Whether interest can be waived if there is a delay in filing of income tax return due to “unavoidable circumstances”? : An Interesting case by Madras HC

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Whether interest can be waived if there is a delay in filing of income tax return due to “unavoidable circumstances”: Interesting case by Madras HC

  1. NAGOOR BABU @ MANO vs. CHIEF COMMISSIONER OF INCOME TAX & ANR.

HIGH COURT OF MADRAS

  1. Dhanapalan, J.

Writ Petn. Nos. 379 to 382 of 2005

20th April, 2009

(2009) 77 CCH 0401 ChenHC

(2009) 227 CTR 0287 : (2009) 24 DTR 0193 : (2010) 320 ITR 0500 : (2009) 181 TAXMAN 0033

Legislation Referred to

Section 234A, 234B, 234C

Case pertains to

Asst. Year 1993-94 to 1996-97

Decision in favour of:

Assessee

Interest under ss. 234A, 234B and 234C—Waiver or reduction—Delay in filing of return due to unavoidable circumstances—Assessee, a playback singer, working 16 hours a day during the relevant period, filing returns voluntarily and paying taxes, his overbusy schedule during the relevant assessment years constituted “unavoidable circumstances” within the meaning of cl. 2(e) of CBDT Notification No. 400/234/1995-IT(B) entitling him for waiver of interest under ss. 234A, 234B and 234C levied upon him for failure to file returns within the time allowed under s. 139(1)/(4)

Held :

A circumspection of the facts of the case would reveal that the assessee has voluntarily filed the returns and due to unavoidable circumstances, he could not file the returns in time. Counsel for the assessee has consistently pleaded that the assessee, being a playback singer in the cinema industry and engaged in work continuously for 16 hours a day, could not file the IT returns within the prescribed time-limit. While so, it is the case of the Revenue that the assessee filed the returns beyond the time-limit prescribed under ss. 139(1) and 139(4). The assessee’s avocation as a playback singer in the cinema industry and his commitment in the industry to work for hours together is not in dispute by the Revenue. However, the delay attributable by the assessee that due to ‘busy schedule’, he had failed to file the returns in time is the cause of action. It is seen that though there is a delay in filing the returns, the assessee had filed the returns voluntarily. Naturally, a person in cinema industry is continuously committed to work. Likewise, in the case on hand, the assessee had been committed to his work and due to some unavoidable circumstances, he could not file the returns within the prescribed time-limit. However, he had filed applications separately for condoning the delay in filing the returns for each of the said assessment years. The issue that has to be looked into is whether the reason assigned by the assessee that due to ‘busy schedule’ he could not file the returns in time can be construed as ‘unavoidable circumstances’. From the facts of the case, it is clear that the assessee is not a habitual defaulter in filing IT returns. The reason assigned by him is that ‘due to circumstances beyond his control’ can be construed as “unavoidable circumstances”. Therefore, the assessee’s claim for waiver of interest can be considered in terms of the fulfilment of the conditions mentioned as per cl. 2(e) of the Notification No. 400/234/1995/IT(B), dt. 23rd May, 1996, wherein, it is stated that 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 AO, reduction or waiver of interest under s. 234A or s. 234B or under s. 234C can be considered. In view of the above, the order passed by the Chief CIT, dt. 29th March, 2004 is quashed insofar as the non-granting of waiver of interest in respect of s. 234C and partial consideration of the waiver of interest in respect of ss. 234A and 234B and the matter is remitted to the Chief CIT for fresh consideration, taking into account the unavoidable circumstances explained by the assessee. The Chief CIT is directed to pass appropriate orders in accordance with law granting waiver of interest to the assessee within a period of four weeks from the date of receipt of a copy of this order.

(Paras 16 to 18)

Conclusion :

Assessee, a playback singer, working 16 hours a day during the relevant period, filing returns voluntarily and paying taxes, his overbusy schedule during the relevant assessment years constituted “unavoidable circumstances” within the meaning of cl. 2(e) of CBDT Notification No. 400/234/1995-IT(B) entitling him for waiver of interest under ss. 234A, 234B and 234C levied upon him for failure to file returns within the time allowed under s. 139(1)/(4).

In favour of :

Assessee

Cases referred:

Bhanuben Panchal & Chandrikaben Panchal vs. Chief CIT (2004) 188 CTR (Guj)449 : (2004) 269 ITR 27 (Guj)

  1. Haridas & Co. vs. Chief CIT (2008) 296 ITR 246 (Mad)
  2. Velu Chettiar vs. Chief CIT (2001) 170 CTR (Mad) 154 : (2002) 256 ITR 490 (Mad)

Sita Holiday Resorts Ltd. vs. Chief CIT (2002) 178 CTR (Del) 8 : (2002) 258 ITR 751 (Del)

T.N. Arumugam vs. Chief CIT (2009) 308 ITR 216 (Mad)

Counsel appeared:

  1. Sivaraman, for the Petitioner : Arunkurien Joseph for Ms. Pushya Sitaraman, for the Respondent
  2. DHANAPALAN, J. :

Since the issues involved in all the four writ petitions are identical, these writ petitions are decided by this common order.

  1. The facts of the case as seen from the affidavit, would run thus :

(i) The petitioner is a popular playback singer both in Tamil and Telugu films. He is assessed to income-tax on the file of the Dy. CIT, Film Circle, Chennai in file No. 10703-N in PAN No. AAEPN-5678-D. Though he is a resident of Chennai, he spends most of his time in Hyderabad, where the bulk of his work lies. According to the petitioner, in the cinema industry the career span being very short and uncertain, the artists usually exert themselves to the full whenever there is demand, leaving no time for anything else.

(ii) The petitioner has a very humble beginning in the industry. His peak period has been from 1992 to 1998, during which, he spent most of his time in Hyderabad and normally worked 16 hours a day and because of his commitment, he could not comply with certain obligations, especially those pertaining to payment of income-tax. It is the plea of the petitioner that the non-compliance of payment of IT returns is neither wilful nor wanton, but only due to the aforesaid bona fide reasons.

(iii) The petitioner filed his returns of income voluntarily for the asst. yrs. 1993-94, 1994-95, 1995-96 and 1996-97 and the AO accepted the returns filed under s. 143(3) r/w s. 147 of the IT Act, 1961 and also levied interest under ss. 234A, 234B and 234C. According to the petitioner, the said assessments and demand notice suffered from several arithmetical errors and hence he filed petitions under s. 154 to the AO in respect of asst. yrs. 1994-95, 1995-96 and 1996-97 and appeal in respect of the asst. yr. 1993-1994.

(iv) Aggrieved by the said order, the petitioner filed a waiver petition before the Chief CIT, the 1st respondent herein, and contended that he was unable to file returns due to circumstances beyond his control, because he was engaged in Hyderabad, concentrating in his profession. Thereafter, he immediately filed returns voluntarily and also co-operated with the IT Department in completing the assessment and paid the tax due and also made part payment of the interest levied under ss. 234A, 234B and 234C of the Act. The 1st respondent vide his order dt. 29th March, 2004 in CC No. II(82)/2001-02 granted waiver of interest of Rs. 43,051 against the amount of Rs. 3,00,832 under s. 234A and in respect of s. 234B, he granted only a sum of Rs. 77,729 as relief as against Rs. 6,06,504 and confirmed the levy of interest of Rs. 23,898 under s. 234C of the IT Act. Challenging the said order of the 1st respondent, the petitioner is before this Court praying to quash the same and to direct the 1st respondent to waive interest levied under ss. 234A, 234B and 234C of the Act for the asst. yrs. 1993-94, 1994-95, 1995-96 and 1996-97.

  1. In the counter affidavit filed by the 1st respondent, the Chief CIT, Chennai, it is stated that the waiver of interest is not a matter of right and it is subject to the fulfilment of the conditions mentioned in notification No. 400/234/95/IT(B) dt. 23rd May, 1996. Accordingly, the delay in filing the returns was considerable and nothing was placed to show that the entire delay was due to unavoidable circumstances. It was held that “busy schedule” cannot merit a concession beyond three months. Accordingly, interest for a period of three months was waived and therefore, the impugned order passed is as per law and the notification.

3a. The 1st respondent has further stated that every return filed voluntarily does not merit waiver of interest; if that be the case, then interest under s. 234A in every case will have to be waived. It is only when an assessee is able to establish that the belated return was filed voluntarily and that the delay in filing the return was due to unavoidable circumstances, that waiver of interest can be considered. He also stated that interest is compensatory in nature and there is no case for argument on a matter of interest. The time taken for completion of assessment is not relevant for the purpose of waiver of interest in terms of the Board’s notification.

3b. It is the case of the 1st respondent that the argument of the petitioner with regard to waiver of interest is untenable as interest under ss. 234A and 234B is charged for different reasons. Only since the delay of three months in filing the returns by the petitioner was acceptable, waiver of interest was allowed under s. 234A for the said assessment year. He also stated that interest under s. 234B is levied till the date of assessment and as far as the interest under s. 234C is concerned, the assessee had not paid the advance tax and therefore, is not liable for waiver of interest. The 1st respondent specifically mentioned that the powers of the Chief CIT are not unlimited as have been made out and they have to act within the terms of Board’s notification.

  1. The 2nd respondent, TRO-X, Chennai has also filed counter, wherein, he has stated that the averment of the petitioner that he has filed returns voluntarily is not correct. According to the 2nd respondent, notices under s. 142(1) of the IT Act was sent to the petitioner calling for the returns of income for the asst. yr. 1994-95, on 18th July, 1996 and that for the asst. yr. 1995-96, on 18th Dec., 1995 and that only after the issuance of notices, the petitioner has filed the returns of income. The 2nd respondent also denied the averment of the petitioner that he filed the returns voluntarily. He has stated that the returns of income for the asst. yrs. 1993-94, 1994-95 and 1995-96 were filed beyond the time-limit prescribed under ss. 139(1) and 139(4) of the IT Act, 1961 and that prescribed in the notices under s. 142(1) of the IT Act issued to the petitioner. Hence, it is the case of the 2nd respondent that as the returns of income for the said assessment years were filed beyond the statutory limit, they are non est in law. Since the income in these non est returns have escaped assessment, notices under s. 148 of the Act were issued to the petitioner and that the returned total income was not accepted as such and substantial additions were made in the assessment.

4a. Further, the 2nd respondent has denied the averments of the petitioner that the AO took 2 to 3 years to complete the assessments and that the delay was not due to the petitioner. The 2nd respondent contended that the delay in filing the returns was squarely attributable only to the petitioner, firstly, for all the assessment years, the petitioner has not filed the returns of income within the limit prescribed under s. 139(1) of the IT Act, 1961; secondly, he has not adhered to the time-limits given to him in the notices under s. 142(1) of the IT Act also for the asst. yrs. 1993-94 to 1995-96 and finally he has not filed his returns of income within the grace time prescribed under s. 139(4) of the IT Act also.

4b. In the counter affidavit, the 2nd respondent has pointed out that the delay in filing the returns of income were furnished by the petitioner himself in terms of number of days in para No. 4 of his affidavit. It is his contention that the petitioner having committed such defaults, can in no terms attribute the delay to the AO and cannot question the legally sanctioned time-limit prescribed under s. 153 of the IT Act for completion of assessment by the AO. According to the 2nd respondent, the AO has passed all the assessment orders well within the time-limit statutorily available to him and hence the order impugned in the present writ petitions is correct, legal and is a reasoned one.

  1. Heard Mr. R. Sivaraman, learned counsel for the petitioner and Mr. Arunkurien Joseph, learned junior standing counsel appearing for the respondents.
  2. Learned counsel for the petitioner would submit that the petitioner had filed the returns on income voluntarily without detection by the AO and that the returns could not be filed by the petitioner in time due to unavoidable circumstances. According to him, the case of the petitioner would squarely fall within para 2(e) of the notification dt. 23rd May, 1996 in F. No. 400/234/1995-IT(B). He would contend that the 1st respondent herein, by his impugned order dt. 29th March, 2004, without considering the twin conditions, namely, the unavoidable circumstances in filing the returns and such returns whether filed voluntarily without any detection by the AO, granted partial waiver of interest under ss. 234A and 234B, rejected the entire waiver relating to s. 234C interest.

6a. Learned counsel would contend that the 1st respondent had been granted power under s. 119(2)(a) of the Act by the CBDT to grant waiver of interest charged under ss. 234A, B and C, vide notification dt. 23rd May, 1996 in F. No. 400/234/1995-IT(B). He would further submit that the 1st respondent had accepted that the returns could not be filed due to unavoidable circumstances; thus, the expression “unavoidable circumstances” was accepted by the 1st respondent with regard to partial waiver for 3 months with respect to interest under s. 234A of the Act and reduction of interest to 1 per cent with regard to waiver of interest under s. 234B. According to the learned counsel, the notification for waiver speaks about the twin conditions and does not contemplate for any partial waiver; once the 1st respondent had accepted the reason assigned by the petitioner that the delay in filing returns is due to unavoidable circumstances, then he ought to have granted the waiver in full.

6b. To strengthen his case, learned counsel for the petitioner has relied on the following :

(i) a decision of the Gujarat High Court in Bhanuben Panchal & Chandrikaben Panchal vs. Chief CIT (2004) 188 CTR (Guj)449 : (2004) 269 ITR 27 (Guj):

“7. It is thus clear that cls. (a) to (d) all state the circumstances beyond the control of the assessee and they may be considered as the species or illustrations of unavoidable circumstances or circumstances beyond the control of the assessee which is the genus contained in cl. (e) providing that 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 AO, waiver of interest can be considered. It appears to the Court that when the circumstances leading to delay in filing of return of income are also the circumstances resulting into late payment of taxes and when the same set of circumstances are considered to be unavoidable circumstances responsible for the delay in filing of the return of income, ordinarily, such circumstances would also qualify to be considered as unavoidable circumstances responsible for the delay in late payment of taxes.

  1. The very first para of the order confers power on the Chief CIT/Director General of IT to waive interest charged under s. 234A, s. 234B or s. 234C of the Act and the classes of cases or classes of income specified in para 2 of the order. The condition precedent is that reduction or waiver of such interest can be ordered only after the assessee has filed the return of income for the relevant assessment year and paid the entire tax due on the income as assessed except the amount of interest for which reduction or waiver has been requested for. …
  2. … The original petitioner had clearly stated in her waiver petition that the delay in filing the return was on account of the fact that there was delay in arranging for funds. In this set of tragic circumstances, if the same have been considered to be unavoidable circumstances for the purpose of waiver of interest under s. 234A of the Act in the facts of this case, the Court is of the view that the same would have to be considered as unavoidable circumstances for the purpose of reduction/waiver of interest under ss. 234B and 234C as well. The reasoning of the Chief CIT that cl. (e) of the notification only deals with the late filing of return of income overlooks the rationale for conferring the power of reduction/waiver of interest………….

Under the circumstances, when the assessee is able to satisfy the Chief CIT that the delay in filing the return of income was due to unavoidable circumstances, it will be absurd to hold that the assessee is not permitted to persuade the Chief CIT/Director General of IT to condone the delay in late payment of taxes when such delay is also due to same unavoidable circumstances or for reasons beyond the control of the assessee. …

  1. In the facts of the present case also, we are of the view that since we have found that the Chief CIT declined to consider the request for reduction/waiver of interest under ss. 234B and 234C of the Act by refusing to exercise the jurisdiction vested in him and also because the Chief CIT has not given reasons for limiting the reduction of interest under s. 234A to only 50 per cent, the impugned order would deserve to be quashed and set aside. However, instead of remanding the matter to the Chief CIT for considering the petitioner’s request for full waiver of interest at this stage when the dispute pertains to asst. yrs. 1992-93, 1993-94 and 1994-95, we are of the view that this is a fit case for granting waiver under ss. 234A, 234B and 234C of the Act to the extent of 75 per cent.”

(ii) a decision of this Court in N. Haridas & Co. vs. Chief CIT & Anr. (2008) 296 ITR 246 (Mad) :

“7. But, the first respondent in the impugned order has merely observed that the condition prescribed in the notification dt. 23rd May, 1996 is not satisfied, without going into the unavoidable circumstances of the case. We are of the view that the first respondent should have taken note of the unavoidable circumstance, viz., the sudden demise of the managing partner at the time when the tax under the VDIS was demanded. Further, the petitioner filed revised return on receipt of notice under s. 148 of the IT Act and paid tax accepting the reassessment. We therefore hold that the first respondent is not correct in rejecting the claim of the petitioner for waiver of interest without properly appreciating the facts and circumstances of the case. Accordingly, the impugned order is liable to be set aside. Considering the fact that twelve years have passed, the earliest assessment year being 1994-95 and that the assessee has already paid tax as per the reassessment, we are inclined to direct the first respondent to waive the interest levied in the impugned order, instead of remitting the matter back to the first respondent.”

(iii) yet another decision of this Court reported in T.N. Arumugam vs. Chief CIT & Anr. (2009) 308 ITR 216 (Mad) :

“7. In the light of the above, the petitioner is entitled to succeed. However, this Court is not in granting any direction to refund the amount as originally prayed for in the writ petition. It is suffice to say that the first respondent shall consider the circumstances under which the petitioner was unable to pay the tax earlier and also the jurisdiction for his seeking for waiver and refund of the interest amount paid. The petitioner also shall be given an opportunity by the first respondent to put forth any additional points in his favour. The first respondent shall consider the representation of the petitioner and also any additional representation made by him and pass an appropriate order within a period of four weeks from the date of receipt of a copy of this order.”

  1. On the other hand, learned counsel for the respondents would submit that the petitioner had filed his returns for the asst. yr. 1993-94 on 13th March, 1996 only with a delay of more than 2 years and therefore, the interest under s. 234A was levied. According to the respondents, the only reason given by the petitioner for the delay was “busy schedule” and the 1st respondent has considered his plea very sympathetically and had accepted such reason to condone a small delay, but not a delay of 2 years; he therefore condoned the delay to the extent of 3 months and waived the proportionate interest under s. 234A, likewise, for the asst. yrs. 1994-95 to 1996-97, the returns were filed only after 8th May, 1997.

7a. Learned counsel for the respondents would contend that the twin conditions of voluntary filing of returns and delay due to unavoidable circumstances should be satisfied to entitle the assessee for waiver, but the petitioner has not fulfilled the conditions for some years and in none of the years, has the condition regarding “unavoidable circumstances” been fulfilled, as “busy schedule” will not amount to “unavoidable circumstances”, which prevented the assessee from filing his returns.

7b. Learned counsel for the respondents has relied on the following judgments in support of his stand :

(i) decision of this Court in P. Velu Chettiar vs. Chief CIT (2001) 170 CTR (Mad) 154 : (2002) 256 ITR 490 (Mad) :

“5. Though, it is true, as submitted by the counsel, that the returns were filed voluntarily and the tax was paid, that by itself does not entitle the assessee to the benefit of waiver. Condition No. 5 of the Board’s circular further requires that the CIT be satisfied about the circumstances which could be regarded as being beyond the control of the taxpayer for not filing the return within the stipulated time-limit. The fact that the assessee had a taxable income from the year 1994-95 is evident from the order of the assessment and the tax paid. No explanation has been given as to why the return was not filed within time for that year. The fact that the assessee had not been assessed to tax earlier, does not by itself constitute a justification. By filing the return belatedly, one cannot claim that fact itself as clothing the person with immunity from the liability of interest.”

(ii) a decision of the Delhi High Court in Sita Holiday Resorts Ltd. vs. Chief CIT (2002) 178 CTR (Del) 8 : (2002) 258 ITR 751 (Del) :

“11. It is well-settled that interest contemplated under s. 234B for deficiency or default in payment of advance tax is mandatory in nature [CIT vs. Anjum M.H. Ghaswala & Ors. (2001) 171 CTR (SC) 1 : (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 cl. (a) of sub-s. (2) of s. 119 of the Act, has issued a Circular/Notification No. 400/234/1995-IT(B) dt. 23rd May, 1996, empowering the Chief CIT and the Director General of IT, to waive or reduce the interest chargeable under s. 234B and two other sections in the class of cases or class of incomes, specified in para 2 thereof for the period and to the extent the Chief CIT/Director General deem fit, subject to fulfilment of the conditions enumerated therein. Clause (d) of para (2) of the said notification prescribed the following conditions for waiver/reduction of interest under s. 234B :

‘(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 income-tax in relation to such income during the previous year.

(c) subsequently, such income became chargeable as per any retrospective amendment of law or a decision of the Supreme Court in assessee’s own case after the end of the previous year.

(d) on account of the above, the advance tax paid by the assessee during the previous year was found to be less than the amount of advance tax payable on his current income and therefore, interest under s. 234B or 234C was found to be chargeable’.”

  1. I have carefully considered the submissions made by the learned counsel for the petitioner and the learned junior standing counsel appearing for the respondents and perused the decisions relied on by them and relevant material documents.
  2. An analysis of the entire facts of the case on hand would reveal that the petitioner, who is a popular playback singer both in Tamil and Telugu films, a resident of Chennai, an income-tax assessee on the file of the Dy. CIT, Film Circle, Chennai had been in the peak period in the cinema industry from 1992 to 1998 and had spent most of his time in Hyderabad. The petitioner claims that he normally worked 16 hours a day and because of his commitment, he could not file his returns in time. However, it is seen that the petitioner had voluntarily filed the returns for the asst. yrs. 1993-94, 1994-95, 1995-96 and 1996-97 and also co-operated with the IT Department in completing the assessment. The AO had accepted the returns filed under s. 143(3) r/w s. 147 of the IT Act, 1961 and also levied interest under ss. 234A, 234B and 234C. From the records, it is seen that the petitioner had paid the tax due and also made part payment of the interest levied under ss. 234A, 234B and 234C. It is further seen that since the petitioner found that there were several arithmetical errors in the said assessments and demand notice, he filed petitions under s. 154 before the AO in respect of asst. yrs. 1994-95, 1995-96 and 1996-97 and appeal in respect of the asst. yr. 1993-94.
  3. Thereafter, the petitioner had filed a waiver petition before the Chief CIT, the 1st respondent herein and explained to him the unavoidable circumstances which prevented him to file returns within the prescribed time-limit. The 1st respondent passed an order on 29th March, 2004, granting waiver of interest of Rs. 43,051 against the amount of Rs. 3,00,832 under s. 234A and in respect of s. 234B, he granted only a sum of Rs. 77,729 as relief as against Rs. 6,06,504 and confirmed the levy of interest of Rs. 23,898 under s. 234C of the IT Act. Aggrieved by the said order of the 1st respondent, the petitioner has filed the present writ petition seeking waiver of interest in full, for the asst. yrs. 1993-94, 1994-95, 1995-96 and 1996-97.
  4. The question that arises for consideration is whether the petitioner is entitled to complete waiver of interest on the returns of income under ss. 234A, 234B and 234C of the IT Act.
  5. Before dealing with the above question, it would be useful to refer to the relevant provisions under ss. 234A, 234B and 234C of the IT Act, as extracted hereunder :

“234A. (1) Where the return of income for any assessment year under sub-s. (1) or sub-s. (4) of s. 139, or in response to a notice under sub-s. (1) of s. 142, is furnished after the due date, or is not furnished, the assessee shall be liable to pay simple interest at the rate of one per cent for every month or part of a month comprised in the period commencing on the date immediately following the due date, and—

(a) where the return is furnished after the due date, ending on the date of furnishing of the return; or

(b) where no return has been furnished, ending on the date of completion of the assessment under s. 144,

on the amount of the tax on the total income as determined under sub-s. (1) of s. 143 or on regular assessment as reduced by the advance tax, if any, paid and any tax deducted or collected at source……….

234B (1) Subject to the other provisions of this section, where, in any financial year, an assessee who is liable to pay advance tax under s. 208 has failed to pay such tax or, where the advance tax paid by such assessee under the provisions of s. 210 is less than ninety per cent of the assessed tax, the assessee shall be liable to pay simple interest at the rate of one per cent for every month or part of a month comprised in the period from the 1st April next following such financial year (to the date of determination of total income under sub-s. (1) of s. 143 (and where a regular assessment is made, to the date of such regular assessment, on an amount) equal to the assessed tax or, as the case may be, on the amount by which the advance tax paid as aforesaid falls short of the assessed tax……….

234C(1)(b) the assessee, other than a company, who is liable to pay advance tax under s. 208 has failed to pay such tax or,—

(i) the advance tax paid by the assessee on his current income on or before the 15th day of September is less than thirty per cent of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of December is less than sixty per cent of the tax due on the returned income, then, the assessee shall be liable to pay simple interest @ one per cent per month for a period of three months on the amount of the shortfall from thirty per cent or, as the case may be, sixty per cent of the tax due on the returned income;

(ii) the advance tax paid by the assessee on his current income on or before the 15th day of March is less than the tax due on the returned income, then, the assessee shall be liable to pay simple interest @ one per cent on the amount of the shortfall from the tax due on the returned income :

Provided that nothing contained in this sub-section shall apply to any shortfall in the payment of the tax due on the returned income where such shortfall is on account of underestimate or failure to estimate

(a) the amount of capital gains : or

(b) income of the nature referred to in sub-cl. (ix) of cl. (24) of s. 2,

and the assessee has paid the whole of the amount of tax payable in respect of income referred to in cl. (a) or cl. (b), as the case may be, had such income been a part of the total income, as part of the (remaining instalments of advance tax which are due or where no such instalments are due), by the 31st day of March of the financial year.)”

  1. From the reading of the above provisions, it is clear that the return of income for any assessment year under sub-s. (1) or sub-s. (4) of s. 139, or in response to a notice under sub-s. (1) of s. 142, is furnished after the due date, the assessee shall be liable to pay simple interest @ one per cent for every month. It is also clear that when an assessee, who is liable to pay advance tax under s. 208 has failed to pay such tax or the advance tax paid by such assessee is less than ninety per cent of the assessed tax, the assessee shall be liable to pay simple interest @ one per cent for every month or part of a month comprised in the period. It is further made clear that when the advance tax paid by the assessee on his current income is less than the tax due on the returned income, then the assessee shall be liable to pay simple interest @ one per cent on the amount of the shortfall from the tax due on the returned income.
  2. Therefore, it is vivid that the respondents have levied interest on the returns of income of the petitioner based on the above provisions of the IT Act. This has been further clarified by the notification in F. No. 400/234/1995-IT(B) dt. 23rd May, 1996, wherein as per cl. 2(e), reduction or waiver of interest under s. 234A or 234B or 234C can be considered. The relevant clause would run thus :

“2(e) 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 AO.”

  1. It is vehemently argued by the learned counsel for the respondents that waiver of interest is not a matter of right and it is subject to the fulfilment of conditions. The question raised in this matter is whether the delay in filing returns was considerable or whether the entire delay was due to unavoidable circumstances. The explanation given by the petitioner that due to busy schedule, he could not file the returns in time is the main issue on hand to consider whether the said delay could be attributed due to “unavoidable circumstances” for waiving interest on the returns, in full or in part.
  2. A circumspection of the facts of the case would reveal that the petitioner has voluntarily filed the returns and due to unavoidable circumstances, he could not file the returns in time. Learned counsel for the petitioner has consistently pleaded that the petitioner, being a playback singer in the cinema industry and engaged in work continuously for 16 hours a day, could not file the IT returns within the prescribed time-limit. While so, it is the case of the respondents that the petitioner filed the returns beyond the time-limit prescribed under ss. 139(1) and 139(4) of the IT Act. The petitioner’s avocation as a playback singer in the cinema industry and his commitment in the industry to work for hours together is not in dispute by the respondents. However, the delay attributable by the petitioner that due to ‘busy schedule’, he had failed to file the returns in time is the cause of action. It is seen that though there is a delay in filing the returns, the petitioner had filed the returns voluntarily. Naturally, a person in cinema industry is continuously committed to work. Likewise, in the case on hand, the petitioner had been committed to his work and due to some unavoidable circumstances, he could not file the returns within the prescribed time-limit. However, he had filed applications separately for condoning the delay in filing the returns for each of the said assessment years. The issue that has to be looked into is whether the reason assigned by the petitioner that due to ‘busy schedule’ he could not file the returns in time can be construed as ‘unavoidable circumstances’.
  3. From the facts of the case, it is clear that the petitioner is not a habitual defaulter in filing IT returns. The reasons assigned by him is that ‘due to circumstances beyond his control’ can be construed as “unavoidable circumstances”. Therefore, the petitioner’s claim for waiver of interest can be considered in terms of the fulfilment of the conditions mentioned as per cl. 2(e) of the notification dt. 23rd May, 1996, wherein, it is stated that 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 AO, reduction or waiver of interest under s. 234A or s. 234B or under s. 234C can be considered.
  4. In view of the above, the order passed by the 1st respondent dt. 29th March, 2004 is quashed insofar as the non-granting of waiver of interest in respect of s. 234C and partial consideration of the waiver of interest in respect of ss. 234A and 234B of the IT Act and the matter is remitted to the first respondent for fresh consideration, taking into account the unavoidable circumstances explained by the petitioner. The 1st respondent is directed to pass appropriate orders in accordance with law granting waiver of interest to the petitioner within a period of four (4) weeks from the date of receipt of a copy of this order.

The writ petition is allowed with the above direction. No costs. Consequently, connected W.P.M.P. Nos. 442, 444, 446 and 448 of 2005 are closed.

 

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