The Punjab and Haryana High Court in a recent ruling held that interest for late filing of income tax returns can be waived in situations where the delay was beyond the control of assessee.
Sant Lal and Ors, the assessee/petitioners submitted applications for settlement of their income tax and wealth tax under Section 245-C of the Income Tax Act, 1961. After evaluating the matter, Income Tax Settlement Commission reduced the interest chargeable under Section 234-A of the Income Tax Act by 50%. However, it directed that interest under Sections 234-B and 234-C of the Income Tax Act be charged to all five applicants/assessee for the assessment year 1989-90. At the same time, the Commission waived the interest chargeable under Section 220(2) of the Income Tax Act.
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The assessee has filed a writ petition before the Punjab and Haryana High Court challenging the order passed by the Income Tax Settlement Commission.
The assessee contended that since the Department agreed with the contention, no reasons were given for reducing the interest by only 50% when the entire interest should have been waived. The assessee also argued that they were unable to file their returns on time because the Department failed to provide copies of the seized documents despite repeated requests.
The department submitted that there is no indiscretion on the part of the Settlement Commission. They have applied their mind fully to the facts of the case and reduced the interest by 50%, in terms of Section 234-A of the Income Tax Act. However, complete interest has been charged under Section 234-B of the Income Tax Act and similarly interest has also been charged under Section 234-C of the Income Tax Act.
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The bench observed that the provisions of imposing the interest is automatic, and if there is a default, interest is liable to be paid. However, in circumstances which are beyond the control of the assessee in filing of the return in time, the interest can be waived.
While exercising the discretion by the Settlement Commission, no reasons have been assigned as to why the interest has been reduced by 50% only, and as to why the complete interest has not been waived off for the assessment year 1989-90, added the bench.
The division Bench of Justices Sanjeev Prakash Sharma and Sanjay Vashisth disagreed with the assessee in terms of the circular on waiver of interest that the interest under Section 234-B and 234-C of the Income Tax Act should be waived, as depositing of advance tax has nothing to do with the seizure of the books of accounts or during the course of proceedings for search, or seizure of cash.
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In view of the above, the bench allowed the writ petition in part, waived the interest under Section 234-A of the Income Tax Act, and rejected the waiver of interest under Sections 234-B and 234-C of the Income Tax Act.
Sunil K. Mukhi and Iqbal Roshan appeared for the assessee. Gauri Neo Rampal Opal appeared for the respondent.
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