Skip to content


Kerala State Cashew Development Corporation Ltd. Vs. Income-tax Officer, C-ward and anr. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberO.P. No. 2645 of 1980
Judge
Reported in(1983)35CTR(Ker)391; [1984]145ITR266(Ker)
ActsIncome Tax Act, 1961 - Sections 139(8); Income Tax Rules, 1962 - Rule 117A
AppellantKerala State Cashew Development Corporation Ltd.
Respondentincome-tax Officer, C-ward and anr.
Appellant Advocate K.P. Radhakrishna Menon and; K.K. Ravindranath, Advs.
Respondent Advocate P.K. Ravindranatha Menon and; N.R.K. Nair, Advs.
Excerpt:
.....authority is satisfied that an assessee was prevented by sufficient cause from furnishing the return in time, he is bound to waive the interest liable to be charged under section 139(8)(a) because the power to waive interest is coupled with a duty especially as the levy is more in the nature of a penalty. p-8, the 2nd respondent has also observed that the evidence had satisfied the ito that 'the petitioner-company was prevented by sufficient cause from furnishing the return within time'.on this finding the 2nd respondent ought to have waived the entire interest. 117a, must mean 'to rescind or annul';else, there would be scope for the exercise of an arbitrary power under the proviso to section 139(8)(a). the fact that the power conferred is not to reduce therate of interest also..........the word 'abate' that it could be used to denote waiver of interest and as abate is a synonym of reduce, waive is also a synonym of reduce, i find it difficult to agree with this contention and the process underlying it. for one thing ' waiver ' is not a synonym for ' reduction ' and for another the word ' abate ' is not a synonym for the word ' waive '. i do not also think that this tortuous process is permissible or legitimate to determine the meanings or equivalents of the word ' waiver'.12. the proviso to section 139(8) uses the words ' reduce or waive'. the use of the two words as alternatives signifies that they were employed not as interchangeables or as conveying the same idea; the intention obviously was to convey different ideas and to confer two different powers, the power.....
Judgment:

Halagangadharan Naik, J.

1. By his order, Ex. P-l, dated December 6, 1977, the 1st respondent, the ITO, C Ward, Trivandrum, assessed the income of the petitioner for the assessment year 1975-76 and determined the tax payable at Rs. 1,11,50,375. In addition to this he charged Rs. 5,57,515 as interest under Section 139(8) of the I.T. Act (' the Act') on the ground that the income-tax return which was duo to be filed on or beforeAMay 31, 1975, was filed out of time on January 23, 1976. From the order of assessment the petitioner preferred an appeal before the appellate authority. In giving effect to the appellate authority's decision the first respondent by his order Ex. P-2 dated March 31, 1978, reduced the interest to Rs. 5,09,770. Thereafter the petitioner moved a petition Ex. P-3 dated August 25, 1973, under the proviso to Section 139(8)(a) before the 1st respondent seeking waiver of the interest on the plea that it was prevented by sufficient cause from furnishing the return within the prescribed time. The first respondent, however, rejected the petition by his order Ex. P-4 dated September 5, 1978. The petitioner carried the order, Ex. P-4, in revision under Section 264 before the 2nd respondent, the Commissioner of Income-tax, Ernakulam. Exhibit P-5 is a copy of the revision petition. During the pendency of the revision the first respondent passed an order, Ex. P-6, dated September 22, 1979, levying a penalty of Rs. 6,11,724 under Section 271(1)(a) holding that he was not satisfied that reasonable cause existed for the delayed submission of the return by the petitioner. The petitioner challenged the order, Ex. P-6, before the Commissioner of Income-tax (Appeals). By the order, Ex. P-7, dated January 14, 1980, the Commissioner (Appeals) cancelled the penalty in the view that the petitioner was prevented by sufficient cause from furnishing the return within the time. The petitioner brought to the notice of the 2nd respondent the above order of the Commissioner (Appeals). On May 27, 1980, the 2nd respondent passed the order, Ex. P-8, declining to vacate the order, Ex. P-4, but reducing the interest charged by Rs. 1 lakh. The petitioner seeks to quash Exs. P-4 and P-8 briefly on the following grounds:

(i) Once the assessing authority is satisfied that an assessee was prevented by sufficient cause from furnishing the return in time, he is bound to waive the interest liable to be charged under Section 139(8)(a) because the power to waive interest is coupled with a duty especially as the levy is more in the nature of a penalty. In Ex. P-8, the 2nd respondent has also observed that the evidence had satisfied the ITO that ' the petitioner-company was prevented by sufficient cause from furnishing the return within time'. On this finding the 2nd respondent ought to have waived the entire interest.

(ii) The proviso to Section 139(8) read along with Rule 117A (v) of the l.T. Rules makes it clear that on such a finding, the assessing authority is bound to waive the interest. The word 'reduce', in the proviso to Section 139(8)(a) and r. 117A, must mean ' to rescind or annul'; else, there would be scope for the exercise of an arbitrary power under the proviso to Section 139(8)(a). The fact that the power conferred is not to reduce therate of interest also indicates that reduction can only mean complete obliteration of the interest on the prescribed conditions being satisfied. Whether it is for the reduction or waiver of the interest, the assessee must satisfy the same prescriptions as is shown by Rule 117A. The word 'reduce' must, therefore, mean abate, rescind or annul.

(iii) The statement in Ex. P-8 that there was loss in Government revenue on account of the postponement of the payment of the tax on making the self-assessment and that this was occasioned by the non-submission of the return in time is based on an irrelevant consideration and has been invented by the 2nd respondent for not waiving the interest in its entirety as is clear from the provisions in Rule 117A(v). These irrelevant considerations have influenced the free exercise of the power by the concerned authority. It is a power coupled with a duty and not a discretionary power and when it is found that an assessee is prevented from submitting the return in time, the authority is bound to waive the interest in its entirety.

2. The 1st respondent has filed a counter-affidavit to the following effect. The contention that once the assessing authority is satisfied that an assessee is prevented by sufficient cause from furnishing the return of income within the time, he is bound to waive the interest leviable under Section 139(8) is not correct as Section 139(8) gives a discretionary power to the ITO to reduce or waive the interest payable by the assessee. The further contention, that the word 'reduce' in the proviso to Section 139(8)(a) must mean ' rescind or annul', is also not correct, for, what the proviso states is only that the ITO may, in such cases and under such circumstances, reduce or waive the interest payable by the assessee. It does not mean that whenever the circumstances prescribed by Rule 117A are satisfied the entire interest should be reduced. Had that been the intention the word 'reduced' would not have been used. The proviso to Section 139(8) gives power to the ITO to use his discretion in certain cases, as prescribed and to reduce or waive the interest. The mere fact that the assessee has satisfied the conditions in Rule 117A does not automatically mean that the entire interest levied should be waived. The ITO is also required to take into consideration other facts. The fact that the Government had lost revenue, on account of the postponement of payment of tax under Section 140A, is a very relevant consideration to be taken into account in waiving the interest. The intention of the Legislature in levying the interest under Section 139(8) is also to compensate the loss of revenue on account of the belated payment of tax under Section 140A, as a result of not filing the return under the conditions specified in Section 139(1). The contention that irrelevant considerations have influenced the free exercise of the power by the concerned authority is not correct. The original petition is thus without merit.

3. The facts of the case as set out in the original petition lie within a narrow compass and need not be recapitulated. The only point raised by the petitioner is that, as it has been found in Ex. P-8, that 'it could, therefore, be inferred that the evidence produced by the petitioner-company was to the satisfaction of the ITO and the petitioner-company was prevented by sufficient cause from furnishing the return within time', the respondents--the first respondent as the original authority and the second respondent as the revisional authority--ought to have totally waived the interest. Sub-section (1) of Section 139 provides for the suo motu furnishing of returns of income and Sub-section (2) provides for the furnishing of return, pursuant to a notice issued by the ITO, within the prescribed time. Sub-section (4) provides for the submission of returns by persons who had not furnished returns within the time allotted under Sub-section (1) or Sub-section (2). Sub-section (8), so far as relevant, lays down that where the return under Sub-section (1) or (2) or (4) for an assessment year is furnished after the specified date or is not furnished, the assessee shall be liable to pay simple interest at 12% per annum, for the period and on the amount specified. The proviso to Sub-section (8) enacts :

' Provided that the Income-tax Officer may, in such cases and under such circumstances as may be prescribed, reduce or waive the interest payable by any assessee under this sub-section. '

4. The prescription contemplated by the proviso is made in Rule 117A which is headed, ' Reduction or waiver of interest payable under Section 139 '. It reads, to quote the material provisions :

' The Income-tax Officer may reduce or waive the interest payable under Section 139 in the case and in the circumstances mentioned below, namely :--... (v) in any case in which the assessee produces evidence to the satisfaction of the Income-tax Officer that he was prevented by sufficient cause from furnishing the return within time. '

5. What the proviso to Sub-section (8) of Section 139 and Rule 117A(v) between themselves prescribe is that the interest payable under Section 139(8) may be reduced or waived even where the assessee had satisfied the ITO that he was prevented by sufficient cause from furnishing the return within time. The petitioner, however, contends that on such satisfaction being given, as here, the original or the revisional authority, as the case may be, has to totally waive the interest. In aid of this argument, it was contended that the words 'reduce' or 'waive' connote the same thing and that interest has, therefore, to be given up in full. This, it was contended, the respondents had failed to do.

6. The petitioner could succeed if only the contention that the word 'reduce 'is interchangeable with' waiver '. That requires to be considered.

7. The relevant meanings of the word 'reduce' in the Concise Oxford Dictionary are :

' diminish (reduce liquid to two-thirds of its bulk ; reduce the prices of the goods, the temperature of the mixture); convert to smaller number by omission, reclassification etc. '

and of 'waive' :

'Refrain from insisting on or using, tacitly or implicitly relinquish or forgo (right, claim, opportunity, legitimate plea etc.)'

8. Chambers' Twentieth Century Dictionary gives the following relevant meanings:

'Reduce :......to bring into a lower state! to lessen : to diminish inweight or girth: to weaken: ...... to break up, separate, disinter-grate ;'

'waive:... to give up voluntarily, as a claim or a contention; to refrain from claiming, demanding, taking, or enforcing ; to forgo.' Regets' International Thesaurus, 3rd Edn., gives the following : 'Reduce: decrease, diminish, lessen, take from ; lower, depress, step down (coll.) tune down (coll.) scale down (U.S.) downgrade; depreciate, deflate ; curtail, retrench, cut, cut down, cut back, roll back (as prices (coll.)); shorten, compress.'

'Waive', in the same book, has the following relevant equivalents ;

'Give up, relinquish, surrender, yield, forgo, renounce, forswear drop.'

9. None of these dictionaries establishes the counsel's contention that the two words have the same meaning and are interchangeable. While 'reduce' means to diminish, or decrease, 'waive' means to refrain from insisting on, or claiming or demanding or to relinquish or forgo or give up, etc. Counsel, however, endeavoured to make out his case by referring to Collins Gem Dictionary of Synonyms & Antonyms and Reader's Digest Use the Right Word--A Modern Guide to Synonyms. In Gem 'reduce' is defined, to quote the relevant sense, as: abate, abridge, contract, curtail, decrease, diminish, lessen, shorten. None of the senses equates 'reduce' with 'waiver', not even 'abated', on which particular emphasis was placed by counsel. ' Abate ' in Gem means only ' decline, decrease, diminish, ebb, lessen, mitigate, moderate, reduce, sink, slacken, subside, wane' and in Concise Oxford Dictionary it means, dimmish ; make or grow less; do away with (nuisance); lower (price); deduct(specified or unspecified part of price); mitigate (violence, pain); weaken (energy). Gem, in my view, affords the petitioner no support.

10. Turning to the Guide by Reader's Digest the synonyms for ' reduce ' are: 'abate, curtail, diminish, lower'. It is further observed:--' These words mean to make or to become smaller or less, but they are not in all cases interchangeable'. 'Reduce' has a wider range of connotations than the other words and is also the most general. It means ' to make less in size, amount, number, extent or intensity: to reduce household expenses; to reduce a labour force during a slack season; to reduce speed on a highway undergoing repairs; to reduce the acreage of a property by selling off several paddocks,... ' The same book explains ' abate ' thus :

' Abate means to reduce, as in strength or degree, usually from an excessive intensity or amount. In this sense, it is most frequently an intransitive verb....In a legal sense, abate is used transitively and means to do away with completely or to make null and void in whole or in part: to abate a nuisance ; to abate rent.'

11. It was argued from this last use and illustration of the word 'abate' that it could be used to denote waiver of interest and as abate is a synonym of reduce, waive is also a synonym of reduce, I find it difficult to agree with this contention and the process underlying it. For one thing ' waiver ' is not a synonym for ' reduction ' and for another the word ' abate ' is not a synonym for the word ' waive '. I do not also think that this tortuous process is permissible or legitimate to determine the meanings or equivalents of the word ' waiver'.

12. The proviso to Section 139(8) uses the words ' reduce or waive'. The use of the two words as alternatives signifies that they were employed not as interchangeables or as conveying the same idea; the intention obviously was to convey different ideas and to confer two different powers, the power to reduce interest and if it was so thought fit to waive interest altogether. I see no compelling reason to attribute a needless tautology to the Legislature.

13. The power to levy interest for delayed furnishing of return under Section 139(8) is compensatory and not punitive as has been held by this court in Kerala Tile and Clay Works v. CIT : [1976]104ITR597(Ker) . In Addl. CIT v. Santosh Industries : [1974]93ITR563(Guj) , one of the decisions followed in that case, the Gujarat High Court observed (p. 577):

' Interest is not charged to him by way of penalty but he is required to pay it, because by reason of extension of time, the filing of the return would be delayed and that would in its turn delay the assessment and consequent realisation of tax from assessee. It is, therefore, by way ofcompensation for delay in realisation of tax that interest is required to be paid by the assessee. '

14. Exhibit 8 does not, therefore, err in having taken into account anything irrelevant.

15. The 2nd respondent was within his jurisdiction when he observed that this was not a fit case for a total waiver of the interest. There is no ground made out to quash Ex. P-4 or P-8.

16. The original petition is dismissed. No costs.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //