TMI Blog2002 (9) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income-tax, Delhi-III, New Delhi, in pursuance of the notification issued by the Central Board of Direct Taxes (for short "the Board") under section 119(2)(a) of the Income-tax Act, 1961 (for short "the Act"), dated May 23, 1996, for waiver of interest under sections 234A, 234B and 234C of the Act, is under challenge in this writ petition. By the impugned order, the Commissioner has granted partial waiver of the interest charged from the petitioner under section 234B of the Act. The material facts, leading to the filing of this petition may be noticed. The petitioner, the assessee-company, was incorporated on October 3, 1989. It established a three star village resort called "the Heritage Village" at Manesar, District Gurgaon, Haryana, by raising loans from financial institutions and started construction of the hotel in the month of February, 1993. The hotel commenced its commercial operation with effect from March 28, 1995. During the period prior to the commencement of commercial operation, i.e., after February 1993, and before March 28, 1995, the assessee invested surplus borrowed funds with banks and companies and earned interest thereon and at the same time paid intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1997. While observing that the assessee's case fell within the scope and ambit Of clause (d) of paragraph 2 of the notification dated May 23, 1996, inasmuch as the assessee was under the bona fide belief on account of some High Court decisions that the interest on investment of surplus borrowed funds could be set off against interest paid on the same borrowed funds during the period of construction of the hotel prior to the commencement of business; its stand was supported by the then prevailing accounting guidelines issued from time to time by the Institute of Chartered Accountants of India; the Assessing Officer had also accepted its stand by accepting the returned income and by not taking any proceedings under section 143(2) of the Act; it was only after the decision of the Supreme Court in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd. [1997] 227 ITR 172 that the assessment was reopened under section 148 and the interest income earned prior to the commencement of business was taxed as income from other sources; it was because of the lapse of the Assessing Officer in taking appropriate action after the return was filed that interest under section 234B was levied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or deficiency or default in payment of advance tax is mandatory in nature (see CIT v. Anjum M. H. Ghaswala [2001] 252 ITR 1 (SC)). There is no provision in the Act authorising any authority to reduce or waive it. However, in order to mitigate the hardships in deserving cases, the Board, in exercise of powers conferred under clause (a) of sub- section (2) of section 119 of the Act has issued a circular/notification No. 400/234/95-IT/B, dated May 23, 1996, empowering the Chief Commissioner of Income-tax and Director General of Income-tax, to waive or reduce the interest chargeable under section 234B and two other sections in the class of cases or class of incomes, specified in paragraph 2 thereof for the period and to the extent the Chief Commissioner/ Director-General deem fit., subject to fulfilment of the conditions enumerated therein. Clause (d) of paragraph (2) of the said notification prescribed the following conditions for waiver/reduction of interest under section 234B of the Act: (a) "Any income was not chargeable to tax on the basis of any order passed in the case of the assessee by the jurisdictional High Court. (b) In view of such decision, the assessee did not pay in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and deserves to be set aside. Mr. Sanjiv Khanna, learned senior standing counsel for the Revenue, on the other hand, while justifying the partial waiver of interest as just and fair has vehemently submitted that the Chief Commissioner having taken into consideration all the relevant factors and applied his mind to all the aspects of the matter, by no stretch of imagination the impugned order could be said to be manifestly erroneous or illegal, requiring interference by this court. He would urge that the circulars issued by the Board confer a wide discretion on the Chief Commissioner or the Director-General, as the case may be, to grant partial or complete waiver of interest and. the assessee having failed to point out any factual procedural irrationality or impropriety in the order, it is not a fit case for judicial review. It is urged that the scope of judicial review being limited, on the facts of the present case, this court may not like to interfere with the impugned order, even if it feels that instead of a partial waiver the interest charged should have been fully waived. In support of the last proposition, learned counsel has placed reliance on certain decisions of the Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by this court as far back as 1970 in A. K. Kraipak v. Union of India, AIR 1970 SC 150. Even so the extent of judicial scrutiny/judicial review in the case of administrative action cannot be larger than in the case of quasi judicial action. If the High Court cannot sit as an appellate authority over the decisions and orders of quasi-judicial authorities it follows equally that it cannot do so in the case of administrative authorities. In the matter of administrative action, it is well-known, more than one choice is available to the administrative authorities; they have a certain amount of discretion available to them. They have a, right to choose between more than one possible course of action upon which there is room for reasonable people to hold differing opinions as to which is to be preferred' (Lord Diplock in Secretary of State for Education and Science v. Tameside Metropolitan Borough Council [1977] AC 1014, 1064 (HL)). The court cannot substitute its judgment for the judgment of administrative authorities in such cases. Only when the action of the administrative authority is so unfair or unreasonable that no reasonable person would have taken that action, can the court inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some thing is vested can be compelled to exercise the discretion but it cannot be told to exercise it in a particular manner. Generally, a discretion must be exercised by the authority to which it is conferred. While adjudicating the validity of an executive decision, the court must grant a certain measure of freedom of play in the joints to the executive but a palpably arbitrary exercise of power has to be declared as void. Judged in the light of the aforenoted broad principles governing the power of judicial review, it cannot be said that the impugned order suffers from any infirmity, factual or legal, warranting interference. The ground on which the Chief Commissioner has declined full waiver of interest, namely, that there was no direct decision of the jurisdictional High Court during or prior to the relevant financial year, supporting the stand of the assessee, cannot be said to be palpably erroneous or contrary to the Board's circulars. The impugned order reflects the application of mind by the Chief Commissioner on the relevant factors and we find it difficult to hold that no other person acting reasonably would have come to the same conclusion as the Chief Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X
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