Law: Income Tax Act, 1961

Section: 119(2)(a),234A,143(1)(a),148

Section 234B of the Income-tax Act, 1961, read with article 226 of the Constitution of India - Interest - For default in payment of advance tax - Assessment year 1993-94 - On a petition filed by assessee before Chief Commissioner praying for waiver or reduction of interest charged under section 234B, 75 per cent of interest was waived - Chief Commissioner had declined full waiver of interest holding that there was no direct decision of jurisdictional High Court during or prior to relevant financial year, supporting stand of assessee for full waiver of interest - Whether in exercise of power of judicial review, authority in which a discretion to do something is vested can be compelled to exercise discretion but it cannot be told to exercise it in a particular manner - Held, yes - Whether while adjudicating validity of an executive decision, Court must grant certain measure of freedom of play to executive but a palpable arbitrary exercise of power has to be declared as void - Held, yes - Whether in instant case exercise of discretion by Chief Commissioner could be said to be palpably erroneous or contrary to Board's circular - Held, no - Whether impugned order suffered from any infirmity, factual or legal, warranting interference - Held, no Circulars and clarifications - Notification No. 400/234 of 1995-IT/B, dated 23-5-1996 and Circular dated 30-1-1997 FACTS Interest under section 234B was levied on the assessee for default in payment of advance tax for the relevant year. The assessee filed a petition before the Chief Commissioner praying for waiver/reduction of interest charged under section 234B on the plea that it fulfilled all the conditions that are laid down in the notification issued by the Board on 23-5-1996, as clarified vide their Circular dated 30-1-1997. While observing that the assessee's case fell within the scope and ambit of paragraph 2(d) of the said notification inasmuch as the assessee was under the bona fide belief on account of some High Courts' decisions that the interest on investment of surplus borrowed funds could be set off against interest paid on the borrowed funds during the period of construction of the hotel prior to commencement…

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