Sections 234A, 234B, and 234C:
The petitioner sought waiver of interest under Sections 234A, 234B, and 234C of the Income Tax Act, 1961, citing financial hardships and legal incapacitation. The Chief Commissioner of Income Tax rejected this request, stating that the petitioner’s case did not fall within the circumstances specified in the CBDT’s Circular dated 26.06.2006 (Para 1, 11).

2. Financial Difficulties and Legal Incapacitation:
The petitioner company faced significant financial difficulties, including the arrest of its Managing Director and the resignation of all directors and principal officers. The company was also ordered to be wound up by the court, which led to a legal disability in managing its affairs and paying taxes (Para 7, 9, 10, 24, 26).

3. Applicability of CBDT’s Circular dated 26.06.2006:
The CBDT’s Circular specifies conditions under which interest can be waived, including search and seizure situations, unexpected income, retrospective amendments, and unavoidable circumstances. The court found that the petitioner’s situation did not fall within these specified conditions (Para 18, 19, 20).

4. Jurisdiction and Power of the Chief Commissioner and the Court:
The Chief Commissioner is bound by the CBDT’s Circular and thus could not grant the waiver. However, the court, under Article 226, has the power to grant relief in cases of genuine hardship. The court recognized the petitioner’s legal incapacity during the winding-up period and granted partial relief by waiving interest for the period between 18.06.2001 and 27.10.2006 (Para 22, 34, 35).

Conclusion:
The court acknowledged the petitioner’s financial and legal difficulties and granted partial relief by waiving interest for the specified period. The case was remitted back to the 2nd respondent to compute the interest payable excluding the waived period, with instructions for timely communication and payment (Para 36, 37, 38).

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