2009 (9) TMI 58 - HC - Income Tax

Block Assessment waiver of interest levied u/s 158BFA payment of tax in installments held that - . From a perusal of Section 220(2A), it is clear that that section begins with a non obstante clause and is a self contained provisions. It overrides the charging provision as contained in section 220(2) but also restricts the power of the authority concerned to reduce or waive the amount of interest paid or payable by an assessee only if he is satisfied that the conditions as set out in the three clauses are satisfied CIT is bound to consider the petition, as to whether the petitioner fulfilled all the three conditions laid down under Section 220(2A) and record reasons as to how the petitioner is not entitled to the waiver of penal interest CIT directed to consider the claim of the assessee with regard to waiver of interest afresh and pass a considered order after giving sufficient opportunity to the petitioner in accordance with law

Summary

Issues Involved:
1. Waiver of interest under Section 220(2A) of the Income Tax Act.
2. Compliance with the principles of natural justice.
3. Applicability of Central Board of Direct Taxes (CBDT) circulars.

Issue-wise Detailed Analysis:

1. Waiver of Interest under Section 220(2A) of the Income Tax Act:
The petitioner sought a waiver of penal interest under Section 220(2A) of the Income Tax Act, 1961. This section allows the Chief Commissioner or Commissioner to reduce or waive interest if three conditions are met: (i) payment of the amount causes genuine hardship to the assessee, (ii) default in payment was due to circumstances beyond the control of the assessee, and (iii) the assessee has cooperated in any inquiry relating to the assessment or recovery proceedings. The petitioner argued that all three conditions were met, citing his cooperation in the proceedings and genuine hardship due to the payment of taxes in installments.

2. Compliance with the Principles of Natural Justice:
The court emphasized that the decision-making process under Section 220(2A) is quasi-judicial and must comply with the principles of natural justice. This includes providing a reasoned order. The court found that the respondent's order did not provide adequate reasons for rejecting the petitioner's request for a waiver, thus failing to meet the requirements of natural justice. The court cited several precedents, including the Supreme Court's decision in S.N. Mukkerjee v. Union of India, which mandates that administrative authorities must record reasons for their decisions to ensure fairness and prevent arbitrariness.

3. Applicability of Central Board of Direct Taxes (CBDT) Circulars:
The petitioner relied on various CBDT circulars and judicial precedents to support his case for waiver. The court noted that while CBDT circulars are binding on the tax authorities, the specific circular cited by the petitioner (dated 21.05.1996) pertained to Sections 234(A), 234(B), and 234(C) of the Act and was not applicable to Section 220(2A). The court, however, reiterated that the principles laid down in these circulars could guide the discretionary power of the authorities under Section 220(2A).

Conclusion:
The court set aside the impugned order due to the lack of cogent reasons and directed the respondent to reconsider the petitioner's request for a waiver of interest. The respondent was instructed to provide a reasoned order after giving the petitioner an opportunity to present his case. The court emphasized the necessity of adhering to the principles of natural justice and ensuring that all three conditions under Section 220(2A) are evaluated comprehensively. The writ petition was allowed, and the connected miscellaneous petition was closed.