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Declaring LTCG in ITR instead of STCG isn’t a bonafide case for waiver of sec. 234A/B/C interest: HC

August 21, 2019[2019] 108 257 (Madras)

INCOME TAX : Once assessee had paid reassessed tax along with interest under sections 234A, 234B and 234C after reassessment order was passed, assessee could claim waiver of such interest only if case of assessee could be brought within scope of notification issued by Central Board of Direct Taxes vide F. No. 400/234/95-IT(B), dated 23-5-1996.


• Assessee claimed long term capital gains on sale of property made during that year.

• Assessing Officer however held that it was short term capital gain and accordingly determined the total income for said assessment year and demanded total net tax payable. The Assessing Officer also charged interest under sections 234A, 234B and 234C.

• Assessee filed a waiver petition under section 119(2) (a) for waiver of interest charged under aforesaid provisions, since, he was under bonafide belief that capital gains yielded by aforesaid transaction would amount to long term capital gains, he filed his return of income on that basis. He invoked Circular issued by the Central Board of Direct Taxes in F.No.400/234/95-IT(B) on 23-5-1996 which provided for waiver of interest under certain circumstances


• Sections 234A, 234B and 234C provide for levy of interest for delay/default/deferment in payment of advance tax/income tax etc. There can be relief from said liabilities only if case of assessee can be brought within scope of notification issued by Central Board of Direct Taxes vide F.No.400/234/95-IT(B), dated 23-5-1996.

• It is not the case of the petitioner that his case will fall under clause 2 (a) or (b) or (c) or (d) of the notification. His case will have to fall only within clause 2(e).

• However, rejection of one's legal contention cannot be characterised as an unavoidable circumstance. The expression 'unavoidable circumstance' occurring in clause 2(e) of the circular dated 23-5-1996 cannot obviously encompass outcomes of judicial and quasi judicial proceedings. This is all the more so because, clause 2(d) deals with arising of liability on account of a subsequent decision of the Supreme Court. If adverse judicial or quasi judicial decisions are to furnish a cause for seeking waiver of interest, it would have been expressly stated in clause 2(e) as in clause 2(d). When a person embarks on the journey of litigation, one should always be prepared for an adverse verdict. Therefore, there is nothing unforeseeable about the outcome of judicial or quasi judicial proceeding.

• The case on hand clearly falls outside the scope of clause 2(e) of the circular dated 23-5-1996. The impugned order is therefore sustained.

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