2015 (9) TMI 664 - HC - Income Tax

Waiver of interest under Section 220(2) rejected - whether petitioner suffered genuine hardship? - Held that - petitioner, a partnership firm, did not submit its returns for the year 2006-07 and 2007-08 within the time stipulated but did so only after the machinery provided under the Income Tax Act was put into force i.e. a search conducted and notice issued, pursuant to which returns were filed on 20.9.2010. The conduct of the petitioner speaks volumes of its commitment to rule of law. The fact that returns submitted when accepted, petitioner was required to pay tax of ₹ 74,74,229/- for the assessment year 2006-07 and ₹ 2,06,00,000 for the assessment year 2007-08. Petitioner did not make the payments immediately thereafter but did so only after coercive steps were taken by attaching the Bank accounts and property of the petitioner, whence ₹ 35 lakhs was paid on 8.5.2014 and the balance of ₹ 75,21,573/- on 20.1.2015 for the assessment year 2006-07, while for the assessment year 2007-08 ₹ 15 lakhs was paid on 11.9.2014 and ₹ 1,11,75,366/- on 20.1.2015. Despite the laxity on the part of the Department in the matter of recovery of the taxes by reason of which petitioner was in possession of the amounts due and payable as tax for almost ten years from the assessment year 2006-07, yet again speaks volumes of the conduct of the petitioner in the matter of payment of taxes. If regard is had to the aforesaid facts and material dates, the contention that petitioner suffers from hardship hence entitled to waiver of interest under Section 220(2) of the Income Tax Act is far from acceptance. Hardship when pressed into service must be genuine and must smack of a conduct of a worthy citizen. In the facts and circumstances hardship cannot be comprehended in favour of the petitioner. Suffice it to state that the Prl. Commissioner of Income Tax Act-V, Bangalore was fully justified in declining waiver of interest at the request of the petitioner. - Decided against assessee.

Issues:
1. Timely filing of income tax returns by a partnership firm.
2. Assessment of income for the years 2006-2007 and 2007-2008.
3. Demand for interest under Section 220(2) of the Income Tax Act.
4. Application for waiver of interest under Section 220(2).
5. Justification for declining waiver of interest.
6. Validity of orders under Article 226 of the Constitution.

Issue 1: Timely filing of income tax returns by a partnership firm
The petitioner, a partnership firm, failed to file income tax returns for the assessment years 2006-2007 and 2007-2008 within the stipulated time. Returns were submitted only after a search was conducted and notices were issued under the Income Tax Act. Despite delays, the returns were eventually filed on 20.9.2010.

Issue 2: Assessment of income for the years 2006-2007 and 2007-2008
Upon assessment, the petitioner was required to pay taxes of specific amounts for the respective years. However, the payments were not made immediately. Coercive steps were taken by attaching bank accounts and properties of the petitioner to ensure payment, which was eventually made after significant delays.

Issue 3: Demand for interest under Section 220(2) of the Income Tax Act
The Principal Commissioner for Income Tax issued a notice demanding interest under Section 220(2) for the assessment year 2007-2008. The petitioner made partial payments after coercive actions were taken, indicating delays in fulfilling tax obligations.

Issue 4: Application for waiver of interest under Section 220(2)
The petitioner filed an application requesting a waiver of interest under Section 220(2) citing genuine hardship. The application was based on the delay in payment and the circumstances surrounding the coercive measures taken for tax recovery.

Issue 5: Justification for declining waiver of interest
The court analyzed the conduct of the petitioner and the circumstances surrounding the tax payments. It was observed that the delays in payment and the necessity for coercive actions did not justify granting a waiver of interest under Section 220(2). The court found the Principal Commissioner's decision to decline the waiver justified based on the petitioner's conduct.

Issue 6: Validity of orders under Article 226 of the Constitution
The court concluded that the orders impugned were not arbitrary or perverse, warranting interference under Article 226 of the Constitution. The petitions lacking merit were rejected, affirming the decision of the Principal Commissioner regarding the waiver of interest.

This detailed analysis of the judgment highlights the key issues surrounding the timely filing of income tax returns, assessment of income, demand for interest, application for waiver, justification for declining the waiver, and the validity of orders under the Constitution.

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