Circular No. 492-Income Tax dated 21-7-1987

1207. Waiver/reduction of interest to be allowed under section 215/217- Rule 40 (1) of the Income-tax Rules, 1962 – How to deter­mine the period for

Attention is invited to Board’s Circular No. 12/66-IT(B), dated 9-6-1965 copy attached for ready reference. It has been brought to the notice of the Board that relying upon the example in the above circular, even in cases where there is no delay attributa­ble to the assessee for completion of the assessment, waiver is limited only up to the date of taking up of the case for assess­ment beyond the period of the first year. Under rule 40(1) of the Income-tax Rules,1962, first a decision has to be arrived at as to whether and if so to what extent the delay in the comple­tion of the assessment beyond the first year is attributable to the assessee. After deciding this, waiver should be given from the end of the first year to the period, if any, from where the delay is attributable to the assessee, and then the waiver should extend up to the date of completion of the assessment.

Circular : No. 492 [F. No. 400/24/87-IT(B)], dated 21-7-1987.

ANNEX- CIRCULAR NO. 12/66-IT(B), DATED 9-6-1965

1. Reference is invited to the Commissioner of Income-tax’s letter/Circular No. 103 (3)/64 dated 1-9-1964 [where a question was raised in respect of the period for which interest should be waived under rule 48 (1) in a case where the assessee filed the return of income on 7-8-1959, but the Income-tax Offi­cer took up the case on 17-10-1962, for the first time.]

2. The matter has been considered in consultation with the Minis­try of Law and the Board are of the view that the position stated by you in para 3 of your letter under reference that the time lapse of one year required in rule 48(1) is merely a condition to attract the provisions of that rule and once that condition is satisfied, the time lapse of one year has no more relevance to the working of the rule and the interest to be waived covers the entire period of delay, is not correct. In fact the intention is that the time taken in complet­ing the assessment after a return has been filed should not normally exceed one year and, therefore, the final interest attributable to the period beyond one year only may be reduced or waived if the delay in assessment is not on account of any de­fault on the part of the assessee. Hence, in the instant case, it is open to the Income-tax Officer to reduce or waive the interest for the period in excess of  only one year, viz, 2 years, 2 months and 9 days.

3. In the circumstances, it is open to the Income-tax Officer in the present case to reduce or waive the interest for the period of 2 years, 2 months and 9 days.

COPY OF LETTER REFERRED TO ABOVE

In the case of an assessee, for the assessment year 1959-60, it is claimed that penal interest charged under section 18A(6) should be waived. A doubt has arisen in the matter of the period for which interest should be waived. I am referring the matter to the Board for instructions. The return of income was filed on 7-8-1959. The Income-tax Officer took up the case on 17th Octo­ber, 1962, for the first time. He completed the assessment on 5-10-1963. Penal interest of Rs. 6,056.31 was charged under section 18A(6). It is seen that the delay from 7-8-1959 (when the return was filed), to 15th October, 1962 (when the Income-tax Officer took up the case for the first time),i.e., a period of 3 years 2 months and 9 days cannot be attributed to the assessee. Under rule 48(1), penal interest is to be waived if the completion of as­sessment is delayed by more than one year after the submission of the return and if the delay in the assessment is not attributable to the assessee. The point for consideration concerns the period for which the interest is to be waived- whether it is the entire period of 3 years, 2 months and 9 days or that period reduced by one year (which is the time required to lapse since the submis­sion of the return in order that rule 48 may apply).