Madras High Court
Indira Cotton Mills (P) Limited, ... vs The Commissioner Of Income Tax And Two ... on 31 January, 1997
Equivalent citations: 1997(3)CTC415
ORDER Jayarama Chouta, J.
1. In this writ petition, the petitioner has prayed for issue of a writ of certiorarified mandamus or any other appropriate writ, direction or order to call for the records relating to C.No. 1241-11 (53 of 1985) on the file of the first respondent and quash the impunged order dated 21.8.1987 and consequently direct the first respondent to grant the relief of waiver of interest to the petitioner for the said assessment year.
2. The petitioner is the private limited company represented by its Managing Director. The petitioner is an assessee of the Income Tax Act on the file of the Income Tax Officer in G.I. No. 10-1. For the assessment Year 1981-82, the petitioner filed a statement of account in Form No. 28A on 11.6.1980 on an income of Rs. 19,80,690 based on the assessment completed for 1977-78 and paid the first two instalment tax at the rate of Rs. 4,25,848, per installment. On 15.12.1980 a revised estimate in Form No. 29 dated 10.12.1980 was filed estimating the income at Rs. 42,50,000 and the tax at Rs. 27,41,250. The different of Rs. 18,89,554 was paid on 14.12.1980. The return of income was filed on 29.7.1981 admitting a total income of Rs. 52,82,480. The assessment was completed an 25.6.1984 determining the total income of Rs. 53,73,870 and the tax of Rs. 34,66,146 and the interest under Section 215 of Rs. 42,233 was charged. After adjusting the advance tax payments and the payment of Rs. 6,61,795 under Section 140-A, a net demand of Rs. 1,01,179 was raised, which was paid on 12.2.1985.
3. After completion of the assessment, the assessing authority found out a mistake in the computation of the total income in that there was a totalling error as the income should have been computed at Rs. 54,73,870. Notice under Section 154 was issued to the assessee petitioner on 27.12.1984 for filing their objection, if any, to the proposed revision on or before 7.1.1985 and the assessment was revised on 2.3.1985 under Section 154 determining the total income at Rs. 54,73,870 and a gross demand of Rs. 35,30,646. Interest under Section 215 was charged at Rs. 66,746 and additional demand of Rs. 89,013 was raised. The petitioner paid a sum of Rs. 64,500 out of this amount, keeping a balance of Rs. 24,513, which was later paid under protest, on 29.1.1985. Aggrieved by the order of the Income Tax officer levying interest under Section 125 of the Income Tax Act, the petitioner filed a waiver petition under Rule 40(1) of the Income Tax Rule, 1962 to the Inspecting Assistant Commissioner of the Income-tax Department. The said Officer vide his order dated 8.8.1985 in GI No. 10-181-82 dismissed the waiver petition filed under Section 215 of the Income-tax on the ground that the petitioner did not satisfy any of the conditions laid down under Rule 40 of the Income-tax Rules. Aggrieved by the said order, the Inspecting Assistant Commissioner, Range-II, the petitioner has filed a revision petition under Section 264 of the Income-tax Act to the CIT/Tamil Nadu II. However, the first respondent by his order dated 21.8.87 in C. 1241-11/(53/85) held that the petitioner's case deserved sympathetic consideration and hence he waived the interest to the extent of Rs. 24,513 and retained the balance. As against the said order, the present writ petition has been filed for the relief which I referred to above on various grounds.
4. Heard Mr. P.P.S. Janarathana Raja, learned counsel appearing on behalf of the petitioner and Mr. S.V. Subramaniam, Senior Standing Counsel for Income Tax cases on behalf of the respondents.
5. Learned counsel for the petitioner took me through the impugned order. He raised number of contentions and one of the contentions raised by him was before levying interest under Section 215 of the Income Tax Act, the Officer should be given an opportunity to the assessee and failure of giving an opportunity to the petitioner and levying of interest under Section 215 of the Income Tax Act is bad in law. Even though number of other contentions were raised by the learned counsel for the petitioner, I will confine my order only in regard to this contention.
6. In this connection, learned counsel has invited my attention to the judgment in M.G. Brothers v. Commissioner of Income-Tax, 154 ITR 695 wherein it was held at page 712 as follows:
"Before parting with this matter, we must refer to file aspect which is disturbing. The ITO seems to have charged the interest in the assessment order without stating any reasons whatsoever. He seems to have treated, the charge of interest as a matter of automatic consequence and that an assessee has no say in these matters before interest is actually charged. It would also appeal that the ITO considered the charge of interest as part of the assessment although the power to levy interest is conferred alt-gether under different provisions not dealing with the determination of total income and computation of tax. We have already referred earlier that the assessee has a right to ask for waiver or reduction of interest leviable under Section 215, under Rule 40 of the I.T. Rules and the leviable under Section 139 under Rule 117A of the I.T. Rules. It, therefore, follows that, before the charge of interest, the ITC should give an opportunity to the assessee in show cause why interest should not be levied. Before actually charging the interest, the ITO should consider the representations made by the assessee and if justification exists either for waiver or for reduction of interest, he should do so even before passing a formal order. It would not be proper for the ITO to levy interest as a matter of course driving an assessee to file representations for waiver or for reduction of interest, as this would result in avoidable hardship to the assessee in the matter of payment of interest before his representations for waiver or for reduction of interest are considered. The charge of interest in a routing fashion in the assessment order is also open to attack by an assessee on the ground that the ITO did not apply his mind and that the interest was charged without the ITO deriving satisfaction that justification exists for charge of such interest. We must, therefore, administer caution that, before charge of interest either under Sections 215, 216, 217 or 139 of the Act, the ITO should give an opportunity to the assessee to show cause why interest should not be charged, consider the assessee's representation in the mater and then pass a formal order, if circumstances require the charging of such interest."
Learned counsel also further submitted that the above decision has been followed by this Court in similar matter in W.P. No. 11477 of 1986 decided on 20.12.1996 and this Court allowed the said petition by setting aside the order passed by the authorities below and remitted the matter for fresh disposal.
7. Placing reliance on this decision, learned counsel for the petitioner submitted that it is a fit case where similar order should be passed.
8. On the other hand, learned senior standing counsel appearing for the Income Tax Department has submitted that the waiver of interest is the discretionary power given to the authority and the assessee cannot take it as a matter of right and in the present case some benefit has been granted to the petitioner/asses see by the first respondent and hence the orders passed by the respondents 1 and 2 do not suffer from any legal infirmities and hence this Court will not be justified in invoking its writ jurisdiction under Article 226 to set aside those orders. On this ground, he has pointed out that there is no merit in this petition and the writ petition is liable to be rejected.
9. After hearing the rival submissions and going through the decision cited by the learned counsel for the petitioner, I am of the opinion that since the Income Tax Officer has not given an opportunity to the petitioner/assessee to show-cause as to why the interest should not be livied. I feel the petitioner/assessee should be given an opportunity. For the reasons stated above, I quash the order dated 8.8.1985 in GI No. 10-I(81-82) and also the order dated 21.8.1987 in C. No. 1241-II (83-85) passed by the first respondent to the extent of disallowing the waiver of interest and remit the matter before the second respondent for disposal of the waiver petition filed by the petitioner under Rule 40(1) of the Income-tax Rules in accordance with law and the observations made above within a period of three months from the date of receipt of copy of this order. This writ petition is ordered on the above terms. However, there will be no order as to costs.