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Judgment
Sunil Kumar Sinha, J.—This writ petition has been filed against the rejection of application of the petitioner, seeking waiver of interest levied under Sections 234A, 234B and 234C of the Income Tax Act, 1961 (for short `I.T. Act'' or `Act''), by the Chief Commissioner of Income Tax, Raipur (CCIT), on 24.07.2007. The interest was levied upon the petitioner for delay in filing income tax returns, for short deposit of advance tax with the financial year and for delay in payment of scheduled installment of advance tax. The assessment order was passed by the Assessing Authority on 28.07.2006, in which the interest was levied against the petitioner under Sections 234A, 234B and 234C. The petitioner had originally moved an application to the Chief Commissioner of Income Tax for waiver of interest. The said application was rejected. Thereafter, the petitioner filed W.P. No. 6067/2006. The said writ petition was disposed of by the High Court vide order dated 27th April, 2007. The High Court observed that if the petitioner-Board was aggrieved by the levy of interest it had to file an appropriate application for waiver of interest either before the Board of Revenues or before the Chief Commissioner, Income Tax. Without exhausting that remedy, which was alternative effective and efficacious remedy, the petitioner-Board would not have approached the High Court. The writ petition, therefore, was disposed of with liberty reserved to the petitioner- Board to file an appropriate application for waiver of interest levied by the Assessing Authority.
Thereafter an application for waiver was filed. The CBDT in pursuance of Section 119 has delegated its powers to the Chief Commissioner of Income tax vide circulars dated 23rd May 1996 and 26th June 2006. Thus the matter came before the Chief Commissioner of Income Tax (CCIT) who decided the same and rejected the application filed by the petitioner-Board vide the impugned order dated 24.7.2007.
So far as levy of interest for Assessment Year (AY) 2003-2004 is concerned, for which this writ petition has been mainly pressed by the petitioner-Board, the CCIT took the view that according to the circular dated 26th June, 2006 the waiver was to be granted in those cases where the return of income could not be filed in time by the assessee due to unavoidable circumstances and such return of income is filed voluntarily by the assessee or his legal heir without detection by assessing officer; and secondly that the matter of waiver of interest was to be considered when the assessee has paid the entire tax assessed. Whereas, in the instant case, the return of Assessment Year (AY) 2003- 2004 was not filed voluntarily and the petitioner-Board (assessee) had not paid the entire tax on the income assessed, thus, basic requirements as per circular dated 26th June, 2006 were not complied with, therefore, the plea of petitioner-Board (assessee) regarding waiver of interest cannot be entertained.
In these circumstances, after passing of the impugned order by the CCIT on 24.7.2007, the petitioner-Board, besides challenging the validity of the said order on merits, also challenged the vires of two circulars dated 23rd May 1996 and 26th June 2006 mainly on the grounds that the condition of payment of assessed tax before filing the waiver application as mentioned in both the circulars is a condition which travels beyond the subject policy so as to whittle down the entire mandate of Section 119(2) itself and makes it vulnerable on the ground of substantive ultra vires.
Mr. Ravi Shankar Prasad, learned Senior Counsel appearing on behalf of the petitioner-Board, has argued that the condition as mentioned in the circulars leaves the entire policy of Section 119(2) ineffective, constricted, otiose and redundant. By issuing the said circulars the delegate-CBDT has exceeded the authority granted to it under the I.T. Act and has traveled beyond the scope of the Act which is not permissible under the law. On merits, he argued that so far as Assessment Year (AY) 2003-2004 is concerned, the finding relating to not filing the return voluntarily for the above Assessment Year (AY) is perverse on the face of the order itself. He further argued that besides the above, no positive finding has been recorded relating to the grounds of genuine hardship and unavoidable circumstances raised by the petitioner-Board, for not filing the return in time and for not paying scheduled installments.
On the other hand, Mr. Rohit Arya, learned Senior Counsel appearing on behalf of the Revenues and Mrs. Fouzia Mirza, learned Assistant Solicitor General appearing on behalf of Union of India, opposed these arguments and submitted that the condition of depositing assessed tax for consideration of the waiver of interest is fully justified and there is no question of exceeding jurisdiction by CBDT while issuing the above 2 circulars. The above condition is not ultra vires and the same is well within the scheme of the I.T. Act. About the merits of the order, they argued that since return of the Assessment Year (AY) 2003-2004 was not filed voluntarily and no sufficient reason was shown for it, therefore, even otherwise also the impugned order, so far as Assessment Year (AY) 2003-2004 is concerned, is fully justified.
Firstly we shall consider the vires of the two circulars.
In circular dated 23rd of May 1996, the condition relating to pre-deposit reads in following manner:-
...However, no reduction or waiver of such interest shall be ordered unless the assessee has filed the return of income for the relevant assessment year and paid the entire tax due on the income as assessed except the amount of interest for which reduction or waiver has been requested for....
In the second circular dated 26th June 2006 almost similar condition is there with short change which reads as under:-
...However, no reduction or waiver of such interest shall be ordered unless the assessee; has filed the return of income for the relevant assessment year and paid the entire income tax (principal component of demand) due on the income as assessed....
Para-4 of the circular dated 26th June 2006 provides that the earlier orders (circulars) u/s 119(2)(a) dated 23rd May 1996 and 30th January 1997 on the subject stand superseded by this later circular dated 26th June 2006.
Mr. Prasad has argued about the jurisdiction of the CBDT to impose such condition on the proposition that conferment of rule making power by an Act does not enable the Rule making authority to make a rule which travels beyond the scope of the enabling Act or which is inconsistent therewith or repugnant thereto; and in the field of administrative law generally subordinate legislation cannot curtail the content and scope of the substantive provision for or under which it has been made. He cited the decisions of Addl. District Magistrate (Rev.) Delhi Admn. Vs. Shri Siri Ram, and Dr. Mahachandra Prasad Singh Vs. Hon. Chairman, Bihar Legislative Council and Others, . He has also referred to the decision of State of Tamil Nadu and Another Vs. P. Krishnamurthy and Others, So far as enabling provision to issue such circulars by CBDT is concerned, there is no dispute about it. Section 119(1) gives ample power to the Board to issue such orders, instructions and directions to other income tax authorities as it may deem fit for the proper administration of this Act, which order/instruction has to be observed and followed by the concerned authorities. Clause (a) of sub-section (2) of Section 119 further provides special power to the Board to issue general or special orders in respect of various provisions including the provisions of Sections 234A, 234B and 234C for the purpose of proper and efficient management of the work of assessment and collection of revenue. We have carefully examined the two circulars in light of various provisions of the Act. In the instant case the two circulars issued by the Board do not travel beyond the scope of the enabling Act. Neither they are inconsistent with the enabling Act nor any character of repugnancy appears to be there. In the Principal Act, there is no prohibition for the Board to impose a condition like deposit of the tax on the income assessed. If the tax assessed is admitted by the assessee he is bound to deposit the same, however, if the same is not admitted, the assessee may go in appeal and simultaneously he may file an application for waiver of interest if levied in his case. Till the tax assessed is not set aside/altered by the Appellate Authority, it operates as a charge against the assessee and the assessee is bound to deposit it under the law to avoid rigours of recovery which would also include a coercive recovery against the assessee though all shall be subject to the orders passed by the Appellate Authority. In the light of the above scheme of the Act it does not appear that the above condition of deposit of assessed tax is beyond the scope of the enabling Act. Even if we test the validity of the above conditions in light of curtailment, they have neither curtailed the scope of the Principal Act or the substantive provisions thereof nor they have in any manner curtailed any provision of the enabling Section. In P. Krishnamurthy (supra), deliberating on authority/constitutionality of the subordinate/ delegated legislation, the Supreme Court held that "There is a presumption in favour of constitutionality or validity of a subordinate legislation and the burden is upon him who attacks it to show that it is invalid. It is also well recognized that a subordinate legislation can be challenged under any of the following grounds: (a) Lack of legislative competence to make the subordinate legislation. (b) Violation of fundamental rights guaranteed under the Constitution. (c) Violation of any provision of the Constitution. (d) Failure to conform to the statute under which it is made or exceeding the limits of authority conferred by the enabling Act. (e) Repugnancy to the laws of the land, that is, any enactment. (f) Manifest arbitrariness/unreasonableness (to an extent where the court might well say that the legislature never intended to give authority to make such rules)." It was further held that "The court considering the validity of a subordinate legislation will have to consider the nature, object and scheme of the enabling Act, and also the area over which power has been delegated under the Act and then decide whether the subordinate legislation conforms to the parent statute. Where a rule is directly inconsistent with a mandatory provision of the statute, then, of course, the task of the court is simple and easy. But where the contention is that the inconsistency or non-conformity of the rule is not with reference to any specific provision of the enabling Act, but with the object and scheme of the parent Act, the court should proceed with caution before declaring invalidity."
Mr. Prasad has next contended that the above conditions are arbitrary and unreasonable. Referring to the provisions of Section 249(4), he has argued that if an assessee would desire to file an appeal against the order of assessment, he/it is required to deposit the tax due on the returned income, whereas, in case of filing an application for waiver of interest the circulars have made provisions for depositing the tax as per assessment orders/income assessed. Therefore, this is a kind of anomaly which should be considered while examining the reasonability of the above provisions of two circulars.
We have given our anxious consideration to the said argument advanced by Mr. Prasad. Right to appeal is a vested right with the assessee which the assessee possesses from the time of filing of the return in case he/it has filed the return, and confers on him/it a right of entering a superior authority (Appellate Authority) seeking its aid and interposition to redress an error of the Assessing Authority. We would like to quote one paragraph from the judgment of the Supreme Court in Transmission Corporation of A.P. Vs. Ch. Prabhakar and Others, to get support to the above observations of ours. The Supreme Court, in the said judgment, observed in Para-18 that:
The main problem will arise where the Special Court itself tries the case of the type described in sub-section (1) of Section 49E of the amended Act in view of the bar created by sub-section (2) of the said section whereby finality is attached to the decision of the Special Court. The appeal is the right of entering a superior court and invoking its aid and interposition to redress an error of the court below. Though procedure does surround an appeal the central idea is a right. The right of appeal has been recognized by judicial decisions as a right which vests in a suitor at the time of institution of original proceedings. S.R. Das, C.J. in Garikapatti Veeraya Vs. N. Subbiah Choudhury, following the decision of the Privy Council in Colonial Sugar Refining Co. Ltd. -Vs- Irving, 1905 AC 369 (PC) and on a review of earlier authorities deduced the following five propositions regarding an appeal viz.: (i) the legal pursuit of a remedy, suit, appeal and second appeal are really but steps in a series of proceedings all connected by an intrinsic unity and are to be regarded as one legal proceeding; (ii) the right of appeal is not a mere matter of procedure but is a substantive right; (iii) the institution of the suit carries with it the implication that all rights of appeal then in force are preserved to the parties thereto till the rest of the carrier of the suit; (iv) the right of appeal is a vested right and such a right to enter the superior court accrues to the litigant and exists as on and from the date the lis commences and although it may be actually exercised when the adverse judgment is pronounced, such right is to be governed by the law prevailing at the date of the institution of the suit or proceeding and not by the law that prevails at the date of its decision or at the date of filing of appeal; and (v) this vested right of appeal can be taken away only by a subsequent enactment if it so provides expressly or by necessary intendment and not otherwise.
The right of appeal, which is a vested right, thus cannot be compared with the right of filing of an application for waiver of interest levied under sections 234A, 234B and 234C which is of compensatory nature. The orders passed by the concerned authority in pursuance of the above referred circulars of the CBDT are not appealable before the Commissioner of Income Tax-Appeals u/s 246A or before the Income Tax Appellate Tribunal u/s 253. A person not filing the tax return in time and not paying advance taxes and installments on the scheduled dates may be a defaulter and would stand on a different footing than a person who files the return in time and challenges assessment on various grounds. Therefore, it is clear that both these provisions operate in two different fields having different legal implications and they cannot be compared in the above manner, as has been argued by Mr. Prasad, so as to hit the constitutionality of the above conditions in the two circulars issued by the CBDT. We have considered the validity of the above two circulars in light of the nature, object and scheme of the enabling Act and also in light of the area over which the power has been delegated under the Act. We find that the above conditions in the two circulars are not directly inconsistent with any mandatory provisions of the Act. We also find that the said conditions are not inconsistent even with the object and scheme of the Act or the provisions of Section 119 of the Act.
Mr. Prasad has next contended that if the petitioner-Board is required to file a waiver application, it shall have to deposit Rs. 93.69 crores over and above the returned tax of Rs. 149.53 crores. The details of calculation have been given by the petitioner-Board in the following manner:-
Particulars
Amount in Rs. Assessment Year 2003-04
Returned Income
406,90,16,700/-
Tax due on returned income
149,53,63,637/-
Tax paid on returned
149,53,63,637/-
Income Tax payable/(refundable) on returned income
Nil
Assessed Income
661,84,40,569/-
Assessed Tax
243,22,76,942/-
Additional tax due to assessment
93,69,13,305/-
Interest levied u/s 234A, 234B & 234C
202,73,93,350/-
It was argued that the petitioner-Board shall thus incur a heavy amount for filing the application for waiver which would cause hardship to the petitioner-Board.
We are unable to accept the argument of Mr. Prasad raised on the ground of hardship. Recently the Supreme Court, while deliberating on the question of Constitutional validity of the taxation law enacted by Parliament or State Legislature laid down the following principles in State of M.P. -Vs- Rakesh Kohli & Anr. (Civil Appeal No. 684 of 2004, decided on May 11, 2012 with Civil Appeal No. 1270 of 2004) that "(i), there is always presumption in favour of constitutionality of a law made by Parliament or a State Legislature; (ii), no enactment can be struck down by just saying that it is arbitrary or unreasonable or irrational but some constitutional infirmity has to be found; (iii), the court is not concerned with the wisdom or unwisdom, the justice or injustice of the law as the Parliament and State Legislatures are supposed to be alive to the needs of the people whom they represent and they are the best judge of the community by whose suffrage they come into existence; (iv), hardship is not relevant in pronouncing on the constitutional validity of a fiscal statute or economic law and (v), in the field of taxation, the Legislature enjoys greater latitude for classification". Though, in the instant case we are not examining the validity of any taxation law enacted by Parliament or State Legislature, therefore, all the principles may not apply in our case, however, the principles regarding hardship in relation to validity of a fiscal statute or economic law, as above, would certainly apply in the instant case.
In view of the foregoing discussion, we do not find any substance in the claim made in the writ petition that the said conditions in the above two circulars are ultra vires. Accordingly we up-hold the validity of the above two circulars.
It was next contended by Mr. Prasad that the return for Assessment Year (AY) 2003-2004 was voluntarily filed by the petitioner-Board and the finding of the CCIT that the return was not filed voluntarily is perverse on the face of the order itself. To appreciate the above contention, we would like to quote the relevant paragraph of the impugned order dated 24.7.2007 passed by the CCIT in which the above finding has been recorded:-
Similarly for A.Yr. 2003-04, the assessee has taken the plea that the return was filed voluntarily. This does not appear to be true as a notice u/s 148 dated 05-08-2003 was issued for the A.Yr. 2001-02 by ACIT-1 (1), Raipur. This was duly received by the appellant company. This proceeding had been dropped on technical grounds as the jurisdiction over the case was with ACIT-1(2) who thereafter issued notice u/s 148 for the A.Yr. 2001-02 & 2002-03 on 09-08-2004. The return for 2003-04 was filed on 02-07-2004 which was subsequent to the assessee receiving the notice u/s 148 for A.Y. 2001-02. Further, it is noticed that the return was filed under protest. Therefore this return cannot be considered as voluntarily filed.
It is an admitted position that the return for Assessment Year (AY) 2003-2004 was filed by the petitioner- Board on 2.7.2004. The CCIT has held that the above return was filed after issuance of a notice u/s 148 on 5.8.2003 and another notice u/s 148 on 9.8.2004. The above portion of the order would show that both the notices, dated 5.8.2003 and 9.8.2004, were issued to the petitioner-Board pertaining to the Assessment Years (AYs) 2001-2002 and 2002- 2003. It is thus clear that no notice as such was issued to the petitioner-Board pertaining to the Assessment Year (AY) 2003-2004. The CCIT has relied on the notice dated 5.8.2003. The notice relied on and referred to have been issued before 2.7.2004 (date of filing of the return for AY 2003-2004) pertains to the Assessment Year (AY) 2001-2002 and not the Assessment Year (AY) 2003-2004 and the same cannot be made applicable for the Assessment Year (AY) 2003- 2004, which the CCIT has done. If the above approach of the CCIT is accepted, all the returns subsequent to a notice for a particular Assessment Year (AY) will be held to be not voluntarily, having long legal consequences prejudicial to the interest of assessee. For example, if the assessee would like to file an application for waiver of interest in any subsequent Assessment Year (AY), his application, in light of the conditions of the circulars, would not at all be entertained. In the instant case, the petitioner-Board suo moto filed its return of income for the Assessment Year (AY) 2003-2004 on 2.7.2004 and no notice pertaining to the above Assessment Year was issued to the petitioner-Board. Therefore, the above reason for recording a finding that the return for Assessment Year (AY) 2003-2004 was not voluntarily filed by the petitioner-Board is incorrect and erroneous.
The term voluntarily has not been defined in the Income Tax Act, therefore, a Dictionary meaning has to be given to the said word `voluntarily'' which would simply mean " Of one''s free will, impulse or choice; not constrined by another; acting voluntarily or willingly ". In Sujatha Rubbers Vs. Income Tax Officer and Another, considering the term "voluntarily", it was observed as follows:-
We are, therefore, inclined to think that the expression "voluntarily" occurring in sub-section (1) of section 273A could not be construed in isolation with reference to the general animus or state of mind of the assessee. From the legal obligation to file a return, no element of fear could be either attributed or inferred. The word "voluntarily", in the context of section 273A(1), therefore, has to be construed as filing of the return by the assessee without being prompted by the animus to avoid or preempt adverse exposure or penal action. The Commissioner, before rejecting the returns as not voluntarily, must have material based upon which it is reasonable to infer that, in all probability, but for the filing of the "voluntary" return, the assessee would have been subjected to penal action or adverse exposure. In other words, "out of fear, an assessee has made full disclosure", by itself, without anything more, cannot be a ground for not exercising the discretion u/s 273A. The fear must be traceable to the imminent or proximate exposure of the assessee to penal action but for the filing of the voluntary return u/s 273A and, in order to enquire into this subjective element, there must be in existence objective facts warranting such an inference.
In view of the above, finding of the CCIT that the return was not voluntarily filed by the petitioner- Board cannot be sustained and the same has to be set-aside being perverse on the face of the order itself.
Mr. Prasad has next contended that the case of the petitioner-Board for waiver of interest was not at all considered on merits by the CCIT, particularly for the Assessment Year (AY) 2003-2004, and the same was rejected on account of not depositing the assessed tax and the erroneous finding of not voluntarily filing the return. Referring to the various facts, he argued that on account of unavoidable circumstances and genuine hardship the return could not be filed in time, therefore, the CCIT ought to have considered those grounds while passing the order on the application of waiver of interest. We would like to mention few important facts, highlighted by the petitioner in this regard. The Central Government was informed about the formation of the new boards and a request was made to issue necessary direction u/s 58(4) of the M.P. Reorganization Act, 2000, enabling the new boards to take over assets and liabilities of the MPEB. The two States could not arrive at a material agreement on the division of assets and liabilities of the MPEB. The Central Government issued a notification dated 12.04.2001 and guidelines relating to division of assets, rights, liabilities, contracts and employees as also for arrangement for distribution of power were laid down in the notification. Thereafter, the State of M.P. made a representation to the Central Government for modification of the said notification in regard to the basis of apportionment of assets and liabilities. Then a writ petition was filed by MPSEB before the High Court of Delhi for the remittance of revenues illegally retained by the CSEB for the period 01.12.2000 to 14.04.2001. Provisionally, apportionment of assets and liabilities were confirmed by the Central Government by letter dated 04.12.2001. The State of C.G. filed a writ petition before this High Court against the two orders passed by the Central Government dated 12.04.2001 and 04.12.2001. The MPSEB filed an application for transfer of the said writ petition to the High Court of Delhi, which was allowed. The Central Government then issued an order dated 23.05.2003 u/s 58(4) of the Act 2000 provisionally allocating various liabilities of the erstwhile Board to the newly constituted Boards. The said order was questioned by CSEB before the High Court of Delhi. We gather from the facts mentioned in M.P. State Electricity Board Vs. Union of India (UOI) and Others, that during the Course of hearing before the High Court of Delhi, the Union of India suggested that the dispute between the parties should be resolved by passing a final order by it upon giving an opportunity of hearing on all the issues raised by the parties in the said writ petition. The said suggestion was accepted by the High Court. Pursuant to the said representation before the High Court, on 02.11.2004, the Central Government issued a notification fixing 15.11.2000 as the date of dissolution of the erstwhile Board. It was further provided in the notification that the erstwhile board would remain functional within the State of M.P. up to 31.12.2000. Thereafter, a further notification was issued on 04.11.2004 in regard to apportionment of assets, rights and liabilities of the erstwhile Board between the petitioner and MPSEB. The MPSEB then filed the above writ petition before the Supreme Court and, inter- alia, questioned the validity of notifications dated 02.11.2004 and 04.11.2004. Infact a relief of quashment of the above notifications dated 02.11.2004 and 04.11.2004 was made by the MPSEB, which came to be decided on 13.09.2006. Mr. Prasad has argued that when the validity of the above notifications were challenged by the MPSEB and the matter remained pending up to the said date, nothing was final throughout in between this period and the CSEB always remained in dilemma regarding the apportionment of the liabilities including the losses sustained by the MPEB in the relevant financial years and for all these reasons, the returns could not be filed in time. We note from the impugned order that so far as Assessment Year (AY) 2003- 2004 is concerned, nothing has been mentioned in the order regarding merits of the claim made by the petitioner-Board. Since we are inclined to remit the matter back to the CCIT for taking a decision on merits, we do not deem it appropriate to comment on the above argument advanced by Mr. Prasad because a finding has to be arrived at by CCIT in this regard. In the above facts and circumstances of the case, we dispose of the writ petition in the following manner:-
i. The validity of the two circulars dated 23.5.1996 and 26.6.2006 are upheld.
ii. The impugned order dated 24.7.2007 passed by the CCIT, so far as it relates to the Assessment Year (AY) 2003-2004, is set-aside and the matter is remitted back to the CCIT.
iii. The CCIT shall grant a reasonable opportunity to the petitioner-Board to deposit the amount of tax assessed for the Assessment Year (AY) 2003-2004 and if such amount is deposited, the application of the petitioner for waiver of interest shall be considered on merits and shall be disposed of in accordance with law.
iv. In case the application is entertained after fulfillment of the above pre-condition, parties shall be free to file additional affidavit, raising all their grievances, before the CCIT.
v. No coercive steps shall be taken by the Revenues against the petitioner-Board pursuant to the dues relating to interest pertaining to the Assessment Year (AY) 2003- 2004 till the decision is taken by the CCIT as per directions contained in this order.
vi. No order as to cost.