P.mahendra Kumar v. The Principal Commissioner Of Income Tax, Trichy

BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED: 21.03.2019 CORAM THE HONOURABLE MR.JUSTICE ABDUL QUDDHOSE W.P.(MD).No.6630 of 2019andW.M.P.(MD) No.5289 of 2019 P.Mahendra Kumar... Petitioner -vs- 1) The Principal Commissioner of Income Tax, Trichy -1, No-44, Williams Road, Cantonment, Tiruchirappalli – 620 001 Trichy -1, No-44, Williams Road, Cantonment, Tiruchirappalli – 620 001 2) The Income Tax Officer, Ward 1(1), No.44, Williams Road, Cantonment, Tiruchirappalli 620 001 No.44, Williams Road, Cantonment, Tiruchirappalli 620 001 3) The Tax Recovery Officer, Trichy -1, No.44, Williams Road, Cantonment, Tiruchirappalli... Respondents PRAYER: Writ Petition filed under Article 226 of the Constitution ofIndia for issuance of a Writ of Certiorarified Mandamus to call forthe records relating to the Order U/s.220(2A) of the Income Tax Actin C.No.6149/PR.CIT/TRY-1/2018-19 / 522 dated 2-1-2019 passed by the1[st] respondent and quash the same as unlawful, arbitrary andunsustainable in law and further direct the 1[st] respondent to grantwaiver of interest on the application filed by the petitioner on1.10.2018 under Sec.220(2A) of the Income Tax Act. For Petitioner: Mr.R.GovindarajFor Respondents: Mr.N.Dilip Kumar O R D E R The instant writ petition has been filed challenging the orderdated 02.01.2019 passed by the first respondent under Section 220(2A) of the Income Tax Act. 2. It is the case of the petitioner that the assessment orderpassed by the second respondent attained finality and thereafter, hehttps://hcservices.ecourts.gov.in/hcservices/paid a sum of Rs.20,19,442/- being the tax amount payable as per theAssessment order. After paying the said amount, the petitioner submitted an application under section 220(2A) of the Income Tax Actseeking waiver of interest. By a demand dated 10.09.2018 made by thethird respondent, the petitioner was directed to pay a sum ofRs.5,86,772/- as interest under Schedule 2 of Rule V of the IncomeTax Act and an additional sum of Rs.5,65,518/- also towards theinterest under section 220(2) of the Income Tax Act. On receipt ofthe demand, the petitioner filed an application under Section 220(2A) of the Income Tax Act seeking waiver of interest before thefirst respondent and he submitted an application on 01.10.2018 onthe following grounds: (a) The demand was because of non-representation by his CharteredAccountant which was not under his knowledge; (b) As soon as he came to know about the demand, he started payingIncome Tax demand with great difficulty and co-operated with thedepartment; (c) He has landed in financial crunch and (d) The delay in payment of tax demand was beyond his control ashe does not have ways and means to pay the demand in one lump sum. 3. The details of the tax payment made by the petitionertotalling Rs.20,19,442/- was also disclosed in the application filedby the petitioner under Section 220 (2A) of the Income Tax Act.Thefirst respondent by his impugned order dated 02.01.2019 rejected theapplication of the petitioner on the ground that he did not co-operate with the Department at the time of scrutiny proceedingswhich culminated in the passing of an ex parte order under section144 of the Income Tax Act. 4. According to the first respondent, on verification of cashflow statement of the petitioner for the year ended in 31.03.2018,it is seen that the petitioner has shown an amount of Rs.5,86,000/-as payable on account of sundry creditors and Rs.11,44,000/- asreceivables being debtors and therefore, the receivables by thepetitioner are much more than the payable. Therefore, the contentionof financial crunch raised by the petitioner gets refuted on meritsand hence do not carry any substance. 4. According to the first respondent, on verification of cashflow statement of the petitioner for the year ended in 31.03.2018,it is seen that the petitioner has shown an amount of Rs.5,86,000/-as payable on account of sundry creditors and Rs.11,44,000/- asreceivables being debtors and therefore, the receivables by thepetitioner are much more than the payable. Therefore, the contentionof financial crunch raised by the petitioner gets refuted on meritsand hence do not carry any substance. 5. In the affidavit filed in support of the writ petition, thepetitioner has denied the observations of the first respondent andcontinues to maintain that only by mortgaging the property he wasable to pay the tax amount, that too in instalments and he is not ina position to pay the interest due to his financial crunch. Thelearned counsel for the petitioner stated that the first respondentis bringing his property for sale as per the sale proclamation dated21.02.2019 and the auction is slated to take place on 26.03.2019. Insuch circumstances, the instant writ petition has been filed.https://hcservices.ecourts.gov.in/hcservices/ upon the petitioner to appear before him with the following details: (i) Brief nature of the business carried out by him as of now; (ii) Copies of financial statements of the returns of incomenamely Profit and Loss Account and balance sheet for the last threeAssessment years and (iii) Any other details relied on by the petitioner to considerthe waiver petition. 7. The documents sought for by the second respondent by hisletter dated 10.10.2018 were produced before the second respondentwhich was also considered in the proceedings under section 220 (2A)of the Income Tax Act by the first respondent. After considerationof the same, under the impugned order, the first respondent hasobserved that from the verification of cash flow statement of thepetitioner for the year ended in 31.03.2018, it is seen that theassessee has shown an amount of Rs.5,86,772/- as payable on accountof sundry creditors and Rs.11,44,000/- as receivables beingdebtors. But the cash flow statement submitted by the petitioner orany other documents submitted by the petitioner has not beenreflected in the impugned order and this Court is also unable togauge from the impugned order as to how the second respondent hascome to the conclusion that the petitioner is not entitled forinterest waiver. 8. There is no objective consideration and elaborate discussionin the impugned order which will conclusively establish that thepetitioner is facing financial crunch and is unable to pay theinterest. Further, being a financier there is a possibility that theamount receivable from his debtors amounting to a sum ofRs.11,44,000/- may not be recoverable and may become bad debts. Allthese factors ought to have been considered by the first respondentin the impugned order. 9. If the petitioner is a genuine person and does not have anydishonest intention of not paying the interest, despite having themeans, he should not be made to suffer. The available evidence onrecord is not sufficient to prove his guilt. Considering all thesefactors, this Court is of the considered view that the petitionermust be given one more opportunity to present his case withsupporting documents to establish that he is facing financial crunchand does not have the means to pay the interest as demanded by therespondents. 10. However, this Court is of the considered view that thepetitioner must be put on terms for reconsideration of theapplication submitted by him under Section 220 (2A) of the IncomeTax Act seeking for waiver of interest. For the forgoing reasons,https://hcservices.ecourts.gov.in/hcservices/the following directions are given: (a) the petitioner shall pay a sum of Rs.2,00,000/- (Rupees Twolakhs only)on or before 26.03.2019; failure to pay the above saidsum will result in automatic dismissal of the writ petition; 10. However, this Court is of the considered view that thepetitioner must be put on terms for reconsideration of theapplication submitted by him under Section 220 (2A) of the IncomeTax Act seeking for waiver of interest. For the forgoing reasons,https://hcservices.ecourts.gov.in/hcservices/the following directions are given: (a) the petitioner shall pay a sum of Rs.2,00,000/- (Rupees Twolakhs only)on or before 26.03.2019; failure to pay the above saidsum will result in automatic dismissal of the writ petition; (b) On payment of Rs.2,00,000/- the petitioner shall also payanother sum of Rs.50,000/- (Rupees Fifty Thousand only) towards theexpenses of sale on or before 26.03.2019. (c) On payment of the aforesaid amount (a+b) totallingRs.2,50,000/- (Rupees Two lakhs and Fifty thousand only), theimpugned order shall stand quashed and the matter is remanded backto the file of the first respondent for fresh consideration inaccordance with law; (d) The petitioner shall also pay the balance sum ofRs.3,65,518/- (Rupees Three lakhs Sixty Five thousand Five hundredand eighteen only) under the demand dared 10.10.2018 on or before20.04.2019. (e) The first respondent shall afford sufficient opportunity tothe petitioner to satisfy the requirements under Section 220(2A) ofthe Income Tax Act in accordance with law and thereafter, the firstrespondent shall pass final orders within a period of eight (08)weeks from the date of receipt of a copy of this order. 11. With the aforesaid directions, the Writ Petition isdisposed of. No costs. Consequently, connected W.M.P.(MD) No.5289 of2019 is closed. Sd/- Assistant Registrar(Records) /True Copy/ Sub Assistant Registrar To 1) The Principal Commissioner of Income Tax, Trichy -1, No-44, Williams Road, Cantonment, Tiruchirappalli – 620 001 +1cc to Mr.R.Govindaraj, Advocate, SR.No.55555+1cc to Mr.N.Dilip Kumar, Advocate, SR.No.56032 Order made inW.P.(MD).No.6630 of 2019 21.03.2019 https://hcservices.ecourts.gov.in/hcservices/