2013 (5) TMI 221 - HC - Income Tax

Search/seizure u/s 132 - ownership of seized jewellery Held that As the Civil Suit pending between the parties in Civil Courts at Ludhiana, and If the Assessee or its partners succeed and the levy of interest is set aside or reduced by a Statutory Forum, the amount shall be released along with interest to the party, who shall be finally entitled to receive the jewellery or its value as per the decision of the Civil Court at Ludhiana. Commissioner powers to waive off the levy of interest u/s 220(2) of the Act - Held that - It may be seen that sub-section (2A) of Section 220 of the Act opens up with a non obstante clause to say that even if Section 220 (2) of the Act is mandatory in nature, yet the Chief Commissioner or Commissioner have the power to reduce or waive the amount of interest paid or payable by an assessee if there exist the circumstances enumerated in the provision. Since the existence of circumstances which may justify reduction or waiving off the interest liability is a question of fact and this aspect has not been discussed in the impugned order by the Commissioner of Income Tax (Central), Ludhaina, we are of the considered view that the findings to the extent is contrary to the Statute as sub-section (2A) of Section 220 of the Act which came into force w.e.f. 1.10.1984 expressly vests such power with the Chief Commissioner or Commissioner of Income Tax, though it is a different issue that the facts and circumstances of a case may or may not justify the exercise of such power.

Summary

Issues:
1. Dispute over ownership of seized jewellery between partners of Assessee
2. Challenge against Settlement Commission's order raising demand
3. Imposition of interest liability by Commissioner of Income Tax
4. Power to waive or reduce interest under Section 220(2A) of the Income Tax Act

Analysis:
1. The judgment addresses a dispute regarding the ownership of jewellery seized during a search operation at the premises of the Assessee and its partners. The Court had previously set aside an order entrusting the jewellery to one partner and remanded the matter for re-determination. The Commissioner subsequently held the jewellery belonged to a specific partner, leading to a challenge by the Assessee and one of its partners in writ petitions.

2. The order passed by the Settlement Commission, raising a demand against the Assessee, was also under challenge. The Court considered the prolonged litigation and the deposit made by the Assessee towards the assessed amount. The judgment highlighted the history of the dispute and the involvement of the Settlement Commission in resolving the matter.

3. The Commissioner of Income Tax imposed an interest liability on the Assessee under Section 220(2) of the Income Tax Act. The Court found that the Commissioner's reasoning overlooked the provision of Section 220(2A), which grants the power to reduce or waive interest under specific circumstances. The judgment emphasized that the Commissioner had erred in not considering the existence of circumstances that may justify reducing or waiving the interest liability.

4. The Court, after a detailed analysis, set aside the Commissioner's order and remitted the case for re-determination, instructing the Commissioner to consider the provisions of Section 220(2A) while assessing the interest liability. Additionally, directions were given for the disposal of the jewellery through public auction, with the proceeds to be deposited in a fixed deposit. The judgment also emphasized the need for expediting the Civil Suit pending between the parties to resolve the ownership issue conclusively.