N.V.BALASUBRAMANIAN, J. - (1.) THE above writ petition has been filed challenging the order of the CIT passed under s. 264 of the INCOME TAX Act, 1961 (hereinafter referred to as 'the Act') and for a direction to the CIT to grant waiver of interest levied under s. 215 of the Act for the asst. yr. 1975-76.
(2.) THE above writ petition was heard along with other writ petitions, viz., M.P. Nos. 21111 to 21113 of 1994, 10022 and 10024 of 1996. THE petitioner is a private limited company engaged in the business of manufacture and sale of typewriters and manufacture and supply of defence equipments/components to various defence establishments in the country. There were raids in the premises of the petitioner by the IT Department during December, 1966 and December, 1976. The petitioner approached the Settlement Commission (IT & WT), Additional Bench, Chennai (hereinafter referred to as 'the Settlement Commission') and filed applications under s. 245C of the Act to settle its tax liability under Chapter XIX-A of the Act for the asst. yrs. 1963-64 to 1982-83 on various dates, and the Settlement Commission also admitted the applications filed by the petitioner on various dates. Insofar as the asst. yr. 1975-76 is concerned, the petitioner filed its return of income on 15th September, 1975, showing a total income of Rs. 11, 79, 522 after claiming set off of carried forward loss of Rs. 4, 35, 412. There is no dispute that the first hearing of the case was posted by the AO on 3rd June, 1977. As already noticed, the petitioner had approached the Settlement Commission for the assessment years from 1963-64 to 1974-75 on 7th April, 1977, and on 25th July, 1977. The petitioner approached the Settlement Commission for the asst. yr. 1975-76 on 21st September, 1977 and the petition was admitted on 7th January, 1976. The petitioner offered a total income of Rs. 14, 92, 604 for the asst. yr. 1975-76 before the Settlement Commission. The Settlement Commission on 30th December, 1992, sent the case back to the AO relating to the asst. yr. 1975-76 along with the cases for other asst. yrs. 1975-76 to 1982-83 by invoking the provisions of s. 245HA(1) of the act for the completion of the assessment proceeding in accordance with Act as if no application under s. 245C was filed.The AO, on the basis of the order of the Settlement Commission, completed the assessment for the asst. yrs. 1975-76 on 15th June, 1993, determining the total income of Rs. 20, 17, 040. The AO also levied interest under s. 215 of the Act of a sum of Rs. 13, 41, 065. The petitioner challenged the assessment before the CIT(A) who reduced the total income to Rs. 20, 10, 040. The petitioner challenged the order of the appellate authority before the Tribunal. The petitioner challenged the levy of interest before the Dy. CIT on the ground that the delay in the completion of assessment from 21st September, 1977 when the application under s. 245C of the Act was filed before the Settlement Commission for the asst. yr. 1975-76 till 30th December, 1992, when the Settlement Commission restored the proceedings to the AO under s. 245HA of the Act was not attributable to the petitioner and hence, there should be a complete waiver of interest under r. 40(1) of the IT Rules, 1962 (hereinafter referred to as 'the Rules'). The petitioner also contended that for the asst. yrs. 1963-64 to 1974-75 disposed of by the Settlement Commission, the interest under s. 215 of the Act was waived for the period beyond one year from the date of filing of the return and the same principle should be applied for waiver of interest levied under s. 215 of the Act for the asst. yr. 1975-76 also. The Dy. CIT, however, did not agree with the submission of the petitioner and rejected the application on the ground that the petitioner did not cooperate with the Settlement Commission from time to time which forced the Settlement Commission to send the case back to the AO. According to the Dy. CIT, the assessment was delayed by the petitioner by not cooperating with the functionaries of the Settlement Commission for rendering a final decision. The Dy. CIT therefore rejected the application. However, he found that when the return of income of the petitioner was filed on 15th September, 1975, the AO posted the case for hearing on 3rd June, 1977, after a period of more than one year and there was no material on record to hold that the delay in taking up the assessment proceedings before 3rd June, 1977, was attributable to the petitioner, and hence, he directed the waiver of interest for a period one year from the date of filing of the return, and in other respects, he found no justification to order waiver of interest.The petitioner thereupon challenged the order of the Dy. CIT before the CIT. The CIT found that the petitioner has not cooperated with the functionaries of the Settlement Commission in preparing a factual report on the application. The CIT after taking note of the order of the Settlement Commission, found that the petitioner did not cooperate with the functionaries of the Settlement Commission in finalising the proceedings before the Settlement Commission, and the delay in the finalisation of the proceedings was clearly attributable to the non-cooperative attitude of the petitioner and the Settlement Commission was left with no other alternative but to send back the case to the AO because of the non-cooperative attitude of the petitioner. The CIT also found that though there was an admitted income, the petitioner has not paid advance-tax and delayed the finalisation of the assessment proceedings for more than 15 years. The CIT was of the view that the petitioner is not entitled to waiver of interest besides what was allowed by the Dy. CIT. It is this order which is subject-matter of this writ petition.
(3.) THE main case of the petitioner is that under r. 40 of the Rules, where assessment is completed after more than one year from the date of submission of return and the delay in assessment is not attributable to the assessee, the AO is empowered to reduce or waive interest payable under s. 215 or 217 of the Act. It is stated that on the facts of the case, the case was posted for first hearing on 3rd June, 1977, whereas the return was filed on 15th September, 1975, and soon thereafter, an application was filed before the Settlement Commission and after the Settlement Commission admitted the application, the petitioner had no occasion to take part in the assessment proceedings and only when the matter was sent back to the AO by the Settlement Commission under s. A of the Act the AO would have jurisdiction to take part in the assessment proceedings. It is therefore submitted that the petitioner could appear before the AO only after the case was sent back from the Settlement Commission and the period from the date when the application was filed before the Settlement Commission till the date on which the matter was sent back from the Settlement Commission should be taken into account for arriving at the period of delay. It is therefore, submitted that the delay in the assessment was not attributable to the petitioner and hence, the entire interest levied has to be waived. Though in the petition, a reference has been made to rr. 40(1) and 40(v) of the Rules, learned senior counsel appearing for the petitioner mainly focussed his attention on r. 40(i) of the Rules. The petitioner has also taken up a plea that the petitioner cooperated with the Settlement Commission and notwithstanding the cooperation extended by the petitioner, the Settlement Commission was of the view that the assessment proceedings should be reverted back to the AO and the only option that was available to the Settlement Commission was to invoke the powers under s. A of the Act. According to the petitioner, the Department was also aware that the petitioner has fully cooperated with the Settlement Commission and the finding regarding non-cooperation was rendered for the limited purpose of sending the case back to the AO under s. A of the Act.In the counter-affidavit filed by the respondent, the respondent has taken a stand that the petitioner has not cooperated with the Settlement Commission by not filing necessary documents and records and hence, the matter was remitted by the Settlement Commission. The contention of the petitioner that the Settlement Commission has decided to send back the case and hence, invoked the power under s. A of the Act was denied. According to the respondent, the plea of the petitioner was not borne out of the records or from the order of the Settlement Commission. It is therefore, stated that the CIT has taken into account all aspects of the matter and found no justification to reduce the interest. The petitioner also filed a reply statement. I heard Mr. V. Ramachandran, learned senior counsel appearing for the petitioner and Mr. S. V. Subramaniam, learned senior counsel for the IT Department and also Mr. C. V. Rajan, learned senior standing counsel for the Department. In my view, the matter should be remitted back to the CIT. The CIT has not considered the entire issue in proper perspective. The interest under s. 215 of the Act is levied on the shortfall of the advance tax paid between the assessed tax and the tax paid by the assessee, if the shortfall is more than 25 per cent in case of normal assessees and 16-2/3 per cent in the case of assessees who are companies. ;