Case Note & Summary
The petitioner, Humayun Suleman Merchant, filed a writ petition challenging the order dated 5th October 2004 passed by the Chief Commissioner of Income Tax (Respondent No.1) under Section 119(2) of the Income Tax Act, 1961, rejecting his application for waiver of interest levied under Sections 234A, 234B, and 234C for assessment year 1996-97. The petitioner had filed his return of income declaring total income of Rs.44,84,820/-. The Assessing Officer levied interest of Rs.53,580/- under Section 234A, Rs.9,73,370/- under Section 234B, and Rs.700/- under Section 234C. In the return, the petitioner claimed exemption from capital gains under Section 54F on sale of land for Rs.85,33,250/-. He agreed to purchase a flat for Rs.69,60,000/- but only made part payments of Rs.35,00,000/- till the date of filing return. The balance of Rs.34,60,000/- ought to have been deposited in a specified account, but he failed to do so. The return was filed after the due date. In a related Income Tax Appeal No.545 of 2002, two substantial questions of law regarding the applicability of Section 54F(4) and the computation of deduction under Section 54F were answered in favor of the revenue and against the assessee. The court held that the power to waive interest under Section 119(2) is discretionary and the petitioner failed to demonstrate any genuine hardship or that the default was beyond his control. The petition was dismissed.
Headnote
A) Income Tax - Waiver of Interest - Sections 234A, 234B, 234C, 119(2) Income Tax Act, 1961 - Discretionary Power - The petitioner sought waiver of interest for delayed filing and non-payment of advance tax. The Chief Commissioner rejected the application. The court held that the power to waive interest under Section 119(2) is discretionary and the petitioner failed to show any genuine hardship or that the default was beyond his control. The rejection was upheld. (Paras 1-5) B) Income Tax - Capital Gains - Section 54F Income Tax Act, 1961 - Deposit in Specified Account - The petitioner claimed exemption under Section 54F for sale of land but did not deposit the unutilized capital gains in a specified account before the due date. The court noted that the failure to deposit disentitled the petitioner to any leniency in waiver of interest. (Paras 4-5)
Issue of Consideration
Whether the Chief Commissioner of Income Tax was justified in rejecting the petitioner's application for waiver of interest levied under Sections 234A, 234B, and 234C of the Income Tax Act, 1961 for assessment year 1996-97.
Final Decision
The petition is dismissed. The impugned order dated 5th October 2004 rejecting the waiver of interest is upheld.
Law Points
- Interest under Sections 234A
- 234B
- 234C is compensatory in nature
- not penal
- waiver under Section 119(2) is discretionary and cannot be claimed as a matter of right
- failure to deposit unutilized capital gains in specified account disentitles assessee to waiver.
