Wp(C)/17208/2006 Of A.l.kannan v. The Asst.commissioner Of Income Tax,Ktm

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE K.VINOD CHANDRAN WEDNESDAY, THE 30TH NOVEMBER 2011 / 9TH AGRAHAYANA 1933 WP(C).No. 17208 of 2006(W) -------------------------- PETITIONER: --------------- A.L.KANNAN, ANAKKALLUNKAL JEWELLERS, KANJIRAPALLY-686 507. BY ADV. SMT.PREETHA S.NAIR RESPONDENTS: --------------- 1. THE ASSISTANT COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE, KOTTAYAM. 2. THE COMMISSIONER OF INCOMETAX, TRIVANDRUM. BY SRI JOSE JOSEPH, STANDING COUNSEL FOR INCOME TAX THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 30/11/2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C).No. 17208 of 2006(W) APPENDIX PETITIONER'S EXHIBITS: EXT.P1-A: TRUE COPY OF THE DEMAND NOTICE CHARGING INTERESTUNDER SECTION 220(2) OF IT ACT ISSUED BY THE FIRSTRESPONDENTUNDER SECTION 220(2) OF IT ACT ISSUED BY THE FIRSTRESPONDENT EXT.P2-A: TRUE COPY OF THE PETITIONER FILED BY THE PETITIONERBEFORE THE COMMISSIONER OF INCOMETAX FOR WAIVEROF INTEREST UNDER SECTION 220(2A)BEFORE THE COMMISSIONER OF INCOMETAX FOR WAIVEROF INTEREST UNDER SECTION 220(2A) EXT.P3-A: TRUE COPY OF THE ORDER OF THE COMMISSIONER OFINCOMETAX REJECTING EXT.P2INCOMETAX REJECTING EXT.P2 EXT.P4(a): TRUE COPY OF THE BALANCE SHEET A AT 31.3.96 EXT.P4(b): TRUE COPY OF THE BALANCE SHEET A AT 31.3.97 EXT.P4(c): TRUE COPY OF THE BALANCE SHEET A AT 31.3.98 EXT.P4(d) : TRUE COPY OF THE BALANCE SHEET A AT 31.3.99 EXT.P4(e): TRUE COPY OF THE BALANCE SHEET A AT 31.3.2000EXT.P4(f): TRUE COPY OF THE BALANCE SHEET A AT 31.3.2001EXT.P4(f): TRUE COPY OF THE BALANCE SHEET A AT 31.3.2001 RESPONDENTS' ANNEXURES: NIL //TRUE COPY// P.A. TO JUDGE K. VINOD CHANDRAN, J- - - - - - - - - - - - -- - - - - - - - - - - - - - - -W.P(C) No. 17208 OF 2006 - - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 30[th] day of November, 2011 J U D G M E N T The petitioner is before this Court challengingExt.P3 order passed by the Commissioner of Income tax underSection 220(2A) of the Income Tax Act, 1961( for short IT Act). 2. The facts leading to the impugned order is that thepetitioner was a dealer in Jewelery and a search wasconducted at his business and residential premises on8.9.2000. On the strength of materials recovered anassessment under section 158BC was made on the petitionerfor the block period 1991-92 to 2000-01 determining anincome of Rs.74,27,844/-. The application filed by thepetitioner before the Settlement Commission also having beenrejected, the petitioner withdrew all statutory proceedings andpaid the taxes due in instalments. Subsequently, theAssessing Officer issued a demand notice charging interestunder section 220(2A) amounting to Rs.5,73,704/-. Thepetitioner approached the Commissioner of Income Tax forwaiver of the said interest under Section 220(2A) of the Act detailing his hardship and pointing out the fact that thedefault in payment of amount was not attributable to him andthat he has cooperated in the enquiry as provided underSection 220(2A). The Commissioner by Ext.P3 order rejectedthe application of the petitioner. detailing his hardship and pointing out the fact that thedefault in payment of amount was not attributable to him andthat he has cooperated in the enquiry as provided underSection 220(2A). The Commissioner by Ext.P3 order rejectedthe application of the petitioner. 3. The learned counsel for the petitioner would contendthat the entire tax liability was cleared by him over a period oftime as is evidenced by Ext.P1 by way of instalments betweenNovember 2002 and October 2004. The said payment it iscontended, would amply demonstrate that the petitioner hadbeen cooperating with the department and that the default inpayment was not attributable to him since he had sufferedhuge losses in the business conducted by him. To buttress thesaid contention the counsel for the petitioner also refers toExt.P4 series of balance sheets to demonstrate that thepetitioner's business had been running at a loss during therespective years. Regarding hardship, the petitioner hasdetailed his huge liabilities and the fact that he had to makeprivate borrowings for payment of the tax amount; which itselfcame to more than 54 lakhs. 4. The learned counsel for the revenue would contendthat in the case of the petitioner none of the conditions as stated under Section 220(2A) has been satisfied and that thedemand raised on account of Section 220(2) was on 26.6.2005and what is relevant for consideration under Section 220(2A)is the hardship for payment of the interest so levied and notthe tax recovered earlier. The learned Standing Counselwould also point out that the entire proceeding was based on asearch conducted in the year 2000 and it is on recovery ofmaterials evidencing suppression that the block assessmentwas taken up. On the facts and also the suppression detectedin the case of the petitioner makes him further ineligible forany waiver under Section 220(2A), asserts the Revenue. 5. The Commissioner of Income tax under Section 220(2A) is conferred with the authority to waive or reduce theamount of interest paid or payable by the assessee on thesatisfaction of the three conditions enumerated in the saidprovision. The conditions necessary for consideration ofwaiver are that the assessee has or would have had genuinehardship in the payment of such interest. Obviously, even ifpayments are made the hardship in making such paymentwould entitle him for being considered for waiver and theprovision also empowers refund of amounts paid. The nexttwo conditions are that the default in the payment of the amount should not have been due to circumstancesattributable to the assessee and that the assessee had co-operated in any enquiry relating to the assessment or anyproceedings for recovery. The Commissioner has evidentlynot entered any finding regarding the co-operation in anyenquiry since he has found both the other conditions namelygenuine hardship and circumstances not attributable to theassessee against the petitioner. The consideration of the thirdcondition would not be necessary since for considering waiverof interest under Section220(2A) all the three conditions areto be satisfied. 6. I am afraid, I do not agree with the contention of thepetitioner that the order of the Commissioner lacks judiciousconsideration of the hardship detailed by the petitioner inExt.P2. The further contention that an ordinary prudent manwould have definitely considered waiver of interest underSection 220(2A) on the strength of the facts detailed in Ext.P2also cannot be countenanced. The Commissioner whileconsidering the hardship projected by the petitioner hasconsidered the balance sheet of the petitioner for the periodending 31.3.2005 which belies the contention that thepetitioner's business was, during the said period running at a loss. 6. I am afraid, I do not agree with the contention of thepetitioner that the order of the Commissioner lacks judiciousconsideration of the hardship detailed by the petitioner inExt.P2. The further contention that an ordinary prudent manwould have definitely considered waiver of interest underSection 220(2A) on the strength of the facts detailed in Ext.P2also cannot be countenanced. The Commissioner whileconsidering the hardship projected by the petitioner hasconsidered the balance sheet of the petitioner for the periodending 31.3.2005 which belies the contention that thepetitioner's business was, during the said period running at a loss. 7. As rightly contended by the Standing Counsel for theRevenue the balance sheets produced by the petitioner are forthe years in which the block assessment was resorted to bythe assessing officer on the allegation of suppression detectedon inspection. The balance sheet for the years in which blockassessment was made on the ground of suppression, in myopinion, is not relevant for considering hardship of thepetitioner under Section 220(2A). Evidently, as has beendetected, the assessee had suppressed substantial incomeduring the said periods, leading to block assessment for theperiod as also subsequent levy of interest. In addition to thisthe Commissioner had found that the assessee has sufficientimmovable properties, the details of which were recoveredduring the search conducted. True, it has been held by thisCourt and the Supreme Court that the mere availability ofassets is not a ground to deny waiver since the possibility ofselling assets and paying interest does not necessarilymitigate the hardship. In the present case, I find thatproperties were acquired by the petitioner during the year1996, 1997 and 1999, the period in which it is asserted on thebasis of balance sheets that the business was running at a loss. The Commissioner had also considered the secondground regarding the circumstances of non-payment being notattributable to the assessee and has held on the facts detailedabove that the said condition also is not in favour of thepetitioner. As observed earlier, the non-consideration of the3[rd] ground cannot by itself vitiate Ext.P3 order since Section220(2A) contemplates satisfaction of all the conditions. 8. The learned Standing Counsel for Revenue alsopointed out a Division Bench decision of this Court reportedin Kerala State Cashew Development Corporation Ltd., v. Income Tax Officer(186ITR 521) wherein levy of interestand the scope of the powers of its waiver conferred on thedepartmental authorities were considered. The DivisionBench considering Rule 117(a)(5) of the Act held that thestipulation of a condition for the reduction of waiver ofinterest and the waiver itself will have to be considered onother relevant factors which includes the loss sustained by theState. The conditions stipulated under Section 220(2A) alsowould only entitle the petitioner for a consideration forwaiver of interest. In the event of any of the conditions notbeing satisfied, the assessee would not be entitled to beconsidered for any waiver. In the facts and circumstances of the instant case I am of the opinion that the Commissioner'finding that the hardship projected by the assessee is notgenuine and that the default in payment can only beattributable to the assessee is perfectly valid. The assesseenot having satisfied the conditions in Section 220(2A), theCommissioner was correct in denying the benefit of waiver tothe petitioner. The Commissioner in entering the said findinghas considered the points in a judicious manner and the samecannot be faulted and hence warrants no interference. The writ petition accordingly fails and is hencedismissed. No costs. Sd/- (K. VINOD CHANDRAN, JUDGE) jma // True copy// P.A To Judge