F January, 2008 v. Commr.of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR FRIDAY, THE 18TH JANUARY 2008 / 28TH POUSHA 1929 OP.No. 1769 of 2001(I) ---------------------- PETITIONER: ------------ M/S.POLAKULATH TOURIST HOME,MULANTHURITHY, PARTNERSHIP FIRMREP. BY ITS MG. PARTNER MR.KRISHNA LAL. BY ADV. SRI.S.ANANTHAKRISHNAN SRI.N.K.SUBRAMANIAN RESPONDENTS: ------------- THE COMMISSIONER OF INCOME TAX,I.S.PRESS ROAD, COCHIN. BY ADV. SRI.P.K.R.MENON(SR.),SC FOR IT THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 18/01/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: DISMISSED: 18.1.2008SD/-(C.N.RAMACHANDRAN NAIR, JUDGE.) APPENDIX PETITIONER'S EXHIBITS: P1: TRUE COPY OF PETITION DT.18.11.99 FILED BEFORE THE RESPONDENT. P2: TRUE COPY OF ORDER DT.26.10.2000 PASSED BY RESPONDENT. P3: TRUE COPY OF CERTIFICATE DT.25.7.2000 ISSUED BY LORD KRISHNA BANK TO THEPETITIONER. P4: TRUE COPY OF ORDER DT.6.10.99 PASSED BY THE CHIEF COMMISSIONER OF INCOMETAX. TRUE COPY PA TO JUDGE C.N.RAMACHANDRAN NAIR, J. .................................................................... O.P. No.1769 of 2001.................................................................... Dated this the 18th day of January, 2008. JUDGMENT Heard Senior counsel Sri.Sarangan appearing for the petitioner andStanding Counsel appearing for the Income Tax Department. The petitioneris challenging Ext.P2 order whereunder the Commissioner has declined towaive interest levied under Section 220(2) of the Income Tax Act forbelated payment of income tax assessed and demanded for the year 1992-93.The petitioner claimed benefit of registration for the Firm which wascarrying on business in liquor. The Assessing Officer, however, declinedregistration as a Firm and assessed the petitioner as an unregistered firm.In the first appeal, the appellate authority allowed the claim which led torevised order dated 10.11.1995 leading to nil demand. However, ondepartment's appeal, the Tribunal restored the original assessment as anunregistered firm. Consequent to this, petitioner was liable to payadditional tax over and above the tax paid and interest under variousprovisions of the Act namely, Sections 234A, 234B and 234C and 220(2) ofthe Income Tax Act. Even though petitioner filed application for waiver ofinterest levied under various heads, the Commissioner allowed waiver of interest demanded under Sections 234A, 234B and 234C vide Ext.P4 order.However, he declined waiver application for waiver of interest levied underSection 220(2) vide Ext.P2 order which is under challenge in this O.P.While the petitioner has relied on decision of this court in SMT.B.INDIRARANI V. COMMISSIONER OF INCOME TAX & OTHERS (2004) 271ITR 570, Standing Counsel has relied on decision of the Supreme Court inVIKRANT TYRES LTD. V. FIRST INCOME-TAX OFFICER (2001) 247ITR 821. If petitioner had made payment pursuant to original order andthe next demand came only after revised order was issued based on order ofthe Tribunal, then of course petitioner cannot be called upon to pay interestfor the period commencing from the original demand. This is the positionlaid down in the two decisions abovereferred. However, if petitioner hasnot made payment pursuant to original demand and the demand remainedunsatisfied, then the mere fact that a first appellate order was in favour ofthe petitioner does not absolve the petitioner from liability for interest underSection 220 by virtue of operation of Section 3(2) of the Taxation Laws(Continuation and Validation of Recovery Proceedings) Act, 1964. It isstated in Ext.P2 by the Commissioner that petitioner had not made payment,but the demands have been recovered through adjustments from refunds dueto partners of the firm. These facts are not very clear from the order. Moreover, the proceeding by which Section 220(2) interest is computed isalso not produced in court. In any case in view of Ext.P4 order, petitionercannot be called upon to pay interest under Section 220(2) of the Act for theinterest originally demanded under Section 234A, 234B and 234C of theAct. Since full facts are not on record, the O.P. is disposed of directing theAssessing Officer to recompute liability for interest under Section 220(2) ofthe Act by taking into account Ext.P4 order and after verifying the dates onwhich adjustments are made against demands. There is no ground forinterfering with the findings in Ext.P2 because petitioner has not establishedany financial hardships warranting waiver of actual interest payable underSection 220(2) of the Income Tax Act. pms C.N.RAMACHANDRAN NAIRJudge