2014 (12) TMI 106 - HC - Income Tax

Waiver of interest u/s 220(2A) - Whether the assessee is entitled to waiver of interest, which has been levied by the Department for belated payment of the income tax dues Held that - The assessment was completed, for the AYs 1977-78 and 1978-79, when the assessee s father was alive the petitioner was a partner of the firm, though at the time when he was admitted as a partner, he was a minor - the petitioner co-operated with the Department and did not contest the matter, but sought for information, such as copy of the assessment order, etc. - This was not furnished, despite the petitioner s pointing out that the matter has been racked up, after a period of 27 years - the petitioner sought for waiver of the demand on interest, for the subsequent period, i.e., January 1990 to October 2005. In B.M. Malani v. CIT 2008 (10) TMI 2 - SUPREME COURT it has been held the genuine hardship inter-alia means a genuine difficulty, that per se would not lead to the conclusion that a person having large assets would never be in difficulty as he can sell those assets and pay the amount of interest levied - when the Department, for the first time issued the demand on the petitioner in the year 2005, the petitioner did not contest the demand, though he submitted representations requesting for furnishing of details - the tax and interest up to that date (January 1990) was paid in the year 2005 - the revenue have not placed any material to show that as to why no action was initiated for 27 years - the relevant date for considering the genuine hardship was also not taken into consideration - the question of demanding interest for the period up to 2005 does not arise - the petitioner paid the tax and interest only in October 2005 as per section 220(2A), the authorities are empowered to reduce or waive the interest amount - thus, the revenue is directed to reduce the amount of interest at ₹ 25,000 decided partly in favour of assessee.

Summary

Issues:
Petitioner challenges rejection of request for waiver of interest under Sub-section 220(2A) of the Income Tax Act, 1961.

Analysis:
1. The petitioner sought waiver of interest due to hardship caused by belated tax payment. The petitioner had cooperated with the Department and paid the demanded amount after facing difficulties in arranging funds.

2. The authority rejected the waiver application citing failure to satisfy conditions under Section 220(2A) of the Act. The authority questioned the genuineness of hardship claimed by the petitioner and found no evidence of severe financial hardship.

3. The petitioner's case involved a delay of 27 years in demanding tax payment, which was settled after the petitioner paid the demanded amount. The authority demanded additional interest for the period from January 1990 to October 2005, causing further dispute.

4. The court referred to relevant legal precedents to determine genuine hardship. It highlighted that genuine hardship does not solely depend on the asset value of the individual and emphasized the need to consider unavoidable circumstances leading to payment delays.

5. Considering the peculiar circumstances of the case, the court found the demand for interest beyond January 1990 unjustified. The court directed the respondents to reduce the interest amount demanded to Rs. 25,000, providing a final settlement for the petitioner's claims.

6. The court remanded the matter to the respondents with instructions to collect the reduced interest amount. It clarified that no further interest should be demanded from October 2005 onwards. Failure to pay the specified amount would allow the respondents to take legal action against the petitioner.