The levy of interest under ss. 234A to 234C of the IT Act, 1961 is compensatory in nature and not penal. The provisions are not arbitrary or unreasonable merely because they do not provide for an opportunity of hearing before levy of interest. The Board has the power to waive interest under s. 119 of the Act in cases of genuine hardship.

G.S.SINGHVI, J.

1. These petitions are being decided by a common order because in all the petitions vires of ss. 234A, 234B and 234C of the IT Act, 1961 (hereinafter referred to as the Act) has been challenged and the petitioners have prayed for declaring these provisions to be ultra vires to the provisions of the Constitution of India. They have also prayed for quashing of the orders issued by the CBDT rejecting their prayer for waiver of interest, etc.

2. For the purposes of this order, it will be appropriate to make reference to a few facts from CWP No. 748 of 1994. Petitioner Sant Lal is partner of M/s Sankhon Wala Bros. which is carrying on business of gold at Sirsa. Search and seizure operations were conducted on the business and residential premises of the petitioner on 10th Feb., 1982. Cash amounting to Rs. 3,71,000 and gold ornaments/bullion worth Rs. 55,65,852 were recovered during the search and seizure operations. Out of this, petitioner Sant Lal had share of Rs. 2,00,000 in cash and Rs. 4,00,140 in jewellery, etc. Gold worth Rs. 12,64,743 was released and the rest was seized. The petitioner says that immediately after the seizure was done he made an application to the Asstt. CIT to adjust the amount of tax due from the assessee. Further allegation of the petitioner is that in order to file return of the income for the year 1988-89 he had made requests vide Annexures P2 to P7 to the Departmental authorities to make available all the copies of the statements recorded during the search operation and also to supply the copies of books/documents seized by the Department, but, respondent No. 3 did not pay any heed to the request made by the petitioner. Not only this, opportunity of inspection was also not given to the petitioner. Photostat copies of the material seized were made available in the year 1990, but, those were also incomplete. At the time of filing of the return, the petitioner is said to have given a detailed note indicating reasons for his inability to file return in time. The petitioner says that ignoring his request for return of documents and for adjustment of the amount seized during operation towards the tax, the assessing authority made provisional assessment and levied interest amounting to Rs. 5,80,884 under ss. 234A, 234B and 234C of the Act. Regular assessment was framed on 30th Dec., 1992 wherein interest was charged upto the period of making of assessment under s. 234B of the Act. The petitioner has challenged the vires of ss. 234A, 234B and 234C of the Act on the ground of arbitrariness. His contention is that prior to the insertion of these provisions, the competent authority had the power to reduce or waive the interest in accordance with the provisions of the statute but with the insertion of these provisions, no such power is left with the authorities and even the amount of interest has been enhanced from 15% per annum to 2% per month in cases of default in the payment of advance tax, deferment of advance tax or late filing of return. The petitioner has also contended that the impugned provisions are penal in character and, therefore, these provisions are beyond the legislative competence of Parliament. The petitioner further states that an application was submitted before the CBDT for waiver of interest, but, the Board has declined this request by a cryptic order dt. 22nd Oct., 1993. This order has been challenged on the ground of non-application of mind and violation of principles of natural justice.

3. The case set up by the respondents is that in respect of the asst. yr. 1989-90, order dt. 30th Dec., 1992 has been passed under s. 143(3) of the Act and now the matter is pending before the Tribunal. It has also been stated that the petitioner has already moved a petition under s. 245C(1) of the Act before the Settlement Commission and his application has been admitted by the Settlement Commission vide his order dt. 7th June, 1994. The respondents have pleaded that after having av