2012 (5) TMI 361 - HC - Income Tax

Application for waiver to an amount which was the balance amount due from the deceased assessee. - Application under section 220(2A) - learned counsel for the Revenue would but contend that with respect to the question of hardship the Commissioner has found the hardship only with respect to further payment of interest and no hardship has been found with respect to the amounts already adjusted towards the interest - In the instant case, what was stated by the Commissioner was that certain amounts were already paid by way of adjustment or otherwise and that certain amounts remained unpaid - Held that The standing counsel for the Revenue would also contend that the waiver of interest was limited to that remaining unpaid since the amount adjusted cannot be taken to be having been paid - Decided in favor of the assessee

Summary

Issues:
Application under section 220(2A) of the Income-tax Act for waiver of interest levied, interpretation of section 220(2A) conditions, exercise of discretion by the Commissioner in granting waiver, consideration of genuine hardship, relevance of amounts already paid in waiver application.

Analysis:
The petitioner, as the legal heir of the deceased assessee, filed an application under section 220(2A) of the Income-tax Act seeking waiver of interest levied. The Commissioner, in exhibit P5 order, limited the waiver to the balance amount due from the deceased assessee, after considering the genuine hardship faced by the petitioner. The waiver application was to waive the interest levied under section 220(2A), separate from the interest under sections 234A, 234B, and 234C which had already been waived by the Chief Commissioner. The Commissioner found all three conditions of section 220(2A) satisfied, including genuine hardship, non-attributable default in tax payment, and cooperation of the assessee. The Revenue contended that the adjustment of amounts already paid should exclude them from the waiver application, but the court disagreed, emphasizing that section 220(2A) does not make such a distinction.

The court highlighted that section 220(2A) requires consideration of three conditions for waiver application: genuine hardship, non-attributable default, and cooperation of the assessee. The Commissioner's order found these conditions satisfied, but the Revenue argued that hardship was only regarding further interest payment, not the amounts already adjusted. The court disagreed, emphasizing that genuine hardship must be assessed based on the individual case's circumstances. The court noted the retrospective amendment in 1984 allowing waiver of interest already paid, indicating that the Commissioner's discretion should encompass both paid and unpaid interest amounts.

The court referenced a Supreme Court decision regarding the Commissioner's discretion in waiving interest, emphasizing the need for reasons behind reducing or limiting the waiver. It criticized the Commissioner's order for lacking reasons for limiting the waiver, stressing the importance of judicious exercise of waiver power. The court also cited another case highlighting the need for fair and judicious exercise of waiver power, which it found lacking in the present case due to the absence of reasons for the waiver limitation.

Further, the court referred to a Supreme Court decision emphasizing the importance of genuine hardship considerations and the need for the Commissioner to judiciously exercise discretion before waiving interest. It noted that the Commissioner's failure to consider waiver of amounts already paid was a misstep, requiring a fresh order to be passed within three months. The court concluded that the Commissioner had not properly exercised discretion and directed a reevaluation of the waiver application in light of the court's observations.