DR.K.M.MEHABOOB V. CHIEF COMMISSIONER OF INCOME TAX

WP(C)/19895/2007

AI Insights

The case revolves around Dr. K.M. Mehaboob, a former partner of a defunct firm, who was held liable for income tax arrears dating back to 1987-88, as per a demand notice issued in 2005. The firm had been dissolved in 1993, and Dr. Mehaboob was under the impression that all dues were settled at that time. Upon receiving the notice, he paid the demanded tax and sought a waiver of the interest charged on the arrears, citing genuine hardship and lack of control over the situation, which was denied by the Commissioner of Income Tax. The High Court of Kerala examined whether the conditions for waiving the interest under Section 220(2A) of the Income-tax Act were met, ultimately deciding in favor of the petitioner.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 758892 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 21-06-2012
• Assessment Year: misc
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: P K R MENON; JOSE JOSEPH
• Assessee Lawyers: MILLU DANDAPANI
• Keywords: Circumstances Beyond Control; Genuine hardship; Income Tax Arrears; Waiver of interest
• Section: 220(2); 220(2A); 222

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE S.SIRI JAGAN THURSDAY, THE 21ST DAY OF JUNE 2012/31ST JYAISHTA 1934 WP(C).No. 19895 of 2007 (R) --------------------------- PETITIONER(S): ----------------------- DR.K.M. MEHABOOB, S/O.DR.K. MOIDU, \"SHADE\", NEAR MALABAR CHRISTIAN COLLEGE, CALICUT. BY ADV. SRI.MILLU DANDAPANI. RESPONDENT(S): -------------------------- 1. THE CHIEF COMMISSIONER OF INCOME TAX, OFFICE OF THE COMMISSIONER OF INCOME TAX, I.S. PRESS ROAD, ERNAKULAM. 2. THE COMMISSIONER OF INCOME TAX, OFFICE OF THE COMMISSIONER OF INCOME TAX, APPELLATE BHAVAN, NORTH BLOCK, KOZHIKODE-673 001. 3. THE TAX RECOVERY OFFICER, OFFICE OF THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-I, CALICUT. BY ADV. SRI.P.K.R.MENON, SR.COUNSEL, GOI (TAXES) BY ADV. SRI.JOSE JOSEPH, SC, INCOME TAXES. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 21-06-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: rs. WP(C).No. 19895 of 2007 (R) APPENDIX PETITIONER'S EXHIBITS:- EXT.P1 COPY OF THE CERTIFICATE/DEMAND NOTICE NO.TR-39/CLT/R1/05-06 DATED 27/07/2005 ISSUED BY 3RD RESPONDENT. EXT.P2 COPY OF THE RECEIPT ISSUED BY THE 3RD RESPONDENT EVIDENCING THE PAYMENT OF MONEY TOWARDS THE INCOME TAX ARREARS. EXT.P3 COPY OF THE RECEIPT ISSUED BY THE 3RD RESPONDENT EVIDENCING THE PAYMENT OF MONEY TOWARDS THE TAX ARREARS. EXT.P4 COPY OF THE PETITION DATED 23/05/2006 FILED UNDER SEC.220 (2A) BEFORE THE 2ND RESPONDENT BY THE PETITIONER. EXT.P5 COPY OF THE EXPLANATION DATED 26/02/2007 FILED BEFORE THE 2ND RESPONDENT BY THE PETITIONER. EXT.P6 COPY OF THE ORDER DATED 05/03/2007 OF 2ND RESPONDENT REJECTING EXHIBIT P4 PETITION. RESPONDENT'S EXHIBITS:- NIL. //TRUE COPY// P.S. TO JUDGE rs. S. Siri Jagan, J. =-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-=-= W.P(C) No. 19895 of 2007 =-=-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-= Dated this, the 21st day of June, 2012. J U D G M E N T The petitioner was the erstwhile partner of a firm which became defunct. The firm was dissolved in the year 1993. By Ext.P1 certificate dated 27.7.2005, arrears of income tax due from the firm for the assessment year 1987-88 was demanded from the petitioner. The petitioner submits that the firm was managed by the erstwhile managing partner and the petitioner was under the impression that at the time of dissolution of the firm, all taxes payable were duly paid. The petitioner could not also trace out any documents after 17 years in respect of the assessment as well. The petitioner immediately paid the tax demanded and submitted an application under Section 220(2A) of the Income-tax Act for waiver from the interest demanded under Section 220(2) of the Income-tax Act, 1961. But the same was rejected by Ext.P6 order. It is challenging that order, the petitioner has filed this writ petition. 2. The learned counsel for the petitioner submits that he does not dispute the liability to pay. The petitioner submits that all the ingredients of Section 220(2A) of the Income-tax Act have been satisfied in the petitioner's case and therefore rejection of the petitioner's application for waiver of interest under Section 220(2A) is clearly unsustainable. 3. With the help of a statement filed on behalf of the respondents, counsel for the Income-tax Department vehementally opposes the prayer of the petitioner. He would W.P(C) No. 19895 of 2007 -: 2 :- submit that none of the ingredients of Section 220(2A) are satisfied in this case and even in Ext.P4 application before the Income-tax Commissioner, the petitioner had no such case. He would therefore submit that the petitioner is not entitled to waiver of interest. 4. I have considered the rival contentions in detail. 5. Section 220(2A) of the Income-tax Act 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.” I am of opinion that the question as to whether these ingredients have been satisfied in the petitioner's case has to be considered in the background of the delay in recovery itself. Admittedly, the tax demanded is for the assessment W.P(C) No. 19895 of 2007 -: 3 :- year 1987-88. Ext.P1 certificate under Section 222 of the Income-tax Act was served on the petitioner only on 27.7.2005. It is not disputed before me that the firm was dissolved in 1993. Of course, the petitioner was one of the erstwhile partners of the firm. He would submit that he was not aware of the arrears of tax insofar as the firm was being managed by the erstwhile managing partner and the petitioner is not in possession of any records in relation to that assessment. He has specifically stated that he was under the impression that at the time of dissolution of the firm, all taxes due have been duly paid. Therefore, there cannot be any doubt that payment of such amount would cause genuine hardship to the assessee insofar as the petitioner has to suffer the burden of the tax by himself. Needless to say, the very same circumstance is more than sufficient to hold that the default in payment was due to the circumstances beyond the control of the assessee. The petitioner immediately on receipt of Ext.P1, paid the tax also and did co-operate with the proceedings for recovery. There is no case for the respondents that the petitioner had not co-operated with the enquiry relating to the assessment as well. Therefore, I am satisfied that all the three ingredients of Section 220(2A) are fully satisfied in this case. That being so, the petitioner is entitled to waiver of interest under that Section. Accordingly, Ext.P6 order is quashed. It is declared that the petitioner is entitled to W.P(C) No. 19895 of 2007 -: 4 :- waiver of interest under Section 229(2A) of the Income-tax Act. Therefore, the respondents shall pass appropriate orders in tune with the above declaration expeditiously. The petitioner shall be given all consequential reliefs also. The writ petition is disposed of as above. Sd/- S. Siri Jagan, Judge. Tds/ "