2021 (8) TMI 1003 - HC - Income Tax

Waiver of interest u/s 220(2A) - petitioner filed rectification petition stating that the interest has been levied without taking into consideration the pre-paid taxes and that the credit of pre-paid taxes was not given in full and interest u/s 234A cannot be levied as the return was filed in time and orders were passed on the rectification application nearly after three years accepting the contention of the petitioner for refund - petitioner made a request to adjust the refund amount due to the petitioner with the demand if any for the other years from 2014 onwards - HELD THAT - Assessing Officer while passing the original assessment order need not record any such non-cooperation as the assessment order was not an ex-parte order. Only when an application is filed seeking waiver of interest then the question arises whether the assessee co-operated for completion of the income tax proceedings or not. Since for claiming waiver of interest co-operation is contemplated as a condition. Therefore it is necessitated for the parties while adjudicating the petition filed by the assessee seeking waiver of interest. Thus the conduct of the assessee throughout the income tax proceedings are vital for the purpose of claiming waiver of interest. The respondents in the present case recorded the non-cooperation of the petitioner assessee. The observations made in this regard would establish that consequent to search notice under Section 153A of the Income Tax Act dated 09.03.2011 calling for return of income within 45 days of the receipt of the notice. But the assessee furnished the return of income only on 15.07.2011. The other incidents are also recorded to establish that the petitioner assessee had not cooperated for the completion of the Income Tax proceedings. This being the factum established this Court has no hesitation in arriving at a conclusion that the petitioner has not established all the three conditions stipulated in the provisions for the purposes of grant of waiver of interest. Contrarily the reasons furnished in the impugned order for rejection of application for waiver of interest are candid and convincing.

Summary

Issues Involved:
1. Legal sustainability of the rejection order for waiver of interest under Section 220(2A) of the Income Tax Act, 1961.
2. Allegations of non-cooperation by the petitioner during the assessment proceedings.
3. Consideration of genuine hardship for waiver of interest.
4. Application of judicial precedents and principles for waiver of interest.
5. Conduct of the Income Tax Department in handling the petitioner’s case.

Issue-wise Detailed Analysis:

1. Legal Sustainability of the Rejection Order for Waiver of Interest:
The petitioner challenged the rejection order passed by the first respondent concerning applications for waiver of interest under Section 220(2A) of the Income Tax Act, 1961. The petitioner, a professional Cine Actor, contended that the interest levied was unjust as he had complied with the tax demands punctually. Despite submitting multiple representations, the petitioner argued that the grounds raised were not considered, leading to the rejection of his application.

2. Allegations of Non-cooperation by the Petitioner During the Assessment Proceedings:
The petitioner faced a search operation on 19.10.2010, and subsequent assessment orders were passed for the years 2007-2008 and 2008-2009. The petitioner argued that he had cooperated fully during the appellate proceedings. However, the respondents contended that the petitioner had not paid the demands in time and had delayed furnishing the return of income. The first respondent noted that the petitioner had not substantiated claims of non-cooperation with any proof and had delayed responses to notices issued during the assessment process.

3. Consideration of Genuine Hardship for Waiver of Interest:
The petitioner cited genuine hardship due to the delay in the disposal of applications and actions by the department. The court referenced the Supreme Court judgment in B.M. Malani vs. Commissioner of Income Tax, which defined genuine hardship as genuine difficulty. The court emphasized that the determination of genuine hardship is a subjective satisfaction of the competent authority and must be established by the assessee. The first respondent concluded that the petitioner had not demonstrated any genuine hardship or reasons beyond his control for the default in payment.

4. Application of Judicial Precedents and Principles for Waiver of Interest:
The petitioner relied on several judicial precedents, including B.M. Malani vs. Commissioner of Income Tax and Auro Food Limited vs. Commissioner of Income Tax, to support his claim for waiver of interest. The court acknowledged these precedents but noted that the principles must be applied considering the facts and circumstances of the case. The first respondent considered these judgments but found that the petitioner did not meet the conditions for waiver of interest as stipulated under Section 220(2A).

5. Conduct of the Income Tax Department in Handling the Petitioner’s Case:
The petitioner argued that the department contributed to the delay in the disposal of applications and actions, which should entitle him to a waiver of interest. The respondents countered that the petitioner had not complied with the tax demands within the stipulated time and had not paid the interest as required. The court observed that the interest charged under Section 220(2) is compensatory and not penal, and the petitioner was bound to pay it. The court concluded that the petitioner had not established all three conditions required for waiver of interest, and the reasons for rejection by the first respondent were convincing.

Conclusion:
The court dismissed the writ petition, concluding that the petitioner failed to establish the conditions necessary for the waiver of interest under Section 220(2A) of the Income Tax Act. The rejection order was found to be legally sustainable, and the petitioner's claims of non-cooperation and genuine hardship were not substantiated. The court emphasized the importance of complying with tax demands and the compensatory nature of interest under the Act.