Income Tax Commissioner Cannot Deny Waiver of Interest u/s 234C Arbitrarily, Must Pass Reasoned Order: Karnataka HC [Read Order]
The court held that the Income Tax Commissioner cannot arbitrarily deny waiver of Section 234C interest and must pass a reasoned order as per CBDT guidelines
![Income Tax Commissioner Cannot Deny Waiver of Interest u/s 234C Arbitrarily, Must Pass Reasoned Order: Karnataka HC [Read Order]](https://images.taxscan.in/h-upload/2026/02/07/2124144-income-tax-karnataka-high-court-taxscan.webp "Income Tax Commissioner Cannot Deny Waiver of Interest u/s 234C Arbitrarily, Must Pass Reasoned Order: Karnataka HC [Read Order]")
The Karnataka High Court held that the Income Tax Commissioner cannot deny waiver of interest under Section 234C of Income Tax Act, 1961 through a “arbitrary, cryptic and vitiated by non-application of mind” order and has to pass a proper reasoned order by applying the CBDT guidelines. Kanhaiyalal Dudheria filed a writ petition challenging the order passed by the...
The Karnataka High Court held that the Income Tax Commissioner cannot deny waiver of interest under Section 234C of Income Tax Act, 1961 through a “arbitrary, cryptic and vitiated by non-application of mind” order and has to pass a proper reasoned order by applying the CBDT guidelines.
Kanhaiyalal Dudheria filed a writ petition challenging the order passed by the Chief Commissioner of Income Tax under Section 119(2)(a) for AY 2008-09 to the extent it rejected waiver of interest under Section 234C of the Income Tax Act.
The petitioner is a partnership firm doing iron ore mining. It stated that the business was dormant for many years and started only after renewal of the mining licence in the later part of the financial year. Interest under Section 234C was levied due to non-payment of advance tax instalments.
The petitioner sought waiver under Section 119(2)(a) read with CBDT order dated 26 June 2006. But the authority rejected waiver for the second and third instalments saying the assessee failed to prove that income was neither anticipated nor contemplated.
The petitioner’s counsel argued that the order was cryptic and without proper application of mind. It was argued that the authority did not do instalment-wise examination as required under the CBDT order, and only gave a bare conclusion.
The department argued that interest under Section 234C is statutory and waiver under Section 119(2)(a) is discretionary, and the assessee must satisfy the CBDT conditions strictly.
Justice K.S. Hemalekha observed that CBDT order requires an objective examination on whether income came after due dates and whether it could be anticipated. The court explained that only saying “assessee failed to establish” without factual analysis is not a proper reasoned exercise of discretion under Section 119(2)(a).
The court allowed the writ petition partly and set aside the order only for denial of waiver relating to second and third instalments. The matter was remanded to the Chief Commissioner for fresh consideration and for passing a reasoned and speaking order.
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