Kerala H.C : M/s Universal Trades Corporation, a partnership firm, challenges Ext. P3 order issued under s. 119 (2)(a) of the IT Act.

High Court Of Kerala

Universal Trades Corporation vs. CCIT & Ors.

Sections 119(2)(a), 234B, 234C

Asst. Year 1997-98

M. Ramachandran, J.

OP No. 20524 of 2000-R

24th November, 2000

Counsel Appeared

P. Balakrishnan, for the Petitioner : P.K. Ravindranatha Menon George K. George, for the Respondents



M/s Universal Trades Corporation, a partnership firm, challenges Ext. P3 order issued under s. 119 (2)(a) of the IT Act. The issue concerns claim for waiver of interest, leviable under ss. 234B and 234C of the Act. The dispute arose in respect of asst. yr. 1997-98.

2. A return of income had been submitted by the petitioner on 31st Oct., 1997, in respect of the asst. yr. 1997-98. Being an exporter of sea foods, in view of double taxation avoidance agreement between the Government of India and Netherlands, they claimed reliefs. But they could not furnish documents supporting their claims, and the AO, accepting the returns, raised a demand for Rs. 15,02,250 which included interest under ss. 234B and 234C of the Act. The matter was, therefore, taken to the first respondent, Chief CIT, by way of a waiver petition after paying the tax minus the interest. No appeal had been filed by the assessee challenging the assessment, and the submission was only in respect of the demand for interest.

3. Though the claim was based on the tax of Board’s order dt. 23rd May, 1996, at the time of hearing the contention could not be substantiated. Dealing with the matter, the first respondent observed as following, in Ext. P3 : “The assessee’s representative conceded that it will not be possible for him to support the claim with reference to any of the specific clauses in the Board’s order. In view of this position the assessee’s application seeking waiver of interest under ss. 234B and 234C of the IT Act for the asst. yr. 1997-98 is rejected as being without any merit.”

4. Advocate Sri. P. Balakrishnan submits that the petitioner was having a bona fide claim, as GSR 382 dt. 27th March, 1989, reported in (1989) 177 ITR 72 (St) in fact governed the issue. It had been submitted that at the time of assessment the petitioner had not been heard, and the order, therefore, was in violation of principles of natural justice. He was at least entitled to a deduction under s.80HHC of the Act.

5. It is also submitted that the Board Circular, referred to by the Chief CIT in Ext. P3 was in fact published as a press note, on 21st May, 1996, and it appeared in (1996) 133 CTR (St) 162 : (1996) 219 ITR 169 (SC). The benefit thereby was sought to be given in certain cases where advance tax was not paid at the relevant time. This had been followed with due diligence, and if there was a mistake, the petitioner ought not have been penalised, as it was a case where the returns were voluntarily filed and advance tax was not paid on the advice that it was not payable as his income was not taxable under the IT Act.

The standing counsel for the Revenue submitted that the tax liability was strict in nature, and a relaxation, therefore, was impermissible. He referred to the endorsement in the return filed, showing the double taxation relief was disallowed, for want of proper certificate. A hearing at that stage was not possible, as it was the obligation of the assessee to make available with the return all relevant documents. Consequently, liability for payment of advance tax had arisen, as the payment of tax was expected to be made, as and when the assessee earned the income. Relying on the counter-affidavit filed, it had also been submitted that after assessment there was only a request for payment by instalments. A rectification petition was however filed, but it was belated, and the claim was beyond the purview of such a petition under s. 154, for want of any supporting documents. The Chief CIT too had filed an affidavit, and reiterated that on the strength of the decision CIT vs. R. Ramalingair (2000) 158 CTR (Ker) 628 : (2000) 241 ITR 753 (Ker), a hearing is not expedient when interest is charged at the time of assessment. A copy of the order of the CBDT, dt. 23rd May, 1996, was also made available as Ext. R1(A). As the conditions were not satisfied waiver was not permissible.

It is a settled position that interest under ss. 234A and 234B are compensatory in character [See Ranchi Club vs. CIT (1996) 131 CTR (Pat) 368 : (1996) 217 ITR 72 (Pat) : TC 43R.740]. Therefore, the contention that they were brought to the statute book substituting the penal provisions and hence a hearing was warranted, may not be a correct view. This is the same view taken in the decision A.M. Sainalabdeen Musaliar vs. Union of India & Ors. (1999) 155 CTR (Ker) 647 : (2000) 242 ITR 400 (Ker), it is submitted.

The next contention was on the basis of Board’s order, dt. 23rd May, 1996. It is seen that Ext. R1(A) which is authentic differs from the press note as published in (1996) 133 CTR (St) 162 : (1996) 219 ITR 169 (St). The standing counsel points out that the press note could not be authentic by any standards, and Ext. R1(A) alone governs the issue. He had also referred to a judgment of this Court in O.P. No. 20524/2000, rendered on an identical situation, upholding the plea of the Department. This position is, therefore, undisputable.

The petitioner had referred to the decision in CIT vs. Hindustan Electro Graphites Ltd. (2000) 160 CTR (SC) 8 : (2000) 243 ITR 48 (SC) in support of his contention that interest was a levy, and amounted to a punishment. But the principle decided in the above case was that the return filed on the date when it was filed was correct, and amending Act with retrospective effect could not have been a ground for levying additional tax. This was also the gift of the decision reported in Evershine Plastics vs. Asstt. Commr. 2000 (2) KLT 884. In fact this position has been taken care of in the circular referred to above.

As to the claim of the petitioner under s. 80HHC, the standing counsel submits that the assessee had not projected such a claim, and the only question that survived was as to the justifiability of interest for delayed payment of income-tax. Circumstance might have conspired against the petitioner, but that is no reason for this Court to interfere in the matter.

In the aforesaid circumstances, I find no substantial reasons to interfere in the matter. Of course, Ext. R1(A), by para 2(a) sought to give relief even to a person, who did not file a return in unavoidable circumstances, and adopting the said yardstick, it might have been possible to canvas for a position that the petitioner’s claims deserved a second look. But as the special contingency is not included in the authentic copy of the circular, it may not be possible for this Court to exercise its jurisdiction in favour of the assessee. Hence, the original petition is dismissed.

[Citation : 249 ITR 291]

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