High Court Of Madras
Coromendal Indag Products India Ltd. vs. CIT & Anr
Sections 215, 217(1)(a), Rule 40
Asst. Year 1985-86,
N.V. Balasubramanian, J.
Writ Petn. No. 13698 of 1989 & WMP No. 19763 of 1989
31st October, 2000
Counsel Appeared
P.P.S. Janarthana Raja, for the Petitioner : C.V. Rajan, for the Respondent
JUDGMENT
N.V. BALASUBRAMANIAN, J.:
This writ petition is filed for the issue of a writ of certiorarified mandamus calling for the records relating to the petitioner on the file of the first respondent in C. No. 1742/1/89/90/Central II, dt. 20th Sept., 1989, and to quash the impugned order passed therein and consequently direct the first respondent to grant relief of waiver of interest to the petitioner for the asst. yr. 1985-86.
2. The petitioner is a deemed public limited company engaged in the manufacture and sale of agrochemicals. For the asst. yr. 1985-86 relevant to the accounting year ended on 30th June, 1984, the petitioner, who is an assessee on the file of the Asstt. CIT, Central Circle II (2), filed return of income on 28th June, 1985, returning a sum of Rs. 1,37,12,872. The petitioner, for the year ended 30th June, 1984, filed an advance tax estimate in Form 29 on 15th June, 15th Sept., and 15th Dec., 1984 and also paid advance tax accordingly. According to the averments contained in the affidavit filed in support of the writ petition, the petitioner has stated that later the petitioner filed a revised return disclosing a sum of Rs. 215.58 lacs on 18th Feb., 1988, after taking into account customs duty element on closing stock of raw materials at factory and revised computation for tax holiday benefit under s. 80-I of the IT Act, 1961, on the basis of the directions given by the CIT(A) in ITA No. 466/86-87, dt. 13th April, 1987, for the asst. yr. 1983-84. The case of the petitioner is that the petitioner filed the revised return voluntarily. According to the petitioner, when the petitioner paid Rs. 97.50 lakhs as advance tax and filed the advance estimate, the petitioner could not have anticipated the directions given by the CIT(A) for the asst. yr. 1983-84 and hence, the shortfall in the payment of advance tax arose.
3. The ITO determined the total income at Rs. 2,26,80,760 and also levied interest under s. 217(1) (a) of the IT Act of a sum of Rs. 19.86 lakhs for the period from 1st April, 1985 to 29th Feb., 1988, in the order of assessment. The petitioner filed a petition under r. 40 of the IT Rules, 1962 for the waiver of interest levied under s. 217(1)(a) of the IT Act on the ground that the petitioner filed valid estimate for advance tax and also paid the advance tax on the basis of the said estimate. It is the case of the petitioner that the additions made and the revisions submitted by the petitioner during the course of the assessment proceedings were not contemplated at the time of filing estimate for advance tax and the assessment has also been completed after one year subsequent to submission of the return and the delay in the completion of the assessment was not attributable to the assessee and the assessee has disputed certain additions made by the IAC and also filed appeals before the CIT(A).
The second respondent by his order dt. 5th Jan., 1989, waived interest to the extent of Rs. 11,20,226 on the ground that the assessment has been completed more than one year after the submission of the return and the delay in completing the assessment was not attributable to the petitioner. In other words, the second respondent has confirmed the levy of interest, to an extent of a sum of Rs. 8,40,168. The petitioner then approached the Dy. CIT raising almost same grounds which were raised before the Asstt. CIT and the Dy. CIT by his order dt. 22nd Feb., 1989, dismissed the petition for waiver on the ground that the assessee has not made out any case for waiver of interest.
The petitioner/assessee then preferred a petition under s. 264 of the IT Act before the first respondent. It was submitted by the petitioner that the petitioner on the basis of the directions of the AAC for the earlier assessment year regarding valuation of closing stock of raw material in respect of imported chemicals and the determination of relief under s. 80-I of the IT Act has revised its income voluntarily on the basis of the direction and hence, the levy of interest as if the petitioner has not filed correct estimated amount of income for the purpose of advance tax is not justified. It was also submitted that the levy of interest would seriously affect the financial position of the petitioner-company and the petitioner has not committed any wilful default and the petitioner has cooperated with the Department in the completion of the assessment.
The CIT rejected the petition filed by the petitioner under s. 264 of the IT Act on the ground that the question of levy of interest arose only when there is variation between the estimated income and the assessed income and the genuineness of the claim is relevant only for the purpose of levy of penalty and not for the purpose of levy of interest. The other ground pointed out by the CIT was that the petitioner did not file any revised return but filed only the revised statement of income and the petitioner did not pay tax under s. 140A of the IT Act. Therefore, the CIT held that the AO has properly exercised jurisdiction in levying interest. The CIT ultimately held that the petitioner is not entitled to any further waiver of interest. The petitioner is challenging the order of the CIT in this writ petition.
Mr. P.P.S. Janarthana Raja, learned counsel appearing for the petitioner, submitted that the CIT has not applied his mind to the relevant considerations for waiver of interest under r. 40 of the IT Rules. According to him, it is a case where the assessee could not have anticipated the directions from the appellate authority at the time of filing the estimate of advance tax and the necessity to file the revised statement of income arose because of certain directions given by the CIT(A) for the earlier assessment year with regard to customs duty element on closing stock of raw material at factory and in the matter of relief under s. 80-I of the IT Act and as soon as the order of the CIT(A) became available, the revised statement of income was filed during the course of assessment proceedings for the year 1985-86 and the petitioner/assessee has revised the income voluntarily. According to him, both the reasons given by the CIT are not germane in considering the question whether the interest should be waived or not under r. 40 of the IT Rules. According to him, since the CIT has not taken into consideration the relevant matters, this Court should set aside the order and examine the question whether the petitioner is entitled to the waiver of interest or not. Learned counsel for the petitioner also submitted that the levy of interest is violative of the principles of natural justice as the second respondent has not given any prior notice before levying interest under s. 217(1)(a) of the IT Act and in support of his submissions, he relied upon certain decisions.
Mr. C.V. Rajan, learned senior standing counsel appearing for the Department relied upon the decision of this Court in Salem Co-operative Sugar Mills Ltd. vs. CIT (2000) 163 CTR (Mad) 234 : (1999) 240 ITR 910 (Mad) wherein this Court held that prior notice is not necessary to levy interest under the IT Act. Learned senior standing counsel also referred to the order of the Asstt. CIT wherein it is stated that the assessee could have anticipated the additions at the time of filing the advance tax estimate and that the assessee had deliberately undervalued the closing stock of raw materials by ignoring the customs duty paid on such material. Learned senior standing counsel also referred to the order of the CIT wherein he has reiterated that the assessee would have anticipated the additions regarding customs duty and the relief under s. 80-I of the IT Act. Learned senior standing counsel also referred to the order of the CIT and submitted that the CIT has found that the AO has already exercised the power vested with him and reduced the interest to Rs. 8.40 lakhs against the original levy of interest of Rs. 19.85 lakhs and submitted that the facts of the case make it clear that the levy of interest is justified and there are no grounds to interfere.
Before considering the question whether the CIT has properly exercised the power under s. 264 of the IT Act, it is necessary to mention the decision of this Court in Salem Co-operative Sugar Mills Ltd. vs. CIT (supra) wherein this Court held that the levy of interest is a part of the process of assessment and the assessing authority is not compelled to give a show-cause notice before levying interest and no prior notice is necessary before the levy of interest under s. 215 of the IT Act. In view of the same, I am unable to accept the submission of the learned counsel for the petitioner that prior notice is necessary. There is no dispute that the petitioner-company filed return of income for the asst. yr. 1985-86 on 28th June, 1985, wherein the total income of Rs. 1,37,12,872 was declared. The assessee filed Form 29 on 15th June, 1984, wherein income subject to advance tax was shown as Rs. 142.40 lakhs and advance tax payable was shown as Rs. 90 lakhs. On 15th Dec., 1984, the assessee also filed another estimate wherein income subject to advance tax was shown as Rs. 154.75 lakhs and advance tax payable was shown as Rs. 92.85 lakhs. The petitioner-company filed its regular return on 28th June, 1985. During the course of the assessment proceedings, the petitioner filed a revised statement of total income wherein the income liable to be taxed was shown as Rs. 2,15,58,192 as the assessee has increased the value of the closing stock of the imported raw materials at factory after taking into account the customs duty paid on such stock and the assessee has also revised its claim under s. 80-I of the IT Act. Though interest was levied under s. 217(1)(a) of the IT Act, for the period from 1st April, 1985, it is actually the interest under s. 215 of the IT Act and the Asstt. CIT has reduced the interest payable by the assessee to Rs. 19,60,394 and a sum of Rs. 11,20,226 levied as interest was waived. It is no doubt true that both the Asstt. CIT and the Dy. CIT have held that the additions made could have been anticipated by the assessee and on that basis the assessee should have estimated the advance tax. When the matter reached the CIT, the CIT gave two reasons. The first reason given by the CIT was that the voluntary act of the petitioner in filing the statement of revised income cannot be taken into account for the waiver of interest. The second reason was that the assessee did not file revised return, but the assessee merely filed revised statement of total income and the assessee did not pay any tax under s.140A of the IT Act.
In my view, both the reasons given are not relevant at all in considering the question whether the interest levied under s. 215 of the IT Act should be waived or not under r. 40 of the IT Rules. In my view, the view of the CIT that the voluntary act of the assessee would be relevant for the purpose of waiver of penalty and not for the purpose of waiver of interest is not relevant. I am of the view that if the view of the CIT that the levy of interest is automatic, and the question whether the assessee has filed the estimate voluntarily or not is accepted, then, there can be (no) waiver of interest at all in any case of levy of interest. Hence, the first reason given by the CIT that the levy of interest is automatic is not relevant for the purpose of considering the application filed under r. 40 of the IT Rules. The second reason given was that the petitioner has not filed any revised return, but only filed the revised statement of income and hence, the petitioner is not entitled for waiver of interest. In my view, the second reason given by the CIT is also not relevant. Let me assume that the petitioner filed the revised return of income and in that case, it would be required to pay the tax under s. 140A of the IT Act. On the facts of the case, the petitioner filed its return of income on 28th June, 1985, and the petitioner filed the revised statement of income on 8th Feb., 1988, and the Asstt. CIT also found that the assessment was completed more than one year after the submission of the return and the delay was not attributable to the assessee and hence, the interest charged for the period after one year i.e., from 28th June, 1986, was waived under r. 40(i) of the IT Rules. Therefore, the filing of the revised statement on 8th Feb., 1988, has no relevance at all as the interest charged for the period subsequent to 8th Feb., 1988, was waived and the question for consideration is whether the petitioner is eligible for waiver of interest for the period from 1st July, 1985, to 30th June, 1986.
I am, therefore, of the view that both the reasons given by the CIT are not relevant and the CIT has not taken into account the relevant factors whether the petitioner would have anticipated the order of CIT(A) at the time of filing of the advance tax estimate and other relevant circumstances whether the petitioner has made out any case for waiver of interest. Therefore, the order of the CIT is liable to be set aside, and accordingly, it is set aside. Though Mr. P.P.S. Janarthana Raja, learned counsel, made a fervent plea that the matter need not be remitted to the CIT and this Court itself may consider the matter on merits of the case, I am not inclined to agree with the submission of the learned counsel for the petitioner as the CIT is entrusted with the powers under s. 264 of the IT Act to consider the question of waiver of interest. Since the CIT has arrived at his conclusion not on valid grounds, the order of the CIT is set aside. I direct the CIT to consider the matter afresh. Accordingly, the matter is remitted to the CIT for fresh consideration.
In the result, the writ petition is allowed and the matter is remitted to the CIT. In the circumstances, there will be no order as to costs. Consequently, WMP No. 19763 of 1989 is closed.
[Citation : 249 ITR 353]
