1997 (9) TMI 23 - HC - Income Tax

Summary

Issues Involved:
1. Waiver of interest under Section 220(2A) of the Income-tax Act, 1961.
2. Financial hardship and circumstances beyond the control of the petitioner.
3. Co-operation with the Income-tax Department.
4. Discretionary power of the Commissioner under Section 220(2A).
5. Judicial review under Article 226 of the Constitution of India.

Detailed Analysis:

1. Waiver of Interest under Section 220(2A) of the Income-tax Act, 1961:
The petitioner-company sought a writ of certiorarified mandamus to quash the order dated November 7, 1988, which rejected their application for waiver of interest amounting to Rs. 4,29,670 levied under Section 220(2) of the Income-tax Act for the assessment year 1980-81. The petitioner contended that the interest waiver application was not properly disposed of by the first respondent.

2. Financial Hardship and Circumstances Beyond the Control of the Petitioner:
The petitioner-company argued that it was in a tight financial position due to ongoing expansion projects, changes in government policy affecting wheat supply, and unremunerative investments in new units. The company claimed that these factors caused genuine hardship, fulfilling the conditions under Section 220(2A)(i) and (ii) of the Act.

3. Co-operation with the Income-tax Department:
The petitioner asserted that it had always co-operated with the Department and promptly paid all taxes due. However, the first respondent rejected the waiver application on the grounds that the petitioner did not satisfy the conditions mentioned in Section 220(2A), particularly regarding genuine hardship and circumstances beyond control.

4. Discretionary Power of the Commissioner under Section 220(2A):
The court examined the discretionary power of the Commissioner under Section 220(2A), which allows for the reduction or waiver of interest if three cumulative conditions are met: genuine hardship, circumstances beyond control, and co-operation with the Department. The court referenced several precedents, including Central Provinces Manganese Ore Co. Ltd. v. CIT and Carborundum Universal Ltd. v. CBDT, to highlight that the power is discretionary and must be exercised judicially and reasonably.

5. Judicial Review under Article 226 of the Constitution of India:
The court considered whether the discretion exercised by the Commissioner could be reviewed under Article 226. The Supreme Court in Apex Finance and Leasing Ltd. v. CIT held that the High Court should examine the merits of the Commissioner's refusal to waive interest. The court also referenced Smt. Harbans Kaur v. CWT, emphasizing that the Commissioner must indicate that they have applied their mind when exercising discretion.

Conclusion:
The court found that the petitioner-company did not satisfy the conditions for waiver under Section 220(2A). The reasons cited by the petitioner, such as modernization and expansion, were not considered genuine hardship. Additionally, the court noted that the petitioner had not co-operated fully with the Department by engaging in litigation. The court held that the first respondent had exercised discretion properly and dismissed the writ petition, concluding that there was no basis for interference under Article 226.

Judgment:
The writ petition was dismissed, and the injunction petition W.M.P. No. 22728 of 1988 was also dismissed, with no order as to costs.