Wp/11268/2004 Of M/S. Kawaljit Enterprises v. The Commissioner Of Income Tax

IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) TUESDAY, THE TWENTY SEVENTH DAY OF JULYTWO THOUSAND AND FOUR PRESENT THE HON'BLE MR JUSTICE BILAL NAZKI and THE HON'BLE MR JUSTICE S.ANANDA REDDY WRIT PETITION NO : 11268 of 2004 Between: M/s. Kawaljit Enterprises, Rep. by its Partner, 221, Bolton Street, Lamba Estate, Secunderabad. Rep. by its Managing Partner,Harinder Singh, S/o. V.S. Lamsa, age 32 Years, R/o. Hyderabad. ..... PETITIONER AND 1 The Commissioner of Income Tax, A.P. - I, Ayakar Bhavan, Basheerbagh, Hyderabad - 500 004. Basheerbagh, Hyderabad - 500 004. 2 The Deputy Commissioner of Income Tax, Circle 4(3), Ayakar Bhavan, Basheerbagh, Hyderabad - 500 004. Basheerbagh, Hyderabad - 500 004. 3 The Assistant Commissioner of Income Tax, Circle-13(4), Hyderabad - 500 004. 4 Union of India, Rep. by its Secretary, Department of Revenue, Ministry of Finance, New Delhi. .....RESPONDENT(S) Petition under Article 226 of the constitution of India praying that in thecircumstances stated in the Affidavit filed herein the High Court will be pleased toissue a Writ order or direction in the nature of Writ of Mandamus or any otherappropriate Writ as the Hon'ble Court deems fit, directing the Ist Respondent towaive interest of Rs. 3,91,090/- u/s. 220(2A) Counsel for the Petitioner:MR.K.K.VISWANATHAM Counsel for the Respondent Nos 1 to 3.: MR.J.V.PRASAD, Standing Counselfor Incometax Department Counsel for the Respondent No.4: Mr.Rajasekhar Reddy, Standing Counselfor Central Government The Court made the following : ORDER: (per Sri Bilal Nazki, J) Heard the learned counsel for the parties and with their consent and in view of thefact that pleadings are complete, the Writ Petition is being disposed of at this stage. In this Writ Petition an order of Commissioner of Income Tax, Hyderabad passedunder Section 220 (2A) of the Income Tax Act, 1961; is challenged. The grievance of the petitioner is that in terms of Section 220 of the IncomeTax Act, he was entitled to waiver of interest but the Commissioner rejected hisapplication, which is illegal. Counter has been filed. The learned Commissioner has re-produced thecontentions of the petitioner in his order and has finally come to the conclusion thatthe third condition laid down under Order 220(2A) of the Act was not satisfied whichreads as follows: “Notwithstanding anything contained in sub-section (2), theChief Commissioner or Commissioner may reduce or waive theamount of interest paid or payable by an assessee under thesaid sub-section if he is satisfied that – i. payment of such amount has caused or would causegenuine hardship to the assessee;genuine hardship to the assessee; ii. default in the payment of the amount on which interest hasbeen paid or was payable under the said sub-been paid or was payable under the said sub- section was due to circumstances beyond thecontrol of the assessee; andcontrol of the assessee; and iii. the assessee has co-operated in any inquiry relating tothe assessment or any proceeding for the recoveryof any amount due from him. From perusal of this Section, it is clear that in order to get benefit under thisprovision an assessee has to satisfy three conditions. Broadly speaking theseconditions would be i. that the payment of interest would cause genuine hardship to theassesseeassessee ii. default in the payment of the amount on which interest was chargedwas due to circumstances beyond the control of the assessee,and,was due to circumstances beyond the control of the assessee,and, iii. the assessee has cooperated in any inquiry relating to the assessmentor any proceeding for the recovery of any amount due fromhim.or any proceeding for the recovery of any amount due fromhim. iii. the assessee has co-operated in any inquiry relating tothe assessment or any proceeding for the recoveryof any amount due from him. From perusal of this Section, it is clear that in order to get benefit under thisprovision an assessee has to satisfy three conditions. Broadly speaking theseconditions would be i. that the payment of interest would cause genuine hardship to theassesseeassessee ii. default in the payment of the amount on which interest was chargedwas due to circumstances beyond the control of the assessee,and,was due to circumstances beyond the control of the assessee,and, iii. the assessee has cooperated in any inquiry relating to the assessmentor any proceeding for the recovery of any amount due fromhim.or any proceeding for the recovery of any amount due fromhim. The learned Commissioner found first two conditions satisfied, but, he found that thethird condition was not satisfied. Therefore, the order of waiver could not be passedin favour of the assessee. The reasons for coming to the conclusion by theCommissioner that the assessee had not cooperated in the enquiry related to theassessment and recovery, are given by him in the order itself. They are: a. it is seen from the record that the assessee has notappeared on different dates during the course ofscrutiny assessment proceedings.appeared on different dates during the course ofscrutiny assessment proceedings. b. The assessee has not cooperated with regard to thepayment of taxes. The A.O has to take upcoercive steps for recovery of demand bydestraint under Section 226(5). The assesseehad then responded and requested foradjustment of refund in his sister concern byname M/s Kawaljeet Transport Corpn, towardspayment of taxes. The A.O has to take upcoercive steps for recovery of demand bydestraint under Section 226(5). The assesseehad then responded and requested foradjustment of refund in his sister concern byname M/s Kawaljeet Transport Corpn, towards The reason given under (b) appears to be contradictory to the finding of theCommissioner that the condition No. 2 was satisfied. If the petitioner had not madethe payment of the tax on which interest was charged due to circumstances beyondthe control, how could he make the payment. Once the Commissioner had found thatthe condition No. 2 was satisfied and the default in payment of taxes was due to thecircumstances beyond the control of the assessee, he could not reject theapplication of waiver on the ground that the assessee had not cooperated in theenquiry in connection with the recovery of amount due from him. He has alsoreasoned that the assessee had not appeared on different dates during the course ofscrutiny of the assessment proceedings. Non appearance, at the hearing on aparticular date or dates would not ipso facto mean non cooperation by the assesseein the assessment proceedings. On the other hand, the assessing authority hasnoted in its assessment order “However, I wish to place on record that the assesseeand his AR have been cooperative in finalization of the case.” If the assessingauthority recorded that the assessee was cooperative, in our view mere seeking ofan adjournment would not make his conduct different and non-cooperative. Under these circumstances, we set aside the order of the Commissioner.However, in the interests of justice, we remand the case back to the Commissionerfor fresh orders, keeping in view the observations made by us in this order. Accordingly, the Writ Petition is allowed. No costs. _____________________ BILAL NAZKI, J _____________________ S. ANANDA REDDY,JDATED: 27.7.2004. Ka The Rule Nisi has been made absolute as above. Witness the Hon’ble Sri Devinder Gupta, the Chief Justice on this Tuesday the Twenty Seventh day of July, two thousand and four. To 1 The Commissioner of Income Tax, A.P. - I, Ayakar Bhavan, Basheerbagh, Hyderabad - 500 004. Basheerbagh, Hyderabad - 500 004. 2 The Deputy Commissioner of Income Tax, Circle 4(3), Ayakar Bhavan, Basheerbagh, Hyderabad - 500 004. Basheerbagh, Hyderabad - 500 004. Accordingly, the Writ Petition is allowed. No costs. _____________________ BILAL NAZKI, J _____________________ S. ANANDA REDDY,JDATED: 27.7.2004. Ka The Rule Nisi has been made absolute as above. Witness the Hon’ble Sri Devinder Gupta, the Chief Justice on this Tuesday the Twenty Seventh day of July, two thousand and four. To 1 The Commissioner of Income Tax, A.P. - I, Ayakar Bhavan, Basheerbagh, Hyderabad - 500 004. Basheerbagh, Hyderabad - 500 004. 2 The Deputy Commissioner of Income Tax, Circle 4(3), Ayakar Bhavan, Basheerbagh, Hyderabad - 500 004. Basheerbagh, Hyderabad - 500 004. 3 The Assistant Commissioner of Income Tax, Circle-13(4), Hyderabad - 500 004. Hyderabad - 500 004. 4 Union of India, Rep. by its Secretary, Department of Revenue, Ministry of Finance, New Delhi. Department of Revenue, Ministry of Finance, New Delhi. 5. 2 CD copies.