Kerala H.C : whereunder the Chief CIT declined petitioner’s request for waiver of interest levied under s. 220(2) of the IT Act for the asst. yr. 1993-94

High Court Of Kerala

Kerala State Financial Enterprises Ltd. vs. DCIT & ANR.

Sections 220(2), 220(2A)

Asst. Year 1993-94

C.N. Ramachandran Nair, J.

OP No. 12393 of 2001

20th March, 2006

Counsel Appeared

P. Balachandran, for the Petitioner : P.K.R. Menon & George K. George, for the Respondents

JUDGMENT

C.N. Ramachandran Nair, J. :

Petitioner is challenging Ext. P4 whereunder the Chief CIT declined petitioner’s request for waiver of interest levied under s. 220(2) of the IT Act for the asst. yr. 1993-94. Petitioner is a Government company engaged in advance of loan, conducting Kuries, etc. Petitioner claimed deduction of huge wage arrears paid to the employees for the asst. yr. 1993-94. However, the claim was disallowed holding that the liability arose in the immediately following year. In other words, the disallowance of the claim during 1993-94 entitled the petitioner for claiming deduction of the very same amount in the assessment for 1994-95. While the disallowance in the assessment for 1993-94 led to a huge demand of above Rs. 1.5 crores against the petitioner, the consequent entitlement of claim of deduction in the asst. yr. 1994-95 led to a huge refund to the petitioner which is in the form of advance tax paid. The assessment for 1993-94 was completed on 22nd Jan., 1996 by which time, time for filing return for 1994-95 was already over. In fact even after getting assessment and demand notice for asst. yr. 1993-94 which entitled the petitioner to get deduction in subsequent year and for refund for the year 1994-95 and right to request for adjustment of the refunds against demand for 1993-94, the petitioner did not choose to file the returns for 1994-95 immediately or within the 35 days time available for payment of demand raised for the asst. yr. 1993-94. Belated return for 1994-95 was made on 23rd Aug., 1996 and the AO on the very same date processed the return under s. 143(1)(a) of the IT Act and adjusted the refund with interest under s. 244A against the demand due from the petitioner for 1993-94. This led to an interest liability under s. 220(2) of the IT Act on the adjusted amount for 15 days and thereafter petitioner became liable for interest for balance amount which was paid only in September, 1996.

It is against levy of this interest that petitioner moved application for waiver before the Chief CIT. While the case of the petitioner is that the conditions for waiver provided in the statute are available, the Chief CIT held that even though petitioner may have satisfied one of the conditions i.e., co-operation with the Department, the petitioner has not established the other grounds namely, that the payment of interest would cause genuine hardship to the assessee and that nonpayment of tax demanded in time was under the circumstances beyond the control of the assessee. The assessee’s counsel submitted that the CIT’s observations are out of place because the assessee is a Government company with lot of limitations and liquidity problems. Petitioner’s further contention is that the amount demanded under the assessment was so huge that in view of the advance tax paid for the subsequent year petitioner was not in a position to raise the funds within a short time of 35 days. Even though petitioner may have the difficulty to raise as huge a sum of Rs. 1.5 crores within a short span of 35 days. I do not find any justification for the petitioner’s delay in furnishing the return for 1994-95 and if that was done at least within the time provided for payment under the notice of demand served along with assessment for 1993-94, petitioner could have saved interest on the amount adjusted from out of excess payment for the year 1994-95 which itself would have avoided levy of interest of Rs. 2,25,799 under s. 220(2) of the Act. Of course, out of total payment of Rs. 1.5 crores, around Rs. 63 lakhs accounts for interest under ss. 234B and 234C of the IT Act. It is not known whether petitioner applied for waiver of this interest and if applied whether any relief is granted. In any case, in view of the foregoing discussion, there is no scope for waiving interest which petitioner could have avoided by filing return for 1994-95 at least after receipt of notice of demand for the year 1993-94. The balance liability as on beginning of April, 1996 was Rs. 20 lakhs, and going by the volume of the business it cannot be said that petitioner had any difficulty to pay the balance amount and there is no explanation as to why petitioner waited till September, 1996 to clear the balance arrears. In the circumstances, I do not find any ground to interfere with Ext. P4.The OP is therefore devoid of any merit and is dismissed. Petitioner is free to pursue application for waiver of interest under ss. 234B and 234C of the IT Act. No costs.

[Citation : 290 ITR 374]

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