CBDT Order extending ITR due date to 30-11-2014 with interest u/s 234A- whether contrary to the directions of the Court and illegal?

The relevant clause 7 of CBDT order dated 26-09-2014 is extracted hereunder:

7. There shall be no extension of the “due date” for the purposes of Explanation 1 to section 234A (Interest for defaults in furnishing return) of the Act and the assessees shall remain liable for payment of interest as per the provisions of section 234A of the Act.

As we all know CBDT has been forced to extend the date by Gujarat High Court. One of the main contention of CBDT was loss of taxes and interest thereon if the date is extended for next two months.

It must be noted that the date of ITRs have been extended by order of the CBDT issued under the powers conferred u/s 119 of the Income Tax Act, 1961. Section 119 related to Instructions to subordinate authorities authorizes CBDT in number of ways. Sub section (1) provides that the Board may from time to time issue orders, instructions and directions to other income-tax authorities if found expedient and necessary for proper administration of the Act. Under sub section (2) which would cover section 139 related to return of income, CBDT has specific powers to pass general or special orders in respect of any class or class of cases as to the guidelines, principles or procedures to be followed in the work related to the assessment or collection of revenue. Thus there is no controversy or doubt about the powers of CBDT in extending the due dates of ITRs.

Please note that as per section 119(2), CBDT can issue such directions, orders or instructions only when these are not prejudicial to the assessee and are in the public interest.

Now this again highlights the basic dispute:

Whether the clause 7 of the CBDT order dated 26-09-2014 can be considered as violating the principle of not prejudicial to assessee or being in the public interest?

Whether CBDT has issued such order on the direction of the Gujarat High Court?

It is interesting to note that the Gujarat High Court, in para 62 of its order, spelling out the need of the extension stated that those assessee who choose to pay tax on or before 30 ^th September, 2014 no interest shall be levied. The para 62 as above is extracted as under:

Such extension needs to be granted with the qualification that the same may not result into non-charging of interest under section 234A. Simply put, while extending the period of filing of the tax return and granting benefit of such extension for all other provisions, interest charged under section 234A for late filing of return would be still permitted to be levied, if the Board so choses for the period commencing from 1.10.2014 to the actual date of filing of the return of income. Those tax payers covered under these provisions if choose to pay the amount of tax on or before the 30th September, 2014, no interest in any case would be levied despite their filing of return after the 30th September, 2014.

Further as per para 63 of the order, the Court considered the option as per para 62 as requisite safeguard for the revenue. Para 62 is extracted here;

“This may provide requisite safeguard against the possible loss to the Revenue as at the base of its apprehension and denial for invoking the powers was such loss, due to deferred collections.”

It is also to be noted that the para 64, giving the final direction to CBDT starts with the line, “In the light of the above discussion”

Therefore the order of the court stating that, “It would, however, be open for the Board to qualify such relaxation by extending the due date for all purposes, except for the purpose of Explanation 1 to section 234A of the Act.” Should be construed in the light of para 62 of the order and not in isolation.

Had the CBDT followed the directions of the Court in the light of para 62 which was an intrinsic part of the judgment, it would have been without causing hardship to assessees and in the public interest as envisaged by the Gujrat High Court and section 119(2).

Therefore, in my opinion, it is true to say that the clause 7 of the order of the CBDT which is against the directions of the Gujarat High Court, is illegal and out of powers in so far as it prejudicial to the interest of the assesssees as per in section 119(2).