As a general rule, levy of penal interest us 234-A, us234-B and us 234-C for alleged delay in depositing taxes has held to be mandatory by the Supreme Court in the case of CIT vs. Anjum M.H. Ghaswala [2001] 252 ITR 1 {SC}. Unless there is no express power granted by the statute to waive the same, the taxing authority would not have any discretion in the matter of levy of the same.

At the same, time, when the assessee is visited with the interest liability either because of impossibility in depositing the tax [where the liability to pay the tax has arisen because of a retrospective amendment} or due to the fault of the Department only, judicial authorities have intervened to redeem the assessee in this situation.

In the case of JSW Steel Ltd vs. ACIT [2010] 5 ITR {Trib} 31{Bangalore}, the assessee was found liable in assessment for interest us 234-B on book profits assessed as the total income u/s 115JB of the Income Tax Act. It was the assessee’s case that this liability had arisen because of a provision brought subsequently with retrospective effect that deferred tax has to be added back in computation of the book profits. The Tribunal found that it was impossible for the assessee to have paid the advance tax when at the due dates for paying the advance tax, this provision was not on the statute book. It accordingly deleted the interest levied.

In another case, the Delhi High Court in the case of CIT vs. Mesco Airlines Ltd [2010] 327 ITR 554 {Del} has ruled that the assessee should not be burdened with interest us 158BFA [1] for delayed filing of the block assessment return for the period of delay occasioned by the time taken by the Department to supply copies of documents seized by the Department, which documents were necessary for compiling the income to be returned.

Taking a cue from the above decisions, two legal principles come to my mind. Firstly, the law does not compel any one to perform the impossible ( lex non ogit ad impossibilia). Secondly, no person should be allowed to take advantage of one’s own default [and that too at the cost of the other and even when the defaulter is an authority himself]. It is time that these principles should be read in to the law by our tax courts in cases where charging of penal interest is otherwise mandatory, where the assessee is not at fault.

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