2019 (3) TMI 1269 - HC - Income Tax

Recovery of dues - Waiver of interest before the Principal Commissioner of Income Tax u/s 220(2A) - recovery proceedings - Default in payment of tax - proclamation of sale - demand for the payment of tax as well as interest - without waiting for the outcome of the waiver of interest application, the respondent is proceeding with the sale of the petitioner s property as per the impugned proclamation of sale - entitlement for waiver in view of the closure of their business pursuant to orders passed by the Hon ble Supreme Court as well as due to the appeal filed by the Department in respect of depreciation - petitioner has paid the entire tax liability - HELD THAT - In the instant case, the tax liability as per the respondent s demand is ₹ 53,78,316/-, which has already been duly paid by the petitioner. Whereas the interest component is an exorbitant figure of ₹ 1,32,93,493/-. Considering the exorbitant interest demanded by the respondent, before the first respondent, this Court is of the considered view that before passing any final order in the application filed by the petitioner, under Section 220 (2A) the properties belonging to the petitioner as per proclamation of sale, dated 20.02.2019, issued by the respondent cannot be brought for sale as it will violate the principles of natural justice. The purpose of a statutory power given to any assessee to seek waiver of interest will be defeated, if the respondent is allowed to bring the property for sale, even before the outcome of the proceedings under Section 220 (2A) of the Income Tax Act, 1961 and it will defeat the objects of Section 220(2A). For the foregoing reasons, this Court quashes the impugned proclamation of sale, dated 20.02.2019 issued by the respondent. Court directs the Principal Commissioner of Income Tax-I, Cochin, to dispose of the application filed by the petitioner under Section 220(2A) of the Income Tax Act, 1961, before the Principal Commissioner of Income Tax, Trivandrum.

Summary

Issues:
Challenge to proclamation of sale and deferment of recovery proceedings till outcome of waiver application under Section 220(2A) of Income Tax Act, 1961.

Analysis:
1. The petitioner challenged the proclamation of sale issued by the respondent regarding the petitioner's property due to default in tax payment for assessment years 1992-1993, 1993-1994, and 1994-1995. The petitioner contended that the tax liability was paid in installments between 05.02.2019 to 25.02.2019, totaling &8377; 53,78,316, wiping out the entire tax liability. The petitioner also applied for waiver of interest under Section 220(2A) of the Income Tax Act, 1961, due to closure of business and other reasons.

2. The petitioner argued that the waiver application filed on 05.03.2019 seeking relief from the interest component of &8377; 1,32,93,493 has not been considered by the Principal Commissioner of Income Tax, Trivandrum. Despite the pending application, the respondent proceeded with the sale of the petitioner's property, prompting the petitioner to file the instant writ petition challenging the sale proclamation dated 20.02.2019.

3. The Court noted that the petitioner had paid the entire tax liability and emphasized the discretionary power available to the Principal Commissioner of Income Tax for waiver of interest under Section 220(2A). The Court found the interest demanded by the respondent to be exorbitant compared to the tax liability paid by the petitioner, leading to a violation of natural justice principles if the property was sold before the waiver application outcome.

4. Consequently, the Court quashed the sale proclamation dated 20.02.2019 but directed the Principal Commissioner of Income Tax-I, Cochin, to dispose of the petitioner's waiver application within six months. The Court highlighted that allowing the sale before the waiver application outcome would defeat the purpose of Section 220(2A) of the Income Tax Act, 1961.

5. Additionally, the Court ordered the petitioner to reimburse the respondent &8377; 50,000 for expenses incurred towards the sale proclamation. The directive required the payment within one week from the date of the order, ensuring fairness in the reimbursement process.

This detailed analysis covers the issues raised in the judgment, focusing on the challenge to the sale proclamation, deferment of recovery proceedings, waiver application under Section 220(2A), and the Court's decision and directives in response to the legal arguments presented by the petitioner.