G.SOMAN V. THE ASSISTANT COMMISSIONER OF INCOME TAX

WA/345/2021

AI Insights

The case involves G. Soman, the appellant, who challenged the orders of the Assistant Commissioner of Income Tax and the Chief Commissioner of Income Tax, which rejected his applications for waiver of interest under Section 220(2A) of the Income Tax Act. The appellant argued that the rejection was based solely on the report of the Assessing Officer, which was not shared with him, thus denying him a fair opportunity to respond. The High Court of Kerala found that the procedure followed did not meet the requirements of natural justice, as the appellant was not provided a copy of the Assessing Officer's report, which formed the basis of the rejection of his waiver application.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 752639 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 30-07-2021
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: P K MENON; JOSE JOSEPH
• Assessee Lawyers: T M SREEDHARAN; V P NARAYANAN; NISHA JOHN
• Keywords: Discretionary power; Genuine hardship; Judicial review; Waiver of interest
• Section: 220(2A)

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS FRIDAY, THE 30TH DAY OF JULY 2021 / 8TH SRAVANA, 1943 WA NO. 345 OF 2021 AGAINST THE JUDGMENT IN WP(C) 25990/2020 OF HIGH COURT OF KERALA APPELLANT/PETITIONER: G.SOMAN 6/576A, PALLICKAL POST, KOTTARAKKARA, KOLLAM DISTRICT, PIN-691 566. BY ADVS. T.M.SREEDHARAN (SR.) SRI.V.P.NARAYANAN SMT.NISHA JOHN RESPONDENT/RESPONDENT: 1 THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-1, AAYAKAR BHAVAN, KARBALA JUNCTION, KOLLAM-691 001. 2 THE CHIEF COMMISSIONER OF INCOME TAX AAYAKAR BHAVAN, KOWDIAR, THIRUVANANTHAPURAM-695 003. BY ADVS. SRI.P.K.RAVINDRANATHA MENON (SR.) JOSE JOSEPH, SC, FOR INCOME TAX THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 30.07.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WA No. 345 of 2021 -2- J U D G M E N T S.V.Bhatti,J. Heard learned Senior Advocate Mr.T.M Sreedharan and Standing Counsel Mr.Jose Joseph for the parties. 2. The instant appeal is at the instance of the unsuccessful writ petitioner. The appellant filed W.P.(C) No.25990 of 2020, challenging the orders of the second respondent in Exts.P11 series made under Section 220 (2A) of the Income Tax Act (for short, the Act) by the second respondent. 3. The appellant was subjected to a series of assessment orders by the respondents. On 10.03.2014, the respondents initiated proceedings under Section 220 (2A) of the Act. The appellant through applications dated 11.03.2019 and 13.03.2019 applied for waiver of interest levied on the tax demanded from the appellant by the respondents. The application was made WA No. 345 of 2021 -3- under Section 220 (2A) of the Act which reads as under: Section 220(2A) in The Income -Tax Act, 1995 “(2A) Not withstanding anything contained 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 enquiry relating to the assessment or any proceeding for the recovery of any amount due from him.” 4. The second respondent through the orders impugned in the writ petition viz., Exts.P11 to P11g, rejected the applications of the appellant. The appellant filed, as noted above, W.P.(C) No.25990 of 2020 challenging Ext.P11 series. The learned Single Judge, through the judgment under appeal, dismissed the writ petition. Hence, the appeal. 5. Senior Adv.T.M Sreedharan appearing for the WA No. 345 of 2021 -4- appellant contends that the object, scope, and the extent of jurisdiction enjoined by Section 220(2A) of the Act on commission of Income Tax is fairly well settled by a catena of decisions. According to him, the appellant having availed the remedy available to an alleged defaulter in payment of income tax, must certainly satisfy the requirements of sub-section (2A) of Section 220 of the Act for an order for waiver or reduction of interest in favour of assesee. In other words, unless and until, the assessee, in default, satisfies the parameters, by referring to which the discretion could be exercised in favour of the assessee and assessee is stated not to have made out a case before the second respondent. This does not presuppose that the discretionary jurisdiction is not guided by the applicable criteria. The Commissioner/second respondent has discretionary power under sub-section (2A) of the Section 220 of the Act and the power being discretionary, is coupled with duty, and exercised judicially and WA No. 345 of 2021 -5- reasonably. Proviso no.2 to sub-section (2A) of Section 220 provides for an opportunity of being heard by the second respondent before the application is rejected. The said proviso reads as under: “ provided further that no order rejecting the application either in full or in part, shall be passed unless the assessee has been given an opportunity of being heard” He further argues that the appellant does not complain that the second respondent did not conduct a hearing on the application filed by the appellant. The legal objection raised is that the orders in Ext.P11 series, refer to the arguments and report of Assessing Officer; perusal of records, and as is evident, the second respondent was totally guided by the report submitted by the Assessing Officer on the reasons pleaded by the appellant for waiver or reduction of interest under sub-section (2A) of Section 220 of the Act. The copy of report is not made available to appellant by the second respondent. The resultant circumstance WA No. 345 of 2021 -6- being the hearing, if any, conducted by the second respondent is completely an empty formality and without knowing the reasons or circumstances which would be accepted against the appellant, the appellant was made participate in the enquiry and it resulted in the order impugned in the writ petition. For convenience we prefer to excerpt the operative portion of order in Ext.P11 and the same reason is stated in other orders as well, for convenience we refer to only one of such orders: “I have examined the arguments placed on records. On verification of the Materials available on the records, it is notice from the Assessing Officer reported that the claims/allegations of the assessee are not true. The assessee did not take a single step to co-operate with the Department and to pay the arrear demand while the bar hotel was in a full-fledged condition. The closure of the bar hotel was with effect from September, 2014 and was reopened in 2017. There was Beer and Wine parlor functioning in the bar hotel for the closure period. Assessee's other businesses like Granites, Marbles, tiles, Finance, textiles, Jewellery etc. are flourishing in the above period. The assessee is financially very sound and the payment of interest u/s.220(2) would not cause genuine hardship to the assessee. The details of turnover and income returned by the assessee for the last three assessment years are as follows: WA No. 345 of 2021 -7- Assessment Year Turnover Returned income 2016-17 20867624 1982590 2017-18 21955211 2624060 2018-19 33764274 3436470 From the above facts, it is clear that payment of interest u/s.220(2) would not cause genuine hardship to the assessee. The default in payment of arrear demand was not beyond the control of assessee. It is also not true to state that the assessee had co- operated with department. Further the case of the assessee does not fall within the ambit of conditions stipulated u/s 220(2A) for waiver of interest u/s 220(2). Therefore, I am unable to accede to the assessee's request in the petition for waiver of interest u/s 220(2), the petition, dated 13-03-2019 stands dismissed.” Hence he prays for setting aside the impugned orders in P11 series and remand the matter to the second respondent for consideration and disposal afresh in accordance with law. The appeal was listed for admission on 29.07.2021 and at the request of learned Standing Counsel, the appeal stood adjourned to WA No. 345 of 2021 -8- 30.07.2021 to enable him to get instructions from the respondents. 6. Learned Standing Counsel submits that the requirements of sub-section (2A) of Section 220 of the Act are complied with while making the orders impugned in the writ petition. Even assuming that the order made under sub-section (2A) of Section 220 of the Act, is reviewable under Article 226 of the Constitution of India, this Court may not examine the validity of an order made under sub-section (2A) as a court of appeal. The scope of judicial review is limited to well established grounds. The decision making process in the order communicated to the appellant conforms to the requirements of law and broadly the principles of natural justice are adhered to by the respondents, no exception could be taken. On the argument of the appellant for remand and reconsideration, it has been stated that it depends upon the view this Court would be WA No. 345 of 2021 -9- taken on conclusions recorded by the second respondent in P11 series. 7. We have taken note of the submissions made by the learned counsel appearing for the parties and we have perused the record. The scope of sub-section (2A) of Section 220 of the Act, the procedure to be followed and the necessity to afford opportunity etc., are not reiterated in the present order. It is sufficient to consider the point of prejudice argued by the counsel for appellant while passing Ext.P11 series orders. The case of appellant is that the appellant has made an application for reduction or waiver of interest under sub-section 2A of Section 220 of the Act. The second respondent has called for a report from the jurisdictional Assessing Officer. The copy of the report was not issued or served on the assessee or to his representative. On the contrary, as we have already noted in the excerpt (supra) that the second respondent primarily considered WA No. 345 of 2021 -10- the report of Assessing Officer and recorded the reasons for rejecting the request of appellant. We are of the view that the report of Assessing Officer is considered or would be constituting the basis for recording the reasons under sub-section (2A) of Section 220 of the Act, or for rejecting the applications of appellant, it would be in the fitness of things as well as would be conforming to the requirement of affording an opportunity of being heard, if a copy of Assessing Officer's report is also made available to the representative of the assessee or to the assessee. Upon such copy being made available to the assessee or his representative, the effectiveness with which the assessee would have presented a case before the second respondent is different from presenting the case without a copy of the report submitted by the Assessing Officer or appreciating the circumstances stated against the assessee. After perusing the operative portion of the order impugned in Ext.P11 series, we are of the view that the case WA No. 345 of 2021 -11- of appellant under sub-section (2A) of Section 220 of the Act has not been considered in the manner in which the jurisdiction has been conferred on the second respondent and for the said reason alone, orders in Ext.P11 series are liable to set aside and accordingly set aside. Writ appeal is allowed by this Judgment, by setting aside the judgment of learned Single Judge: a) Matter remitted to second respondent for consideration and disposal afresh in accordance with law. b) The second respondent on receipt of a copy of this judgment, furnishes a copy of Assessing Officer’s report within two weeks thereafter to the assessee by Registered Post Acknowledgment Due/EMS speed post. c) The assessee within two weeks from the date of receipt, is permitted to file submission/objection/explanation on the report submitted by the Assessing Officer for consideration of his request under sub-section (2A) of WA No. 345 of 2021 -12- Section 220 of the Act. d) The second respondent considers and disposes of the said applications within six weeks from the date of receipt of copy of explanation/objections submitted by the assessee as permitted by this order. Accordingly, Writ appeal is allowed as indicated above. No orders as to costs. Sd/- S.V.BHATTI JUDGE Sd/- BECHU KURIAN THOMAS JUDGE JS "