2011 (11) TMI 447 - HC - Income Tax

Hardship - Waiver - Business loss suffered, had to make private borrowings - Held That - What is relevant for consideration under Section 220(2A) is the hardship for payment of the interest so levied and not the tax recovered earlier. Appeal of assessee rejected.

Summary

Issues:
Challenge to order under Section 220(2A) of the Income Tax Act 1961 for interest waiver.

Analysis:
1. The petitioner contested Ext.P3 order by the Commissioner of Income-tax under Section 220(2A) of the IT Act. The petitioner underwent a search resulting in an assessment for the block period 1991-92 to 2000-01 with an income of Rs. 74,27,844. Despite clearing the tax liability in instalments, interest under Section 220(2A) amounting to Rs. 5,73,704 was charged. The petitioner sought waiver citing hardship, lack of default, and cooperation in the enquiry, but the Commissioner rejected the application (Ext.P3).

2. The petitioner's counsel argued that tax liability was cleared through instalments, demonstrating cooperation, and attributing payment default to significant business losses. Ext.P4 balance sheets evidenced continuous business losses and substantial liabilities, justifying the request for interest waiver. In contrast, the Revenue contended that the petitioner did not meet Section 220(2A) conditions, emphasizing the search-based assessment and suppression detected, making the petitioner ineligible for waiver.

3. Section 220(2A) allows the Commissioner to waive interest if the assessee faces genuine hardship, did not cause the default, and cooperated in the assessment. The Commissioner's order lacked a finding on cooperation but denied waiver based on hardship and default attribution to the petitioner. All three conditions must be met for interest waiver under Section 220(2A), which the petitioner failed to satisfy.

4. The judgment disagreed with the petitioner's claim of insufficient consideration of hardship in Ext.P2 and the assertion that an ordinary prudent person would grant waiver based on the facts. The balance sheet evidence contradicted the claim of continuous business losses, undermining the waiver request.

5. The balance sheets presented by the petitioner for the years of block assessment were deemed irrelevant for assessing hardship under Section 220(2A) due to the detected income suppression leading to the assessment and interest levy. Despite asset availability not being a sole ground for denial of waiver, the petitioner's property acquisitions during loss-making years and the Commissioner's findings on non-attribution of payment default to the assessee supported the denial of waiver.

6. Referring to a Division Bench decision, the judgment emphasized that the conditions under Section 220(2A) must be satisfied for interest waiver consideration. The Commissioner's finding on lack of genuine hardship and default attribution to the assessee was deemed valid, justifying the denial of waiver. The judgment dismissed the writ petition, upholding the Commissioner's decision without any costs.