9911796707
TMI Blog1999 (9) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... , under section 220(2) of the Act for the said assessment years, and the petitioner also filed separate applications under section 220(2A) of the Act for various years mentioned earlier and the circumstances leading to the levy of interest for various assessment years are as under : The petitioner is an assessee on the file of the Deputy Commissioner of Income-tax, Special Range-II, Chennai-34. For the assessment years 1987-88 to 1992-93, the petitioner filed returns of income declaring the income derived by her. The assessments were completed by the Assistant Commissioner/Deputy Commissioner of Income-tax on various dates determining the income and the particulars regarding the years of assessment, dates of completion of assessments and the income assessed are as under : --------------------------------------------------------------------------------------------------------------------------------------------------- Assessment year Date of completion income assessed of of assessment Rs. --------------------------------------------------------------------------------------------------------------------------------------------------- 1987-88 23-12-1994 9,29,080 1988-89 23-12-19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 234A 234B 234C Rs. Rs. Rs. -------------------------------------------------------------------------------------------------------------------------------------------------- 1989-90 16,16,513 12,60,870 22,95,430 119 1990-91 68,69,147 38,46,696 82,42,920 860 1991-92 44,81,141 13,44,330 31,87,460 1992-93 1,21,63,022 7,29,780 87,57,360 8,432 -------------------------------------------------------------------------------------------------------------------------------------------------- According to the petitioner, while the appeals were pending before the Commissioner of Income-tax (Appeals), she filed applications before the third respondent for stay of collection of the disputed tax. According to her, on the basis of the direction of the third respondent, various amounts were paid in respect of the assessment years 1987-88 to 1991-92 which are as under : -------------------------------------------------------------------------------------------------------------------------------------------------- Assessment Date Amount Total Cumulative total year (Rs.) (Rs.) (Rs.) ----------------------------------------------------------------------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... --------------------------------------------------------------------------------------------------------- 1987-88 3,71,064 1988-89 8,00,238 1989-90 13,67,181 1990-91 46,97,536 1991-92 25,31,565 1992-91 56,81,645 -------------------------------------------------------------------------------------------------------------------------------------------------- According to her, no notice or opportunity was given before the levy of interest under section 220(2) of the Act. Against the levy of interest under section 220(2) of the Act, the petitioner filed petitions for waiver of the same before the Commissioner of Income-tax, Central-II(5), Chennai-34, under section 220(2A) of the Act. Section 220(2A) reads as under : "Notwithstanding anything contained in sub-section (2), the Chief Commissioner or Commissioner may reduce or waive the amount of interest paid or payable by an assessee under the said sub-section if he is satisfied that--- (i) payment of such amount has caused or would cause genuine hardship to the assessee ; (ii) default in the payment of the amount on which interest has been paid or was payable under the said sub-section was due to circumstances beyond the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounts were frozen, she was not in a position to pay tax. According to her, she has produced all evidence before the first respondent to show that even on the date when the amounts became due, she was not in a position to pay the huge tax liability. According to her, she also filed appeals against the orders of assessment and during the pendency of the appeals, the Assessing Officer granted stay. She, therefore, stated that it is erroneous on the part of the first respondent to conclude that the non-payment of tax on the dates on which the amounts were demanded would show that the non-payment of tax was not beyond her control. According to her, the alleged default in the payment of tax on the relevant dates was due to circumstances beyond her control. It is stated that she has fulfilled the second condition mentioned in section 220(2A) of the Act. The petitioner also stated that she has co-operated in the enquiry relating to assessments or other proceedings for the recovery of the amounts. According to the petitioner, the Commissioner has taken into consideration the irrelevant fact of non-filing of the returns of income and according to the petitioner, there is a total non-appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 992-93. It is, therefore, stated that the claim of the petitioner that payment could not be made in view of the attachment is not correct. It is also stated in the counter-affidavit that the petitioner had considerable money available in her proprietary concern, Dak Exports and the Department on coming to know of the same, attached the amount and realised the same by means of taking garnishee proceedings It is stated that if the petitioner had really wanted to discharge the liability, she could have utilised the amount for discharging her liabilities, but for reasons best known to her, she did not do so and she had used it for her benefit. In so far as the condition regarding default in payment was due to circumstances beyond the control of the petitioner is concerned it is stated that the petitioner has not given any evidence to state as to why she could not make the payment of demands as and when they were made. It is also stated that the petitioner did not effect payment of the amounts due from her on due dates, but sought for time for making the payment which request was granted by permitting her to, pay the amount, in instalments, but the petitioner did not adhere to the inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erfectly justified in rejecting the petitions filed by the petitioner for waiver of interest. The petitioner also filed a reply affidavit. According to the petitioner, the petitioner had taken effective steps to discharge the liability and her conduct in the assessment proceedings clearly shows that she has co-operated with the. Department. It is stated that she has paid the entire arrears including the disputed tax notwithstanding the fact that the petitioner has not accepted the assessments and filed appeals which are still pending on the file of the Tribunal. According to her, the assessments are arbitrary and the Commissioner has not applied his mind and has unjustly declined to exercise the power under section 220(2A) of the Act. It is stated that the petitioner has explained the reasons as to why the demands could not be paid on the due dates and it was not possible for her to raise necessary funds at that time. It is stated that the observation of the Commissioner that since the petitioner did not make the payment of tax as demanded the interest could not be waived clearly shows his non-application of mind. It is stated that it is incorrect to state that gifts were availabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oans from the party, and according to learned senior counsel, even before the expiry of six months, the petitioner had paid the sum of Rs. 3,97,26,573. He submitted that all funds of the petitioner were locked up and the Commissioner has taken into consideration irrelevant materials and rejected the applications for waiver. Learned senior counsel submitted that the circumstances were beyond her control and, hence, the tax due could not be paid on the due dates, and it is nobody's case that amounts were available with her and in spite of the same, the petitioner did not pay the tax demanded. He also submitted that the petitioner applied for stay and the Department also granted stay and the fact that the Department as well as the Director-General of Income-tax granted stay clearly shows that the Department accepted the position that the petitioner did not have sufficient funds and, accordingly, allowed the petitioner to pay the tax and interest in instalments. Learned senior counsel, therefore, submitted that the order of the Commissioner of Income-tax rejecting the petitions for waiver of interest is unjustified and this court should set aside the order. It is also submitted that si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l justice in this regard would be clearly applicable. It will be seen that a decision which is taken by the authority under section 220(2A) can be subjected to judicial review, as was sought to be done in the present case by filing a petition under article 226 ; this being so and where the decision of the application may have repercussions with regard to the amount of interest which an assessee is required to pay it would be imperative that some reasons are given by the authority while disposing of the application." Learned standing counsel for the Department relied upon the decision of the Supreme Court in the case of Carborundum Universal Ltd. v. CBDT [1989] 180 ITR 171, wherein the Supreme Court has held that the power under section 220(2A) of the Act is a discretionary power and where the petitioner had an opportunity to represent his case in writing and the Board (then authority) had taken into consideration the report of the Commissioner, the petitioner was not entitled to the right of being heard by the Board before the petition was disposed of by the Board. In Mahalakshmi Rice Mills, v. CIT [1981] 129 ITR 53, the Karnataka High Court has held that the word, "co-operation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the occasion arises for the Commissioner to exercise his discretion not before." It is relevant to notice here that the counter affidavit has been filed by the Deputy Commissioner of Income-tax, Central-II(2), Chennai, having jurisdiction over the files relating to the petitioner. The order that is the subject-matter of challenge is an order passed by the Commissioner of Income-tax, Central-II, Chennai, but the said authority has not chosen to file any counter affidavit. There is, no dispute that the power to be exercised by the Commissioner of Income-tax under section 220(2A) of the Act is a quasi-judicial power. It is implicit in the provisions of section 220(2A) of the Act that the application should be decided by way of a speaking order and it is imperative that reasons must be given by the Commissioner of Income-tax while disposing of the said application. As observed by the Supreme Court in Smt. Harbans Kaur's case [1997] 224 ITR 418, the Commissioner has the discretion to reduce the amount of interest or waive the entire interest if the conditions are satisfied, which clearly shows that the reasons given by the Commissioner must be relevant and germane and the order must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t circumstance to establish that the payment of interest amount would (not?) cause genuine hardship to the petitioner. The second reason given by the Commissioner that the petitioner had paid a sum of Rs. 93,23,325 and Rs. 3,97,26,573 on August 3, 1996, and January 9, 1997, and therefore, the petitioner had the capacity to mobilise funds and things were under her control is also not a relevant consideration at all. The case of the petitioner was that she had borrowed money from her party to discharge the liability and the view of the Commissioner that she should have borrowed more money and paid the interest also is not a relevant consideration. It is also not clear what the Commissioner meant by stating, "things are under her control." The third reason given by the Commissioner regarding existence of genuine hardship is also not a relevant consideration. The Commissioner has stated that the Assistant Commissioner of Income-tax, in his report, has stated that nowhere the petitioner has represented in courts that she was not able to mobilise funds to engage a lawyer because of her bank accounts and other assets being attached by the Directorate of Vigilance and Anti-Corruption, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e money from her party is not relevant at all. The Commissioner is also not correct in his view that the circumstances were under the control of the petitioner. The petitioner in her application before the Commissioner has stated that as against the income of Rs. 12,91,008 admitted by her for the assessment years 1987-88 to 1992-93, the income assessed for the said assessment years was Rs. 4,88,17,041 and the difference has mainly arisen because of the different views expressed by the Department treating her birthday gifts as assessable to tax. It is also stated that because of the huge additions to her major source of income, the circumstances went beyond the control of the petitioner and, hence, the tax amounts could not be paid on due dates. It is also stated that in addition to that, her bank accounts were frozen and properties Were attached by the Directorate of Vigilance and Anti-Corruption as well as by the Income-tax Department. The Commissioner was of the view that on the due dates of payment, there was no freezing of bank accounts and, hence, the non-payment could not be termed as "beyond her control and circumstances were under her control." That apart, in the affidavit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the circumstances beyond her control, she could not pay the amounts due. The order of the Commissioner clearly shows that he has omitted to take into account the relevant circumstances before holding that the second condition prescribed under section 220(2A) of the Act is not satisfied. In so far as the third condition, viz., co-operation in the matter of assessment is concerned, the reason given by the Commissioner is also faulty. The Commissioner has stated that the returns were filed beyond the due dates and the petitioner did not pay any advance tax on the admitted income. Clause (iii) of section 220(2A) of the Act postulates the co-operation of the assessee in any inquiry relating to the assessment or any proceeding for the recovery of any amount due from him and the Commissioner of Income-tax has overlooked the fact that the inquiry relating to assessments would commence after the filing of the return and the belated filing of the return is not a relevant circumstance to hold that the assessee has not co-operated in the inquiry relating to the assessment. The Commissioner, has not adverted to the assessment records of the petitioner and examined the question whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay 50 per cent. of the tax component of Rs. 1,86,46,651 before August 5, 1996, and the balance of tax in six monthly instalments from September, 1996, to March, 1997. The petitioner was also directed to pay the interest component of Rs. 3,04.03,247 in 12 monthly instalments. The petitioner on August 3, 1996, paid a sum of Rs. 93,23,325 being the 50 per cent. of the tax due and did not effect any other payment. When the recovery proceedings were initiated on October 17, 1996, the petitioner paid the entire amount of Rs. 3,97,26,573 on January 9, 1997. Then, the petitioner filed petitions for waiver of interest levied under rule 5 of the Second Schedule and interest levied under section 220(2) of the Act. The Commissioner has not considered the question what is the effect of the order directing the petitioner to pay the amounts in instalments and the Commissioner has also not considered the effect of payment of the entire amount when the Tax Recovery Officer initiated the proceedings. He has also not adverted to the question that due to the freezing of bank accounts and attachment of the properties, whether the petitioner could have made the payment. The Commissioner has not conside ..... X X X X Extracts X X X X X X X X Extracts X X X X
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