B.m. Malani v. Commr. Of Income Tax & Anr

[2008] 14 S.C.R. 63 B.M. MALANI v. COMMR. OF INCOME TAX & ANR. (Civil Appeal No. 5950 of 2008) OCTOBER 01, 2008 [S.B. SINHA AND CYRIAC JOSEPH, JJ] Income Tax Act, 1961 - s. 220 (2-A) - Waiver of interest payable by assessee - Non-deposit of tax by assessee - Levy of interest for non-payment of dues - Request by assessee to c the Authority to dispose of shares and securities seized from his premises to appropriate sale proceeds towards taxes but request not met with - Application for waiver of interest - Re-jection of, by Commissioner of Income Tax as also High Court - On appeal, held: Statutory Authority on receipt of request of D assessee to sell his shares and securities should have taken some action - Compulsion to pay any unjust dues per se -would cause hardship Commissioner and High Court did not consider in its proper perspective whether default in pay-ment of amount due to circumstances beyond control of as-sessee - However, said ground not available to assessee in E respect of demand draft seized as he did not make any re-quest- Thus, in the interests of justice order of High Court set aside and matter remitted to Commissioner for fresh consid-eration. 'Genuine hardship' - Interpretation of - Held: 'Genuine hardship' means genuine difficulty - Principle of purposive construction is to be applied for determining whether any hard"' ship had been caused or not. Appellant was engaged in money lending business and was trading in shares and securities. Raid was con-ducted in his residential premises and shares and secu-rities worth market value of Rs. 61.38 lakhs and a demand draft of Rs. 10 lakhs in the name of P company were seized. 63 A The appellant-assessee was to pay tax. He requested the Income Tax Authorities to dispose of the s•eized shares and securities expeditiously and appropriate the sale pro-ceeds towards taxes but the request was not met with. The Income Tax Department recovered Rs.40 lakhs from B the appellant. The Settlement Commission did not accept the income declared by the ,appellant and 1enhanced the amount of taxable income. Appellant filed application u/s. 245C(1) of the Income Tax Act. The Settlement Commis-sion passed an order dated 2.12.1999. The Department c encashed the demand draft which was seized. Thereaf-ter, it levjed interest for a sum of Rs. 31,41,106/ for non-payment of the dues u/s.220 (2) of the Act. The said amount was rectified to the extent of Rs.24,36,352/-. Ap-pellant filed application u/s. 220 (2-A) for waiver of inter-D est but the same were rejected. The Commissioner of In-come Tax held that the appellant did not satisfy the con-ditions required for allowing waiver application; and that the levy of interest did not cause genuine hardship to the . appellant. Writ petition filed thereagainst was also dis-missed. Hence the present appeal. Allowing the appeal and remitting the matter, the Court · HELD: 1.1 For interpretation of term genuine hard-ship, the principle of purposive construction should be F resorted to. Levy of interest although is statutory in na-ture, inter alia for re-compensating the revenue from loss suffered by non-deposit of tax by the assessee within the time specified therefor. The said principle should also be applied for the purpose of determining as to whether any G hardship had been caused or not. A genuine hardship would, inter alia, mean a. genuine difficulty. That per se would not lead to a conclusion that a person having large assets would never be in difficulty as he can ~ell those assets and pay the amount of interest levied. [Para 8] [7 4-H B-C] New Collins Concise English Dictionary - referred to. [ 2008 ] 14 63 64 66 68 1.2 The ingredients of genuine hardship must be de-termined keeping in view the dictionary meaning thereof and the legal conspectus attending thereto. For the said purpose, the well-known principle, namely, a person can-B not take advantage of his own wrong, may also have to be borne in mind. The said principle should be applied even in a case of this nature. A statutory authority despite receipt of such a request could have kept mum. It should have taken some action. It should have responded to the prayer of the appellant to sell his shares and securities. [c ][Para 8] [7 4-D-F] Priyanka Overseas Pvt. Ltd. & Anr. v. Union of India & Ors. 1991 Suppl. (1) SCC 102; Union oflndia & Ors. v. Major General Madan Lal Yadav (Retd.) (1996) 4 SCC 127; Ashok D Kapil v. Sana Ullah (dead) & Ors. (1996) 6 SCC 342; Sushi/ Kumar v. Rakesh Kumar (2003) 8 SCC 673; Kusheshwar Prasad Singh v. State of Bihar & Ors. (2007) 11 SCC 447 -referred to. 1.3 A statutory authority must act within the four cor- ners of the statute. Indisputably, the Commissioner has the discretion not to accede to the request of the asses-see, but that discretion must be judiciously exercised. He has to arrive at a satisfaction that the three conditions laid \ [down ][therein have been fulfilled before passing ][an ][order ]waiving interest. [Para 8] [75-AB] 1.4 Compulsion to pay any unjust dues per se would cause hardship. Whether the default in payment of the amount was due to circumstances beyond the control of the assessee, was not considered by the Commissioner G and the High Court in its proper perspective. The Depart-ment took the plea that unless the amount of tax due was ascertainable, the securities could not have been sold and the demand draft could not have been encashed. The same logic would apply to the case of the assessee in H A regard to levy of interest also. It is one thing to say that f' the levy of interest on the ground of non-payment of cor-rect amount of tax by itself can be a ground for non-ac-ceding to the request of the assessee as the levy is a statu-tory one but it is another thing to say that the said factor s . shall not be taken into consideration at all for the purpose of exercise of the discretionary jurisdiction on the part of the Commissioner. [Para 8] [75 8-E] 1.5 It was not even a case where section 226(3) of the Act was resorted to. As. the offer was voluntary, the C authorities of the Department subject to any statutory in-terdict could have considered the request of the appel-. lant. It was probably in the interest of the revenue itself to realize its dues. Whether this could be done in law or not has not been gone into. The same ground, however, was D not available to the appellant in respect of the demand draft, as in relation thereto no such request was made. The demand draft was in the name of a Company. When any document is.seized, a presumption is raised that the same belongs to the person from whose possession or E control it was seized as is laid down in sub-Section (4A) of Section 132 of the Act, but such a presumption is a re-buttable one .. In the absence of any request made by the Assessee himself, probably at that point of time, the same could not have been encashed. Appellant did not own the F same in law. He did not make any request for its , enchashment. Whether such a presumption should be raised or not was the subject matter of consideration by the Assessing Officer at the time of making its final as-sessment as the appellant himself filed an application G befor:_e the Settlement Commission in terms of Section 245C(1) of the Act. [Para 9] [75-F-H, 76-A-C] 1.6 The interests of justice would be subserved if the impugned judgment is set aside and the matter is remit-ted to the Commissioner of Income Tax for consideration H of the matter afresh. [Para 1 O] [76-D] of 2008 From the final Judgment and Order dated 27.7.2006 of [c ] 2008 1993-94 17.01.1995 69 the High Court of Judicature of Andhra Pradesh at Hyderabad in Writ Petition No. 2672 of 2003 M.L. Verma and J.C. Gupta, Rajesh for the Appellant. Rajni 0. Lal and B.V. Balaram Das for the Respondents. The Judgment of the Court was delivered by S.B. SINHA, J. 1. Leave granted. 2. This appeal is directed against the judgment and order E dated 27.7.2006 passed by the High Court of Judicature of Andhra Pradesh at Hyderabad in Writ Petition No. 2672 of 2003 whereby and whereunder the Writ Petition filed by the appellant herein against an order dated 26.11.2002 passed by the Com-missioner of Income Tax rejecting the application filed by the F appellant herein under Section 220 (2-A) of the Income Tax Act, was dismissed. 3. Appellant had been carrying on money-lending business and trading in shares and securities. On or about 4 .9 .1994, a raid was conducted in his residential premises by the authori-G ties in exercise of their power under Section 132 of the Income Tax Act (for short, "the Act"). Amongst others, shares worth mar-ket value of Rs. 61.38 lakhs and a demand draft worth Rs. 10 lakhs in the name of PAN Clothing Company Limited were seized. By a letter dated 15.12.1994, a declaration was made H A by the appellant in terms of sub-Section (4) of Section 132 of the Act, by reason whereof he opted to pay taxes from out of the seized shares and securities stating that the shares be expedi-tiously disposed of and the sale proceeds therefrom be appro-priated towards taxes. The said letter dated 15.12.1994 reads as under : "Please refer to your letter cited in reference above in the matter of payment of taxes. I had made declaration U/s. 132(4) of the Act and pursuant declaration opted to pay c taxes from out of the assets namely shares and securities under seizure, as I have no further funds. I have therefore delivered my consent and requested the Asst. Director of Income Tax (Inv.) Unit-2(3), to dispose of the shares as expeditiously as possible for appropriating the proceeds towards taxes and advance tax. In the above circumstances D I request you sir to arrange for sale of Shares, Securities under seizure to meet the tax liabilities and oblige." Indisputably, the said request of the appellant was not ac-ceded to. However, the fact that such an offer had been made E by the appellant is not denied or disputed. It is furthermore not disputed that the Income Tax Department demanded and re-covered a sum of Rs.40 lakhs in between the period January and March 1995, the details whereof are as under: "Assessment Year Date of Payment Amount (Rs.) Indisputably, the appellant filed an application in terms of B.M. MALANI v. COMMR. OF INCOME TAX & ANR. [S.S. SINHA, J.] sub-Section (1) of Section 245C before the Settlement Com-mission on 2.1.1996 whereupon an order was passed by the Settlement Commission on 2.12.1999. The demand draft drawn in the name of PAN Clothing Company Limited worth Rs. 10 lakhs which was seized during the course of search was encashed by the Income Tax Depart-ment in July 2000 after the same was got revalidated . By an order dated 8.3.2002, the Income Tax Officer, Ward 10(1 ), Hyderabad levied interest for a sum of Rs. 31,41, 106/-under Section 220(2) of the Act for the assessment years 1990- c 91 to 1995-96.