2015 (12) TMI 113 - HC - Income Tax

Reduction of interest payable under Section 220(2) to 25% - entitlement for complete waiver of the interest - Held that - In the facts and circumstances, the authority had applied its mind to the situation while granting 75% waiver of the interest. It is not correct to state that the Commissioner did not apply its mind though we do find that proper reasoning has not been given. However, by not giving such proper reasoning it does not mean that the order is incorrect or is liable to be set aside. We are of the opinion, that a finality should be reached and the matter should be laid at rest. The petitioner has been litigating for almost 20 years and the matter should come to an end once and for all. The contention that complete waiver of interest should be granted cannot be accepted. Admittedly, the enhanced income was found to be valid to a certain extent and the contention of the assessee was not accepted. A demand of ₹ 75,000/- was eventually accepted by the petitioner which was paid. Consequently, interest was liable to be paid under Section 220(2) of the Act. Considering the peculiar facts and circumstances of the present case, we find that the original demand was reduced to ₹ 75,000/-. However, the interest component under Section 220(2) of the Act has swelled to ₹ 4.77 lacs. According to the learned counsel for the petitioner, the interest as on date would be ₹ 1,19,353/- as per the impugned order. We find that for the assessment year 2008-09 the petitioner s total salary was ₹ 1,40,400/-. Considering the aforesaid, we are of the opinion that directing the petitioner to pay ₹ 1,19,353/- would entail undue hardship to him. Considering the peculiar facts and circumstances in the given case, we are of the opinion, that in the interest of justice, the demand of interest should not exceed the demand of ₹ 75,000/- - Decided partly in favour of assessee.

Issues:
1. Reduction of interest payable under Section 220(2) of the Income Tax Act.
2. Application for waiver/reduction of interest under Section 220(2A) of the Act.
3. Judicial review of quasi-judicial orders.
4. Consideration of genuine hardship for partial waiver of interest.
5. Application of mind by the authority in granting waiver of interest.
6. Finality of decisions in long-standing litigations.
7. Interpretation of Section 220(2-A) regarding power to reduce or waive interest.
8. Assessment of undue hardship in determining interest payable.

Issue 1: Reduction of interest payable under Section 220(2) of the Income Tax Act:
The petitioner contested a tax demand for the Assessment Year 1994-95, leading to a reduction in the demand to Rs. 75,000, which was paid. However, interest remained unpaid, resulting in a significant interest amount. The Commissioner of Income Tax initially reduced the interest by 25%, which was challenged through a writ petition.

Issue 2: Application for waiver/reduction of interest under Section 220(2A) of the Act:
The petitioner sought complete waiver of interest under Section 220(2A) of the Act due to hardship. The Commissioner reconsidered the matter and reduced the interest by 75%, directing the petitioner to pay 25% interest. The petitioner contested this decision, arguing for a 100% waiver based on the existing circumstances.

Issue 3: Judicial review of quasi-judicial orders:
The petitioner relied on various judgments emphasizing the authority's obligation to provide reasons and exercise discretion fairly in quasi-judicial orders. The court reiterated the need for proper reasoning in such decisions subject to judicial review.

Issue 4: Consideration of genuine hardship for partial waiver of interest:
The court acknowledged the genuine hardship faced by the petitioner and the authority's decision to grant a partial waiver of interest by reducing it to 75%. It emphasized the importance of considering the circumstances and applying the statutory provisions appropriately.

Issue 5: Application of mind by the authority in granting waiver of interest:
While the court noted the lack of detailed reasoning in the authority's decision, it upheld the partial waiver of interest, emphasizing that a conclusive decision should be reached to end the prolonged litigation spanning almost 20 years.

Issue 6: Finality of decisions in long-standing litigations:
Considering the extended litigation period and the reduced tax demand accepted by the petitioner, the court rejected the plea for complete interest waiver and directed the petitioner to pay Rs. 75,000 towards interest to settle the matter conclusively.

Issue 7: Interpretation of Section 220(2-A) regarding power to reduce or waive interest:
The court clarified that the Commissioner, upon fulfilling the conditions under Section 220(2-A), has the discretion to either reduce or waive the interest amount based on the circumstances of the case, without being obligated to grant a complete waiver.

Issue 8: Assessment of undue hardship in determining interest payable:
In light of the circumstances and the disparity between the reduced tax demand and the accrued interest, the court determined that demanding the full interest amount would cause undue hardship to the petitioner. Therefore, it directed the petitioner to pay a reduced sum of Rs. 75,000 towards interest to mitigate the financial burden.

This judgment highlights the meticulous consideration of statutory provisions, judicial precedents, and the unique circumstances of the case to arrive at a fair and just decision regarding the reduction and payment of interest under the Income Tax Act.

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