Karanvir Singh Gossal Vs Commr.of Income Tax & Anr (Supreme Court of India)
The Supreme Court of India, in Karanvir Singh Gossal Vs Commissioner of Income Tax & Anr., examined whether the levy of interest under Sections 234A and 234B of the Income-tax Act, 1961, was mandatory and whether an assessee could obtain relief under a CBDT circular permitting waiver or reduction of statutory interest. The controversy arose against the background of conflicting judicial opinions regarding the nature of interest chargeable under Sections 234A, 234B and 234C. The assessee relied upon the earlier decision of the Patna High Court in Ranchi Club Ltd. v. Commissioner of Income Tax, which had been the subject of an appeal dismissed by a three-judge Bench of the Supreme Court.
The Supreme Court relied upon the Constitution Bench decision in Commissioner of Income Tax v. Anjum M.H. Ghaswala, reported in [2001] 252 ITR 1, which established that statutory interest under Sections 234B and 234C is mandatory and compensatory in nature. The Court observed that the five-judge Bench decision was binding notwithstanding the earlier three-judge Bench decision concerning Ranchi Club Ltd. The Court further referred to the principle that the assessing authority was not required to make a specific recital directing initiation of penal proceedings in the assessment order, as discussed in the judgment.
However, the Supreme Court distinguished the mandatory character of interest from the statutory power to grant relief under beneficial CBDT circulars. Referring to the observations in Anjum M.H. Ghaswala, the Court noted that the CBDT, exercising powers under Section 119(2)(a), had issued Circular/Notification No. F.No.400/234/95-IT(B) dated 23 May 1996, authorising specified income-tax authorities to waive or reduce interest in prescribed classes of cases. The Court also noted the binding nature of beneficial CBDT circulars upon the Revenue, as recognised in UCO Bank v. CIT, [1999] 237 ITR 889 (SC). Since neither the Tribunal nor the High Court had examined whether the assessee qualified for relief under the circular, the Supreme Court set aside their orders and remitted the matter to the Tribunal for the limited purpose of determining the applicability of the circular. The civil appeal was allowed to that extent, with no order as to costs.
Cases Discussed
- Commissioner of Income Tax v. Anjum M.H. Ghaswala and Others, [2001] 252 ITR 1 (Supreme Court) — Five-judge Constitution Bench decision holding statutory interest mandatory, subject to relief available under applicable CBDT circulars. TaxGuru reference.
- Ranchi Club Ltd. v. Commissioner of Income Tax and Others, [1996] 222 ITR 44 (Patna High Court) — Earlier decision concerning levy of interest and the requirement of directions in assessment proceedings. TaxGuru reference.
- Commissioner of Income Tax and Others v. Ranchi Club Ltd., [2001] 247 ITR 209 (Supreme Court) — Three-judge Bench dismissal of the appeal arising from the Patna High Court decision. TaxGuru reference.
- UCO Bank v. CIT, [1999] 237 ITR 889 (Supreme Court) — Cited for the binding nature of beneficial CBDT circulars upon the Revenue.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
Heard learned counsel on both sides.
The civil appeal is allowed in terms of the signed order.
No order as to costs.
Heard learned counsel on both sides.
The short point involved in the present case is whether levy of interest under Section 234A/234B of the Income Tax Act, 1961, [for short, ‘the Act’], is mandatory or not. At one point of time there was a doubt on the nature of interest payable by the assessee under Section 234A/234B of the Act. That controversy stood finally settled by a Five-Judge Bench decision of this Court in the case of Commissioner of Income-Tax vs. Anjum M.H. Ghaswala and Others, [2001] 252 ITR 1. This judgment is binding on us. In the said judgment, this Court held in unequivocal
terms that interest under Section 234B/234C is mandatory in nature. In view of the said decision, we are of the opinion that there was no need for the Assessing Officer to specifically recite in the Order of Assessment that penalty proceedings should be initiated, as contended on behalf of the assessee.
It is true that at one point of time, prior to the decision in Anjum Ghaswala’s case [supra], there was a conflict of opinion amongst various High Courts in India. One such case was the judgment of Patna High Court in the case of Ranchi Club Ltd. vs. Commissioner of Income-Tax and Others, [1996] 222 ITR 44. Against the judgment of the Patna High Court, the civil appeal(s) was dismissed by this Court in the case of Commissioner of Income-Tax and Others vs. Ranchi Club Ltd., [2001] 247 ITR 209. However, that dismissal is by a Three-Judge Bench, whereas the judgment of Anjum Ghaswala’s case [supra] is of a Five-Judge Bench of this Court. Be that as it may, the position that emerges after the judgment of this Court in Anjum Ghaswala’s case [supra] is that if interest is leviable in a given case under Section 234B/234C, then in
such a case that levy is mandatory and compensatory in nature.The recitation by the Assessing Officer directing institution of penal proceedings is not obligatory and penal proceedings could be initiated for such default without a specific direction from the Assessing Officer. In this particular case we have to follow the judgment in Anjum Ghaswala’s case [supra] in toto. In the said judgment it has been held that in appropriate cases, the Chief Commissioner has an authority to waive the interest. We quote herein below the relevant portion of the judgment in Anjum Ghaswala’s case [supra], which reads as under:
“The learned Solicitor General has pointed out that by virtue of the power vested in the Board under Section 119(2)(a) of the Act, the Board has issued circulars by Notification No.F.No.400/234/95-IT(B), dated May 23, 1996. As per this circular, it has empowered that the Chief Commissioner of Income-tax and Director-General of Income-tax may waive or reduce interest charged under sections 234A, 234B and 234C of the Act in the class of cases or class of incomes specified in paragraph 2 of the said order for the period and on conditions which are enumerated therein. He submitted that in view of the said circular, the same authority can be exercised by the Commission since the said circular would amount to relaxation of the rigour of sections 234A, 234B and 234C of the Act. We are in unison with this submission of the learned Solicitor General. This court in a catena of cases has held that the circulars of the Central Board of Direct Taxes are legally binding on the Revenue : see UCO Bank v. CIT [1999] 237 ITR 889 (SC). Since these circulars are beneficial to assessees, such benefit can be conferred also on assessees who have approached the Settlement Commission under Section 245C of the Act on such terms and conditions as contained in the circular. In our opinion, it is for this purpose that section 245F of the Act has empowered the Settlement Commission to exercise the power of an income-tax authority under the Act. We must clarify here that while exercising the power derived under the circulars of the Board, the Commission does not act as a subordinate to the Board but will be enforcing the relaxed provisions of the circulars for the benefit of the assessee in the process of settlement. For the reasons stated above, we hold that the Commission in exercise of its power under Section 245D(4) and (6) does not have the power to reduce or waive interest statutorily payable under sections 234A, 234B and 234C except to the extent of granting relief under the circulars issued by the Board under Section 119 of the Act.”
In the present case, the assesee is placing reliance on the
Circular issued by the CBDT, which has been referred to and mentioned in
the above extracted portion in Anjum Ghaswala’s case [supra]. This aspect has not been considered in the present case by the High Court in its impugned order. It has not been considered even by the Tribunal.
For the above reasons, we set aside the impugned orders of the Tribunal as also of the High Court. We direct the Tribunal to consider whether the assessee would be entitled to waiver of interest under the Circular bearing No.400/234/95-IT(B) dated 23rd May, 1996, which has been referred to by this Court in the case of Anjum Ghaswala [supra].
To this limited extent, the civil appeal stands allowed and the matter is remitted to the Tribunal to decide the question of applicability of the said circular to the facts of this case.
No order as to costs.
