P.G. Mani and Others vs Chief Commissioner of Income Tax and Others

Antony Dominic, J.—Heard the learned counsel for the petitioner and the learned standing counsel appearing for the respondents. The petitioner is a partnership firm. For the asst. yrs. 1995-96 and 1996-97, they filed returns under the IT Act showing taxable income of Rs. 2,67,230 and Rs. 4,35,230 respectively. These returns were filed claiming the status of a firm and were processed under s. 143 of the IT Act.

Subsequently, based on the Full Bench judgment of this Court in Narayanan and Co. and K.S. Ramakrishnan, P.K. Narayanan and Co. Vs. Commissioner of Income Tax, , the assessment was reopened under s. 147 of the IT Act and taxable income was determined at Rs. 7,40,790 and Rs. 11,11,360 for the asst. yrs. 1995-96 and 1996-97 respectively, treating the assessee as an AOP instead of a partnership firm. The AO also levied interest under ss. 234B and 234C of the Act. Seeking waiver of the interest thus levied on the petitioner, they filed Ext. P1 application to the first respondent, under r. 119(2) of the IT Rules where benefit of the Board''s notification dt. 23rd May, 1996, authorising the first respondent to waive or reduce the interest was claimed. That application of the petitioner was finally rejected, by Ext, P2 order. It is challenging Ext. P2, this writ petition is filed.

Among the Various provisions of the notification dt. 23rd May, 1996, the benefit claimed was that provided in para 2, cl. (d) thereof which reads thus:

Where any income which was not chargeable to income tax on the basis of any order passed in the case of an assessee by the High Court within whose jurisdiction he is assessable to income tax and as a result, he did not pay income tax in relation to such income in any previous year and subsequently in consequence of any retrospective amendment of law or as the case may be, the decision of the Supreme Court in his own case, which event has taken place after the end of any such previous year, in any assessment or reassessment proceedings the advance tax paid by the assessee during the financial year immediately preceding the relevant assessment year is found to be less than the amount of advance tax payable on his current income, the assessee is chargeable to interest under s. 234B or s. 234C and the Chief CIT or Director General is satisfied that this is a fit case for reduction or waiver of such interest.

This claim was considered and has been rejected thus:

The primary condition for invoking cl. (d) is that there should be an income which was not chargeable to tax on the basis of a decision of the jurisdictional High Court which becomes taxable as a result of any retrospective amendment of law or a later decision of the Supreme Court. There is no such income in this case and hence cl. (d) has no application.

It is the correctness of this reasoning adopted by the first respondent which arises for consideration in this case.

If the provisions of cl. (d) are perused, it can be seen that the income must not have been chargeable to tax on the basis of any order passed by the jurisdictional High. Court and it should become taxable as a consequence of any retrospective amendment of law or on a decision of the Supreme Court. Insofar as the case in question is concerned, it can be seen that the petitioner was assessed with the status as a firm and that subsequently, following the judgment of this Court in Narayanan & Co. vs. CIT (supra), assessment was reopened and the tax was reassessed treating the petitioner as an AOP. Therefore, situation as contemplated in para 2, cl. (d) was not available to the petitioner to claim the benefit thereof. As held by the apex Court in Commissioner of Income Tax, Mumbai Vs. Anjum M.H. Ghaswala and Others, [sic- Commissioner of Income Tax, Mumbai Vs. Anjum M.H. Ghaswala and Others, ] interest under ss. 234A, 234B and 234C is mandatory. It is also settled that unless the claim for waiver or reduction comes within the four corners of the conditions specified by the Central Government, interest levied under the aforesaid provisions cannot be waived [see in this connection-- Universal Trades Corporation Vs. Chief Commissioner of Income Tax and Others, ]. In this case, on facts I have already concluded that the claim of the petitioner did not come within cl. 2(d) of the notification relied on. If that be so, the assessee could not have claimed waiver of interest. Therefore, its rejection by Ext. P2 order cannot be said to be illegal warranting interference in this writ petition.

Writ petition fails and is dismissed.