2008 (10) TMI 2 - SC - Income Tax

Shares and demand draft seized levy of interest for non-payment of tax - application for waiver of interest rejected by CIT - submission of asssessee is that it will cause genuine hardship to them - whether the default in payment of the amount was due to circumstances beyond the control of the assessee has not been considered by CIT or HC - Whether a presumption that draft belongs to the person from whose possession it was seized can be drawn is a subject matter of AO - matter remitted to CIT

Issues Involved:
1. Rejection of application under Section 220(2A) of the Income Tax Act by the Commissioner of Income Tax.
2. Determination of genuine hardship caused to the appellant.
3. Non-encashment of demand draft and non-selling of shares and securities by the Income Tax Department.
4. Levy of interest under Section 220(2) of the Income Tax Act.
5. Consideration of the appellant's cooperation with the Income Tax Department.

Detailed Analysis:

1. Rejection of Application under Section 220(2A):
The appellant's application for waiver of interest under Section 220(2A) was rejected by the Commissioner of Income Tax on the grounds that the appellant did not satisfy all three conditions required for waiver. The Commissioner acknowledged the appellant's cooperation with the Department but concluded that the levy of interest did not cause genuine hardship and that the default in payment was not due to circumstances beyond the appellant's control.

2. Determination of Genuine Hardship:
The Supreme Court emphasized the need to interpret "genuine hardship" as per its dictionary meaning and legal context. The term "genuine" means real and not fake or counterfeit. The Court noted that genuine hardship implies genuine difficulty and that possessing large assets does not automatically negate the possibility of hardship. The principle that a person cannot take advantage of their own wrong was highlighted. The Court criticized the Commissioner and the High Court for not adequately considering whether the appellant's circumstances constituted genuine hardship.

3. Non-encashment of Demand Draft and Non-selling of Shares and Securities:
The appellant had requested the Income Tax Department to sell the seized shares and securities to pay the tax liabilities, but this request was not acceded to. The Court found that the Department should have responded to the appellant's request and taken action. The non-encashment of the demand draft worth Rs. 10 lakhs was also discussed, with the Court noting that no request for its encashment was made by the appellant, and it was in the name of a company, raising a rebuttable presumption of ownership.

4. Levy of Interest under Section 220(2):
Interest was levied for non-payment of dues as on 8.3.2002 for several assessment years. The Court noted that the levy of interest is statutory and aims to compensate the revenue for the loss suffered due to non-deposit of tax. However, the Court stated that the Commissioner must judiciously exercise discretion when considering a waiver of interest and must be satisfied that the conditions laid down in Section 220(2A) are fulfilled.

5. Consideration of Appellant's Cooperation:
The Commissioner accepted that the appellant had cooperated with the Department. The Court emphasized that all three conditions under Section 220(2A) must be met for a waiver of interest, including cooperation with the Department.

Conclusion:
The Supreme Court set aside the impugned judgment and remitted the matter to the Commissioner of Income Tax for fresh consideration, emphasizing the need to judiciously exercise discretion and adequately consider genuine hardship and other relevant factors. The appeal was allowed to the extent of remitting the matter for reconsideration, with no costs awarded.

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