Interest waiver-reduction u/s 220(2A) denial for threat by assessee not justified. Satisfaction must be arrived at as per prescribed 3 conditions-High Court

Interest waiver-reduction u/s 220(2A) denial for threat by the assessee not justified. The satisfaction must be arrived at with reference to the prescribed three conditions -Kerala High Court.

ABCAUS Case Law Citation:
1007 2016 (09) HC

Brief Facts of the Case:
The Petitioner assessee was aggrieved by the rejection by the Commissioner of his application u/s 220(2A) of the Income Tax Act 1961 without considering the mater in accordance with the law.

Under section 220(2) when the assessee is deemed to be in default and the amount specified in the notice of demand u/s 156 is not paid within 30 days of the service of the notice, the assessee is liable to pay simple interest @ one per cent. 

However under the provisions of sub section (2A) of section 220, Commissioner of Income Tax (PrCCIT/CCIT/CIT) may reduce/waive the interest on being satisfied that:

(i) payment of such amount has caused orwould cause genuine hardship to the assessee ;

(ii) default in the payment of the amount on which interest has been paid orwas 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.

Contentions of the Assessee:
It was stated that the petitioner had cooperated with the assessment proceedings and he was having genuine hardship to pay the amount of interest and with the substantial amount of interest he would not be in a position to discharge the liability. It was also stated that the only property belonging to the assessee had been attached by the Income Tax Department and unless the property was sold, the petitioner would not be able to pay even the principal amount.

It was submitted that the Commissioner had not considered the matter in accordance with law and therefore, the matter requires reconsideration. Reliance was placed upon the judgment of the Apex Court in B. M. Malani vs. Commissioner of Income Tax and Another (2008) (10) (SCC) 617 where the Supreme Court while considering similar issues regarding the scope and effect of Section 220(2A) observed that a  statutory  authority must act within the four corners of the statute and the Commissioner must exercise his discretion rejecting the request of the assessee judiciously. The satisfaction envisaged in the sub section must be arrived at before coming to conclusion that the three conditions laid down therein have been fulfilled before passing an order waiving interest.

Contentions of the Revenue:
It was stated by the Revenue that petitioner had not co-operated with the proceedings and that he did not pay any amount due as tax though he had given a self declaration regarding undisputed income. It was submitted that the Commissioner had considered the question regarding the plea of the petitioner and had rightly disposed of the same.

Observations made by the High Court:
The High Court observed that when the statutory authority had been given the discretion to consider the compliance of the conditions specified under Section 220(2A), it was for the said authority to take into consideration all the necessary materials which had been placed before it in the form of a representation as well as documents and either to allow the same or to reject the same. 

According to the Court, the question of genuine hardship, whether the default was due to the circumstances beyond the control of the assessee and whether the assessee had co-­operated with the enquiry is to be verified on the basis of the facts available. However, the Commissioner had observed that the petitioner had not complied with any of those conditions but apparently no reasons had been stated. 

The Court noticed that the Commissioner had stated that there was a threat by the assessee and waiver of interest cannot be done by threat. However, the Court opined that such reason alone would not justify denial of the benefit of waiver or reduction of interest because the said denial had to be considered in the light of the statutory provisions as enumerated in Section 220(2A). 

Held:
The matter was directed to be reconsidered by the Commissioner within two months