Kerala High Court

G.Soman vs The Assistant Commissioner Of ... on 30 July, 2021

             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-




                         JUDGMENT

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

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

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

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

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

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

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

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

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

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

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/-