2013 (1) TMI 161 - HC - Income Tax

Waiver of interest u/s 220(2A) - assessee not produce any proof that he had no other business or source of income - Held that - It is an admitted case of the respondents that the entire properties of the petitioner are under attachment and that the interest liability of the petitioner was satisfied from out of the compensation amount remitted by the Corporation of Cochin. These facts, prima facie substantiate the case of the petitioner that he had no business or source of income and that payment of interest as demanded, would cause genuine hardship. Default committed in complying with the conditional waiver order and the instalment facility was for the reason that he had no source of money to comply with the same - orders rejecting the waiver application quashed.

Summary

Issues:
Challenge to order for waiver of interest under Section 220(2A) of the Income Tax Act, 1961.

Analysis:
The petitioner challenged Ext.P3, an order passed by the 1st respondent rejecting the petitioner's application for waiver of interest under Section 220(2A) of the Income Tax Act, 1961. The petitioner had requested the waiver of interest liability of Rs.8,54,476, which was rejected by Ext.P3 order. Subsequently, the entire interest liability was satisfied by appropriating amounts from the Corporation of Cochin due to the petitioner in a land acquisition proceeding. The reasons stated in Ext.P3 for rejection were the petitioner's alleged failure to prove the absence of any other business or source of income and lack of cooperation during recovery proceedings.

In response to the first reason for rejection, the court noted that the respondents did not claim that the petitioner had any other business or income sources. It was also acknowledged that all of the petitioner's properties were under attachment, and the interest liability was cleared using compensation from the Corporation of Cochin. These facts supported the petitioner's claim of genuine hardship due to the lack of income sources. Regarding the lack of cooperation, the petitioner's defense was that non-compliance was due to a lack of funds, not willful default. The court found this defense plausible, given the circumstances of property attachment and subsequent clearance of liabilities through appropriation of compensation.

The revenue contended that since the interest liability was discharged using compensation, there was no genuine hardship. However, the court disagreed, stating that the mere discharge of liability did not negate the existence of hardship, especially if all available funds were appropriated by the revenue. Consequently, the court quashed Ext.P3 and directed the 1st respondent to reconsider the petitioner's application within three months, with proper notice and in accordance with the law. The writ petition was disposed of.