Waiver of interest and penalty : S. 139(8), S. 217, S. 271(1)(a), S. 273 and S. 273A of Income-tax Act, 1961 : A.Ys. 1987-88 and 1988-89 : Commissioner waived penalty but refused to waive interest : Not justified.

45. Waiver of interest and penalty : S. 139(8), S. 217, S. 271(1)(a), S. 273 and S. 273A of Income-tax Act, 1961 : A.Ys. 1987-88 and 1988-89 : Commissioner waived penalty but refused to waive interest : Not justified.

[Sun Deep Jewellers v. CIT (Bom.), W.P. No. 888 of 1994, dated 20-4-2009 (Not reported)]

For the A.Ys. 1987-88 and 1988-89 the petitioner-firm and its partners filed their returns belatedly on 7-2-1990. The Assessing Officer completed the assessment u/s.143(1) of the Income-tax Act, 1961 accepting the returned income. The Assessing Officer charged interest u/s.139(8) and u/s.217 of the Act and also imposed penalty u/s.271(1)(a) and u/s.273 of the Act. On an application for waiver of interest and penalty the Commissioner waived penalty but refused to waive interest.

The Bombay High Court allowed the writ petition filed by the petitioner and held as under :

“(i) Admittedly, the petitioners had submitted the income-tax returns voluntarily without any notice or any action being taken by the Income-tax Department and had also deposited the income-tax as per their own assessment. The AO found the assessment correct and the returns were accepted without any objection. It shows that the petitioners had, in fact, co-operated in the assessment and the enquiry which could be held before or after filing of such income-tax returns. This indicates that they acted in good faith and they had made full and true disclosure of their income voluntarily.

(ii) They had also given reasons and the circumstances in which the income-tax returns could not be submitted within time. Those reasons were accepted for the purpose of waiver of penalty. If the conditions were satisfied and if the reasons given by the petitioners were good for waiver of penalty, it is difficult to understand why they could not be good for waiver of interest, particularly when it appears that the delay was not intentional and because of the circumstances, in which they found themselves, the returns could not be submitted within time.”

The High Court quashed and set aside the order of the Commissioner refusing to waive interest and directed the refund of the interest paid by the petitioner.