Wa/345/2021 Of G.soman v. The Assistant Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAMPRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMASFRIDAY, THE 30 DAY OF JULY 2021 / 8TH SRAVANA, 1943 WA NO. 345 OF 2021 AGAINST THE JUDGMENT IN WP(C) 25990/2020 OF HIGH COURT OF KERALAAPPELLANT/PETITIONER: G.SOMAN 6/576A, PALLICKAL POST, KOTTARAKKARA, KOLLAM DISTRICT, PIN-691 566. BY ADVS. T.M.SREEDHARAN (SR.)SRI.V.P.NARAYANANSMT.NISHA JOHN RESPONDENT/RESPONDENT: 1THE ASSISTANT COMMISSIONER OF INCOME TAXCIRCLE-1, AAYAKAR BHAVAN, KARBALA JUNCTION, KOLLAM-691 001. 2THE CHIEF COMMISSIONER OF INCOME TAXAAYAKAR BHAVAN, KOWDIAR, THIRUVANANTHAPURAM-695 003. BY ADVS.SRI.P.K.RAVINDRANATHA MENON (SR.)JOSE JOSEPH, SC, FOR INCOME TAX THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 30.07.2021,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: J U D G M E N T S.V.Bhatti,J. Heard learned Senior Advocate Mr.T.M Sreedharan and Standing Counsel Mr.Jose Joseph for the parties. 2. The instant appeal is at the instance of theunsuccessful writ petitioner. The appellant filed W.P.(C) No.25990 of 2020, challenging the orders of the second respondent inExts.P11 series made under Section 220 (2A) of the Income TaxAct (for short, the Act) by the second respondent. 3. The appellant was subjected to a series of assessmentorders by the respondents. On 10.03.2014, the respondentsinitiated proceedings under Section 220 (2A) of the Act. Theappellant through applications dated 11.03.2019 and 13.03.2019applied for waiver of interest levied on the tax demanded fromthe appellant by the respondents. The application was made under Section 220 (2A) of the Act which reads as under: -Section 220(2A) in The Income Tax Act, 1995 “(2A) Not withstanding anything contained sub-section (2),the Chief Commissioner or Commissioner may reduce orwaive the amount of interest paid or payable by an assesseeunder the said sub-section if he is satisfied that- (i) payment of such amount has caused or would causegenuine hardship to the assessee; (ii) default in the payment of the amount on which interesthas been paid or was payable under the said sub-sectionwas due to circumstances beyond the control of theassessee; and (iii) the assessee has co-operated in any enquiry relating tothe assessment or any proceeding for the recovery of anyamount due from him.” 4.The second respondent through the orders impugned in the writ petition viz., Exts.P11 to P11g, rejected theapplications of the appellant. The appellant filed, as noted above, W.P.(C) No.25990 of 2020 challenging Ext.P11 series. The learned Single Judge, through the judgment under appeal, dismissed thewrit petition. Hence, the appeal. 5. Senior Adv.T.M Sreedharan appearing for the appellant contends that the object, scope, and the extent ofjurisdiction enjoined by Section 220(2A) of the Act on commissionof Income Tax is fairly well settled by a catena of decisions.According to him, the appellant having availed the remedyavailable to an alleged defaulter in payment of income tax, mustcertainly satisfy the requirements of sub-section (2A) of Section220 of the Act for an order for waiver or reduction of interest infavour of assesee. In other words, unless and until, the assessee,in default, satisfies the parameters, by referring to which thediscretion could be exercised in favour of the assessee andassessee is stated not to have made out a case before the secondrespondent. This does not presuppose that the discretionaryjurisdiction is not guided by the applicable criteria. TheCommissioner/second respondent has discretionary power undersub-section (2A) of the Section 220 of the Act and the power beingdiscretionary, is coupled with duty, and exercised judicially and WA No. 345 of 2021 WA No. 345 of 2021 reasonably. Proviso no.2 to sub-section (2A) of Section 220provides for an opportunity of being heard by the secondrespondent before the application is rejected. The said provisoreads as under: “provided further that no order rejecting the applicationeither in full or in part, shall be passed unless the assessee hasbeen given an opportunity of being heard” He further argues that the appellant does not complain that the second respondent did not conduct a hearing on the applicationfiled by the appellant. The legal objection raised is that theorders in Ext.P11 series, refer to the arguments and report ofAssessing Officer; perusal of records, and as is evident, the secondrespondent was totally guided by the report submitted by theAssessing Officer on the reasons pleaded by the appellant forwaiver or reduction of interest under sub-section (2A) of Section220 of the Act. The copy of report is not made available toappellant by the second respondent. The resultant circumstance WA No. 345 of 2021 -6- being the hearing, if any, conducted by the second respondent iscompletely an empty formality and without knowing the reasonsor circumstances which would be accepted against the appellant,the appellant was made participate in the enquiry and it resultedin the order impugned in the writ petition. For convenience weprefer to excerpt the operative portion of order in Ext.P11 andthe same reason is stated in other orders as well, for conveniencewe refer to only one of such orders: “I have examined the arguments placed on records. Onverification of the Materials available on the records, it isnotice from the Assessing Officer reported that theclaims/allegations of the assessee are not true. The assesseedid not take a single step to co-operate with theDepartment and to pay the arrear demand while the barhotel was in a full-fledged condition. The closure of the barhotel was with effect from September, 2014 and wasreopened in 2017. There was Beer and Wine parlorfunctioning in the bar hotel for the closure period.Assessee's other businesses like Granites, Marbles, tiles,Finance, textiles, Jewellery etc. are flourishing in the aboveperiod. The assessee is financially very sound and thepayment of interest u/s.220(2) would not cause genuinehardship to the assessee. The details of turnover andincome returned by the assessee for the last threeassessment years are as follows: Assessment YearTurnoverReturnedincome2016-172086762419825902017-182195521126240602018-19337642743436470 From the above facts, it is clear that payment ofinterest u/s.220(2) would not cause genuine hardship to theassessee. The default in payment of arrear demand was notbeyond the control of assessee. It is also not true to state that the assessee had co-operated with department. Further the case of the assesseedoes not fall within the ambit of conditions stipulated u/s220(2A) for waiver of interest u/s 220(2). Therefore, I amunable to accede to the assessee's request in the petition forwaiver of interest u/s 220(2), the petition, dated 13-03-2019stands dismissed.” Hence he prays for setting aside the impugned orders in P11series and remand the matter to the second respondent forconsideration and disposal afresh in accordance with law. Theappeal was listed for admission on 29.07.2021 and at the requestof learned Standing Counsel, the appeal stood adjourned to WA No. 345 of 2021 30.07.2021 to enable him to get instructions from therespondents. It is also not true to state that the assessee had co-operated with department. Further the case of the assesseedoes not fall within the ambit of conditions stipulated u/s220(2A) for waiver of interest u/s 220(2). Therefore, I amunable to accede to the assessee's request in the petition forwaiver of interest u/s 220(2), the petition, dated 13-03-2019stands dismissed.” Hence he prays for setting aside the impugned orders in P11series and remand the matter to the second respondent forconsideration and disposal afresh in accordance with law. Theappeal was listed for admission on 29.07.2021 and at the requestof learned Standing Counsel, the appeal stood adjourned to WA No. 345 of 2021 30.07.2021 to enable him to get instructions from therespondents. 6. Learned Standing Counsel submits that therequirements of sub-section (2A) of Section 220 of the Act arecomplied with while making the orders impugned in the writpetition. Even assuming that the order made under sub-section(2A) of Section 220 of the Act, is reviewable under Article 226 ofthe Constitution of India, this Court may not examine the validityof an order made under sub-section (2A) as a court of appeal.The scope of judicial review is limited to well establishedgrounds. The decision making process in the ordercommunicated to the appellant conforms to the requirements oflaw and broadly the principles of natural justice are adhered toby the respondents, no exception could be taken. On theargument of the appellant for remand and reconsideration, it hasbeen stated that it depends upon the view this Court would be taken on conclusions recorded by the second respondent in P11series. 7. We have taken note of the submissions made by thelearned counsel appearing for the parties and we have perusedthe record. The scope of sub-section (2A) of Section 220 of theAct, the procedure to be followed and the necessity to affordopportunity etc., are not reiterated in the present order. It issufficient to consider the point of prejudice argued by thecounsel for appellant while passing Ext.P11 series orders. Thecase of appellant is that the appellant has made an applicationfor reduction or waiver of interest under sub-section 2A ofSection 220 of the Act. The second respondent has called for areport from the jurisdictional Assessing Officer. The copy of thereport was not issued or served on the assessee or to hisrepresentative. On the contrary, as we have already noted in theexcerpt (supra) that the second respondent primarily considered the report of Assessing Officer and recorded the reasons forrejecting the request of appellant. We are of the view that thereport of Assessing Officer is considered or would be constitutingthe basis for recording the reasons under sub-section (2A) ofSection 220 of the Act, or for rejecting the applications ofappellant, it would be in the fitness of things as well as would beconforming to the requirement of affording an opportunity ofbeing heard, if a copy of Assessing Officer's report is also madeavailable to the representative of the assessee or to the assessee.Upon such copy being made available to the assessee or hisrepresentative, the effectiveness with which the assessee wouldhave presented a case before the second respondent is differentfrom presenting the case without a copy of the report submittedby the Assessing Officer or appreciating the circumstances statedagainst the assessee. After perusing the operative portion of theorder impugned in Ext.P11 series, we are of the view that the case of appellant under sub-section (2A) of Section 220 of the Act has not been considered in the manner in which the jurisdiction hasbeen conferred on the second respondent and for the said reasonalone, orders in Ext.P11 series are liable to set aside andaccordingly set aside. Writ appeal is allowed by this Judgment,by setting aside the judgment of learned Single Judge: a) Matter remitted to second respondent for consideration of appellant under sub-section (2A) of Section 220 of the Act has not been considered in the manner in which the jurisdiction hasbeen conferred on the second respondent and for the said reasonalone, orders in Ext.P11 series are liable to set aside andaccordingly set aside. Writ appeal is allowed by this Judgment,by setting aside the judgment of learned Single Judge: a) Matter remitted to second respondent for consideration and disposal afresh in accordance with law. b) The second respondent on receipt of a copy of thisjudgment, furnishes a copy of Assessing Officer’s reportwithin two weeks thereafter to the assessee byRegistered Post Acknowledgment Due/EMS speed post.c) The assessee within two weeks from the date of receipt, is permitted to file submission/objection/explanation onthe report submitted by the Assessing Officer forconsideration of his request under sub-section (2A) of Section 220 of the Act. d) The second respondent considers and disposes of the said applications within six weeks from the date of receipt of copy of explanation/objections submitted by the assessee as permitted by this order. Accordingly, Writ appeal is allowed as indicated above. Noorders as to costs. Sd/- S.V.BHATTIJUDGE Sd/- BECHU KURIAN THOMAS JUDGE JS