2021 (12) TMI 1088 - HC - Income Tax

Interest charged u/s 220 - Settlement Commission order under Section 245D(4) - HELD THAT - The effect of the first proviso to sub-Section (2) to Section 220 will be that the amount on which the interest is payable under sub-Section (2) of Section 220 will get modified according to the Appellate order. As seen from the proviso to sub-Section (2) of Section 220, there can be variation in charging interest if ultimately due to the result of Appellate order, the liability to pay the original amount on which interest is levied under Section 220 ceases, accordingly, the Assessee needs to be given the benefit of reduction in interest resulting in reduced payment of interest. In the facts of the present case, CIT(A)(VI), Bombay, by order dated 30/03/1995, directed the Assessing Officer to withdraw the investment allowance granted under Section 32A of the Act. Accordingly, demand notice under Section 156 of the Act came to be issued to Respondent No.1. The said amount of interest on investment allowance under Section 32A was directed to be waived by order dated 05/06/1998 by the Settlement Commission. Petitioners therefore filed an application for recalling the order dated 05/06/1998, which by the impugned order was rejected. The issue involved in the present Petition is restricted only to the liability of Respondent No.1 to pay interest under Section 220 of the Act on the amount of set off of brought forward investment allowance. As per proviso to sub-Section (2) of Section 220 of the Act, once the amount on which interest was charged gets extinguished, consequently the liability of Respondent No.1 to pay interest on said amount will also be extinguished. Mr. Walve is right in submitting that as per Section 245(i) of the Act, the order passed by Settlement Commission is conclusive and binding on all authorities under the Act. But in our opinion, it is not necessary to go into said issue, since the result of the order passed is to extinguish the liability of Respondent No.1 to pay the amount on which the interest was charged under Section 220 of the Act, interference under Article 226 which is discretionary, would result into the revival of illegality. We are therefore of the view that interference by this Court in the present Writ Petition would result in direction to Respondent No.1 to pay interest on an amount which had been extinguished due to the Judgment and consequently will result into miscarriage of justice. The power under Article 226 needs to be exercised to prevent miscarriage of justice. It will be exercised only in furtherance of interest of justice and not merely on the making out of a legal point.

Summary

Issues:
Challenge to orders reducing interest under Section 220(2) of the Income Tax Act, 1961.

Analysis:
1. The petitioners challenged orders reducing interest levied under Section 220(2) of the Income Tax Act, 1961, for the assessment year 1989-90.
2. The respondent filed the return of income for the relevant assessment year, and the total income was subsequently revised.
3. The Settlement Commission determined the taxable income for the respondent for the assessment year 1989-90.
4. Disputes arose regarding the waiver of interest under Section 220(2) and the benefit of set off of brought forward investment allowance.
5. The petitioners contended that the Settlement Commission exceeded its jurisdiction by modifying its order.
6. The respondent argued that the liability to pay interest was extinguished due to appellate orders.
7. The court considered the provisions of Section 220(2) of the Act, emphasizing the reduction of interest in case of a reduced payable amount.
8. The court analyzed the impact of appellate orders on the liability to pay interest under Section 220(2).
9. The court noted that once the amount on which interest was charged is extinguished, the liability to pay interest is also extinguished.
10. Referring to legal precedents, the court highlighted the discretionary nature of writ remedies and the importance of substantial justice over technicalities.
11. The court concluded that interference in the present case would lead to a miscarriage of justice and refused to exercise jurisdiction under Article 226 of the Constitution of India.
12. Consequently, the petition was dismissed, maintaining the decision to reduce the interest payable under Section 220(2) for the respondent.

This detailed analysis covers the issues raised in the petition challenging the reduction of interest under Section 220(2) of the Income Tax Act, 1961, for the assessment year 1989-90. The court's interpretation of relevant legal provisions and consideration of precedents demonstrate a thorough examination of the matter, leading to the dismissal of the petition.