High Court Of Karnataka
Balkrishna Breeding Farms (P) Ltd. vs. CCIT & Anr.
Sections 119(2)(a), 234B
Asst. Year 1993-94, 1995-96, 1997-98
R. Gururajan, J.
Writ Petn. Nos. 45504 to 45507 of 2003
1st December, 2003
Counsel Appeared
S. Parthasarathi, for the Petitioner : M.V. Seshachala, for the Respondent
ORDER
R. Gururajan, J. :
The petitioner-Balakrishna, aggrieved by Annex. ‘F’ dt. 20th Feb., 2003 in file No. CC-I/ACIT(T) I/119(2)(a)/I/34/02-03 is before me. The petitioner private limited company is an assessee in terms of the provisions of the IT Act (for short ‘the Act’). For the asst. yr. 1993-94, the petitioner filed its return claiming a net refund of Rs. 1,26,257 after availing the benefits of special deduction under ss. 80HHA, 80-I and 80JJ of the Act. An intimation under s. 143(1) was issued. Deductions claimed were disallowed and the total tax liability of Rs. 10,43,045 was determined. After adjustment, the total tax payable was Rs. 10,29,382. This included levy of interest under s. 234B of the Act. A representation was made by the petitioner in the light of the judgment of this Court and in the light of the judgment of Andhra Pradesh High Court and based on those judgments, the assessing authority passed an order under s. 154 of the Act and tax was determined at Rs. 1,48,620. A notice of demand was received and the petitioner paid this tax demand in the regular assessment. For the asst. yr. 1994-95, return was filed on 30th Nov., 1994, and in this return a refund of Rs. 2,87,054 was claimed after claiming special deductions under ss. 80HHA, 80JJ and 80-I. After this return was filed, the petitioner has not received any notice or intimation from the Department under s. 148 of the Act. For the asst. yr. 1995-96, the return was filed on 28th Nov., 1995 claiming a refund of Rs. 3,98,909. Special deduction was availed under ss. 80HHA, 80-I and 80JJ of the Act. No notice was received till 27th Dec., 2000. For the asst. yr. 1997-98, the petitioner filed returns and in the return, the tax payable was shown as Rs. 19,27,285 and the same was paid. Special deductions were taken into account while arriving at the total income. Intimation under s. 143(1) of the Act was received on 31st March, 1998. The same was followed by a demand. A reply was sent by the petitioner in this regard.
On 6th Dec., 2000, the assessing authority issued a notice under s. 154 of the Act proposing to rectify the mistake in the case on hand. A reply was submitted by the petitioner. The petitioner relied on the judgment of this Court in CIT vs. Rahebar Farms in ITRC No. 25/1991. The Supreme Court thereafter in the case of CIT vs. Venkateswara Hatcheries (P) Ltd. & Ors. (1999) 153 CTR (SC) 105 : (1999) 237 ITR 174 (SC) reversed the judgment of this Court and ruled that special deduction was available for new industrial undertakings which were engaged in manufacture or production of articles, a condition precedent to claim this deduction and further ruled that the units engaged in poultry farming or hatcheries do not manufacture or produce articles and hence, they are not entitled for special deductions. Assessments were reopened in the light of the judgment of the Supreme Court. Notices were issued in terms of Annexures ‘B’ to ‘B3’. Returns were submitted by the petitioner on 31st Jan., 2001 and thereafter assessments were concluded in terms of Annexures ‘D’ to ‘D3’.
The petitioner thereafter filed petitions under s. 119(2)(a) seeking for waiver of interest charge under s. 234B of the Act before the Chief CIT, Bangalore. A common order was passed on 20th Feb., 2003. In the order, the Chief CIT waived interest till 30th April, 1999. Thereafter, he directed the assessee to pay interest and confirm the demand of the AO. This order is challenged. Respondents have entered appearance. Parties are heard in the matter.
Sri Parthasarathi, learned counsel took me through the pleadings to contend that the petitioner, on the peculiar facts and circumstances of this case, is entitled for waiver of interest for the entire period and not for a portion of a period in terms of the order of the Chief CIT. Learned counsel says that the judgment of the Karnataka High Court was available to him on the said date of return and that therefore, he bona fide believed that he is entitled for deductions. The Supreme Court subsequently reversed the judgment of the High Court and the said reversal of the judgment of the High Court by the Supreme Court should not come in his way of claiming waiver of interest on the peculiar facts of the case. Per contra, the State counsel says that levy of interest is automatic and no waiver is permissible in such cases. He says that the order is to be confirmed by this Court.
After hearing the learned counsel, I have carefully perused the material on record. Admitted facts reveal of an application made by the petitioner seeking for waiver of interest. Material facts further reveal that the petitioner claims certain deductions in the light of the judgment of a jurisdictional High Court and the same was accepted. The jurisdictional High Court judgment was subsequently reversed by the Supreme Court in the case of Venkateswara Hatcheries (P) Ltd. (supra) and in those circumstances, the assessment proceedings were reopened and interest was levied. The petitioner moved the Chief CIT. The Chief CIT, after noticing the material facts has ruled in paras 4 and 5 reading as under : “The decision of the jurisdictional High Court in the case of Rahebar Farms vs. CIT was pronounced on 23rd Oct., 1992, which was in favour of the assessee and the Supreme Court’s decision reversing the above High Court’s decision was pronounced on 24th March, 1999. In view of this, the petitioner is entitled for waiver of interest as per para 2(d) of Board’s order under s. 119(2)(a) in F. No. 400/234/95/IT-(B) dt. 23rd May, 1996 and 30th Jan., 1997. As the petitioner claims in the waiver petition that the advance tax was paid based on the decision of the Karnataka High Court, it is entitled for waiver of interest upto the date of reversal of this decision. Considering the reasonable time allowable for filing of the revised return, the petitioner should have filed the revised return voluntarily and paid the taxes accordingly at least by 30th April, 1999. The petitioner has filed the returns in response to notice under s. 148 only on 31st Jan., 2001.
In view of the above, the interest chargeable under s. 234B upto 30th April, 1999 vis-a-vis the income assessed for the asst. yrs. 1993-94, 1994-95, 1995-96 and 1997-98 on account of the Supreme Court’s decision referred to above, is hereby waived. Interest, if any, chargeable subsequent to 30th April, 1999 and upto the date of assessment shall be charged and collected by the AO.”
8. It is to be noticed at this stage, a few provisions governing levy of interest. Sec. 4 of the IT Act provides for charge of IT Act in respect of a total income of the previous year of every person. Sec. 139 provides for procedure for assessment. Sec. 234A provides for interest for default in furnishing return of income. It provides for interest and the said section mandates payment of simple interest in terms of the said provision.
9. The Supreme Court has considered the binding effect of the judgment of the Supreme Court in the case of Shenoy & Co. vs. CTO AIR 1985 SC 621. In the said case, the Court ruled that the law laid down by the Supreme Court is binding on all, notwithstanding the fact that it is against the State or a private party and it is binding on even those who were not parties before the Court. A mere reading of Art. 141 brings into sharp focus its expanse and its all pervasive nature. The facts in that case would show that the validity of the Karnataka Tax on Entry of Goods into Local Areas was challenged in this Court. This Court has struck down the Act as invalid. The State filed an appeal in only one case. State appeal was allowed. The Act was revived. Thereafter, certain proceedings were initiated and they were questioned again. The one appeal filed by the State was the subject-matter of debate in the said case. The Supreme Court in that context ruled, as referred to above in my earlier paragraph. The Supreme Court has noticed as under : “A writ or an order in the nature of mandamus has always been understood to mean a command issuing from the Court, competent to do the same, to a public servant amongst others, to perform a duty attaching to the office, failure to perform which leads to the initiation of action. In this case, the petitioners-appellants assert that the mandamus in their case was issued by the High Court commanding the authority to desist or forbear from enforcing the provisions of an Act which was not validly enacted. In other words, a writ of mandamus was predicated upon the view that the High Court took that the 1979 Act was constitutionally invalid. Consequently the Court directed the authorities under the Act to forbear from enforcing the provisions of the Act qua the petitioners. The Act was subsequently declared constitutionally valid by the Supreme Court. The Act, therefore, was under an eclipse, for a short duration; but with the declaration of the law by the Supreme Court, the temporary shadow cast on it by the mandamus disappeared and the Act revived with its full vigour, the constitutional invalidity held by the High Court having been removed by the judgment of the Supreme Court. If the law so declared invalid is held constitutionally valid, effective and binding by the Supreme Court, the mandamus forbearing the authorities from enforcing its provisions would become ineffective and the authorities cannot be compelled to perform a negative duty. The declaration of the law is binding on everyone and it is therefore, futile to contend that the mandamus would survive in favour of those parties against whom appeals were not filed.”
10. This judgment would show that the temporary shadow cast by the judgment of this Court gets collapsed in the light of a subsequent judgment of the Supreme Court. This judgment supports the view taken by the Department.
11. The Supreme Court in the case of CIT vs. Anjum M.H. Ghaswala & Ors. (2001) 171 CTR (SC) 1 : (2001) 252 ITR 1 (SC) has ruled as under : “If the scheme of levy of interest is to be analysed on the anvil of the provisions referred to hereinabove, it shows that the interest contemplated under ss. 234A, 234B and 234C is mandatory in nature and the power of waiver or reduction having not been expressly conferred on the Commission, the same indicates that so far as the payment of statutory interest is concerned, the same is outside the purview of the settlement contemplated in Chapter XIX-A of the Act.”
The section as well as the dictum of the Supreme Court categorically provide for levy of interest. The only provision available for waiver in such cases is under s. 119 of the IT Act. Sec. 119(2)(a) provides for an order being issued with regard to waiver of interest. But for this provision, waiver is impossible. The Board has issued an order on 23rd May, 1996, providing for reduction or waiver of interest for late filing of return of income, etc. Therefore, the petitioner cannot as a matter of right demand that interest has to be waived as a whole in the given circumstances. The waiver is by virtue of a power under s. 119(2)(a) in terms of the Board’s order. In the case on hand, the CIT exercising his power under the said section in the light of the Board’s order, has chosen to waive interest up to 30th April, 1999, i.e., till date of the judgment of the Supreme Court. This waiver, in my view, is reasonable and acceptable in the given circumstances.
The argument of Sri Parthasarathi, learned counsel is that the jurisdictional judgment of the High Court was available to him on an earlier occasion. It has now been reversed in the light of the subsequent judgment of the Supreme Court in the given case. Once the Supreme Court laid down law, it is deemed to be the law not only in the light of the judgment but even for the earlier period. Therefore, the petitioner is liable to pay interest for the whole period and in terms of the waiver provision, interest is substantially reduced. Justice has been done to the parties. I do not think that in this case, I should interfere in the given circumstances. The order is confirmed. At this stage, I must also notice the argument of the petitioner that there was no notice, etc. and that therefore, the question of payment does not arise. It may be noticed that no notice was issued in the given circumstances. That by itself cannot be taken advantage of for the purpose of waiver in the light of a statutory compulsion of payment of interest. This argument does not appeal to me.
In the result, this petition is rejected. The order is confirmed. No costs.
[Citation : 266 ITR 15]
