2012 (7) TMI 159 - HC - Income Tax

Waiver of interest u/s 229(2A) - petitioner was the erstwhile partner of a firm which was dissolved in the year 1993 - Held that - All the three ingredients of Section 220(2A) are fully satisfied as the firm was managed by the erstwhile managing partner and the petitioner was under the impression that at the time of dissolution of the firm, all taxes payable were duly paid. The petitioner could not also trace out any documents after 17 years in respect of the assessment as well, thus payment of such amount would cause genuine hardship to the assessee insofar as the petitioner has to suffer the burden of the tax by himself - the very same circumstance prove that the default in payment was due to the circumstances beyond the control of the assessee and the petitioner had co-operated with the enquiry relating to the assessment as well - waiver of interest is warranted.

Summary

Issues involved:
1. Application for waiver of interest under Section 220(2A) of the Income-tax Act.

Analysis:
The petitioner, an erstwhile partner of a defunct firm, received a demand for arrears of income tax for the assessment year 1987-88. The petitioner contended that he was unaware of the outstanding taxes as the firm was managed by the former partner, and he had no records of the assessment. The petitioner paid the tax immediately upon receipt of the demand and applied for waiver of interest under Section 220(2A) of the Income-tax Act. The application was rejected, leading to the filing of a writ petition challenging the rejection.

The petitioner's counsel argued that all requirements of Section 220(2A) were met, justifying the waiver of interest. Conversely, the Income-tax Department vehemently opposed the petitioner's request, claiming that none of the conditions under Section 220(2A) were satisfied in this case. The Department contended that the petitioner did not have a valid case for the waiver.

The court examined the provisions of Section 220(2A) of the Income-tax Act, which allows for the reduction or waiver of interest if certain conditions are fulfilled. The court noted that the tax demand dated back to the assessment year 1987-88, and the firm was dissolved in 1993. The petitioner, being an erstwhile partner, was unaware of the outstanding taxes and believed they were settled upon dissolution. The court found that the payment of the tax would cause genuine hardship to the petitioner, and the default in payment was beyond his control. Additionally, the petitioner promptly paid the tax upon receipt of the demand and cooperated with the recovery proceedings. Consequently, the court concluded that all three requirements of Section 220(2A) were satisfied in this case, entitling the petitioner to the waiver of interest.

In light of the above findings, the court quashed the order rejecting the petitioner's application for waiver of interest and declared the petitioner's entitlement to the waiver under Section 220(2A) of the Income-tax Act. The court directed the respondents to process the waiver expeditiously and provide the petitioner with all consequential reliefs. The writ petition was disposed of accordingly.