A party's financial hardship does not justify a waiver of statutory interest under the Income Tax Act, which demands adherence to specific CBDT criteria for such waivers.

ORDER :

P.Sam Koshy, J.

1. Heard Ms. Anjali Agarwal, learned counsel for the petitioners; and Ms. B. Swapna Reddy, learned Senior Standing Counsel for Income Tax Department appearing on behalf of the respondents.

2. The instant writ petition under Article 226 of the Constitution of India has been filed by the petitioner assailing the order dated 29.03.2007, in Proceeding F.NO.CC/Tech-I/40(2103)/05-06, passed by respondent No.1 as illegal, unjustified, and contrary to the guidelines given by the CBDT in Circular No.400/29/2002-IT (B), dated 26.06.2006.

3. The facts of the case are that the petitioners were subjected to reassessment proceedings under Section 147 of the Income Tax Act, 1961 (for short ‘the Act’) for the assessment year 1992-1993 on 08.05.2002, for the assessment years 1993-1994 and 1994- 1995 on 23.05.2001, for the assessment years 1995-1996 to 1997- 1998 on 28.05.2001, and for the assessment year 1998-1999 on 25.03.1998. Notices under Section 148 the Act were issued between the years 2001 and 2002 for various assessment years. The petitioners had originally filed their returns of income on different dates. The petitioner No.1 filed returns for the assessment year 1992-93 on 28.01.2003, for the assessment year 1993-94 on 09.11.1995 and for the assessment year 1994-95 on 16.11.1995. The petitioner No.2 filed returns for the assessment years 1995-96, 1996-97, and 1997-98 on 19.09.1997, and for the assessment year 1998-99 on 31.10.1998.

4. The original assessment proceedings were completed in 31.03.2003, wherein the total income assessed was Rs.25,09,156/-. Subsequently, reassessment orders were passed on 19.04.2005 following the directions of the Income Tax Appellate Tribunal which had remanded the matter back to the Assessing Officer. In the reassessment orders passed on 19.04.2005, the total income was reduced to Rs.16,10,987/-. The petitioners accepted these reassessment orders and paid the entire tax liability as determined by the Department with an intention to buy peace and avoid prolonged litigation. However, the petitioners contested the levy of interest charged under Sections 234A, 234B and 234C of the Act.

5. The petitioners filed a waiver petition before respondent No.1 seeking waiver of the interest levied under Sections 234A, 234B, and 234C stating that interest should only be levied from the last date for filing returns for each assessment year till the actual date on which the returns were filed, and not till the date of reassessment in the year 2005. The respondent No.1, vide order dated 29.03.2007, rejected the waiver petition filed by the petitioners. The rejection was based on the observation that there was substantial variation between the incomes originally returned by the petitioners and those assessed thereafter by the Department.

6. The petitioners, being aggrieved by the order passed by respondent No.1 and having been left with no alternative and efficacious remedy filed the present writ petition.

7. Learned counsel for the petitioners contended that the petitioners operated a partnership firm dealing with construction activities at Himayatnagar, Hyderabad. Following the death of one partner, petitioner No.1 firm was dissolved and petitioner No.2 became the sole proprietor. The lessor firm, M/s.Shashi Enterprises (Shashi Kwatra wife of petitioner No.2), was similarly dissolved and taken over by the petitioner No.2. Both entities filed their income tax returns regularly which were acknowledged by the Department. On 25.03.1998, a survey was conducted under Section 133A of the Act at their premises in Himayat