High Court Of Kerala
Common Wealth Trust (India) Ltd. vs. DCIT & ORS.
Sections 220(2), 220(2A)
Asst. Year 1988-89
Kurian Joseph, J.
OP No. 15356 of 1997
10th August, 2005
Counsel Appeared
P. Balachandran, for the Petitioner : N.R.K. Nayar, for the Respondents
JUDGMENT
Kurian Joseph, J. :
The issues raised in this writ petition pertains to the request made by the petitioner for waiver of interest under s. 220(2A) of the IT Act, 1961. The asst. yr. is 1988-89. Ext. P1 is the assessment order. After adjustments the net liability towards interest is Rs. 1,27,772. Petitioner filed Ext. P7 application under s. 220(2A) for waiver of interest. The same was rejected as per Ext. P8. The said order passed by the CIT is under challenge in the writ petition. Sri Balachandran, learned senior counsel appearing for the petitioner, submits that the CIT has not properly applied the law governing s. 220(2A) to the fact situation. According to the learned senior counsel, irrelevant factors have been taken into consideration while leaving out the relevant. Sri Raveendranatha Menon, learned senior counsel appearing for the Revenue, submits that Ext. P8 order is passed after taking into consideration all the relevant factors and that the CIT has exercised his power in accordance with law and has passed a proper order. Sec. 220(2A) reads as follows : “220(2A) Notwithstanding anything contained in sub-s. (2), the Chief CIT or CIT may reduce or waive the amount 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 cause genuine hardship to the assessee; (ii) default in the payment of the amount on which interest has been paid or was payable under the said sub-section was due to circumstances beyond the control of the assessee; and (iii) the assessee has co-operated in any inquiry relating to the assessment or any proceeding for the recovery of any amount due from him.”
The three ingredients for the invocation of the power are (1) the payment of the amount of interest causes or has caused genuine hardship to the assessee; (2) payment of the amount of tax leading to the levy of interest was defaulted due to circumstances beyond the control of the assessee; and (3) the assessee has co-operated with the enquiry relating to the assessment/proceedings for recovery. The CIT has found in Ext. P8 that of the three conditions only the third one was satisfied; the petitioner co-operated with the enquiry/ proceedings. According to the CIT the default in payment of the tax amount which led to the levy of interest was not fully due to circumstances beyond the control of the assessee and that the payment of interest would not cause any genuine hardship. Referring to the accounts from 1992 to 1994 the CIT has observed that during the said period there was excess payment made by the petitioner and remaining with the Department to be adjusted and after such adjustment the liability was only Rs. 2,50,000 and in such circumstances it cannot be said that payment of interest would cause any genuine hardship to the assessee.
4. A perusal of the statement of accounts of the petitioner would show that the petitioner had been continuously running on loss upto 1991-92. It is also stated in the writ petition that the petitioner was in serious financial crisis at the relevant time, being burdened with liabilities to provident fund, ESI, etc. This crucial aspect of the loss being accumulated for over a period from 1985 to 1992 has missed the notice of the CIT. The relevance of such continuous loss on both conditions regarding genuine hardship and the default being referable to circumstances beyond the control of the assessee has certainly to be looked into. That there was excess payment remaining to be adjusted is necessarily not a conclusive indicator to hold that there was no financial difficulty and that their is no genuine hardship. Only in view of the demands made by the Department the payments were made lest other consequences should have followed. If owing to the statutory remedies there were certain amounts liable to be adjusted and when such adjustment is actually made, it cannot be said that owing to such adjustment the financial difficulty of the petitioner and the genuine hardship to the petitioner are obliterated. It should be noted that the expression ‘hardship’ is qualified and stipulated as ‘genuine’ and not ‘severe’ or ‘grave’, etc. Even if the hardship is really severe or grave, the same need not be genuine. Stress is more on the background and conduct and not on the quantum. Whether the non-payment of the tax is due to circumstances beyond the control of the assessee and whether the payment of interest would cause genuine hardship have to be analysed and appreciated taking into account various other factors also, some of which are indicated above, regarding the accumulated loss, liability to other statutory bodies, the conduct of the parties, the nature of the transaction, the financial position, etc.
5. It is the contention of the learned senior counsel that the CIT gets jurisdiction to look into the matter only if all the three conditions are satisfied. Reliance is placed on various decisions reported in Kerala State Cashew Development Corporation Ltd. vs. ITO & Anr. (1990) 186 ITR 521 (Ker), G.T.N. Textiles Ltd. vs. Dy. CIT & Anr. (1995) 127 CTR (Ker) 11 : (1996) 217 ITR 653 (Ker), Smt. Harbans Kaur vs. CWT (1997) 138 CTR (SC) 211 : (1997) 224 ITR 418 (SC), Kishan Lal vs. Union of India (1998) 145 CTR (SC) 450 : (1998) 230 ITR 85 (SC), etc. There is no quarrel with the legal proposition. Hence, it is not necessary to refer to those decisions or to the factual background in which such decisions are rendered. Here the short question is whether there is proper consideration as to the existence of the conditions precedent to the exercise of power by the CIT under s. 220 (2A). I have, already found that relevant factors have missed the notice of the CIT and the CIT has misdirected himself to a wrong conclusion in respect of the existing factual situation. Therefore, I quash Ext. P8. The matter is remitted to the third respondent for fresh consideration. Orders in accordance with law, in the light also of the observations contained in this judgment and with notice to the petitioner shall be passed within a period of four months from the date of receipt of the judgment. The writ petition is disposed of as above.
[Citation : 280 ITR 70]
