Smt. K.E. Rehmath vs Commissioner of Income Tax and Another

V.V. Kamat, J.—In this petition under article 226 of the Constitution of India the question is of waiver of interest u/s 139(8) of the Income Tax Act, 1961. By the impugned order (exhibit P-6) passed by the Commissioner of Income Tax, Cochin, on October 30, 1992, in revision waiver of interest to the extent of 50 per cent. is already granted leaving the petitioner to this court to consider whether there is a case for total waiver of interest.

The assessment year is 1986-87. In other words for the assessment year in question the return ought to have been filed on or before July 31, 1986, and it has been filed on March 10, 1989, within a little less than three years thereafter. Originally the return was filed admitting an income of Rs. 85,850. On discussion with the assessee''s representatives it was rounded off to Rs. 7,06,970. The Income Tax Officer--the assessing authority--levied interest u/s 139(8) of the Act from August 1, 1986, up to February 28, 1989, at Rs. 1,28,921. The other aspects are of no relevance in this petition.

The aspect was considered by the appellate authority--Assistant Commissioner of Income Tax, Investigation Circle, Cannanore--and the order was passed by the Commissioner of Income Tax (Appeals), Calicut. The total income of Rs. 7,06,966, rounded off as above got reduced in appeal to Rs. 4,34,930. Correspondingly, the amount of interest u/s 139(8) of the Act was also reduced to Rs. 76,221.

It was in regard to this aspect that the petitioner approached the Assistant Commissioner of Income Tax, Investigation Circle, Cannanore, by an application dated July 8, 1989 (exhibit P-3) for waiver of interest. In the said application the reason for late filing of the return is shown as finalising the accounts of the business--Mahe Auto Fuel Enterprises, the income from which constitutes the major source of income of the assessee, it is urged. It is also stated that there was some delay in ascertaining the share of the petitioner''s income from other firms. It is stated that the return, as above, was filed on the total income of Rs. 85,850 u/s 140A of the Act.

It also appears in the petition that there was a search u/s 132 of the Income Tax Act of the business premises of the petitioner on March 17, 1987. The delay was for finalising the accounts and was not intentional or wilful omission or as a result of any lapse on the part of the petitioner.

It is also submitted that the accounts had to be audited u/s 44AB of the Income Tax Act, 1961, and the return came to be filed as soon as the accounts were finalised and the audit report was made available. It is also stated that disallowance of the amount of sales tax payment amounting to Rs. 4,64,875 u/s 43B of the Act was also a factor which was ultimately considered by the first appellate authority. The petitioner submitted for waiver of interest, resorting to Rule 117A(iv) and (v) of the Income Tax Rules, 1962.

This petition came to be rejected by the order dated July 12, 1989 (exhibit P4), passed by the Assistant Commissioner of Income Tax, Canna-nore, stating that the reasons do not cover the aspects under Rule 117A. If the provisions of Rule 117A of the Income Tax Rules, 1962, are seen it will have to be observed that the only provision that becomes of some relevance in the context of the factual matrix would be Rule 117A(v) thereof. The situation speaks of factors preventing the assessee from furnishing the return within time by sufficient cause. In other words, the order (exhibit P-4) would have to be understood to state that the petitioner could not be seen to be prevented by sufficient cause from furnishing the return within time. Learned counsel for the petitioner has no dispute it is only this clause and none of the other clauses of Rule 117A would be of any relevance to the factual matrix of this petition. The orders are not necessarily to be understood as speaking orders. Reading the application (exhibit P-3) and the text of the order (exhibit P-4) stating that the provisions of Rule 117A are not attracted and the position that it is only Rule 117A(v) would be relevant, the situation will have to be understood as the authority not being satisfied with regard to the material on record that the petitioner was prevented by sufficient cause from furnishing the return within time and that too in the context of the contents of the petition referred to above. Be that as it may, the petitioner approached the second revisional authority-Commissioner of Income Tax, Cochin (Ernakulam), by the revision petition (exhibit P-5). This was a petition u/s 264 of the Income Tax Act, 1961. A perusal of the said petition would show, in substance, that there was a valid cause for the delay in filing the return of income for 1986-87 and in regard thereto the Assistant Commissioner ought to have found that the delay was not due to any wilful or intentional omission.

By the impugned order passed by the Commissioner of Income Tax, Cochin, u/s 264 of the Income Tax Act, 1961, it would be seen that it was urged that disallowance of Rs. 2,67,582 u/s 43B of the Act resulted in a huge liability towards interest. It was also urged that there was a search u/s 132 of the Act on the premises of the assessee on March 17, 1987, which could also be understood as contributing to the delay in filing the return. It was finally submitted that in the special circumstances of the case waiver ought to have been allowed in exercise of the powers under Rule 117A of the Rules.

The revisional authority has observed that the proper date for filing the return was July 31, 1986, and it was on March 17, 1987, the search was conducted which could have contributed to the delay in filing the return. The revisional authority also considered that disallowance u/s 43B also resulted in the huge demand by way of interest u/s 139(8) of the Act. It is in this situation, referring to these two aspects the revisional authority allowed waiver of interest to the extent of 50 per cent, by the impugned order.

Learned counsel for the petitioner in support of his contentions contended, in addition to the submissions that weighed with the lower authorities, that an audit report u/s 44AB was also a factor delaying the submission of the return. Learned counsel referred to the statutory provisions of the above Section 44AB. Learned counsel contended that no sooner the audit report was received than the return came to be filed on the basis thereof. In fact it was the strenuous contention of learned counsel relying on the statutory provisions of Sections 44AB and 139 of the Act that the return has to be accompanied by the audit report obtained u/s 44AB. Learned counsel referred to the Explanation to Section 139(9) of the Act to point out that a return of income unaccompanied by the auditor''s report (Explanation-(bb)) would have to be considered as defective filing of the return in regard to which the Income Tax Officer has to proceed as if it is a defective filing of the return. It is obvious that it is not that the return must be accompanied by a report of the auditor as required u/s 44AB. In any case it is not that filing of the return is excusable on account of the non-receipt of the report of the auditor. It will be seen that the audit is compulsory for every person whose business is over Rs. 40 lakhs in any previous year. Reading the provision it need not detain the filing of return. At any rate when the return was due on July 31, 1986, till the premises were searched on March 17, 1987, for a period of 7 to 8 months there could not be an explanation, much less considered by the two authorities. Be that as it may, the second revisional authority has exercised jurisdiction allowing waiver of interest to the extent of 50 per cent. on factual peculiarities. Therefore, taking into consideration all the facts and circumstances of the case there is no need to exercise exceptional and extraordinary powers in a matter of discretion as regards the waiver, especially when the second revisional authority has exercised it in favour of the petitioner substantially. No case for exercise of exceptional or extraordinary powers is made out and it is also not in the interest of justice to take resort to the said powers. Original petition stands dismissed.