2004 (11) TMI 64 - HC - Income Tax

Scope for levy of interest under section 220(2) whenever an application is filed seeking waiver of interest, the same should be decided by the authority by a speaking order. Inasmuch as the first respondent is exercising quasi-judicial function, we hold that it is incumbent on its part to record its reasons in support of the order it makes - order of the Commissioner cannot be said to be a speaking order recording his reasons for dismissing the petition filed by the assessee. We hold that the order of the Commissioner is not supported by reasons and the observation - We direct the Commissioner of Income-tax to restore the application of the petitioner filed under section 220(2A) to his file and dispose of the same afresh in accordance with law

Summary

Issues:
1. Appeal against order for waiver of interest under section 220(2A) of Income-tax Act, 1961.
2. Proper exercise of discretion by the Commissioner of Income-tax in rejecting the waiver petition.
3. Requirement of recording reasons by the authority while deciding applications under section 220(2A).

Analysis:
1. The case involved an appeal against the order of the learned single judge confirming the Commissioner of Income-tax's decision to dismiss a petition for waiver of interest under section 220(2A) of the Income-tax Act, 1961. The petitioner, a company, claimed deduction under section 80J of the Act, which was finally decided by the Supreme Court. The petitioner argued that the demand was not outstanding as it had paid its claim after a revision of assessment post the Supreme Court's decision. The Commissioner dismissed the petition, leading to the writ petition and subsequent appeal.

2. The key issue was whether the Commissioner of Income-tax properly exercised discretion in rejecting the waiver petition. The petitioner contended that the Commissioner did not apply his mind adequately and provide sufficient reasons for the dismissal. The Commissioner, after considering the statutory provisions and the petitioner's claim, concluded that the reasons presented were not enough to invoke section 220(2A) of the Act. The High Court analyzed the relevant provision and emphasized the need for the assessee to establish genuine hardship, circumstances beyond their control, and cooperation in any inquiry or proceeding to avail the benefits.

3. The judgment highlighted the requirement of recording reasons by the authority while deciding applications under section 220(2A). Drawing on a Supreme Court case, the High Court emphasized that even though the provision does not explicitly mandate recording reasons, it is essential for the authority to issue a speaking order when deciding on waiver of interest applications. The Court referenced a case where the Supreme Court set aside an order due to lack of reasons provided by the authority. In this context, the High Court found that the Commissioner's order lacked sufficient reasoning for dismissing the petitioner's application, leading to the decision to set aside the order and direct a fresh disposal of the application in accordance with law.

In conclusion, the High Court allowed the writ appeal, setting aside the previous order and directing the Commissioner of Income-tax to re-examine the petitioner's application for waiver of interest under section 220(2A) within a specified timeframe.