2023 (2) TMI 645 - HC - Income Tax

Waiver of interest u/s 220 (2A) - declared income of the petitioner included income of his minor son and the petitioner also claimed credit of prepaid taxes - demand raised non considering the payment of advance tax paid by the petitioner for the same income in the PAN number of his minor son - first respondent has granted only partial waiver of interest viz., 20% and has directed the petitioner to pay the balance 80% - HELD THAT - In the case on hand, excepting for stating that the assessee had not approached the AO for rectification with regard to shortfall of credit, instead a separate return in the hands of the minor son was filed which resulted in total refund (including interest under Section 244A) which compelled the respondents to pay an excess refund to the petitioner, the contentions of the petitioner as raised in the petitions filed under Section 220 (2A) of the Income Tax Act both dated 25.02.2021 have not been considered. The petitioner has certainly suffered genuine hardship and for no fault of his, interest cannot be levied under Section 220 (2) when the advance taxes were infact paid on time though mistakenly in the petitioner's minor son's PAN number. It is also not the case of the respondents that the petitioner did not cooperate in any enquiry relating to the assessment or any proceedings for the recovery of amount due from him. The first respondent under the impugned order has granted partial waiver of interest to the petitioner at 20% without giving any reason as to how they arrived at that rate. When the first respondent has granted partial waiver at 20%, this Court is of the considered view that too when there is no finding given by the first respondent under the impugned orders that the petitioner has not satisfied the three conditions required for waiver of interest under Section 220 (2A) viz., a) payment of such amount has caused or would cause genuine hardship to the assessee; b) default in the payment of the amount on which interest was payable under the said Sub-Section was due to circumstances beyond the control of the assessee; and c) the assessee has not cooperated in any inquiry relating to the assessment or any proceeding for the recovery of any amount due from him; the first respondent ought to have granted full waiver of the interest to the petitioner, but, instead, erroneously has granted only 20% waiver by passing non speaking orders. This Court will also have to take note of the fact that the petitioner has already got the benefit of interest while the respondents had refunded a sum of Rs.3,59,300/- and Rs.1,59,500/- under Section 244A of the Income Tax Act. Certainly that amount has to be adjusted from and out of the waiver of interest under Section 220(2A) of the Income Tax Act. The petitioner had sought for waiver under Section 220 (2A) of the Income Tax Act which has been partially allowed by granting 20% waiver to the petitioner under the impugned orders and the balance 80% amount - This Writ Petition is partly allowed by modifying the impugned order by granting full waiver of interest to the petitioner under Section 220 (2A) and by directing the petitioner to pay a sum which he has received towards refund of interest under Section 244A of the Income Tax Act from the respondents within a period of four weeks from the date of receipt of a copy of this order.

Issues Involved:
1. Jurisdiction and principles of natural justice.
2. Conditions for waiver of interest under Section 220(2A) of the Income Tax Act.
3. Credit for advance tax paid under a different PAN number.
4. Hardship due to erroneous tax demand and delay in rectification.
5. Compensatory nature of interest and technical glitches.

Issue-wise Detailed Analysis:

1. Jurisdiction and Principles of Natural Justice:
The petitioner argued that the impugned orders were passed contrary to law, beyond jurisdiction, and violated principles of natural justice. They contended that the orders were non-speaking and lacked reasons for rejecting the full waiver of interest. The court noted that the orders did not address the petitioner's contentions comprehensively, thus failing to meet the required legal standards.

2. Conditions for Waiver of Interest under Section 220(2A):
The petitioner claimed that they satisfied all conditions under Section 220(2A) for waiver of interest, which include:
- Genuine hardship caused by payment.
- Default due to circumstances beyond control.
- Cooperation in any inquiry or proceeding.
The court observed that the respondents did not adequately consider these conditions and failed to provide reasons for only granting a partial waiver of 20%.

3. Credit for Advance Tax Paid under a Different PAN Number:
The petitioner included the income of his minor son in his returns and paid advance tax under the son's PAN. The respondents rejected credit for this tax, advising the petitioner to seek rectification and re-pay under his own PAN. The court highlighted that the petitioner had already paid the taxes in 2011, albeit under the minor's PAN, and the department had the tax amounts throughout, questioning the basis for levying interest.

4. Hardship Due to Erroneous Tax Demand and Delay in Rectification:
The petitioner faced hardship due to erroneous tax demands and delays in rectification by the respondents. The court acknowledged the petitioner's claim that the delays and errors were beyond his control and led to undue hardship. The court noted that the petitioner had no deliberate lapse or wilful default in tax payments.

5. Compensatory Nature of Interest and Technical Glitches:
The petitioner argued that interest is compensatory, and since the tax amounts were with the department from 2011, levying interest was unwarranted. The court agreed, noting that the department benefited from the taxes twice over for a short period. The court also recognized the petitioner's efforts in addressing technical glitches and approaching various authorities, which should not result in penalization.

Conclusion:
The court concluded that the petitioner suffered genuine hardship and met the conditions for a full waiver of interest under Section 220(2A). The court modified the impugned orders, granting full waiver of interest but directed the petitioner to repay amounts received as interest refunds under Section 244A within four weeks. The writ petitions were partly allowed, and the connected writ miscellaneous petitions were closed.

← Previous Next →