Where pursuant to survey conducted upon assessee, it admitted an undisclosed income, however, no advance tax was paid on said admitted income, assessee could not claim waiver of interest under sections 234B and 234C
HIGH COURT OF KARNATAKA
Chief Commissioner of Income Tax, Bengaluru*
WRIT PETITION NO. 6644 OF 2017 (T-IT)
NOVEMBER 26, 2019
Section 234A, read with sections 234B and 234C, of the Income-tax Act, 1961 – Interest, chargeable as (Waiver of) – Assessment years 2009-10 and 2010-11 – A survey under section 133A was conducted upon assessee company during which assessee had admitted certain amount as unaccounted – Assessment was concluded under section 143(3) levying interest under sections 234A, 234B and 234C – Assessee contended that books and documents were impounded during survey and same was not available to assessee despite several requests which caused delay in filing return of income and, further, return of income was filed voluntarily by assessee without any detection by Assessing Officer, thus, impugned interest levied upon assessee was to be deleted – It was noted that indeed, on detection made at time of survey, assessee had admitted tax liability and filed return of income – However, no advance tax was paid on admitted income – Whether in these circumstances, utmost, delay caused in filing return if to be attributed to impounding of documents during survey proceedings, interest under section 234A for default committed in filing return of income would be waived of, but not interest leviable under sections 234B and 234C for default in payment of advance tax and for deferment of advance tax – Held, yes [Para 12][Partly in favour of assessee]
Circulars and Notifications: CBDT Circular No. 400/29/2002-IT(B), dated 26-6-2006.
Bhanuben Panchal and Chandrikaben Panchal v. Chief CIT  136 Taxman 237/269 ITR 27 (Guj.) (para 11) followed.
P.S. Seshadri v. Chief CIT  38 taxmann.com 10/218 Taxman 485 (Kar.) (para 12) and Lakshmi Stone Crushing Industries v. ITO [IT Appeal No. 448 of 2009, dated 3-2-2015] (para 12) distinguished.
CASES REFERRED TO
P.S. Seshadri v. Chief CIT  38 taxmann.com 10/218 Taxman 485 (Kar.) (para 4), Lakshmi Stone Crushing Industries v. ITO [IT Appeal No. 448 of 2009, dated 3-2-2015] (para 4) and Bhanuben Panchal and Chandrikaben Panchal v. Chief CIT  136 Taxman 237/269 ITR 27 (Guj.) (para 4).
Smt. Jinita Chatterjee and S. Parthasarathi, Advs. for the Petitioner. K.V. Aravind, Adv. for the Respondent.
1. The petitioner though has challenged the orders dated 26-9-2016 and 10-11-2016 passed by the respondent for the assessment years 2009-10 and 2010-11 inter alia seeking a direction to the respondent to waive of the interest charged under sections 234A, 234B and 234C of the Income-tax Act, 1961 (‘Act’ for short), has now restricted the challenge only to the orders relating to the assessment year 2010-11.
2. The petitioner is an individual engaged in pawn broking business at Mysore. On 16-2-2010, the Income-tax Department conducted a survey under section 133A of the Act and in the statements recorded, the petitioner had admitted certain amounts as unaccounted. Assessments were concluded under section 143(3) of the Act on 22-3-2013 relating to the assessment year 2010-11 levying interest under section 234A, 234B and 234C of the Act. The petitioner had filed an application under the Board’s Circular in F.No.400/29/2002-IT(B) for waiver of the interest before the Chief Commissioner of Income Tax, Bengaluru, on 19-6-2013. The respondent – CCIT declined to waive of the interest. Further, the petitioner’s application dated 4-3-2016 for review and re-consideration of the order dated 19-6-2013 was also rejected. Hence, the present writ petition.
3. Learned counsel Smt.Jinita Chatterjee appearing for the petitioner would vehemently contend that the respondent Authority has failed to appreciate the tenor of the Circular instructions of the Central Board of Direct Taxes (CBDT), dated 26-6-2006 inasmuch as the survey conducted under section 133A of the Act in the business premises of the assessee pertaining to the assessment year in question vis-à-vis filing of the return by the assessee on 5-4-2011. Learned counsel submitted that the books and documents were impounded during survey and the same was not available to the petitioner despite several requests made which caused delay in filing the return of income. The same has to be construed as unavoidable circumstances. The return of income was filed on 5-4-2011 voluntarily by the assessee without any detection by the Assessing Officer. As such, the benefit of the Circular instructions dated 26-6-2006 has to be extended to the petitioner.
4. Learned counsel for the petitioner argued that the phrase “or otherwise” employed in clause 2(a) of the CBDT Circular dated 26-6-2006 has to be given a wider connotation to extend the benefit of the circular instructions keeping in mind the intent of the said Notification to waive of the interest, in order to mitigate the hardship caused to the assessee. Learned counsel would submit that the phrase “or otherwise” in clause 2(a) of the instructions of CBDT requires to be applied even to the proceedings of survey under section 133 of the Act. Clause 2(d) of the said circular dated 26-6-2006 was also referred to.
Reliance is placed on the following judgments:
|1.||P.S. Seshadri v. Chief CIT  38 taxmann.com 10/218 Taxman 485 (Kar.).|
|2.||Lakshmi Stone Crushing Industries v. ITO [IT Appeal No. 448/2009, dated 3-2-2015]|
|3.||Bhanuben Panchal and Chandrikaben Panchal v. Chief CIT  136 Taxman 237/269 ITR 27 (Guj.)|
5. Learned counsel for the revenue submitted that the phrase “or otherwise” is consciously used to extend the benefit of the circular instructions to the seizure under section 132-A which contemplates for requisition and seizure. It is submitted that on the survey conducted by the Department, the petitioner has admitted the taxes and filed the return of income on 5-4-2011. Thus, neither clause 2(a) nor 2(d) of CBDT instructions dated 26-6-2006 are applicable to the facts of the present case. It was submitted that the interest levied under section 234A, 234B and 234C of the Act is for the commitment of default in furnishing the return of income, default in payment of advance tax, deferment of advance tax
respectively. At the time of conducting the survey on 16-2-2010, three quarters were already over. No attempt was made by the petitioner to file the return of income and to make the advance tax in terms of the Act. In such conditions, waiver of interest would not arise.
6. Heard the learned counsel for the parties and perused the material on record.
7. Clause 2(a) and 2(d) of the CBDT instructions dated 26-6-2006 reads thus:
“2(a) – Where during the course of proceedings for search and seizure under section 132 of the Income-tax Act, or otherwise, the books of account and other incriminating documents have been seized, and the assessee has been unable to furnish the return of income for the previous year, during which the action under section 132 has taken place, within the time specified in this behalf, and the Chief Commissioner/Director General is satisfied, having regard to the facts and circumstances of the case, that the delay in furnishing such return of income cannot reasonably be attributed to the assessee.”
“2(d) Where a return of income could not be filed by the assessee due to unavoidable circumstances and such return of income is filed voluntarily by the assessee or his legal heirs without detection by the assessing officer. ”
8. The contents of paragraph 2(a) has to be read as a whole not in isolation. A comprehensive reading of the said clause 2(a) would indicate that seizure of books of account and other incriminating documents is mandatory to attract the same. The proceedings for search and seizure under section 132 or otherwise has to be construed with reference to such seizure. As regards clause 2(d), two ingredients are necessarily to be satisfied viz., (1) the assessee could not file return of income due to unavoidable circumstances, (ii) such return of income was filed voluntarily without detection by the Assessing Officers.
9. It is not in dispute that after the survey conducted on 16-10-2010, the petitioner has filed the return of income on 5-4-2011. The said filing of the return of income cannot be construed as the return of income filed voluntarily by the assessee without detection by the Assessing Officer. Indeed, on the detection made at the time of survey, the petitioner has admitted the tax liability and filed the return of income. Moreover, no advance tax was paid as required under the Act for the three quarters on the admitted income. Thus, the assessee cannot take shelter under the survey proceedings to cover up the default committed in filing the true and correct return of income within the prescribed period.
10. The judgments relied upon by the learned counsel for the petitioner would be of little assistance to the petitioner for the reason that in P.S.Seshadri’s case, supra, the provision relating to “capital gain” was the subject matter and the tax was levied in view of retrospective amendment. In the case of Lakshmi Stone Crushing Industries, supra, the Division Bench of this Court was dealing with the Circular No. 7/2003 which is in a different context and the same is not applicable to the facts of the present case.
11. In the case of Bhanuben Panchal and Chandrikabel Panchal (supra), the High Court of Gujarat while examining the waiver of interest in the context of the death of the husband of the petitioner who was in a senile condition prior to his death, held that the delay caused in filing the returns on account of the delay in arranging for funds, would also qualify to be considered as unavoidable circumstances responsible for the delay in late payment of taxes and accordingly, waiver of interest would be granted to the extent of 75%.
12. In the circumstances, utmost, the delay caused in filing the return if to be attributed to the impounding of the documents during survey proceedings, the interest under section 234-A of the Act for the default committed in filing the return of income would be waived of, but not the interest leviable under sections 234B and 234C, the default in payment of advance tax and for deferment of advance tax.
For the aforesaid reasons, writ petition stands disposed of, with a direction to the respondent to waive of the interest under section 234A of the Act relating to the assessment year 2010-11. The levy of interest under section 234B and 234C is confirmed.
Writ petition stands disposed of in terms of the above
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