2011 (9) TMI 53 - HC - Income Tax

Waiver of interest u/s 220(2) - whether the default in payment of the amount was due to circumstances beyond the control of the assessee. - The Chief Commissioner-VII, is also incorrect in rejecting the petition for waiver of interest under Section 220(2) on the ground that the petitioner No. 1 had nowhere mentioned that it was facing genuine hardship, whereas this was specifically claimed, highlighted and stated. The Chief Commissioner- VII is not right in rejecting the application for waiver of interest on the ground that interest of Rs.7,04,175/- was paid on 28th March, 2007, and therefore, the assessee s claim that it was facing hardship does not arise. Interest under Section 220 (2) was imposed because of the delay in payment. Genuineness of the hardship during the period of delay was required to be examined. Section 220(2A) is applicable and the petition for waiver can be filed even after interest has been paid. Further the interest was paid after the petitioner No. 1 had filed the petition for waiver of interest.

Summary

Issues Involved:
1. Waiver of interest under Section 220(2A) of the Income Tax Act, 1961.
2. Return of seized jewellery.

Detailed Analysis:

Waiver of Interest under Section 220(2A):

Background and Contentions:
- The petitioners, a partnership firm and its partner, challenged the orders dated 6th May 2009 and 24th August 2009 by the Chief Commissioner of Income Tax, rejecting their request for waiver of interest under Section 220(2A) of the Income Tax Act, 1961.
- The petitioners argued that they had requested the sale of seized jewellery to settle tax dues, which the department did not act upon. They highlighted their cooperation in assessment proceedings and financial hardship.
- The Chief Commissioner dismissed the waiver application, stating the petitioners did not demonstrate genuine hardship and had already paid the interest.

Court's Observations:
- The court found the Chief Commissioner's order cryptic and lacking in reasons, failing to address the petitioners' contentions.
- The court noted the petitioners' cooperation in assessment proceedings and their financial difficulties, as evidenced by their income declarations for subsequent years showing losses or marginal income.
- The court emphasized the need for a purposive construction of Section 220(2A), which allows for waiver of interest if genuine hardship is proven, and the default was due to circumstances beyond the assessee's control.

Judgment:
- The court quashed the impugned orders and directed that the petitioners are entitled to a waiver of interest to the extent of one-third of the interest paid/payable under Section 220(2). The amount waived was quantified at Rs. 2,25,000/-.
- This decision took into account the prolonged retention of jewellery by the Revenue, the inconvenience and harassment suffered by the petitioners, and the increase in the value of the jewellery over time.

Return of Seized Jewellery:

Background and Contentions:
- The petitioners also sought the return of jewellery valued at Rs. 4,49,255/- seized during a search operation on 28th October 1992.
- The respondents, in their counter affidavit, submitted an order dated 30th September 2010 directing the release of the jewellery, rendering this part of the writ petition infructuous.

Court's Observations:
- The court acknowledged the delay and laches in returning the jewellery and issued suitable directions to ensure its immediate and timely return.

Judgment:
- The court directed that the jewellery should be returned within one month of the receipt of the order, failing which the Revenue would be liable to pay damages of Rs. 10,000/- per month until the jewellery is returned.

Conclusion:
The court's judgment addressed the petitioners' grievances comprehensively, ensuring relief in terms of waiver of interest and the return of seized jewellery. The decision underscored the importance of a reasoned approach by tax authorities in dealing with waiver applications and the necessity of timely action in returning seized assets.