2016 (8) TMI 966 - HC - Income Tax

Waiver or reduction of interest - Application under Section 220(2A) rejected - non fulfillment of all the conditions laid down in Section 220 (2A) - Held that - When the statutory authority has been given the discretion to consider whether any of the conditions specified under Section 220 (2A) has been complied with, it is for the said authority to take into consideration all the necessary materials which had been placed before it in the form of a representation as well as documents and either to allow the same or to reject the same. On the basis of the facts made available, it has to be verified whether the imposition of interest causes genuine hardship to the assessee. It has also to be verified whether the default in payment of the amount was due to the circumstances beyond the control of the assessee and the assessee has cooperated with the enquiry. In Ext.P6, the Commissioner has observed that the petitioner had not complied with any of those conditions but apparently no reasons have been stated. As rightly contended by the learned counsel on behalf of the petitioner, the Hon ble Supreme Court in B.M.Malani vs. Commissioner of Income Tax and Another 2008 (10) TMI 2 - SUPREME COURT had clearly indicated that when an application is considered under Section 220(2A) it has to be considered in a judicious manner. The Commissioner in Ext.P6 stated that there is a threat by the assessee and waiver of interest cannot be done by threat. Thus we do not think that the said reason alone would justify denial of the benefit of waiver or reduction of interest. The denial of reduction or waiver of interest has to be considered in the light of the statutory provisions as enumerated in Section 220(2A). Under such circumstances, it is of the view that the matter requires reconsideration by the Commissioner. Ext.P6 is set aside. The first respondent shall reconsider the matter and pass appropriate orders on Ext.P5 within a period of two months from the date of receipt of a copy of this judgment and in the light of the law relied on by the Apex Court as referred above.

Summary

Issues:
Challenge to rejection of application under Section 220(2A) of the Income Tax Act 1961 based on non-fulfillment of conditions.

Analysis:
The petitioner challenged the rejection of their application under Section 220(2A) of the Income Tax Act 1961, arguing that the Commissioner did not consider the reasons stated in the application. The petitioner claimed genuine hardship in paying the amount, citing cooperation with assessment proceedings and attachment of their only property by the Income Tax Department. The petitioner asserted compliance with all conditions under Section 220(2A) for waiver or reduction of interest.

The petitioner contended that the Commissioner did not consider the matter in accordance with the law and referred to the judgment in B.M.Malani vs. Commissioner of Income Tax, emphasizing the principle of genuine hardship. The judgment highlighted the need for a purposive construction in interpreting the provision, emphasizing that a person with substantial assets may still face genuine difficulty in paying. The judgment stressed that a statutory authority must act within the statute's confines and exercise discretion judiciously when waiving interest.

The Standing Counsel supported the rejection, alleging lack of cooperation from the petitioner in tax proceedings and minimal payment towards the tax liability for the block period 1993-1997. The petitioner responded with a statement indicating personal health issues affecting their ability to pay. The High Court, after hearing both sides, emphasized that the statutory authority must consider all materials presented, verify genuine hardship, assess whether non-payment was beyond the assessee's control, and evaluate cooperation with the enquiry.

The Court found that the Commissioner's rejection lacked sufficient reasoning and did not align with the principles outlined by the Supreme Court for judicious consideration under Section 220(2A). The Court deemed the threat cited by the Commissioner as insufficient grounds for denial of interest waiver. Consequently, the Court set aside the rejection, directing the Commissioner to reconsider the matter within two months, guided by the legal principles established by the Apex Court in similar cases.