IN HIGH COURT OF JUDICATURE AT MADRAS DATED : 13.11.2014 CORAM HONOURABLE MR.JUSTICE T.S.SIVAGNANAM Writ Petition Nos.1439 and 1440 of 2008 and M.P.Nos.1, 2, 2 and 3 of 2008 Christy Arockia Raj Petitioner in both W.Ps. Vs. 1. Commissioner of Income Tax, Chennai VI 2. Tax Recovery Officer XVI, Annex Building V Floor, 121 Nungambakkam High Road, Chennai 600 034 3. Additional Commissioner of Income Tax, Range-II, Trichy Respondents in both W.Ps. Prayer: Writ Petitions filed under Article 226 of Constitution of India, seeking for issuance of Writ of Certiorarified Mandamus to call for records in C.No.6851 (12)/05-06/VI, dated 18.07.2006, pertaining to assessment years 1978-79 and 1977-78, respectively, passed by first respondent and to quash same and further direct first respondent to refund tax and interest of Rs.58,000/- along with interest. For Petitioner in all W.Ps. : Mr. T.C.A.Ramanujam, assisted by, Ms. T.C.A.Sangeetha For Respondents in all W.Ps. : Mr. T.Pramod Kumar Chopda & Mr. Rajkumar Jhabath --- 2 COMMON ORDER petitioner challenges orders, dated 18.07.2006, passed by respondent, by which respondent rejected request made by petitioner for waiver of interest under Sub-section 220(2A) of Income Tax Act, 1961 (hereinafter will be referred to as Act ). 2. petitioner was assessed to tax on file of Income Tax Officer, Circle-II(4), Trichirappalli, for assessment years 1977-78 and 1978-79. demand, including interest, under Section 220 (2) of Act was certified by Tax Recovery Officer and after collecting entire arrears, Tax Officer raised demand of Rs.65,472/- representing interest under Rule 5 of Income Tax Rules, 1962 (hereinafter will be referred to as Rules ). Against said demand, petitioner preferred application before Commissioner of Income Tax under Section 220 (2) of Act for waiver of interest demanded. 3. In said petition, petitioner stated that more than 25 years, petitioner was assessee on file of Income Tax Officer, Circle- II(4), Trichy, and then he was student and his income tax affairs were looked after by his father, Mr.K.S.Rajan, who is no more at present and taxes were also paid and there was no outstanding demand. It was further stated that petitioner has settled down in Madras and his old assessment records were not traceable. Further, petitioner was served with 3 Wealth Tax assessment order, dated 21.02.1983 under Section 30 of Wealth Tax Act, for assessment years 1977-78 and 1978-79 and as per order and also notice, tax payable was 'nil'. It was stated that after lapse of 27 years, Tax Recovery Officer issued summons, dated 27.02.2004, under Section 131 of Act and petitioner was asked to appear before him and to pay arrears of Rs.58,000/- together with interest levied under Rule 5 of Rules. petitioner made request to Tax Recovery Officer to furnish details and by reply, dated 17.03.2004, petitioner was informed that interest under Section 220 (2) of Act and Rule 5 of Rules, up to January 1990 is Rs.33,165/- and income tax payable for assessment years 1977-78 and 1978-79 is Rs.24,835/-. On receipt of letter, petitioner requested Tax Recovery Officer and then Assessing Officer to furnish copies of assessment orders and also evidence for service of notices of demand. Such request was made by petitioner because of fact that assessment years were 1977-78 and 1978-79 and summons were issued for payment only in 2004, i.e., after lapse of 27 years. 4. Though petitioner did not receive any information on his request made, he paid amount of Rs.58,000/- with view to purchase peace and settle matter and avoid further litigation. After making payment of Rs.58,000/-, which includes tax and interest, Tax Recovery Officer again raised demand of Rs.65,472/- claiming interest under Rule 5 of 4 Rules for period from January 1990 till October 2005 and demand shows arrears only as Rs.24,835/- and interest (including sum of Rs.65,472/-) is Rs.98,637/-. Therefore, petitioner stated that entire interest charged may be waived, as petitioner has paid tax and interest earlier demanded, though it caused hardship to him in arranging necessary funds, and then, non-payment of tax is because of reasons beyond his control and he cooperated with Department in all proceedings in payment of tax. 5. Thereafter, respondent was repeatedly issuing demands calling upon petitioner to pay sum of Rs.65,472/-. Once-again, another representation was made by petitioner, on 14.07.2006, wherein petitioner has elaborately set-out reasons, as to why he is justified in his claim for waiver of interest. Thereupon, impugned orders have been passed. 6. On perusal of impugned orders, it is seen that authority, after extracting conditions to be satisfied for waiver under Section 220 (2A) of Act, has stated that assessee failed to satisfy three conditions cumulatively and assessee has not brought anything on record to show that demand on Rule 5 interest would cause or have caused hardship to him and even if hardship appears to have been really severe or grave, it is not genuine. authority then proceeded to discuss on 5 petitioner's financial position as on date when impugned orders were passed and stated that there is no genuine hardship. Challenging same, present writ petition has been filed. 7. Heard Mr.T.C.A.Ramanujam, learned counsel, assisted by Ms.T.C.A.Sangeetha, learned counsel for petitioner and Mr.T.Pramod Kumar Chopda and Mr. Rajkumar Jhabath, learned standing counsel for respondents. 8. short issue, which falls for consideration, in these writ petitions, is as to whether petitioner is entitled to waiver of interest, which has been levied by Department for belated payment of income tax dues. 9. Section 220 (2A) of Act states that notwithstanding anything contained in Sub-section (2) of Section 220 of Act, Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may reduce or waive amount of interest paid or payable by assessee, subject to assessee satisfying following three conditions:- (i) payment of such amount has caused or would cause genuine hardship to assessee; (ii) default in payment of amount on which interest has been paid or was payable under said sub- section was due to circumstances beyond control of 6 assessee; and (iii) assessee has co-operated in any inquiry relating to assessment or any proceeding for recovery of any amount due from him..... 10. Therefore, while examining application under Sub-section (2A) of Section 220 of Act, authority is bound to consider that, whether payment of such amount has caused or would cause genuine hardship to assessee; default in payment of amount on which interest has been paid or payable was due to circumstances beyond control of assessee and whether assessee co-operated in enquiry relating to assessment year. 11. On facts noted above, assessment was completed, for assessment years 1977-78 and 1978-79, when petitioner's father was alive. Admittedly, petitioner was partner of firm, though at time when he was admitted as partner, he was minor. Nevertheless, there was no allegation of failure to file returns or failure to pay tax for any anterior periods. Subsequently, petitioner's father died and petitioner is said to have shifted his place of residence to Madras. For first time, after about 27 years, after completion of assessment, notice was issued by Tax Recovery Officer and petitioner was called upon to pay Income Tax liability of Rs.24,835/- for both assessment 7 years and interest under Section 220 (2) and Rule 5, up to January 1990, which was calculated as Rs.33,165/-. petitioner co-operated with Department and did not contest matter, but sought for information, such as copy of assessment order, etc., This was not furnished, despite petitioner's pointing out that matter has been racked up, after period of 27 years. Nevertheless, petitioner paid Rs.58,000/-. After having accepted amount, respondents demanded interest from January 1990 till date of payment, i.e., October 2005 and stated that if same is not paid, respondent would initiate action. 12. In light of above, petitioner sought for waiver of demand on interest, for subsequent period, i.e., January 1990 to October 2005. authority, while examining such application, as regards genuine hardship, should take into consideration circumstances which was prevailing in year 2005, when petitioner made remittance of tax, together with interest, which was calculated up to January 1990. This observation is in light of peculiar facts of this case. 13. Hon'ble Supreme court in case of B.M.Malani v. CIT, reported in (2008) 306 ITR 196 (SC) considered term genuine and held that genuine hardship inter-alia means genuine difficulty, that per se would not lead to conclusion that person having large assets 8 would never be in difficulty as he can sell those assets and pay amount of interest levied. 14. Further, Hon'ble Division Bench of this Court, in case of N.Haridas and Company v. Chief Commissioner of Income-Tax and another, reported in (2008) 296 ITR 246 (Mad) has held that Commissioner should have taken note of unavoidable circumstances, namely, sudden demise of Managing Partner, at time when tax under Voluntary Disclosure of Income Scheme was demanded. Further, petitioner therein filed revised return on receipt of notice under Section 148 of Act and paid tax accepting reassessment. It was further pointed out in said decision, that Chief Commissioner was not correct in rejecting claim of petitioner for waiver, without properly appreciating facts and circumstances of case and considering fact that 12 years have passed, earliest assessment year being 1994-95 and assessee had already paid tax, as per reassessment, Commissioner was directed to waive interest. 15. In light of above referred to decisions, if case on hand is examined, it is seen that when Department, for first time issued demand on petitioner in year 2005, petitioner did not contest demand, though he submitted representations requesting for furnishing of details. Nevertheless, petitioner paid tax amount together with 9 interest, which was calculated and demanded by Department. At that point of time, prior to petitioner remitting amount, Department did not issue revised reassessment / demand, till that date, but demand was only for interest calculated up to January 1990. 16. Be that as it may. tax and interest up to that date (January 1990) was paid in year 2005. Thereafter, Department now seeks to demand interest from January 1990 till October 2005 and learned Standing Counsel for respondents would submit that interest is also leviable during pendency of this writ petition also. 17. In my view, respondents have not placed any material to show that as to why no action was initiated for 27 years. While considering waiver application also, Authority did not consider this question. Further, in facts of case, which are peculiar, relevant date for considering genuine hardship was also not taken into consideration. Therefore, question of demanding interest for period up to 2005 does not arise. However, petitioner has admitted that in year 2004, he was served with demand notice. Despite such statement, petitioner paid tax and interest only in October 2005. Therefore, to that extent, petitioner has to blamed for not immediately making payment of tax and interest. 10 18. Therefore, by taking note of fact that sub-section (2A) of Section 220 of Act, empowers authorities to reduce or waive interest amount, this Court is of view that it is fit case where there should be direction to respondents to reduce amount of interest, which has been demanded, which according to this Court, shall be Rs.25,000/-. 19. In result, these writ petitions are partly allowed and matters are remanded to respondents, with direction to respondents to collect sum of Rs.25,000/-, as being interest, which shall be full and final settlement of all claims against petitioner. It is further made clear that, since writ petitions were admitted and pending for all these years, no interest shall be demanded from October 2005 to till date. However, if petitioner fails to remit amount, as fixed by this Court, then it is open to respondents to proceed against petitioner in accordance with law. No costs. Consequently connected MPs are closed. 13.11.2014 Index : Yes / No Web : Yes / No srk 11 To 1. Commissioner of Income Tax, Chennai VI 2. Tax Recovery Officer XVI, Annex Building V Floor, 121 Nungambakkam High Road, Chennai 600 034 3. Additional Commissioner of Income Tax, Range-II, Trichy 12 T.S.SIVAGNANAM, J., srk W.P.Nos.1439 & 1440 of 2008 & M.P.Nos.1, 2, 2 and 3 of 2008 13.11.2014 Christy Arockia Raj v. Commissioner of Income-tax, Chennai/ Tax Recovery Officer XVI, Chennai/ Additional Commissioner of Income-tax, Range-II, Trichy