TMI Blog2004 (3) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... y R. M. Lodha J. -Heard Mr. Jhaveri, learned counsel for the petitioner and perused the petition and the documents annexed thereto. The petitioner challenges the constitutional validity of the provisions of sections 234A, 234B and 234C of the Income-tax Act, 1961, as ultra vires the Constitution. The petitioner also challenges the legality and correctness of the order of the Chief Commissioner of Income-tax dated September 23, 2003. The aforesaid challenge arises in the facts and circumstances that we briefly narrate hereinafter. The petitioner is a proprietor of M/s. Unitech Marketing Services and has been providing services to various foreign principals in the field of petrochemical and textile projects. For the assessment years 1993-94 to 1996-97, the petitioner filed returns of income in time. He claimed deductions under section 80-O of the Income-tax Act on the basis of the gross foreign earnings. The said assessment for all the four assessment years was accepted by the concerned Assessing Officer under section 143(1) and the intimations were issued to the petitioners. On November 16, 1999, the Assessing Officer served upon the petitioner notices under section 148 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia [1995] 215 ITR 758, the learned single judge of the Karnataka High Court was seized of the question whether sections 234A, 234B and 234C of the Income-tax Act, 1961, were unconstitutional. The learned single judge of the Karnataka High Court held that on the face of the language employed in sections 234A, 234B and 234C the objects behind the introduction the said provisions by means of the Direct Tax Laws (Amendment) Bill, 1987, was to remove uncertainty in the matter of assessments by cutting down the areas of subjective decisions of the tax authority with a view to ensure uniform treatment of persons similarly placed and to reduce litigation. The learned judge held that sections 234A, 234B and 234C do not envisage the grant of any hearing; the levy was automatic the moment it was proved that the assessee committed a default within the comprehension of the provisions in question. It was also held that section 119(2) confers the Central Board of Direct Taxes (for short, "the Board") powers of relaxation of any of the provisions mentioned in the sub-section including sections 234A, 234B and 234C of the Act. The learned judge, accordingly, did not find any constitutional infirmi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he argument that the authorities must grant such a hearing and exercise the power to grant relief, the legislative intent to the contrary notwithstanding. The principles of natural justice upon which the petitioners rely do not supplant the law, they simply supplement it. These principles have no application where a statute either by express words or by necessary implication excludes the grant of a hearing to the assessee concerned. The provisions of sections 234A, 234B and 234C are in my opinion incapable of being interpreted to mean that the assessee concerned has a right of being heard against the levy which is otherwise automatic in nature." The Division Bench of the Punjab and Haryana High Court in Sant Lal v. Union of India [1996] 222 ITR 375 also considered the constitutionality of sections 234A, 234B and 234C of the Income-tax Act, 1961. The Division Bench agreed with the view of the Karnataka High Court and held the said provisions intra vires. The Division Bench considered the submission that even in cases of extreme hardship no discretion has been conferred upon the assessing authority to waive or reduce the interest and, therefore, the provisions were unreasonable. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to legislative judgment. The Legislature after all has the affirmative responsibility. The courts have only the power to destroy, not to reconstruct. When these are added to the complexity of economic regulation, the uncertainty, the liability to error, the bewildering conflict of the experts, and the number of times the judges have been overruled by events, self-limitation can be seen to be the path to judicial wisdom and institutional prestige and stability." The court must always remember that "legislation is directed to practical problems, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry; that exact wisdom and nice adoption of remedy are not always possible and that judgment is largely a prophecy based on meagre and uninterpreted experience". Every legislation particularly in economic matters is essentially empiric and it is based on experimentation or what one may call trial and error method and, therefore, it cannot provide for all possible situations or anticipate all possible abuses. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... article 19(1)(g). Learned counsel could not show how the said provisions restricts the petitioner's right to carry on business. Besides, in cases of extreme hardship, the Board can exercise the power. Section 119(2) of the Income-tax Act confers power upon the Board to grant relaxation of any of the provisions mentioned in the sub-section including sections 234A, 234B and 234C of the Act. The Board can grant relaxation in respect of any class of income or class of cases by a general or special order. On the face of section 119(2) of the Income-tax Act, can it be said that even in the case of extreme hardship, the assessee is left with no remedy to seek waiver or reduction of interest. The answer has to be in the negative. The mechanism has been provided by the Legislature for dealing with the cases of hardship and the power has been conferred on the Board under section 119(2) of the Income-tax Act to issue appropriate directions to relieve the hardship in c suitable cases. As a matter of fact, the Board in exercise of its power under section 119(2)(a) issued notification on May 23, 1996, which reads thus: "In exercise of the powers conferred under clause (a) of sub-section(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equent instalments of advance tax which was neither anticipated nor was in the contemplation of the assessee and the advance tax on such income is paid in the remaining instalment or instalments and the Chief Commissioner or Director-General is satisfied on the facts and circumstances of the case that this is a fit case for reduction or waiver of interest chargeable under section 234C of the Income-tax Act. (d) Where any income which was not chargeable to income-tax on the basis of any order passed in the case of an assessee by the High Court within whose jurisdiction he is assessable to income-tax, and as a result, he did not pay income-tax in relation to such income in any previous year and subsequently, in consequence of any retrospective amendment of law or, as the case may be, the decision of the Supreme Court in his own case, which event has taken place after the end of any such previous year, in any assessment or reassessment proceedings the advance tax paid by the assessee during the financial year immediately preceding the relevant assessment year is found to be less than the amount of advance tax payable on his current income, the assessee is chargeable to interest unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner or Director-General is satisfied that this is a fit case for reduction or waiver of such interest.' 2. In partial modification of this para, of the order, the Central Board of Direct Taxes has decided that there shall be no condition that the decision of the High Court or the Supreme Court, as referred to therein, must be given in the assessee's own case. Also the condition that any retrospective amendment of law or the decision of the Supreme Court or the jurisdictional High Court must have been made after the end of the relevant year stands withdrawn. 3. If any petition in the past has been rejected because the Board had not issued this modification, the same may be reconsidered and decided in accordance with this modification read with the order dated May 23, 1996." It was in the backdrop of these two notifications that the petitioner filed a petition for waiver of interest before the Chief Commissioner of Income-tax. The whole case of the petitioner is that in the return of income for the assessment years 1993-94 to 1996-97, the petitioner claimed deductions on gross receipts based on the judgment of the Madras High Court in Addl. CIT v. Isthmian India Maritime (P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law, or in view of the Supreme Court judgment in his own case or in any other case. The assessee's case cannot be said to be covered by the above notification of the Board primarily because, it is not the case that the assessee had not offered any income for taxation as a result of any High Court judgment and subsequently that High Court judgment was reversed by any amendment to law or by the Supreme Court." The Chief Commissioner of Income-tax thus held that the assessee's prayer for waiver of interest cannot be said to be covered by the notification dated May 23, 1996, partially modified by the subsequent notification dated January 30, 1997. Learned counsel for the petitioner was not in a position to dispute that the judgment of the Madras High Court was no longer good law in the light of the amendment in the law. Incidentally we may notice that the petitioner neither pleaded nor proved any case of hardship for waiver of interest before the Chief Commissioner of Income-tax. We, therefore, do not find any infirmity in the order of the Chief Commissioner of Income-tax warranting interference by this court in its extraordinary jurisdiction under article 226 of the Constit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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