Chief Commissioner of Income Tax and Another vs Jimmichan M. Varicatt

C.N. Ramachandran Nair, J.—Appeal is filed against the judgment of the learned single Judge holding that the Respondent-Assessee who was granted waiver of interest u/s 234A of the Income Tax Act, 1961 by the Chief Commissioner is entitled to waiver of interest payable under Sections 234B and 234C as well on the same ground that is Clause (e) in Notification No. 400/234/95/IT dated 23-5-1996. We have heard standing counsel appearing for the department and Sri S. Vijayan Nair, counsel appearing for the Respondent-Assessee. After hearing both sides, we are unable to uphold the finding of the learned single Judge with regard to entitlement of the Respondent-Assessee for waiver of interest payable under Sections 234B and 234C of the Act, merely because the Assessee has voluntarily filed returns and paid tax. In our view, Clauses (a) and (e) of the notification deal with the same subject, that is circumstances for waiver of interest u/s 234A. However, for waiver of interest payable under Sections 234B and 234C, application has to be considered with specific reference to Clauses (b), (c) and (d) of the notification. While Clause (a) refers to disability of an Assessee from filing return on account of search and seizure and retention of books of account, Clause (e) deals with other cases where parties were disabled from filing of returns for unavoidable reasons, may be party happens to be out of India, happens to be sick and laid up, etc. However, the finding of the learned single Judge that Clause (e) is a condition, satisfaction of which, entitles the Assessee to claim waiver of interest under Sections 234B and 234C of the Act, in our view, is not tenable, because it only lays down a condition for waiver of interest u/s 234A of the Act. We therefore allow the appeal by reversing the judgment of the learned single Judge and by holding that satisfaction of the condition under Clause (e) does not entitle the Assessee for waiver of interest u/s 234B and Section 234C of the Act.

Sri Vijayan Nair, counsel appearing for the Respondent-Assessee, pointed out the peculiar circumstances of the case and the nature of income assessed in this case. The amount assessed is the compensation received by the Assessee for surrendering tenancy rights to the building owner. There was controversy as to whether income itself is assessable and if so under what head. Ultimately total income of around Rs. 38 lakhs was subjected to tax on capital gains. The tax demanded is Rs. 7,66,720 and the demand of interest under various provisions of Section 234 is Rs. 4,72,174. The Chief Commissioner has already waived Rs. 2 lakhs payable u/s 234A. Since the position of tax liability was not clear to the Assessee, naturally there was non-payment of advance tax. We therefore feel some leniency is called for in this case. Accordingly we fix the interest liability under Sections 234B and 234C at Rs. 1 lakh with direction to the department to refund excess if any collected or otherwise limit the recovery to Rs. 1 lakh under Sections 234B and 234C of the Act. The relief granted by us is in addition to the waiver of interest granted by the Chief Commissioner u/s 234A of the Act.

Writ appeal is allowed by reversing the impugned judgment and WPC is allowed granting the relief as above.