Whether Clause (a) to (d) of section 54EC, states the circumstances beyond the control of the assessee and they may be considered as the species or illustrations of unavoidable circumstances or circumstances beyond the control of the assessee which is the genus contained in Clause (e) providing that Where a return of income could not be filed by the assessee due to unavoidable circumstances, and assessee proved to have a bona fide belief , coupled with the voluntary payment of tax liability, the Chief Commissioner was not justified in declining the benefit of a waiver of interest to assessee under section 234B. Thus, ends of justice would be met by waiving interest up to 80 per cent under section 234B.
HIGH COURT OF KARNATAKA, BANGALORE
DATED THIS THE 2nd DAY OF JULY, 2013
WRIT PETITION NO. 42424OF 2012 (T-IT)
P S SESHADRI
THE CHIEF COMMISSIONER OF INCOME TAX
Petitioner, a retired scientist from the Indian Defence Organisation, claims to have acquired under a deed of settlement dated 14.2.1981 a certain immovable property at Chennai valued at Rs. 60,000/-, which when sold under a registered sale deed dated 16.3.2006 fetched a consideration of Rs. 1,99,00,000/-. With an intention to invest the sale consideration under Bonds issued by the National Highways Authority of India or Rural Electrification Corporation, for short Capital Gains Exemption Bonds under Section 54EC of the Income Tax Act, 1961, for short Act , made an application to the National Highways Authority of India on 8.8.2006 to invest Rs. 1,82,00,000/- in the absence of a limit on the quantum of investment under Section 54EC. Petitioner filed a return of income-tax on 25.9.2006 declaring income of Rs. 2,01,284/- and paid self assessment tax of Rs. 3,321/- and thereafter on 09.10.2006 filed a revised return of income disclosing sale of property at Chennai claiming exemption of investment under the capital gain bonds, which out of inadvertence was not set out in the original return of income filed on 25.9.2006. The National Highways Authority having noticed that the petitioner had not mentioned the PAN number issued a letter which was responded to by letter dated 15.8.2006 furnishing the PAN number. That application when rejected by the National Highways Authority of India, the application was returned with the Demand Drafts for Rs. 1,82,00,000/- by letter dated 5.10.2006 Annexure-F. Petitioner claiming to be under the bonafide belief that he would be allotted the capital gain bonds made the application for investment and seek exemption from paying long term capital gains tax.
2. The Central Board of Direct Taxes (CBDT) issued a circular dated 30.6.2006 Annexure-G under Section 119(2)(c) of the Act extending the time limit for investment in the Capital Gains bonds upto 31.12.2006 without a ceiling limit and thereafter upto 31.3.2007 however imposing a maximum ceiling limit of Rs. 50 lakhs, with retrospective effect from 01.03.2006.
3. Petitioner addressed a letter dated 30.8.2007 Annexure-H to the Commissioner of Income Tax setting forth the aforesaid facts and sought a remedy over the next course of action. According to the petitioner he was advised by the department to apply in the next issue of bonds and accordingly during January of 2007 petitioner made an application to the National Highways Authority for investment of Rs. 50 lakhs in the Capital Gain Bonds . According to the petitioner he had no intention of evading tax, being a hon ble citizen, and having served the Nation in the Defence and in fact, followed up the matter with the Income-tax Department by another letter dated 17.9.2007 Annexure-J. Petitioner s application for capital gain bonds when rejected, voluntarily paid capital gains tax of Rs. 29,09,800/- on 25.9.2007 under the challan Annexure-K.
4. Petitioner s return was processed and after assessment was issued with an intimation under Section 143(1) on 10.1.2008 Annexure-L, since the department selected petitioner s return for scrutiny and passed an assessment order on 11.03.2008 Annexure-N under subsection (3) of Section 143 of the Act determining tax liability of Rs. 36,94,298/- including interest under Section 234A, 234B and 234C, which was rectified under Section 154 of the Act by giving credit of Rs. 29,09,800/- being the tax amount paid, to reduce the tax liability to Rs. 6,98,430/- being the interest portion as follows Interest levied u/S 234-A ndash Rs. 87,342/- Interest levied u/S 234-B ndash Rs. 6,12,768/-
5. Petitioner s application dated 19.5.2009 Annexure-O before the CBDT for waiver of interest in terms of the notification dated 26.6.2006 Annexure-N when not acted upon led to the petitioner filing an application before the respondent-Chief Commissioner of Income-tax, Bangalore-3 Annexure-P, which when rejected by order dated 26.4.2012, Annexure-A has presented this petition.
6. Learned counsel for the petitioner submits that under the notification dated 29.6.2006 issued under Section 54EC and the explanation (b)(i) to sub-section (3), not imposing a limitation on the investment in the capital gain bonds, the amendment by Finance Act 2007 to explanation (b) of Section 54EC imposing a limitation of Rs. 50 lakhs over the investment, with retrospective effect from 1.4.2006 of which the petitioner had no knowledge, was an extraordinary circumstance which ought to have weighed in the mind of the Chief Commissioner of Income-tax, to extend the benefit of waiver of interest under Section 234B, by placing reliance upon the observations of the Gujarat High Court in Bhanuben Panchal and Chandrikaben Panchal ndash v- Chief Commissioner of Income Tax (2004) 269 ITR 27 as also on the unreported opinion of this court in M/s UB Global Corporation Limited ndash v- Chief Commissioner of Income tax in W.P.No.16136/2011 DD 11.3.2013. Learned counsel hastens to add that the Chief Commissioner of Income tax while rejecting the applications for exemption of interest under Section 234B fell in error in observing that Clauses (a), (b) and (c) of the Notification dated 26.6.2006 Annexure-N does not take into its fold circumstances as made out by the petitioner.
7. Learned Sr.counsel for the respondent-revenue seeks to sustain the order as being well merited, fully justified and not calling for interference. According to the learned Sr.counsel the amendment to the proviso to Sec. 54EC(1) w.e.f. from 1.4.2007 is over investments made on or after 01.04.2007 in the long term specified assets by an assessee during any financial year does not exceed Rs. 50 lakhs. However exemption over and above Rs. 50 lakhs investment in Capital gain bonds under Section 54EC of the Act, though was available to the petitioner, having not invested the said sum within the extended period from 16.3.2006 the date of sale of the asset, is disentitled to waiver of interest. In addition it is submitted that the decision in Bhanuben’s case (supra), as well as the opinion of this court were on different factual matrix, hence inapplicable to the facts of this case and that clauses (a), (b) and (c) of the notification Annexure-N have justifiably no application, and seeks to sustain the order Annexure-A.