1990 (7) TMI 96 - HC - Income Tax

Summary

Issues Involved:
1. Waiver of interest u/s 139(8) of the Income-tax Act, 1961.
2. Discretion of the Income-tax Officer in reducing or waiving interest.
3. Relevance of the delay in audit and payment of tax.
4. Impact of penalty cancellation u/s 271(1)(a) on interest waiver.

Summary:

1. Waiver of interest u/s 139(8) of the Income-tax Act, 1961:
The assessee challenged the order of the Commissioner of Income-tax, which refused to waive the interest levied u/s 139(8) for delayed furnishing of the return. The return for the assessment year 1975-76 was due on July 31, 1975, but was furnished only on January 23, 1976. The Income-tax Officer demanded Rs. 5,57,515 as interest, later reduced to Rs. 5,09,770 after appeal modifications. The assessee's application for waiver, citing delay in audit due to large volume of accounts, was rejected.

2. Discretion of the Income-tax Officer in reducing or waiving interest:
The Commissioner partly allowed the revision petition, reducing the interest by Rs. 1 lakh, but did not grant a total waiver. The court held that the terms "reduction" and "waiver" in rule 117A are not interchangeable and convey different powers. The discretion to reduce or waive interest must be exercised judiciously, considering relevant factors such as the loss to the Revenue due to delayed payment.

3. Relevance of the delay in audit and payment of tax:
The Commissioner noted that the assessee was liable to pay Rs. 74.24 lakhs on self-assessment u/s 140A, and the delay in filing the return postponed this payment by six months, causing loss to the Government. The court agreed that the delay in audit was not a sufficient cause for total waiver of interest, as the loss to the Revenue was a relevant factor.

4. Impact of penalty cancellation u/s 271(1)(a) on interest waiver:
The penalty imposed u/s 271(1)(a) for failure to furnish the return in time was cancelled on appeal, finding reasonable cause for the delay. However, the court held that cancellation of penalty does not automatically entitle the assessee to total waiver of interest, as interest is compensatory, not punitive. The discretion to reduce or waive interest must consider all relevant circumstances, including the loss to the Revenue.

Conclusion:
The court dismissed the writ appeal, upholding the orders of the Income-tax Officer and the Commissioner. The orders were based on relevant circumstances, and the reasons stated were valid and did not justify review under article 226 of the Constitution. The discretion to reduce or waive interest was exercised judiciously, considering the loss to the Revenue due to delayed payment of tax.