METALLURGICAL AND ENGINEERING CONSULTANTS (INDIA) LTD. VS COMMISSIONER OF INCOME-TAX
2002 P T D 1757
[242 I T R 647]
[Patna High Court (India)]
Before Sachchidanand Jha and Aftab Alam, JJ
METALLURGICAL AND ENGINEERING CONSULTANTS (INDIA) LTD.
versus
COMMISSIONER OF INCOME-TAX and others
Civil Writ Jurisdiction Case No.2009 of 1991(R), decided on 04/09/1998.
Income-tax---
----Recovery of tax---Writ---Interest for delay in paying taxes---Waiver or reduction of interest---Difference between Ss. 215 & 220-- Conditions laid down in S.220(2A) do not prohibit High Court from passing appropriate order on a writ petition ---CIT directed to consider whether there had been delay in receiving refunds and such a delay resulted in 'assessee not being able to pay taxes on time-- Indian Income Tax Act, 1961, Ss.215 & 220---Constitution of India, Art. 226.
Section 215 of the Income Tax Act, 1961, provides for interest payable by the assessee wherein any financial year, the assessee has paid advance tax under section 209A or 212 on the basis of his own estimate (or revised estimate) and the advance tax so paid is less than 75 per cent. of the assessed tax (where the assessee is a company, the advance tax so paid should be less than 83-1/3 per cent. of the assessed tax). Section 220(2) on the other hand, contemplates the stage after the income-tax liability has already been determined and notice of demand under section 156 of the Act has already been issued but the assessee fails to pay the amount within the stipulated period. The considerations for allowing waiver/reduction of interest payable under section 215 and similar waiver/reduction under section 220(2) are bound to be different There may be genuine cases where the assessee under a bona fide belief as to his income-tax liability by has paid less advance tax on the basis of his own estimate and in the facts of the particular case, therefore, he may be allowed waiver or reduction. In the case of interest chargeable under section 220(2), however, the income-tax liability of the assessee already stands determined. He cannot take the plea of bona fide belief as in the case of interest chargeable under section 215. Nonetheless interest chargeable under section 220(2) can also be waived or reduced but only in the circumstances mentioned in section 220(2A) which reads as follows:
"(2A) 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 the said subsection if he is satisfied that-(i) payment of such amount has caused or could 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 proceeding for the recovery of any amount due from him." The above subsection which begins with a non obstante clause is a self-contained provision. It overrides the charging provision as contained in subsection (2) but also restricts the power of the authority (the Chief Commissioner or the Commissioner) to reduce or waive the amount of interest paid or payable by an assessee only if he is satisfied that the conditions as set out in the three clauses are satisfied. It is to be kept in mind that for claiming reduction or waiver under this provision, the assessee has to satisfy all the conditions cumulatively. The conditions laid down in subsection (2A) of section 220 for allowing waiver or reduction of interest are meant for the Chief Commissioner/ Commissioner and they do not create any fetter on the power of the High Court in passing appropriate orders in the facts and circumstances of a particular case and on a ground not mentioned therein, in exercise of writ jurisdiction.
Held,that the Commissioner had recorded a finding of fact that the petitioner had failed to establish the ground that the default of payment was due to circumstances beyond its control. The finding being in the nature of a finding of fact could not be interfered with by the Court in writ jurisdiction. Without going into the correctness of the submissions it appeared that if the benefit of refund ...actual or by way of adjustment-was not given to an assessee without any delay, there may be justification to reduce the amount of interest payable under section 220(2) of the Act, to the extent of the loss suffered by the assessee on account of belated refund/adjustment. If refund is allowed to an assessee without any delay, he may be able to make better use of the money; without doing so and depriving him of the benefits in this regard, it may not be proper on the part of the authorities to deny him the benefit of reduction of the amount of interest. Since this and other related aspects of the matter had not been gone into by the Commissioner, it would be in the ends of justice to direct him to consider the matter afresh and pass an appropriate order.
On a concession by the Department it was observed that this judgment would not stand in the way of the assessee taking recourse to the Kar Vivad Samadhan Scheme, 1998. It was clarified that if the petitioner eventually decided to avail of the benefit of the aforesaid Scheme, it would be entitled to take into account payment of Rs.20 lakhs made by it pursuant to the interim order of the Court and accordingly, would be required to pay only the balance amount out of the 50 per cent. of the total impugned demand of Rs.54,24,218 for availing of the benefit of the Samadhan Scheme.
A. Moitra and S.K. Dutta for the.Assessee.
Debi Prasad and K.K. Jhunjhunwala for Respondents.
JUDGMENT
SACHCHIDANAND JHA, J.-The petitioner, which is a Government company within the meaning of the Companies Act, 1956, 100 per cent. shares whereof are held by the President of India, seeks quashing of the order of the Commissioner of Income-tax, Ranchi, dated. September 6, 1991, rejecting its application for waiver of interest under section 220(2A) of the Income Tax Act, 1961 (in short "the Act''), and the consequential order of the Deputy Commissioner of Income-tax, Special Range, Ranchi, dated September 11, 1991, calculating the interest allegedly chargeable under section 220(2) of the Act at Rs.65,70,873. Copies of the said two orders are Annexures 8 anti 9 to the writ petition.
The facts of the case, as stated in the writ petition, may briefly be set out as follows. For the assessment year 1987-88 to which the dispute relates, the petitioner filed its return of income on August 27, 1987, declaring a total income of Rs.11,81,96,860. On February 9, 1990, a revised return was filed declaring an income of Rs.11,21,56,700. According to the petitioner, the income-tax payable on the returned income had been paid before filing the return and no income-tax remained outstanding. The assessment was completed on March 5, 1990, as per which the income-tax liability of the petitioner was determined at Rs.20,57,94,530 and it was asked to pay a further sum of Rs.5,47,49,865 including interest of Rs.1,25;79,096 under section 215 of the Act. The petitioner filed an appeal before the Commissioner of Income-tax (Appeals) against the assessment order and also filed an application under section 220(3) bf the Act before the Deputy Commissioner of Income-tax, Special Range, Ranchi, for stay of realization of the demand till disposal of the appeal. However, on March 5, 1990, a demand notice was mechanically issued by the him for the aforesaid sum of Rs.5,47,49,865.
According to the petitioner, the amount could not be paid on account of resource constraints which it was facing at the relevant time. Besides, it had already preferred an appeal against the assessment order which was eventually allowed in part by the Commissioner of Income-tax (Appeals),. Ranchi, on August 20, 1990. A revised, order was passed by the Deputy Commissioner of Income-tax, Special Range, Ranchi, giving effect to the said appellate order on December 21, 1990, as per which the petitioner was held liable to pay income-tax of Rs.4,43,97,899. On December 21, 1990, the revised demand notice was accordingly issued. The demand was further reduced to Rs.3,82,11,219 in, view of the order of the Commissioner of Income-tax, Ranchi, dated March. 22, 1991, under section-264 of the Act. On March 25, 1991, the petitioner paid a sum of Rs.1,04,72,382. According to the petitioner, during the intervening period it had been allowed revised refunds of Rs.1,02,38,087 for the assessment year 1990-91 and Rs.1,75,00,770 for the assessment year, 1989-90 which were adjusted, respectively, on January 29, 1991, and March 28, 1991. The payment of Rs.1,04,72,382 on March 25, 1991, thus amounted to a full satisfaction of the demand in the following manner:
| Refund for the assessment year 1990-91 adjustedRs. on January 29, 19911,02,38,087 Refund for the assessment year 1989-90 adjusted on March 28, 19911,75;00,770 Actual payment made by assessee on March 25, 19911,04,72,382 3,82,11,239 |
It would not be out of place to mention that according to the petitioner, the aforesaid payment of Rs.1,04,72,382 was made on March 25, 1991, after taking loan from the bank in view of the persisting resource constraints for the past three years.
On April 11, 1991, the petitioner filed an application for waiver/reduction of the interest leviable under section 220(2) of the Act in terms of section 220(2A) of the Act apprehending that such interest would be levied for the late payment of the demand. By the impugned order, dated September 6, 1991, Annexure 8, the said application has been rejected and the impugned demand of Rs.65,70,873 by way of interest under section 220(2) has been issued. In the course of hearing we were informed that the amount has since been reduced to Rs.54,24,218. It may be mentioned here that out of the said amount the petitioner has paid Rs.20,00,000 pursuant to the interim order of this Court, dated October 1, 1991, passed in the present case.
Mr. A. Moitra, learned counsel for the petitioner, firstly contended that the same authority, i.e. Commissioner of Income-tax, Ranchi, having allowed waiver of interest payable under section 215 of the Act on the same facts and circumstances, he ought to have allowed waiver of interest payable under section 220(2) as well. I do not find any substance in this contention. Section 215 of the Act provides for interest payable by the assessee where, in any financial year, the assessee bas paid advance tax under section 209A or section 212 on the basis of his own estimate (or revised estimate), and the advance tax so paid is less than 75 per cent. of the assessed tax (where the assessee is a company the advance tax so paid should be less than 83-1/3 per cent. of the assessed tax). Section 220(2) of the Act, on the other hand, contemplates the stage after the income-tax liability has already been determined and notice of demand under section 156 of the Act has already been issued but the assessee fails to pay the amount within the stipulated period. It would be apt to quote the provision, so far as relevant, as hereunder:
"(2) 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 per cent. for every month or part of a month comprised in the period commencing from the day immediately following the end of the period mentioned in subsection (1) and ending with the day on which the amount is paid."
The considerations for allowing waiver/reduction of interest payable under section 215 and similar waiver/reduction under section 220(2) are bound to be different. There may be genuine cases where the assessee under a bona fide belief as to his income-tax liability has paid less advance tax on the basis of his own estimate and in the facts of the particular case, therefore, he may be allowed waiver or reduction. In the case of interest chargeable under section 220(2), however, the income-tax liability of the assessee already stands determined. He cannot take the plea of bona fide belief as in the case of interest chargeable under section 215. Nonetheless interest chargeable under section 220(2) of the. Act can also be waived or reduced but only in the circumstances mentioned in section 220(2A) which reads as follows:
"(2A) 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 the 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 proceeding for the recovery of any amount due from him."
It would appear that the above subsection which begins with a non obstante clause is a self-contained provision. It overrides the charging provision as contained in subsection (2) but also restricts the power of the authority (the Chief Commissioner or the Commissioner of Income-tax) to reduce or waive the amount of interest paid or payable by an assessee only if he is satisfied that the conditions as set out in the three clauses are satisfied. It is to be kept in mind that for claiming reduction or waiver under this provision the assessee has to satisfy all the conditions cumulatively. In other words, he has not only to show that payment of the amount has caused or would cause genuine hardship to him but also that the default in payment of the amount on which interest has been paid or was payable under sec-ion 220(2) was due to circumstances beyond his control and 'further that he had 'cooperated in the enquiry relating to the assessment or any proceeding for recovery of any amount due from him.
Mr. Debi Prasad, learned counsel for the respondents, in this connection pointed out that the petitioner had claimed waiver on the ground of hardship alone but its case in this regard has been disbelieved. And even if another view of the matter is taken, it cannot be held entitled to any reduction or waiver without establishing that the default in payment of the amount was due to circumstances beyond its control. Mr. Prasad contended that the expression "due to circumstances beyond the control" cannot be given the same meaning as "genuine hardship". The two expressions, according to him, contemplate two different situa tions. He submitted that in any view of the matter, the Commissioner has recorded a finding of fact that the petitioner has failed to establish the ground that the default of payment was due to circumstances beyond its control. The finding being in the .nature of finding of fact cannot be interfered with by this Court in writ jurisdiction.
The submissions aforesaid as propositions of law are well founded. Mr. Debi Prasad, however, agreed that the conditions laid down in subsection (2A) of section 220 for allowing waiver or reduction of interest are meant for the Chief Commissioner/Commissioner of Income-tax, and they do not create any fetter on the power of this Court in passing an appropriate order in the facts and circumstances of the particular cases and on a ground not mentioned therein, in the exercise of writ jurisdiction.
Mr. Moitra was at pains to submit that while the Department interest in each case of delayed payment of the tax, it does not rptdnds and adjustments with corresponding promptness. He referred to several instances where the benefit of refund was allowed belatedly by adjusting the amount against the tax liability of earlier periods. For example, it was stated, the petitioner was allowed refund of Rs.1,75,00,770 for the assessment year 1989-90 but the same was adjusted only on March 21, 1991, against the liability for the assessment year 1977-78. Mr. Moitra also stated that the petitioner has been regularly paying advance tax, some times in excess of the tax payable but the Department has been slow in giving the benefit of refund/adjustment. According to counsel, this amounts to failure on the part of the departmental authorities to perform their statutory duties in a proper and judicious manner.
Without going into the correctness of the submissions it appears to me that if the benefit of refund---actual or by way of adjustment---is not given to an assessee without any delay, there may be justification to reduce the amount of interest payable under section 220(2) of the Act, to the extent of the loss suffered by the assessee on account of belated refund/adjustment. There can be little doubt that if refund is allowed to an assessee without any delay, he may be able to make better use of the money; without doing so and depriving him of the benefits in this regard, it may not be proper on the part of the respondent-authorities to deny him the benefit of reduction of the amount of interest. Since this and other related aspects of the matter have not been gone into by the Commissioner of Income-tax (and, perhaps, could not have been gone into by him within the parameters of section 220(2A), it would be in the ends of justice to direct ,him to consider the matter afresh and pass an appropriate order.
I would accordingly direct the Commissioner of Income-tax, Ranchi, to consider the matter afresh in the light of the discussions made hereinabove and pass an appropriate order after giving an. opportunity of hearing to the petitioner in accordance with law.
Before I conclude, I may mention that in the course of hearing of the case and in response to the observations of the Court, Mr. Debi Prasad, learned counsel for the respondents, after taking instructions from the Commissioner of Income-tax, Ranchi, stated that it is open to the petitioner to avail of the benefits of the Kar Vivad Samadhan Scheme, 1998, contained in the Finance (No.2) Act, 1998. Mr. Motira stated that without instructions in this regard he cannot take a defininte stand. Considering the fact that petitioner is a Government company and it tray not be possible for-counsel to get proper instructions in the matter within a short time, we decided to close the hearing and proceed with the judgment. This judgment, however, will not stand in the way of the petitioner in taking recourse to the aforesaid Scheme which, according to us, would be proper course to do. We would in this connection clarify that if the petitioner eventually decides to avail of the benefit of the aforesaid Scheme, it would be entitled to take into account payment of Rs.20 lakhs made by it pursuant to the interim order of this Court and, accordingly, would be required to pay only the balance amount out of the 50 per cent. of the total impugned demand of Rs.54,24,218 for availing of the benefit of the Samadhan Scheme.
This writ petition is allowed in the manner and. with the observation mentioned hereinabove. There will be no order as to costs.
M.B.A./721/FCPetition allowed.