Wp(C)/7031/2010 Of South India Produce v. The Chief Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR FRIDAY, THE 19TH DAY OF DECEMBER 2014/28TH AGRAHAYANA, 1936 WP(C).No. 7031 of 2010 (D) --------------------------- PETITIONER: -------------------------- SOUTH INDIA PRODUCE CO., P.B.NO.344, JEW TOWN, KOCHI- 682 002. REPRESENTED BY ITS PARTNER- T.VIDYASAGAR. BY ADVS.SRI.K.I.MAYANKUTTY MATHER SRI.MAHESH V.MENON RESPONDENTS: ---------------------------- 1. THE CHIEF COMMISSIONER OF INCOME TAX, C.R.BUILDING, I.S.PRESS ROAD, KOCHI- 682 018. 2. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-I, MATTANCHERRY, KOCHI. 3. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE I(1), KOCHI. 4. TAX RECOVERY OFFICER, INCOME TAX DEPARTMENT, RANGE I CENTRAL REVENUE BUILDING, IS PRESS ROAD, KOCHI-18. CENTRAL REVENUE BUILDING, IS PRESS ROAD, KOCHI-18. R, BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON19-12-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P.(C) No.7031/2010 APPENDIX PETITIONER'S EXTS: EXT.P1:COPY OF THE JUDGMENT OF THIS HON'BLE COURT IN ITA NOS.17/1999 ETC.NOS.17/1999 ETC. EXT.P2:COPY OF THE MODIFIED ASSESSMENT ORDER (1989-90) EXT.P2(a):COPY OF THE ORDER LEVYING INTEREST UNDER SECTION 220(2) OF THE INCOME TAX ACT (1989-90)(2) OF THE INCOME TAX ACT (1989-90) EXT.P3:COPY OF THE MODIFIED ASSESSMENT ORDER (1991-92) EXT.P3(a):COPY OF THE ORDER LEVYING INTEREST UNDER SECTION 220(2) OF THE INCOME TAX ACT (1991-92)(2) OF THE INCOME TAX ACT (1991-92) EXT.P4:COPY OF THE MODIFIED ASSESSMENT ORDER (1995-96) EXT.P4(a):COPY OF THE ORDER LEVYING INTEREST UNDER SECTION 220(2) OF THE INCOME TAX ACT (1995-96)(2) OF THE INCOME TAX ACT (1995-96) EXT.P5:COPY OF THE MODIFIED ASSESSMENT ORDER (1996-97) EXT.P5(a):COPY OF THE ORDER LEVYING INTEREST UNDER SECTION 220(2) OF THE INCOME TAX ACT (1996-97)(2) OF THE INCOME TAX ACT (1996-97) EXT.P6:COPY OF THE MODIFIED ASSESSMENT ORDER (1997-98) EXT.P6(a):COPY OF THE ORDER LEVYING INTEREST UNDER SECTION 220(2) OF THE INCOME TAX ACT (1997-98)(2) OF THE INCOME TAX ACT (1997-98) EXT.P7:COPY OF THESALE NOTICE EXT.P7(a):COPY OF THE DEMAND NOTICE NO.TRO/R1/EKM/40/02-03 EXT.P8:COPY OF THE ORDER PASSED BY THE 1ST RESPONDENT. EXT.P.9:COPY OF THE CIRCULAR F NO.400/29/2002-IT(B) EXT.P10:COPY OF THE ORDER PASSED BY THE 1ST RESPONDENT. EXT.P11:COPY OF THE NOTICE ISSUED BY THE RECOVERY OFFICER. //TRUE COPY// PS TO JUDGE A.K.JAYASANKARAN NAMBIAR, J. ------------------------------- W.P.(C).NO.7031 OF 2010 (D) ----------------------------------- Dated this the 19[th] day of December, 2014 J U D G M E N T The petitioner firm is a dealer in hill produce. The income taxassessments for the years 1989-90, 1991-92, 1995-96, 1996-97 and1997-98 were completed against the petitioner by rejecting the standof the petitioner that the interest amounts made on short termdeposits made by the petitioner would be assessable as businessincome and not under the head of income from other sources. In theassessment orders passed against the petitioner, the Assessingauthority under the Income Tax Act found that the interest incomewould be treated as income from other sources. The assessmentproceedings attained finality in the year 2003, consequent to thedecision of the High Court on the said issue, in the case of thepetitioner. In the present writ petition, the petitioner is aggrieved byExts.P8 and P10 orders, both dated 11.2.2010, whereby his claim forwaiver of interest levied under Section 234A, B and C, and Section220(2) of the IT Act, were rejected by the 1[st] respondent throughseparate orders. Exts.P8 and P10 are impugned in the writ petitioninter alia on the ground that the 1[st] respondent, while considering the W.P.(C).NO.7031/2010 W.P.(C).NO.7031/2010 application for waiver, had not considered facts that were germane toa consideration of the issue and had not exercised his discretionjudiciously while rejecting the claim of the petitioner. 2. A statement has been filed on behalf of the respondentswherein the orders impugned in the writ petition are sought to bejustified for the reasons contained therein. It is pointed out that in theexercise of the discretion vested in the 1[st] respondent, in terms of theIT Act, the 1[st] respondent is not to be fettered by the guidelines issuedin the matter of exercise of discretion, by the Central Board of DirectTaxes. It is stated that even if an assessee in any particular caseshows the conditions prescribed in the guidelines to exist, it is notnecessary for the 1[st] respondent to automatically grant a waiver of theinterest which is statutorily levied. 3. I have heard Sri.Mayankutty Mather, the learned counselappearing on behalf of the petitioner as also Sri.Jose Joseph, thelearned Standing counsel appearing on behalf of the respondents. 4. On a consideration of the facts and circumstances of the caseas also the submissions made across the Bar, I note that in Ext.P8 W.P.(C).NO.7031/2010 order which was passed by the 1[st] respondent rejecting theapplication for waiver of interest levied under Section 234A, B and C,the 1[st] respondent has considered the claim of the petitioner in thebackdrop of the clarifications issued through the Board Circular dated26.6.2006. In Ext.P8 order, the 1[st] respondent considers thecontentions of the petitioner, against each of the four categories ofsituations that are prescribed in the aforementioned circular for grantof waiver of the interest levied under Section 234A, B and C. The 1[st]respondent has come to the definite conclusion that the case of thepetitioner does not fall within the purview of the Board's Circular andtherefore there was no scope for granting any waiver of interestunder Sections 234A, B and C in the instant case. On a perusal of thesaid order of the 1[st] respondent Commissioner, I am convinced thatthe exercise of discretion by the Commissioner has been validly doneand I see no scope for interference with the said order in the presentwrit petition. 5. In the case of Ext.P10 order passed by the 1[st] respondentrejecting the application for waiver of interest levied under Section220(2) of the IT Act, however, I find that although the 1[st] respondenthas considered the claim of the petitioner with regard to the three conditions expressly mentioned in Section 220(2A) of the IT Act,namely, (i) whether the payment of the amount has caused genuinehardship to the assessee; (ii) whether the default in payment of theamount on which interest has been paid or was payable was due tocircumstances beyond the control of the assessee and (iii) whetherthe assessee had co-operated with the enquiry relating to theassessment or any proceedings due to the recovery of any amount duefrom him, he did not have the occasion to consider certain aspectswhich are now brought to my notice by the learned counsel for thepetitioner. The financial condition of the petitioner is stated to beprecarious, and, further, it is stated that of the two brothers whoformed the partnership in the petitioner firm, one has since expiredand the other is presently convalescing in a hospital after undergoinga surgery to treat a brain hemorrhage. It is also pointed out thatthere are several financial claims raised against the petitioner firmfrom various quarters, which are also in various stages of adjudicationbefore the authorities concerned. In that view of the matter, I feel thatit would be necessary for the 1[st] respondent to reconsider the matterregarding levy of interest under Section 220(2) of the IT Act in thecase of the petitioner, taking into account the peculiar circumstancesin this case. No doubt, the 1[st] respondent would be exercising his discretion in accordance with the provisions of Section 220(2A) of theIT Act but, it must be borne in mind that it is a discretion that has tobe exercised judicially and keeping in mind the aspect of genuinehardship to an assessee who is called upon to make payments ofexorbitant amounts towards interest liability. In that view of thematter, and treating this as a special case warranting an interferenceby this Court, I quash Ext.P10 order of the 1[st] respondent and directthe 1[st] respondent to reconsider the issue, with regard to waiver ofinterest levied under Section 220(2) of the IT Act, in the light of thedocuments produced by the petitioner before him, and after hearingthe petitioner, within a period of three months from the date ofreceipt of a copy of this judgment. The writ petition is disposed as above. prp A.K.JAYASANKARAN NAMBIAR JUDGE