Sec. 234A Interest Can Be Waived Off if Tax Was Deposited Immediately After Receiving Notice From AO | HC

Case Details: Baso Devi vs. Central Board of Direct Taxes - [2024] 161 taxmann.com 17 (Punjab & Haryana)

Judiciary and Counsel Details

• Sanjeev Prakash Sharma & Vikas Suri, JJ.
• Ms Divya Suri & Sachin Bhardwaj, Advs. for the Petitioner. 
• Ms Gauri Neo Rampal Opal for the Respondent.

Facts of the Case

In the instant case, the assessee preferred a writ petition praying for allowing waiver of the interest charged under Section 234A, 234B and 234C for non-submission income tax returns. The Central Board of Direct Taxes (CBDT) rejected the application filed under section 119(2).

High Court Held

The Punjab and Haryana High Court held the old age and illiteracy of the assessee were important factors that were considered while judging the veracity of the assertion regarding the ignorance relating to the filing of returns.

It was observed that the CBDT circular dated 23-5-1996, which provides the class of incomes or class of cases in which the reduction or waiver of interest under sections 234A, 234B or 234C, can be considered. One of the cases provided in such order is where the assessee could not file a return of income due to unavoidable circumstances, and such return of income is filed voluntarily by the assessee or his legal heirs without detection by AO.

The word detection would have to be understood in terms of the provisions of the Income Tax Act, while in layman’s knowledge, the detection would be coming to know of a particular aspect alone. Still, in terms of the Income Tax Act, the provisions of sections 142 and 148 would come into play, i.e. where there is an evasion on the part of any assessee who comes to the knowledge of AO. He initiates proceedings by issuing notice under section 142(1) that it can be said that AO has detected such action of tax evasion.

AO discovered Form 15-H, signed by the assessee, revealing undisclosed information. Despite the assessee’s failure to file returns for several years and AO’s letters dated 30-1-2000, the assessee promptly filed returns on 3-2-2000 within four days of receiving the letters. Additionally, the assessee deposited taxable income and corresponded with the authorities. Consequently, it’s evident that the income tax return was filed voluntarily, not merely due to the detection by AO.

The second condition, concerning the assessee’s failure to file a return due to unavoidable circumstances, may not seem evident at first glance. However, as previously noted by this Court, factors such as the assessee’s old age and illiteracy are crucial. Hence, they can be considered relevant and deemed as unavoidable circumstances.

The Chief Commissioner’s decision deeming the circumstances insufficient for tax waiver is unjustified and misinterprets the CBDT notification. This notification seems tailored by the CBDT for cases like this. If a citizen promptly deposits tax upon realizing their liability, it’s not deliberate evasion, and interest under section 234A can be waived.