2018 (11) TMI 1754 - HC - Income Tax

Waiver u/s 220(2A) - non payment of interest under section 234-A, B, C - HELD THAT - Applying the principle mentioned in the said case, namely, Poompuhar Shipping Corpn. Ltd. 2017 (11) TMI 578 - MADRAS HIGH COURT case, and also the principle in general that, the genuine hardship in Indian condition is nothing but the financial hardship as held in CARBORANDUM UNIVERSAL LIMITED 1989 (10) TMI 1 - SUPREME COURT , the present reason cited by the Revenue in the impugned order, in the considered view of this court, cannot be considered to be a worthy reason for rejecting the plea made by the assessee for waiver. Since the assessee already complied with the third condition and in respect of the 1 and 2 conditions, which are coupled with each other, regarding the genuine hardship, to some extent the assessee was able to demonstrate the reasoning, it should have been considered in proper perspective by the Revenue. Any further supporting document or materials required by the Revenue, that could have been called for from the assessee. No doubt, the issue with regard to the chance of personal hearing is not decided in this case for the reason set out above, at least, the additional particulars could have been called for by the Revenue. No such exercise seems to have been taken by the Revenue and without making such exercise, this Court is at loss to understand, as to how the Revenue has come to the conclusion that the assessee was not able to establish the case of genuine hardship cogently and clearly with reference to their books of accounts and cash availability. This Court is of the considered view that, the respondent, being a quasi judicial authority, while exercising its power of discretion vest in them u/s 220(2A) of the Act, has not acted judiciously with cogent and plausible reasons with supporting materials. Therefore, this Court has no hesitation to hold that, the impugned order is not sustainable, accordingly, it is liable to be interfered with. While making such re-consideration, it is open to the respondent to seek for further materials/documents from the assessee and once such demand is made to the assessee for producing additional documents in support of his case to prove the genuine hardship as claimed by them, the assessee shall immediately produce those documents and cooperate with the Revenue for concluding the decision to be taken. The aforesaid exercise as directed above, shall be undertaken by the Revenue within a period of 3 months from the date of receipt of copy of this order.

Issues Involved:
1. Waiver of interest under Section 220(2A) of the Income-tax Act, 1961.
2. Genuine hardship faced by the assessee.
3. Non-payment due to circumstances beyond the control of the assessee.
4. Cooperation of the assessee in any inquiry or proceeding.
5. Requirement of personal hearing before passing the order.

Detailed Analysis:

1. Waiver of Interest under Section 220(2A) of the Income-tax Act, 1961:
The petitioner/assessee applied for a waiver of interest for the Assessment Years 1996-97 and 1997-98 under Section 220(2A) of the Income-tax Act, 1961. The demand was ?10,34,719/- for 1996-97 and ?3,79,120/- for 1997-98. The application for waiver was rejected by the respondent/Revenue, leading to the filing of these writ petitions.

2. Genuine Hardship Faced by the Assessee:
The assessee argued that the demand for interest caused genuine hardship, as they had been regularly paying taxes through advance tax and TDS. The interest levied under Sections 234-A, 234-B, and 234-C was considered an additional due, causing further financial strain. The assessee claimed that their business was shattered, and they had no liquid assets to pay the interest.

The Revenue, however, contended that the assessee did not provide sufficient evidence of genuine hardship. The balance sheet showed immovable properties worth ?18 lakhs and ?45 lakhs, indicating the capacity to pay the interest. The court referred to the Supreme Court's interpretation in B.M. Malani v. CIT, which defined genuine hardship as a genuine difficulty, not necessarily precluding someone with large assets from experiencing hardship.

3. Non-payment Due to Circumstances Beyond the Control of the Assessee:
The assessee claimed that the non-payment was due to circumstances beyond their control, including a lack of business for four years. The Revenue argued that the assessee failed to prove that the non-payment was beyond their control, as they had substantial assets.

The court noted that the Revenue's conclusion was based on the balance sheet, which showed significant immovable properties. However, the court found that the Revenue did not consider the specific circumstances faced by the assessee adequately.

4. Cooperation of the Assessee in Any Inquiry or Proceeding:
The Revenue did not dispute the assessee's cooperation in any inquiry or proceeding, implicitly accepting that the third condition under Section 220(2A) was satisfied.

5. Requirement of Personal Hearing Before Passing the Order:
The assessee argued that they were not given an opportunity for a personal hearing before the waiver application was rejected. The court referred to the Supreme Court's decision in Carborundum Universal Ltd. v. Central Board of Direct Taxes, which implied that natural justice requires an opportunity to be heard, especially in quasi-judicial proceedings.

The court found that the Revenue did not provide a personal hearing or request additional documents to substantiate the assessee's claim of genuine hardship. The court emphasized the need for the Revenue to act judiciously and provide cogent reasons for their decision.

Conclusion:
The court quashed the impugned order and remitted the matter back to the respondent for reconsideration. The Revenue was directed to seek additional documents from the assessee, if necessary, and to provide a personal hearing. The entire process was to be completed within three months. The court emphasized the importance of a thorough and judicious consideration of the assessee's claims, in line with the principles laid down by the Supreme Court and other High Courts.

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