2009 (6) TMI 598 - HC - Income Tax

Waiver of interest on delayed payment of tax Condition precedent section 220(2A) Payment of interest would cause genuine hardship to assessee Income of relevant period to be taken into account Past liability not relevant Finding that payment of interest would not cause financial hardship Refusal to waive interest Justified

Summary

Issues:
Challenge against exhibit P6 order under section 220(2A) of the Income-tax Act, 1961 seeking waiver of interest due on delayed payment of tax for the assessment year 1988-89.

Analysis:
1. The petitioner filed a return for the assessment year 1988-89, declaring a total income of Rs. 59,410. The assessment was completed under section 143(3) on a total income of Rs. 5,51,190, resulting in a demand of Rs. 3,61,891. The interest charged under sections 139(8) and 217 was partially waived, reducing the demand to Rs. 3,11,502. Subsequently, interest under section 220(2) amounting to Rs. 1,08,982 was levied, leading to the petition seeking waiver under section 220(2A).

2. Under section 220(2A), the conditions for waiver include genuine hardship to the assessee, default beyond the assessee's control, and cooperation in assessment proceedings. The Commissioner found that the petitioner cooperated but held that payment of the amount would not cause genuine hardship considering the income and agricultural earnings of the assessee.

3. The petitioner contended that the Commissioner failed to consider the petitioner's liabilities in subsequent years, arguing that liabilities should be a criterion for assessing capacity for payment. The Commissioner's decision was upheld, emphasizing that liabilities are not determinative of the capacity to pay.

4. The petitioner further argued that the Commissioner did not adequately consider the circumstances beyond the assessee's control leading to the default. Despite the history of assessment and previous waivers, the first respondent found that all three conditions for waiver under section 220(2A) must be satisfied. As condition No. (1) was not met, the failure to consider condition No. (2) was deemed inconsequential.

5. The petitioner's counsel contended that the first respondent did not properly evaluate the case based on statutory requirements for waiver eligibility. The court disagreed, finding that the first respondent had duly considered the issue and statutory conditions, concluding that there was no impropriety in the proceedings.

6. The writ petition was dismissed as devoid of merit, upholding the decision of the first respondent to reject the petition seeking waiver of interest under section 220(2A) for the assessment year 1988-89.