2023 (9) TMI 615 - HC - Income Tax

Writ Appeal Dismissed on Interest Levy & Settlement Commission Decision

E.O. Lawrence (Legal Heir), Thankamma Lawrence, Lemin Lawrence, Lenil Lawrence, Leril Lawrence Versus Union Of India, Central Board Of Direct Taxes, Principal Chief Commissioner Of Income Tax, Kochi, Tax Recovery Officer,

E.O. Lawrence (Legal Heir), Thankamma Lawrence, Lemin Lawrence, Lenil Lawrence, Leril Lawrence Versus Union Of India, Central Board Of Direct Taxes, ... Issues involved:The issues involved in this legal judgment include the challenge against demand of interest under Section 158BFA and Section 245D(6A) of the Income Tax Act, 1961. The appellant contested the demand of interest under Section 158BFA based on rejection of waiver application by the Central Board of Direct Taxes (CBDT) and the erroneous reasoning cited by CBDT. Additionally, the appellant disputed the demand of interest under Section 245D(6A) due to financial difficulties faced by the family and delay in filing returns.Challenge against demand of interest under Section 158BFA:The appellant challenged the demand of interest under Section 158BFA by invoking Section 119(2)(a) of the Act, arguing that the Settlement Commission did not have the power to grant waiver of interest under this section. The appellant contended that the CBDT had erred in rejecting the waiver application, citing Supreme Court decisions to support the claim. However, the learned Single Judge rejected the contentions, stating that the levy of interest under Section 158BFA was automatic once the tax payable was determined by the Settlement Commission. The Single Judge also noted that the CBDT's power to waive interest could only be exercised in relation to a class of cases, not individual cases.Challenge against demand of interest under Section 245D(6A):Regarding the demand of interest under Section 245D(6A), the appellant mistakenly assumed it was levied under Section 220(2) of the Act. The appellant approached the Principal Chief Commissioner of Income Tax seeking waiver of interest, but no order was passed. The learned Single Judge dismissed the appellant's contentions, emphasizing that the interest under Section 245D(6A) was part of the Settlement Commission's decision and could not be waived by either the Settlement Commission or the CBDT. The Judge considered the appellant's delayed approach to the CBDT and financial difficulties faced by the family in denying relief and dismissing the writ petition.Decision and Rationale:The Writ Appeal challenging the demand of interest under Section 158BFA and Section 245D(6A) was dismissed. The Court found that the levy of interest under Section 158BFA was automatic due to the delayed filing of returns beyond the prescribed period. The CBDT's power to waive interest under this section applied to a class of cases, not individual cases. The Court also upheld the demand of interest under Section 245D(6A) as part of the Settlement Commission's decision, which could not be waived. The Court directed the respondents to issue a fresh demand notice, considering any payments made by the appellant, within six weeks from the date of the judgment.