2024 (12) TMI 711 - HC - Income Tax

Demanding interest u/s 220 (2) - owing to the claim petition filed, the amount received by sale of the property of the deceased husband of the petitioner came to be adjusted against the arrears only on 07-06-1991 - HELD THAT - The statement filed by Income Tax Department shows that an amount of Rs.12,01,000/- was received by the Income Tax Department on 07-02-1989 from the sale of the property of the late husband of the petitioner. Since there were amounts in excess of the demands under the 1961 Act at that point of time, the Income Tax Department remitted a sum of Rs.3,03,288/-in court in proceedings initiated by the aforesaid Mrs. Jolly Thomas. It does not appear from the statement that there was any interdicting order preventing the Income Tax Department from adjusting the balance of the amount against the demand outstanding at the relevant time. Therefore, the petitioner cannot be mulcted with any liability for interest u/s 220 (2) for the period from 07-02-1989 to 07-06-1991. Therefore, this writ petition is allowed by directing that the amount of Rs.1,00,000/- paid by the late husband of the petitioner before the Tax Recovery Officer against the demand for the assessment year 1987-88 along with interest u/s 244A shall be refunded to the petitioner without undue delay and at any rate, within a period of three months from the date of receipt of a certified copy of this judgment. Any demands made on the late husband of the petitioner / the petitioner for interest u/s 220 (2) for the period from 07-02-1989 to 07-06-1991 will stand quashed for reasons indicated above. If the amount demanded as interest u/s 220 (2) has been adjusted from any refund due to the petitioner, the said amount shall also be refunded to the petitioner along with applicable interest (if any) due on the said amount.

Summary

Issues:
1. Demand for interest under Section 220(2) of the Income Tax Act, 1961
2. Refund of amounts due to the petitioner
3. Legal basis for demanding interest

Analysis:
The writ petition before the Kerala High Court involved several reliefs sought by the petitioner, including the issuance of a Writ of Mandamus to direct the disbursement of amounts due and the declaration that the recovery of alleged interest under Section 220(2) of the Income Tax Act, 1961 was illegal. The case revolved around the arrears of income tax owed by the late K.T. Thomas, whose property was auctioned to recover the outstanding amount. Despite certain tax clearance certificates being issued, further demands were made, leading to a dispute over interest charges and refunds.

The Senior Standing Counsel for the Income Tax Department acknowledged that the refund due to the petitioner as per an order had been granted, but also admitted that an additional amount paid by the petitioner needed to be refunded with interest under Section 244A of the Income Tax Act. The interest demanded under Section 220(2) was explained as a result of delays in adjusting the amounts received from the sale of the property against the arrears, due to a claim petition filed by another party.

The primary issue considered by the court was the legality of demanding interest under Section 220(2) of the Income Tax Act for the period between the sale of the property in 1989 and its adjustment against the arrears in 1991. The court analyzed the circumstances and found no legal basis for imposing interest on the petitioner during that period. It was concluded that the petitioner should not be held liable for interest during that time frame, and the demand for interest under Section 220(2) for that period was quashed.

In its judgment, the court directed the refund of the amount paid by the late husband of the petitioner, along with applicable interest, within a specified timeframe. Any demands for interest during the disputed period were deemed invalid, and any amount adjusted from refunds was also to be returned to the petitioner. The writ petition was allowed in favor of the petitioner, granting the reliefs sought and providing clarity on the legal basis for demanding interest under the Income Tax Act, 1961.

This detailed analysis of the judgment showcases the court's thorough consideration of the issues raised, the legal arguments presented, and the ultimate decision rendered in favor of the petitioner.