High Court Of Punjab & Haryana
Roxy Industrial Corporation vs. CIT (Central)
Section 220
Surya Kant & R. P. Nagrath, JJ.
CWP No. 7757 of 2011 & 19911 of 2011
14th March, 2013
Counsel appeared:
Rajesh Garg, Sandeep Goyal, Advocate for the Petitioner.: Rajesh Katoch, Advocate for the Respondent
SURYA KANT, J.
This order shall dispose of CWP Nos. 7757 and 19911 of 2011 as both the writ petitions are directed against the order dated 11.3.2011 passed by the Commissioner of Income Tax (Central), Ludhiana, under Section 132B of the Income Tax Act, 1961 (for short ‘the Act’). For brevity the facts are being taken from CWP No. 7757 of 2011, which has been preferred by Roxy Industrial Corporation (hereinafter referred to as ‘the Assessee’). A search and seizure operation under Section 132 of the Act was conducted at the business premises of the Assessee and the residential premises of its partners. The books of accounts, valuables, cash, locker keys etc. were seized by the Department, including silver articles weighing 16 kg and gold jewellery weighing 3276 gms which were recovered from the bank lockers of one of the partners of the Assessee. To cut the matter short, it was after a prolonged litigation that the Assessee approached the Settlement Commission for settlement of the dispute and pursuant thereto the Settlement Commission passed order dated 31.10.1996, raising a demand of Rs.77,74,531/- inclusive of interest against the Assessee. The order passed by the Settlement Commission is under challenge at the instance of the Assessee in CWP No. 19267 of 1996, though it is stated that out of the assessed amount, a sum of Rs.52,94,770/- has since been deposited.
While the seized articles including the jewellery were in possession of the Department, an unfortunate dispute cropped up between the two partner-brothers of the Assessee, as to whether the jewellery belonged to the Assessee or one of its partners. It was in relation to that controversy that this Court in CWP No. 5400 of 2009, filed at the instance of the Assessee passed order dated 10.12.2010 (Annexure P-3) whereby the order dated 16.3.2009, of the Commissioner of Income Tax (Central), Ludhiana, entrusting the jewellery to one partner was set aside and the matter was remanded for re-determination. The operative part of the order dated 10.12.2010 reads as follows:-
“5. A perusal of impugned order dated 16.3.2009 passed by the Commissioner of Income tax under Section 132-B of the Act shows that while directing release of jewellery and silver articles to respondent P.K. Mittal against bank guarantee, he has neither taken into account discharge of tax liability nor the effect of memorandum of understanding. The order proceeds only on the assumption that under Section 132-B(3), only the person from whose custody assets were seized could get the same. In our view, interpretation of Section 132-B(3) taken by the Commissioner in not correct. The above provision does not exclude consideration of discharge of liability of the department nor arrangement if any between a person from whom assets may have been seized and any other person.
7. In view of the above, we set aside the impugned order and direct respondent No. 1 to pass a fresh order taking into account the aspect of discharge of existing liability of the department in view of statement that value of the goods is much more than the dues of the department. The alleged understanding reached by respondent No. 2 with the petitioner after the seizure of the articles may also be looked into. It may be made clear that release of goods will be subject to adjustment of rights of the parties in the pending suit. The order may be passed within two months from the date of receipt of copy of this order.”
It was in compliance to the above reproduced directions that the Commissioner of Income Tax (Central), Ludhiana, has passed the impugned order dated 11.3.2011 (Annexure P-4) holding that the “entire jewellery belongs to Sh. S.C. Mittal”. The Commissioner has also held that the Assessee is liable to levy of interest under Section 220 (2) of the Act and in the absence of any discretion to reduce or waive off that interest, the Assessee is liable to pay interest to the tune of Rs.82,78,452/-. While the Assessee is aggrieved by the impugned order to the extent of imposition of interest liability, one of the partners of the Assessee in the connected writ petition impugns the afore- stated order in its entirety.
We have heard learned counsel for the parties at some length and gone through the record. With our intervention and persuasion, learned counsel for the petitioners in both the writ petitions have fairly agreed that the seized jewellery which is still lying with the Department may be disposed of by the Department in association with them and the sale proceeds may be kept in a fixed deposit in a nationalized Bank to fetch the maximum rate of interest and the amount so deposited in the fixed deposit then can be released in favour of either of the parties on the basis of the decision in the Civil Suit pending between the parties in Civil Courts at Ludhiana, in which the issue of ownership of the firm is also statedly involved. Both of them, however, assail the order passed by the Commissioner of Income Tax (Central), Ludhiana in so far as it imposes the interest liability on the assessee.
We find from the impugned order that the Commissioner of Income Tax (Central), Ludhiana, has proceeded on the premise that provisions of Section 220(2) are mandatory in nature and that there is no power either with the ITO or the Commissioner to waive off or reduce the amount of interest which becomes due in view of the provisions of sub- Section (2) of S. 220 of the Act.
In our considered view, the above given reasoning by the Commissioner of Income Tax (Central), Ludhiana, has apparently overlooked sub-section 2A of Section 220 of the Act which reads as follows:-“(2A) Notwithstanding anything contained in sub-section (2), the Chief Commissioner or Commissioner 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.”
It may be seen that sub-section (2A) of Section 220 of the Act opens up with a non obstante clause to say that even if Section 220 (2) of the Act is mandatory in nature, yet the Chief Commissioner or Commissioner have the power to reduce or waive the amount of interest paid or payable by an assessee if there exist the circumstances enumerated in the provision.
Since the existence of circumstances which may justify reduction or waiving off the interest liability is a question of fact and this aspect has not been discussed in the impugned order by the Commissioner of Income Tax (Central), Ludhaina, we are of the considered view that the findings to the extent that there is no power with the ITO or the Commissioner to waive or reduce the interest liability is contrary to the Statute as sub-section (2A) of Section 220 of the Act which came into force w.e.f. 1.10.1984 expressly vests such power with the Chief Commissioner or Commissioner of Income Tax, though it is a different issue that the facts and circumstances of a case may or may not justify the exercise of such power. Consequently and for the reasons afore-stated, we set aside the order dated 11.3.2011 (Annexure P-4) passed by the Commissioner of Income Tax (Central), Ludhiana and remit the case to the said Authority for re-determination within the meaning of Section 220(2) read with sub-section (2A) of the Act. The Commissioner of Income Tax, needless to say, shall bear the parties and assign reasons within the statutory contours of sub-section (2A), reproduced above.
So far as the disposal of the jewellery as per the agreed terms is concerned, we direct (i) the Commissioner of
Income Tax (Central), Ludhiana, shall dispose of the jewellery by way of public auction and/or by following the procedure as may be expressly prescribed under the Act/circulars of the Department; (ii) he shall send an advance notice to the Assessee and its partners Shri S.C. Mittal and Pawan Kumar Mittal, intimating the date of public auction or any other mode of disposal of the jewellery, in accordance with law; (iii) the partners shall be at liberty to bring a customer, who is willing to pay the higher price than the offer received by the Commissioner in the public auction provided that the bidder brought by the partners is willing to deposit the sale price as per the terms and conditions imposed by the Commissioner of Income Tax uniformly; and (iv) offer of the highest bidder shall be accepted and after deducting the undisputed liability to the tune of Rs.24,82,663/-, the balance sale price shall be deposited in the shape of FDR in the name of Commissioner of Income Tax (Central) Ludhiana, in a nationalized Bank to fetch the maximum interest.
The Commissioner of Income Tax (Central), Ludhiana, meanwhile shall re-determine the interest liability of the Assessee as per directions issued hereinabove without prejudice to the right of the Assessee or its partners to impugn the interest component liability, if any, levied by the Commissioner/Competent Authority after afresh determination. The Commissioner/Competent Authority shall be free to encash the FDR to the extent of such re- assessed liability. However, if the Assessee or its partners succeed and the levy of interest is set aside or reduced by a Statutory Forum, the amount shall be released along with interest to the party, who shall be finally entitled to receive the jewellery or its value as per the decision of the Civil Court at Ludhiana. The Assessee or its partners shall also be at liberty to impress upon the Commissioner/Competent Authority that in the facts and circumstances of the case in hand, no interest is leviable and the said issue too shall be decided in accordance with law.
Since the controversy shall come to an end only after the Civil Court’s decides the suit, we also direct the learned trial Court before whom the Civil Suit is pending between the parties to expedite its disposal by granting limited opportunities to both the parties to lead their evidence and make an endeavour to decide the same, as early as possible and preferrably within one year. Disposed of. Dasti.
[Citation : 352 ITR 569]
