Wp(C)/17449/2011 Of Arun Sunny v. Chief Commissioner Of Income Tax Kochi

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE S.SIRI JAGAN TUESDAY, THE 12TH JULY 2011 / 21ST ASHADHA 1933 WP(C).No. 17449 of 2011(E) --------------------------------------- PETITIONER: ------------------- ARUN SUNNY, CHIRAKKAL HOUSE, XL/676, CHITTUR ROAD, KOCHI-682 011. BY ADV. SRI.S.VIJAYAN NAYAR. RESPONDENTS: ------------------------ 1. CHIEF COMMISSIONER OF INCOME TAX,KOCHI, C.R.BUILDING, I.S.PRESS ROAD, KOCHI-682018. 2. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2(1), CENTRAL REVENUE BUILDING, I.S.PRESS ROAD, KOCHI-682 018. R1 & R2 BY SRI. JOSE JOSEPH, S.C. THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 12/07/2011,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P.(C). NO.17449/2011-E: APPENDIX PETITIONERS' EXHIBITS: EXT.P.1: COPY OF THE ASSESSMENT ORDER DTD. 26/11/2008. EXT.P.2: COPY OF THE ORDER DTD. 17/06/2009. EXT.P.3: COPY OF THE PETITION DTD. 02/07/2009 BEFORE THE R.1. EXT.P.4: COPY OF THE ORDER DTD. 08/06/2011 ISSUED BY THE R.1. RESPONDENTS' EXHIBITS: NIL. //TRUE COPY// P.A. TO JUDGE. Prv. ================== W.P.(C).No. 17449 of 2011 ================== J U D G M E N T The petitioner is an assessee under the Income Tax Act. ByExt.P1 order, tax was assessed on him. The petitioner challenged theassessment in an appeal and a second appeal. Both were dismissed.During the pendency of the appeals, the petitioner had obtainedconditional stay against recovery proceedings. Subsequently, thepetitioner paid the entire amount due by Ext.P2. The petitioner wasdirected to pay interest on the defaulted tax and interest till the dateof payment. The petitioner invoked the jurisdiction of the 1[st]respondent under Section 220(2A) of the Income Tax Act seekingwaiver or reduction of the interest payable. That petition was rejectedby Ext.P4 order holding that the petitioner has not satisfied theconditions in Section 220(2A) for becoming eligible for waiver ofinterest. That is under challenge in this writ petition. The petitioneralso raises a contention that in Ext.P2 interest has been calculated oninterest also, which is not permissible. 2.The petitioner contends that the 1[st] respondent has notproperly applied his mind to the facts and law applicable. He submitsthat in the appeals, the petitioner applied for and obtained conditionalstay. The petitioner promptly complied with the conditions of stay. So w.p.c.17449/11 until dismissal of the appeal by the Tribunal, there was a stay ofpayment of balance tax. As such, the petitioner was not at default atany time. He points out that, as is evident from Ext.P4, the petitionerpaid the entire balance amount within a span of three months. Hesubmits that the same has been considered as non-co-operation in theproceedings for collection of tax, which is totally arbitrary and againstvarious decisions on the point. According to the petitioner, filingappeals and obtaining stay cannot be considered as non-co-operationwith the proceedings for collection of tax. 3.The learned Standing Counsel for the Income TaxDepartment opposes the contentions of the petitioner. According tohim, merely because an assessee obtains a stay from the appellateauthorities, that does not ipso facto operate as a stay of accrual ofinterest on the defaulted tax as well. Once the appeal is ultimatelydismissed, the entire assessed amount would be payable with fullinterest. He submits that the three conditions mentioned in Section220 (2A) have to be satisfied cumulatively for an assessee to claimbenefit of Section 220(2A). He points out that as is evident fromExts.P3 and P4, the petitioner did not succeed in proving that paymentof the tax would have caused hardship to him and that the non-payment was on account of circumstances beyond his control. On theother hand, his contention was that all his money was locked up in deposits in banks and financial institutions and if he withdraws thedeposits prematurely, he would lose interest. According to the learnedcounsel for the Income Tax Department, that cannot operate as acircumstance beyond the control of the assessee and genuine hardshipto the assessee. He had money with him and in order to make moneywith that money, he did not pay the tax due, which cannot be acceptedas a genuine hardship or circumstance beyond the control of theassessee, is the contention. 4.As regards the second contention, he would point out thatExt.P2 demand for interest was dated 17.6.2009. The petitioner neverraised any objection to the same even in Ext.P3. The petitioner doesnot dispute the correctness of the computation of that amount.According to him, Section 220(2A) can be invoked only when theassessee accepts the interest payable as demanded and seeks waiveror reduction thereof. After having invoked Section 220(2A), thepetitioner cannot now dispute the correctness of the interestdemanded is the contention raised. He also points out that againstExt.P2 demand for interest, the petitioner could have very well filed arevision under Section 264 before the Commissioner, which has notbeen done in this case. 5.The petitioner relies on various decisions in support of hiscontentions, which are: w.p.c.17449/11 1.P.RAMASAMY v. COMMISSIONER OF INCOME TAX AND OTHERS[(1999) 237 ITR 169].[(1999) 237 ITR 169]. 2.KISHAN LAN v. UNION OF INDIA AND ANOTHER [(1998) 230 ITR 85] 3.COMMONWEALTH TRUST (INDIA) LTD. v. DEPUTY COMMISSIONEROF INCOME-TAX (ASSESSMENT) AND OTHERS [(2006) 280 ITR 70(Ker)]OF INCOME-TAX (ASSESSMENT) AND OTHERS [(2006) 280 ITR 70(Ker)] 4.J.JAYALALITHA v. COMMISSIONER OF INCOME-TAX AND OTHERS[(2000) 244 ITR 74][(2000) 244 ITR 74] 5.CHIEF COMMISSIONER OF INCOME-TAX AND ANOTHER v.JIMMICHAN M.VARICATT [(2011) 300 ITR 338 (Ker.)]JIMMICHAN M.VARICATT [(2011) 300 ITR 338 (Ker.)] 6.I have considered the rival contentions in detail. 7.Section 220(2A) reads thus: “220. ...... (2A)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 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-section was due tothe circumstances beyond the control of the assessee; and (iii)the assessee has co-operated in any inquiry relating tothe assessment or any proceeding for the recovery of any amount duefrom him.” As is clear from the same, three conditions mentioned therein should be cumulatively satisfied to enable the assessee to avail of the benefit of that section. First of all, the petitioner should prove that payment ofthe said amount would cause genuine hardship to him and secondly,that default in payment of demand on which interest has been paid or was payable under the said sub-section was due to circumstances beyond the control of the assessee. Ext.P4 order reads thus: “The assessee by his application dated 02.07.2009 filed in thisoffice on 06.07.2009 has sought waiver of interest charged undersection 220(2) of Rs. 9,48,640/- for the delay in payment of the taxdemanded for the A.Y. 2006-07. The application was posted forhearing and Shri C.V.Sunny, father of the assessee appeared onauthorization He has been heard. 2.The demand for Rs. 2,17,73,630/- which fell due for paymentin January 2009 was paid in the following manner:- A sum of Rs. 9,48,640/- was charged under section 220(2) for thedelayed payment of tax for the period from January 2009 to June2009. 3.According to the assessee, the non-payment of the demandwithin the stipulated time was due to circumstances beyond his controlfor the reasons given below: “The assessee by his application dated 02.07.2009 filed in thisoffice on 06.07.2009 has sought waiver of interest charged undersection 220(2) of Rs. 9,48,640/- for the delay in payment of the taxdemanded for the A.Y. 2006-07. The application was posted forhearing and Shri C.V.Sunny, father of the assessee appeared onauthorization He has been heard. 2.The demand for Rs. 2,17,73,630/- which fell due for paymentin January 2009 was paid in the following manner:- A sum of Rs. 9,48,640/- was charged under section 220(2) for thedelayed payment of tax for the period from January 2009 to June2009. 3.According to the assessee, the non-payment of the demandwithin the stipulated time was due to circumstances beyond his controlfor the reasons given below: i)There was no liquid cash available for making the taxpayment as the entire money received on sale of propertyhad been invested as term deposits in banks and financialinstitutions. It was difficult to withdraw the deposits beforethe dates of maturity.payment as the entire money received on sale of propertyhad been invested as term deposits in banks and financialinstitutions. It was difficult to withdraw the deposits beforethe dates of maturity. ii)Due to various technical reasons, the banks and financialinstitutions in which the assessee had deposits, did notmake tax payment directly to the Department on the basisof notices issued by Assessing Officer under section 226(3)of the Act on 16.3.2009.institutions in which the assessee had deposits, did notmake tax payment directly to the Department on the basisof notices issued by Assessing Officer under section 226(3)of the Act on 16.3.2009. iii)The recovery of tax stood stayed from 19.03.2009 to30.06.2009 by the ITAT, Kochi.30.06.2009 by the ITAT, Kochi. It is also contended that tax payment before the stipulated date wouldhave caused genuine hardship to him as withdrawal of term depositsbefore maturity would have resulted in loss of interest receipts. It is also contended that he had cooperated with the Department during theassessment proceedings and for remittance of the tax. Accordingly, theassessee has sought waiver of interest under section 220(2A) of theAct. 4.Admittedly, the tax demanded in this case was not paid withinthe time prescribed in the notice of demand under section 156. Assuch the assessee was in default from January 2009 onwards. Noticesunder section 226(3) issued on 16.03.2009 could not be enforced bythe Assessing Officer due to stay of collection of demand granted bythe ITAT from 19.03.2009 at the instance of the assessee. Non-availability of liquid cash for tax payment, or non-collection of tax onthe basis of notice under section 226(3), or stay of recovery of tax byITAT, cannot be a ground for waiver of interest under section 220(2A).The assessee had received Rs. 11 crores from sale of land and washaving substantial deposits in Banks and other financial institutions.Had the assessee so decided, he could have even prematurelyencashed some of the deposits for paying the tax. Instead of clearingthe tax liability within the stipulated date with a view to avoid paymentof interest under section 220(2), the assessee chose to wait formaturity of the term deposits for making tax payment. As such thepayment of interest under section 220(2) of Rs. 9,48,640/- in this casewould not have caused genuine hardship to the assessee. The defaultcommitted in the payment of tax was admittedly for avoiding loss ofinterest on term deposits from banks, and as such was intentional. Itcannot, therefore, be claimed that default in the payment of tax wasdue to circumstances beyond the control of the assessee. The assesseecaused unnecessary hindrance to collection by applying for stay ofoperation of the notice of attachment under section 226(3) issued bythe Assessing Officer on 16.03.2009. As such, the assessee has not co-operated with the proceedings for collection of the tax which was duefrom him. 5.In the light of the above facts, it is found that the conditionsspecified in section 220(2A) are not satisfied in this case for orderingwaiver of interest charged under section 220(2) of the Act. It is settledlaw that all the three conditions prescribed in section 220(2A) are tobe satisfied cumulatively for making eligible a case for waiver ofinterest under section 220(2). None of the conditions is satisfied.Therefore, this is not a fit case for waiver of the interest. Theapplication for waiver of interest under section 220(2A) for the A.Y.2006-07 is rejected.” (underlining supplied) 8.The petitioner does not dispute the narration of thecontention of the petitioner in paragraph 3 is not correct. Therefore,his contention in support of condition Nos.1 and 2 was that he had noliquid cash available for paying tax as the entire money received on w.p.c.17449/11 sale of properties had been invested as term deposits in banks andfinancial institutions and if he closes the same before the dates ofmaturity, he would lose interest. I am not satisfied that that wouldamount to satisfaction of condition Nos.1 and 2. The gist of thecontention of the petitioner is that he had money to pay the amount oftax, but since the same is locked up in deposits in banks and financialinstitutions, if he withdraws the said deposits before its maturity, hewill lose interest on the same. That means he wants his deposits toaccrue interest and at the same time, he wants to deny the IncomeTax Department interest legitimately due to them. The same cannot bea situation where the payment of tax would cause genuine hardship tothe assessee or a situation where the petitioner did not pay the taxdue to circumstances beyond the control of the assessee. In view ofthe fact that I am satisfied that condition Nos.1 and 2 have not beensatisfied in the case of the petitioner, even if the contention of thepetitioner regarding non-co-operation in the enquiry relating to theassessment is accepted, it will make no difference insofar as all thethree conditions have to be cumulatively satisfied, I am not going intothe satisfaction of the 3[rd] condition mentioned in Section 220(2A).Therefore, I do not find anything wrong with Ext.P4 order, by which,the Chief Commissioner of Income Tax denied the petitioner benefitunder Section 220(2A). 9.As far as the other contention is concerned, I do not think that interest on interest has been charged on the petitioner. There isnoting on record to show that interest on interest has been demandedfrom the petitioner. Only permissible interest has been charged on thepetitioner. Even otherwise, Ext.P2 is dated 17.6.2009. The petitionerdid not dispute the interest charged at any point of time except in thiswrit petition. Not even in Ext.P3 he had such a contention. That beingso, I am not inclined to exercise my discretionary jurisdiction in favourof the petitioner to interfere with the said demand. In view of my above findings, I find no merit in this writ petitionand accordingly, the same is dismissed. Sd/- sdk+ S.SIRI JAGAN, JUDGE ///True copy/// P.A. to Judge