A.L. Kannan vs Assistant Commissioner of Income Tax, Central Circle, Kottayam

K. Vinod Chandran, J.—The petitioner is before this Court challenging Ext. P3 order passed by the Commissioner of income tax u/s 220(2A) of the income tax Act 1961 (for short IT Act). The facts leading to the impugned order is that the petitioner was a dealer in Jewellery and a search was conducted at his business and residential premises on 8.9.2000. On the strength of materials recovered an assessment u/s 158BC was made on the petitioner for the block period 1991-92 to 2000-01 determining an income of Rs. 74,27,844/-. The application filed by the petitioner before the Settlement Commission also having been rejected, the petitioner withdrew all statutory proceedings and paid the taxes due in instalments. Subsequently, the Assessing Officer issued a demand notice charging interest u/s 220(2A) amounting to Rs. 5,73,704/-. The petitioner approached the Commissioner of Income Tax for waiver of the said interest u/s 220(2A) of the Act detailing his hardship and pointing out the fact that the default in payment of amount was not attributable to him and that he has cooperated in the enquiry as provided u/s 220(2A). The Commissioner by Ext. P3 order rejected the application of the petitioner.

The learned counsel for the petitioner would contend that the entire tax liability was cleared by him over a period of time as is evidenced by Ext.P1 by way of instalments between November 2002 and October 2004. The said payment it is contended, would amply demonstrate that the petitioner had been cooperating with the department and that the default in payment was not attributable to him since he had suffered huge losses in the business conducted by him. To buttress the said contention the counsel for the petitioner also refers to Ext.P4 series of balance sheets to demonstrate that the petitioner''s business had been running at a loss during the respective years. Regarding hardship, the petitioner has detailed his huge liabilities and the fact that he had to make private borrowings for payment of the tax amount; which itself came to more than Rs. 54 lakhs.

The learned counsel for the revenue would contend that in the case of the petitioner none of the conditions as stated u/s 220(2A) has been satisfied and that the demand raised on account of Section 220(2) was on 26.6.2005 and what is relevant for consideration u/s 220(2A) is the hardship for payment of the interest so levied and not the tax recovered earlier. The learned Standing Counsel would also point out that the entire proceeding was based on a search conducted in the year 2000 and it is on recovery of materials evidencing suppression that the block assessment was taken up. On the facts and also the suppression detected in the case of the petitioner makes him further ineligible for any waiver u/s 220(2A), asserts the Revenue.

The Commissioner of Income tax u/s 220(2A) is conferred with the authority to waive or reduce the amount of interest paid or payable by the assessee on the satisfaction of the three conditions enumerated in the said provision. The conditions necessary for consideration of waiver are that the assessee has or would have had genuine hardship in the payment of such interest. Obviously, even if payments are made the hardship in making such payment would entitle him for being considered for waiver and the provision also empowers refund of amounts paid. The next two conditions are that the default in the payment of the amount should not have been due to circumstances attributable to the assessee and that the assessee had cooperated in any enquiry relating to the assessment or any proceedings for recovery. The Commissioner has evidently not entered any finding regarding the co-operation in any enquiry since he has found both the other conditions namely genuine hardship and circumstances not attributable to the assessee against the petitioner. The consideration of the third condition would not be necessary since for considering waiver of interest u/s 220(2A) all the three conditions are to be satisfied.

I am afraid, I do not agree with the contention of the petitioner that the order of the Commissioner lacks judicious consideration of the hardship detailed by the petitioner in Ext.P2. The further contention that an ordinary prudent man would have definitely considered waiver of interest u/s 220(2A) on the strength of the facts detailed in Ext.P2 also cannot be countenanced. The Commissioner while considering the hardship projected by the petitioner has considered the balance sheet of the petitioner for the period ending 31.3.2005 which belies the contention that the petitioner''s business was, during the said period running at a loss.

As rightly contended by the Standing Counsel for the Revenue the balance sheets produced by the petitioner are for the years in which the block assessment was resorted to by the assessing officer on the allegation of suppression detected on inspection. The balance sheet for the years in which block assessment was made on the ground of suppression, in my opinion, is not relevant for considering hardship of the petitioner u/s 220(2A). Evidently, as has been detected, the assessee had suppressed substantial income during the said periods, leading to block assessment for the period as also subsequent levy of interest. In addition to this the Commissioner had found that the assessee has sufficient immovable properties, the details of which were recovered during the search conducted. True, it has been held by this Court and the Supreme Court that the mere availability of assets is not a ground to deny waiver since the possibility of selling assets and paying interest does not necessarily mitigate the hardship. In the present case, I find that properties were acquired by the petitioner during the years 1996, 1997 and 1999, the period in which it is asserted on the basis of balance sheets that the business was running at a loss. The Commissioner had also considered the second ground regarding the circumstances of non-payment being not attributable to the assessee and has held on the facts detailed above that the said condition also is not in favour of the petitioner. As observed earlier, the non-consideration of the 3rd ground cannot by itself vitiate Ext. P3 order since Section 220(2A) contemplates satisfaction of all the conditions. The learned Standing Counsel for Revenue also pointed out a Division Bench decision of this court reported in Kerala State Cashew Development Corporation Ltd. Vs. Income Tax Officer and Another, wherein levy of interest and the scope of the powers of its waiver conferred on the departmental authorities were considered. The Division Bench considering section 117(a)(5) of the Act held that the stipulation of a condition for the reduction of waiver of interest and the waiver itself will have to be considered on other relevant factors which includes the loss sustained by the State. The conditions stipulated u/s 220(2A) also would only entitle the petitioner for a consideration for waiver of interest. In the event of any of the conditions not being satisfied, the assessee would not be entitled to be considered for any waiver. In the facts and circumstances of the instant case I am of the opinion that the Commissioner''s finding that the hardship projected by the assessee is not genuine and that the default in payment can only be attributable to the assessee is perfectly valid. The assessee not having satisfied the conditions in Section 220(2A), the Commissioner was correct in denying the benefit of waiver to the petitioner. The Commissioner in entering the said finding has considered the points in a judicious manner and the same cannot be faulted and hence warrants no interference.

The writ petition accordingly fails and is hence dismissed. No costs.