S. A. WAHAB VS INCOME-TAX OFFICER
2000 P T D 735
[232 I T R 624]
[Kerala High Court (India)]
Before P. A. Mohammed, J
S. A. WAHAB
versus
INCOME-TAX OFFICER and another'
O.P. No.2218 of 1993 L, decided on 27/08/1997.
Income-tax---
----Revision---Discretion of Commissioner---Commissioner cannot pass an order "prejudicial to assessee"---Interference with order passed by Commissioner not automatic---Reduction or waiver of interest ---I.T.O. refunding excess tax paid by assessee arising from Tribunal's order---High Court setting aside Tribunal's order---Notice of demand issued for tax and interest---Revision petition filed by assessee dismissed by Commissioner-- Commissioner holding that tax demanded not paid in time---Assessee diverting funds for construction of theatre building without paying tax when it was due ---Establishes that assessee has not co-operated in proceedings for recovery of tax---Commissioner finding that no genuine hardship to assessee as he derived income from transport business regularly ---Assessee unable to establish that default in payment of tax due to circumscribes beyond control of assessee---Commissioner holding that due to non- compliance with provisions interest cannot be waived---Discretion of Commissioner properly exercised---Indian Income Tax Act, 1961, Ss.220(2), (2A) & 264.
The power of the High Court to interfere with an order passed by the Commissioner under section 264 of the Income Tax Act, 1961, is not automatic; it has its own limitations.
For the assessment year 1987-81, the Income-tax Officer passed an order of assessment fixing the total income of the petitioner at Rs.1,31,810 and the total tax payable at Rs.70,483. Against the order of the Income-tax Officer, the petitioner, filed an appeal before the Appellate Assistant Commissioner who rejected the appeal. On further appeal, the Tribunal allowed the application of the petitioner for rectification under section 154 of the Income Tax Act, 1961, as a result of which the depreciation in respect of buses was fixed at the rate of 40 percent. Subsequently, the Income-tax Officer passed an order giving effect to the order of the Tribunal, thereby allowing refund of the iota] amount of Rs.11,554 being the excess tax paid. Against the order of the Tribunal, the Commissioner came on a reference to the High. Court and the High Court set aside the order of the Tribunal and answered the reference in favour of the Revenue. Thereafter, the Income-tax Officer passed art order demanding an w mount of Rs. 36,349 towards interest under section 220(2) of the Act. The petitioner thereafter filed a revision petition under section 264 of the Act against the order of the Income-tax Officer before the Commissioner of Income-tax. The Commissioner dismissed the revision petition. On a writ petition challenging the order of the Commissioner, the petitioner contended that the Commissioner had failed to apply his mind to the case of the assesses for waiver of interest under section 220(2A) of the Act, because the appeal preferred by the assessee had been allowed by the Tribunal ordering refund of tax to the assessee and hence the respondents, were not entitled to recover interest under section 220(2) of the Act:
Held, that the Commissioner of Income-tax in exercise of his revisional power under section 64 might grant relief to the assessee but under the section the Commissioner is not empowered to pass an order prejudicial to the assessee. Though the Commissioner dismissed the revision petition filed by the petitioner, it did not mean it was an order prejudicial to the assessee and hence the commissioner had no power to pass such an order. The Commissioner had found that the entire tax demanded in respect of the assessment year 1980-81 had not been paid by the petitioner even at the time of passing the order by the Commissioner dismissing the revision petition filed by the petitioner. The petitioner's plea was that he could not remit the tax in time inasmuch as he had to raise funds for the construction of a theatre building, which meant that the petitioner was diverting the money for other purposes without paying the tax as and when it was due. This established that the petitioner had not cooperated in the proceedings for recovery of tax legally due from him. The Commissioner had further found that there was no genuine financial hardship to the petitioner inasmuch as he derived income from transport business regularly. The petitioner had no case that the default in the pay anent of tax was caused due to circumstances beyond the control of the petitioner. The Commissioner was not satisfied as to the requirements contemplated by subsection (2A) of section 220 of the Act, though he had not specifically mentioned the same in his order. The commissioner in view of the non-compliance with the provisions of subsection (2A) of section 220 refused to waive the interest. There was no infirmity in the order passed by the Commissioner and no miscarriage of justice and no error apparent on the face of the record which required interference. The writ petition was liable to be dismissed.
CIT v. Chittoor Electric Supply Corporation (1995) 212 ITR 404 (SC), CIT v. The Tribunal (1948) 16 ITR 214 (PC); ITO v. Seghu Buchaiah Setty (1964) 52 ITR 538 (SC):-New Woodlands Hotel v. CIT (1991) 188 ITR 137 (Ker.) and New Woodlands v. CIT (1982) 138 ITR 795 (Ker ) ref.
P. V. Baby for Petitioner .
P.K.R. Menon and N.R.K. Nair for Respondents.
JUDGMENT
The petitioner is an "assessee" under the Income Tax Act, 1961 (for short "the Act").. The question raised in this writ petition relates to the correctness and legality of an order passed by the Commissioner of Income tax under section 264 of the Act.
The facts involved in this case are briefly summarised thus: For the assessment year 1980-81, the first respondent passed Exh. P1 order of assessment fixing the total income of the assessee as Rs.1,31,810 and the total tax payable as Rs.70,483. As against it, the assessee filed an appeal and by Exh. P2, dated December 12, 1983, the Appellate Assistant Commissioner rejected the appeal. The petitioner filed a further appeal before the Income-tax Appellate Tribunal as I. T. A. No. 231 (Cock) of 1984. It was allowed as per Exh.. P-3. Consequently, the application of the assessee for rectification under section 154 was allowed, as a result of which the depreciation in respect of buses had been fixed at the rate 40 percent. Subsequently, the first respondent issued Exh. P4 order giving effect to Exh.P3 order thereby allowing refund of the total amount of Rs.11,554 being the excess amount paid. As against Exh. P3 order of the Tribunal, the Commissioner of Income-tax came before this Court in Income-tax Reference No. 548 of 1985. This Court by Exh.P5 judgment answered the questions referred in the negative, i.e., in favour of the Revenue and against the assessee. In other words Exh.P3 order of the Tribunal was set aside by :his Court. Subsequently by Exh.P-6, the Income-tax Office demanded an amount of Rs.36,649.towards interest under section 220(2) of the Act. The petitioner thereafter filed a revision petition against the said order before the Commissioner of Income-tax under section 264 of the Act. It was dismissed by Exh.P9 order which is challenged in this writ petition.
Section 264 authorises the Commissioner of Income-tax either of his own motion or on an application by the assessee for revision to call for the record of any proceedings under the Act in which any such order has been passed by an authority subordinate to him and may make such inquiry or cause such inquiry to be made and subject to the provisions of the Act, may pass such order thereon, not being an order prejudicial to the. assessee, as he thinks fit. Under this provision wide discretion has been conferred on the Commissioner of Income-tax to revise an order passed by an authority subordinate to him. It cannot be said that this power is not judicial or quasi -judicial to character. What is vouchsafed is sound and honest discretion to be exercised carefully applying the mind to the facts and circumstances of each case. In substance it is a power coupled with a duty to exercise it in the interest of judicial to the assessee.
The prime point urged by counsel for the petitioner is that the Commissioner has failed to apply his mind to the case of the assessee for waiver of interest under section 220(2A) of the Act which nuts as follows:
"Notwithstanding anything contained in subsection (2), the Chief Commissioner or Commissioner may reduce or waive the amount of interest paid or payable by an assessee under said subsection 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 subsection was due to circumstances beyond the control of the assessee; and
(iii) the assessee has cooperated in any inquiry relating to the assessment or any proceedings for the recovery of any amount due from him."
Under this provision, the Commissioner has power to reduce or waive the amount of interest paid or payable by an assessee in case he is satisfied with all the three requirements provided therein. The satisfaction of one of the conditions alone will not be sufficient inasmuch as .the three requirements are conjunctive and not alternative.
Subsection (2) of section 220 provides that if the amount specified in any notice of demand under section 156 is not paid within the period limited under subsection (1), the assessee shall be liable to pay simple interest at one and one-half percent for every month or part of a month Therefore, the amount contemplated under subsection (2A) is an amount specified -in any notice of demand under section 156. In the present case it was pointed out that by Exh.P3 order of the Tribunal, the appeal preferred by the assessee had been allowed and consequently refund was ordered. Therefore, the contention of the assessee is that the respondents are not entitled to recover interest under section 220(2) of the Act. In support of this, the assessee has relied on the decision of the Supreme Court in ITO v. Seghu Buchiah Setty (1964) 52 ITR 538 wherein it was held that the amount of tax assessed having been reduced as a result of the orders of the Appellate Assistant Commissioner a fresh demand notice had to be served on the assessee before he could be treated as a defaulter under the Act. Senior standing counsel for the Department has vehemently attacked this plea. Further, he has brought to my notice a decision of Kochu Thomrnen, J. (as he then was of this Court ) in New Woodlands v. CIT (1982) 138 ITR 795 (Ker). There the learned Judge took notice of section 3 of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964, and then observed (page 800);
"A notice of demand is a consequential order made on the basis of the original order of assessment. If a fresh notice of demand is not required under the Act where the original order of assessment was superseded by an appellate order reducing the amount of tax. I see no reason why fresh notice is required where the appellate authority has set aside the original order of assessment and remanded the case for fresh consideration. The fate of the demand is the same in both cases. The notice of demand remains valid and effective to .the extent that the tax is finally determined to be due and payable by the assessee."
This decision of the learned Judge was reversed by this Court in New Woodlands Hotel v. CIT (1991-) 188 ITR 137. However, the Supreme Court in CIT v. Chittoor Electric Supply Corporation (1995) 212 ITR 404 did not agree with the above decision of the Division Bench of this Court in New Woodlands Hotel v. CIT (1991) 188 ITR 137. In other words, the Supreme Court agreed with the view expressed by Kochu Thommen, J. in New Woodlands v. CIT (1982) 138 ITR 795 (Ker). The following observation of the Supreme Court in CIT v. Chittoor Electric Supply Corporation (1995) 212 ITR 404 is very relevant (headnote):
"Whether an assessment order is set aside and a fresh assessment is directed to be made, the assessment must be deemed to be still pending, which has to be completed. In such a cases the question of an amount being refundable does not arise. It arises only when a fresh assessment is made and the amount properly chargeable is ascertained. When the assessment proceedings for an assessment year are still pending, it is idle to talk of any amount of refund becoming due to the assessee in respect of that assessment year, particularly, in the light of section 237 of the Income Tax Act, 1961."
No doubt, under section 264 the Commissioner is not (sic) empowered to pass an order "not being an order prejudicial to the assessee". By the impugned order, Exh.P-9, the revision filed by the assessee has been dismissed. Thai does not mean it is an order "prejudicial to the assessee" and hence the Commissioner has no power to pass such an order. Of course, the Commissioner in the exercise of his revisional power under section 264 may grant relief to the assessee but in terms of the section, the Commissioner in no case can pass an order prejudicial to the assessee. The Privy Council in CIT v. The Tribune Trust (1948) 16 ITR 214 observed that the expression "prejudicial to the assessee" means (page 226):
"It appears to them that an order made by the Commissioner under section 33 can only be said to be prejudicial to the assessee when he is, as a result of it, in a different and worse position than in which he was placed by the order under review. "
It also reveals from the above decision that the incidence and operation of the tax on the assessee after the order passed on revision did not certainly leave him m a worse position than he was in, prior to the revision. This view is now given statutory effect by Explanation I which enacts that order by the commissioner declining to interfere shall not be an order prejudicial to the assessee.
Can it be said Exh.P9 is invalid for want of application of mind by the Commissioner to the parameters prescribed for waiver of interest under section 220(2)?
The Commissioner has observed that the entire tax demanded in respect of the assessment year 1980-81 has not been paid by the assessee even at the time of passing Exh.P-9. The case of the assessee is that he could not remit the tax in time inasmuch as he had to raise funds for the construction of the theatre building. That means the assessee was diverting the money for other purposes without paying the tax as and when it was due, This would establish that the assessee has not cooperated in the proceedings for recovery of tax legally due from him. The Commissioner further observes that this is not a case where genuine financial hardship is caused to the assessee inasmuch as he derives income from the transport business regularly. That means there would not be any genuine hardship to the assessee for the payment of tax. The assessee has no case that the default in the payment of tax was caused due to circumstances beyond the control of the assessee. In sum and substance the Commissioner is not satisfied as to the requirements contemplated under subsection (2A) of section 220 of the Act Of course, the Commissioner has not specifically mentioned is Exh.P-9 order that he is not satisfied with the requirements 1, 2 and 3 contained in subsection (2A). Because of non-mentioning of these provisions in the impugned order, I cannot attribute any infirmity to it when the substance of the reason for dissatisfaction is crystalline. The Commissioner apparently in view of the non-compliance of the aforesaid provisions found that there is no reason to waive the interest. After anxious consideration of the entire matter, I do not find my way to attribute any infirmity to Exh.P-9 order passed by the Commissioner. I do not see any miscarriage of justice; nor are there any errors apparent on the face of the record which attract interference in the present proceedings. The power of this Court to interference with an order passed by the Commissioner under section 264 of the Act is not automatic; it has its own limitations. Exh.P9 order is accordingly confirmed.
In view of the discussion here in above, this writ petition is liable to be dismissed. It is accordingly dismissed. No order as to costs.
M.B.A./3274/FCPetition dismissed.