The Bombay High Court quashed an order rejecting an application for waiver of interest under Section 234C of the Income Tax Act and remanded the matter for fresh consideration. The Court emphasized the need for addressing the financial difficulties caused by the COVID-19 pandemic while examining the waiver request.

1. Procedural Context (Paras 1-2)

   • The petition was heard under Article 226 of the Constitution of India, challenging an order dated 30th March 2024, wherein the petitioner's application for waiver of interest under Section 234C was rejected.

2. Factual Background (Paras 3-5)

   • The petitioner filed its return for AY 2021-22 with total tax liability of ₹206,03,13,939, including interest of ₹3,88,59,353 for delayed Advance Tax payments.
   • The delay was primarily in the second quarter due to COVID-19’s adverse impact on business.

3. Petitioner's Contentions (Paras 6-13)

   • The petitioner argued that due to the COVID-19 pandemic, it was unable to accurately estimate book profits, impacting timely Advance Tax payments.
   • Reliance was placed on Sections 208, 209, and 119 of the Income Tax Act and earlier instructions/orders (e.g., Press Note dated 21st May 1996).
   • The petitioner cited judicial precedents, including the Supreme Court’s suo moto extension of limitation (January 2022) and the Karnataka High Court’s ruling in Bosch Ltd. v. ACIT.

4. Revenue's Response (Paras 14)

   • The Revenue contended that the waiver application was an afterthought and supported the rejection based on lack of merit and discretionary powers.

5. Court’s Analysis and Findings (Paras 15-18)

   • The Court observed that the impugned order failed to address key submissions, particularly the pandemic’s impact and judicial precedents cited by the petitioner.
   • It held the order lacked reasoning and amounted to non-application of mind.

6. Directions (Paras 18-20)

   • The Court set aside the impugned order and remanded the case for reconsideration within 8 weeks, directing respondent No. 1 to pass a reasoned order after hearing both parties.

Acts and Sections Discussed

1. Income Tax Act, 1961:

   • Section 234C: Interest on deferment of Advance Tax.
   • Sections 208 & 209: Liability and computation of Advance Tax.
   • Section 119: Powers of CBDT to issue orders/instructions for mitigation of hardship.

2. Article 226 of the Constitution of India: Judicial review of administrative actions.

Ratio Decidendi

1. COVID-19 Pandemic as a Mitigating Factor:
   The inability to estimate profits accurately due to an unprecedented pandemic justified reconsideration of interest waiver.

2. Non-Application of Mind:
   Orders dismissing waiver applications must consider all relevant facts, including external adversities and cited precedents.

Subjects:

Taxation Law – Waiver of Interest – Impact of COVID-19 on Advance Tax Compliance.

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