SAVALLE INDIA PVT LTD Vs. G K MISHRA

JUDGEMENT

(1.) BY this petition under Art. 226 of the Constitution of India, the petitioner company has challenged the legality and validity of the order dt. 22nd March., 1988 passed by the CIT, Bombay City VI, Bombay under S. 264 of the IT Act, 1961. The assessment year involved are 1982-83 and 1983- 84. The assessment were completed under S. 143 (3) of the It Act on 16th Feb., 1985 and 19th March., 1986. Advance tax paid by the petitioner on the basis of its own estimate fall short of the required percentage of tax payable by it. Accordingly, interest was charged under S. 215 of the IT Act, 1961. The petitioner applied to the IAC for waiver or reduction of the interest under r. 40 of the IT Rules. The application were rejected. Thereafter it filed revision application under S. 264 of the IT Act before the CIT. BY his impugned order he also rejected the applications.

(2.) AFTER hearing Shri Mehta, the learned counsel for the petitioner and Dr. Balsubramanian the learned counsel for the Revenue, it is seen that the return of income for the two years were filed on 11th Dec., 1981 and 11th June, 1982 and that the assessments were completed on 16th Feb., 1985 and 19th March, 1986. One of the grounds for reduction or waiver of interest taken by the petitioner was that the assessments were completed more than one year after the submission of returns and that the delay was not attributable to it. The other ground taken was that even otherwise circumstances existed which justified the reduction or waiver of interest under r. 40. The CIT in his impugned order considered the second ground only. The first ground has not even been referred to in the order and he has rejected the application. In my judgment, the AO has, no doubt a discretion under r. 40 to reduce or waive interest payable under S. 215 or under S. 217 of the Act in certain circumstances. Such circumstances are enumerated in the rule itself. If one or more of the circumstances enumerated in rule are satisfied the AO has a duty to exercise discretion and must reduce or waive interest depending upon other relevant factors. The assessments herein were admittedly completed more than three years after filing of the returns. The first notice for assessment was itself issued after about two years in each case. The case of the petitioner, thus, squarely falls within the ambit of sub-r. (1) of r. 40. It was, therefore, incumbent upon the CIT to exercise discretion under r. 40 which he has not done.

(3.) WITH these directions rule is made absolute.