Waiver of interest and penalty cannot be refused where the assessee accepts the tax demand and is ready to deposit the tax due.

Where an assessee accepted the tax demand raised under the assessment order and expressed readiness to pay, the rejection of waiver of interest and penalty under Section 128A was found unsustainable. The court treated the deposit requirement as capable of compliance within a fixed time and held that the application should not be refused solely because the tax had not yet been paid, especially when the liability had already been reflected in the assessment summary. On the same factual basis, the rejection of the rectification petition under Section 161 was also unsustainable. The assessee was given time to deposit the tax, after which the waiver request was to be reconsidered afresh on merits.

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Issues: Whether the rejection of the application for waiver of interest and penalty under Section 128A and the rejection of the rectification petition under Section 161 could be sustained when the assessment order reflected tax liability, the electronic ledger showed a tax column as zero, and the assessee expressed readiness to deposit the tax demanded.

Analysis: The assessment order under Section 73 had already raised tax, interest, and penalty for the relevant tax period. The assessee did not dispute the existence of the tax demand and acknowledged that the liability had been reflected in the assessment summary. The dispute turned on whether the application under Section 128A could be rejected merely because the tax had not yet been deposited, notwithstanding the assessee's readiness to pay the amount demanded. In these circumstances, the statutory requirement of deposit was treated as capable of being satisfied by directing payment within a fixed time, and the rectification rejection was also found unsustainable in the same factual setting.

Conclusion: The rejection orders were not sustained. The assessee was granted an opportunity to deposit the tax within the time granted, after which the application for waiver of interest and penalty was to be reconsidered afresh on merits.

Ratio Decidendi: Where the assessee accepts the tax demand and is prepared to comply with the payment requirement, an order refusing consideration of waiver benefits can be interfered with and the matter directed to be reconsidered after deposit of the tax due.

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