Madras High Court
Fuaad Musvee vs The Principal Commissioner Of ... on 9 February, 2023
W.P.Nos.34902 and 34905 of 2022
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 09.02.2023
CORAM
THE HON'BLE MR. JUSTICE ABDUL QUDDHOSE
W.P.Nos.34902 and 34905 of 2022
and
W.M.P.Nos.34326 and 34332 of 2022
Fuaad Musvee ... Petitioner
In both W.Ps.
Vs.
1.The Principal Commissioner of Income Tax,
Income Tax Department,
Room No.301, Wanarpathy Block II Floor,
Wanaparthy Block No.121, Mahatma Gandhi Road,
Nungambakkam,
Chennai - 600 034.
2.The Joint Commissioner / Deputy Commissioner of Income Tax,
Non-Corp Range-3,
Chennai - 600 034.
3.The Commissioner of Income Tax,
Centralized Processing Center (ITR),
Post Bag No.1, Electronic City Post Office,
Bangalore - 560 100. ... Respondents
In both W.Ps.
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W.P.Nos.34902 and 34905 of 2022
COMMON PRAYER: Writ Petitions have been filed under Article 226 of
the Constitution of India to issue a Writ of Certiorarified Mandamus, calling
for the records in PAN AAGPM1199J for the assessment years AY 2009-10
and AY 2011-12 and quash the impugned order u/s. 220 (2A) of the Income
Tax, 1961 passed by the 1st respondent in DIN and Letter
Nos.ITBA/COM/F/17/2021-22/1042404459(1) and ITBA/COM/F/17/2021-
22/1042405236(1) both dated 31.03.2022 for A.Y.2009-10 and A.Y. 2011-
12 and direct the respondents to waive interest u/s. 220 (2) and also impose
cost on the respondents.
For Petitioner
In Both W.Ps. : Mr.G.Vardini Karthik
For Respondents
In Both W.Ps. : Mr.V.Mahalingam
Standing Counsel
COMMON ORDER
These Writ Petitions have been filed challenging the impugned orders
both dated 31.03.2022 passed under Section 220 (2A) of the Income Tax
Act, 1961, for the assessment years 2009-10 and 2011-12, granting a waiver
of 20% of the interest levied under Section 220 (2) of the Income Tax Act,
amounting to Rs.2,44,076 and Rs.1,63,036/- respectively to the petitioner,
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eventhough the petitioner had sought for full waiver in his petitions both
dated 25.02.2021.
2. The brief facts leading to the filing of these Writ Petitions are as
follows:
a) The petitioner is an individual assessee who has filed his Tax
Returns for the assessment years 2009-10 and 2011-12, declaring a total
taxable income of Rs.88,37,380/- and Rs.87,10,242/- respectively. The
petitioner also filed a return of income for the assessment years 2009 -10
and 2011-12 for his minor son, separately.
b) According to the petitioner, it was done by way of abundant
caution. The declared income of the petitioner included income of
Rs.33,46,321/- and Rs.35,13,860/- of his minor son Master Imaad Musvee
(PAN No.AAAPI4751J) and the petitioner also claimed credit of prepaid
taxes of Rs.21,27,450/- and Rs.25,41,037/- (including advance tax and
TDS) paid on account of his minor son in his return of income.
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c) The petitioner had included the income of his minor son Master
Imaad Musvee as envisaged under Section 64 of the Income Tax Act in his
return. He had paid the advance tax on the said minor's income in the PAN
number of the minor and also by way of abundant caution filed a return for
the minor son showing the same amount in his hands also.
d) The second respondent had raised tax demand on the petitioner
under Section 143 (1) of the Income Tax Act on 14.03.2011 and on
29.12.2012 for the assessment years 2009-10 and 2011-12 without
considering the payment of advance tax paid by the petitioner for the same
income in the PAN number of his minor son. The second respondent had
also informed the petitioner that credit cannot be given for the amount paid
under different PAN numbers and advised the petitioner to file a rectification
petition under Section 154 of the Income Tax Act in the case of his minor
son Master Imaad Musvee and obtain refund and once again pay the tax in
the PAN number of the petitioner.
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e) Since the petitioner had already paid the tax amounts, he sought for
total waiver of the interest amount of Rs.12,20,380/- and Rs.8,15,179/-
under Section 220 (2) of the Income Tax Act for the period 29.12.2012 to
25.11.2018 as he has paid the taxes in the year 2011 itself albeit in his
minor son's PAN number. According to the petitioner, the Income Tax
Department had the tax amounts with them through all these years and
therefore, there is no basis for the demand of interest. However, under the
impugned orders both dated 31.03.2022, the first respondent has granted
only partial waiver of interest viz., 20% and has directed the petitioner to
pay the balance 80%. Aggrieved by the same, the petitioner has filed these
Writ Petitions.
3. The petitioner has raised the following grounds for challenging the
impugned orders:
a) The impugned orders have been passed contrary to law beyond the
Jurisdiction and in violation of the principles of natural justice and they are
also non speaking orders;
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b) The first respondent ought to have seen that the waiver of interest
levied under Section 220 (2) has to be awarded if the assessee fulfills or
satisfies all the conditions under Section 220 (2A) of the Income Tax Act
and the impugned orders rejecting the waiver petitions are silent on the
same;
c) The petitioner submits that the wrong tax demands generated by
the third respondent without giving credit to the advance tax paid by the
petitioner in the name of his minor son Master Imaad Musvee and delay in
passing the rectification order dated 30.01.2018 and 12.11.2018 and
18.12.2018 by the second respondent are the reasons behind demand of
interest under Section 220(2) for the period 2009-10 and 2011-12
respectively;
d) The first respondent ought to have seen that there is no deliberate
lapse on the part of the petitioner in the payment of his taxes and he has also
not committed any wilful default and there is no such allegation against the
petitioner in the impugned orders also;
e) The first respondent ought to have seen that if the taxes deposited
under the petitioner's minor son account were duly credited to the petitioner's
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account immediately on the date of remittance, the petitioner would not be
made liable for any tax on interest under Section 234 A, B, C and under
Section 220;
f) The first respondent ought to have seen that the petitioner once
again paid the taxes of Rs.13,26,540/- and Rs.11,48,990/- in his own PAN
number on 12.11.2018 and 11.12.2018 respectively and the refund of
Rs.16,27,220/- and Rs.13,08,490/- (including interest under Section 244A)
on 26.11.2018 and 01.01.2019 respectively;
g) The first respondent ought to have seen that the hardship
undergone by the petitioner was due to the erroneous action of the second
and third respondents in not giving credit to the Advance Tax paid;
h) The first respondent ought to have seen that the interest under
Section 220 (2) has been levied eventhough the taxes have been paid in
2009 and 2011 itself on the income of the minor son and the same had been
included in the return of the petitioner as envisaged in Section 64 of the Act;
i) The first respondent ought to have seen that it is well settled law
that interest is compensatory in nature, and when the tax amounts have been
with the Department from 2011 onwards, the question of levying interest
will not arise. The petitioner's payment of taxes in his own PAN number was
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even before the refunds were granted to his son, thus resulting in the
Department having the benefit of the taxes twice over for a short period;
j) The first respondent failed to appreciate that it was the petitioner
who was made to run from pillar to post approaching various authorities on
account of the technical glitch in the computer / software applications of the
Department and the petitioner cannot be penalized for such technical issues.
4. Learned counsel for the petitioner reiterated the contentions of the
petitioner during the course of her submissions. In support of the petitioner's
contentions, she also relied upon the following authorities:
a) A Judgment of a learned Single Judge of this Court in the case of
Madras Race Club Vs. Commissioner of Income Tax, Chennai - III
reported in 2017 (88) taxmann.com 319 (Madras);
Relying upon the aforesaid Judgment, learned counsel for the
petitioner would submit that the impugned orders have not given reasons as
to why the petitioner is not entitled for waiver of interest and therefore, the
impugned orders are non speaking orders. According to the petitioner, the
conditions required for waiver of interest under Section 220 (2A) of the
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Income Tax Act have been satisfied, but, despite the same, the respondents
have only granted partial waiver of interest.
b) A Division Bench Judgment of the Delhi High Court in the case of
Court on its Own Motion Vs. Commissioner of Income Tax reported in
2013 (352) ITR 273 (Delhi).
Relying upon the aforesaid decision, learned counsel for the petitioner
would submit that filing of application under Section 154 i.e., application for
rectification and correction by the assessee would entail substantial expenses
on the part of the assessee who would be required to engage a counsel or
advocate or make repeated visits to the Income Tax Office for the said
purpose. This would defeat the main purpose behind computerization i.e., to
reduce involvement of human element. Therefore, she would submit that
only due to the said fact an application under Section 220 (2A) of the
Income Tax Act was filed by the petitioner seeking waiver of interest.
5. Per contra, learned Standing Counsel appearing for the respondents
would reiterate the contents of the impugned order and would submit that
the petitioner had not approached the Assessing Officer for rectification with
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regard to shortfall of credit, instead, separate returns on the hands of his son
were filed which resulted in total refund of Rs.16,85,870/- and
Rs.13,08,490/- (including interest under Section 244A). He would also
submit that the Assessing Officer has stated that the assessee had paid total
demand of Rs.13,26,540/- and Rs.11,48,990/- and hence, there is excess
refunds of Rs.3,59,300/- [Rs.16,85,870/- (-) Rs.13,26,540/-] and
Rs.1,59,500/- [Rs.13,08,490 (-) Rs.11,48,990/-] causing loss to the
Department. According to him, only based on the materials available on
record, the respondents have partially allowed the waiver applications filed
by the petitioner under Section 220 (2A) of the Income Tax Act by granting
waiver of 20% of the interest amounting to Rs.2,44,076/- and Rs.1,63,036/-
and directed the petitioner to pay the balance 80% interest amounting to
Rs.9,76,304/- and Rs.6,52,143/- by 30.04.2022. According to him, there is
no infirmity in the impugned orders.
Discussion:
6. Section 220 (1) of the Income Tax Act, 1961 provides that any
amount, otherwise than by way of advance tax, specified as payable in a
notice of demand under Section 156 shall be paid within thirty days of the
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service of the notice at the place and to the person mentioned in the notice.
Where the Assessing Officer has any reason to believe that it will be
detrimental to revenue if the full period of thirty days aforesaid is allowed,
he may, with the previous approval of the Joint Commissioner, direct that
the sum specified in the notice of demand shall be paid within such period
being a period less than the period of thirty days aforesaid, as may be
specified by him in the notice of demand.
7. Section 220(2) of the Act provides that if the amount specified in
any notice of demand under Section 156 is not paid within the period limited
under Sub-Section (1), the assessee shall be liable to pay simple interest at
one 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 Sub- Section (1) and ending with the day on which the amount
is paid.
8. Section 220 (2A) of the Income Tax Act provides that
notwithstanding anything contained in Section 220 (2), the Principal Chief
Commissioner or Chief Commissioner or Principal Commissioner or
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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-
a) payment of such amount has caused or would cause genuine
hardship to the assessee;
b) default in the payment of the amount on which interest was
payable under the said Sub-Section was due to circumstances beyond the
control of the assessee; and
c) the assessee has co-operated in any inquiry relating to the
assessment or any proceeding for the recovery of any amount due from him.
9. Before passing an order under Section 220 (2A) of the Income Tax
Act, 1961, the respondent must satisfy himself that none of the conditions
adumbrated under Section 220 (2A) of the Income Tax Act did exist and
only thereafter he can reject an application under Section 220 (2A) of the
Income Tax Act, 1961.
10. In the case on hand, excepting for stating that the assessee had not
approached the Assessing Officer for rectification with regard to shortfall of
credit, instead a separate return in the hands of the minor son was filed
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which resulted in total refund of Rs.16,85,870/- and Rs.13,08,490/-
(including interest under Section 244A) which compelled the respondents to
pay an excess refund of Rs.3,59,300/- and Rs.1,59,500/- to the petitioner,
the contentions of the petitioner as raised in the petitions filed under Section
220 (2A) of the Income Tax Act both dated 25.02.2021 have not been
considered.
11. The respondents before rejecting the petitioner's applications have
not taken note of the following undisputed facts:
a) The wrong tax demand generated by the third respondent without
giving credit to the advance tax paid by the petitioner in the name of his
minor son Imaad and there was delay in passing the rectification order dated
30.01.2018 and 12.11.2018 and 18.12.2018 by the second respondent are
beyond the control of the petitioner;
b) There is no lapse on the part of the petitioner in the payment of his
taxes and he has not committed any default;
c) The taxes deposited under the petitioner's minor son's account were
duly credited to the petitioner's account immediately on the date of
remittance;
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d) The petitioner has once again paid the taxes of Rs.13,26,540/- and
Rs.11,48,990/- in his own PAN number on 12.11.2018 and 11.12.2018 and
the refund of Rs.16,27,220/- and Rs.13,08,490/- (including interest under
Section 244A) was made by the respondents only on 26.11.2018 and
01.01.2019 respectively;
e) The hardship undergone by the petitioner due to the erroneous
action of the second and third respondents in not giving credit to the
Advance Taxes paid by the petitioner have not been given due consideration
in the impugned orders;
f) The interest under Section 220 (2) of the Income Tax Act has been
levied eventhough the taxes has been paid in 2009 and 2011 itself on the
income of the minor son and the same had been included in the return of the
petitioner as envisaged in section 64 of the Act;
g) The interest is compensatory in nature and when the tax amounts
have been with the Department from 2011 onwards, there is no warrant to
levy interest. The petitioner's payment of taxes in his own PAN number was
even before the refunds were granted to his son, thus resulting in the
Department having the benefit of the taxes twice over for a short period;
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h) The first respondent in the impugned order has failed to appreciate
that the petitioner has been approaching various authorities on account of
the technical glitch in the computer / software applications of the
Department for which the petitioner cannot be penalized.
12. The decisions relied upon by the learned counsel for the petitioner
referred to supra also supports the case of the petitioner.
13. For the foregoing reasons, the petitioner has certainly suffered
genuine hardship and for no fault of his, interest cannot be levied under
Section 220 (2) of the Income Tax Act when the advance taxes were infact
paid on time though mistakenly in the petitioner's minor son's PAN number.
It is also not the case of the respondents that the petitioner did not cooperate
in any enquiry relating to the assessment or any proceedings for the recovery
of amount due from him. The first respondent under the impugned order has
granted partial waiver of interest to the petitioner at 20% without giving any
reason as to how they arrived at that rate. When the first respondent has
granted partial waiver at 20%, this Court is of the considered view that too
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when there is no finding given by the first respondent under the impugned
orders that the petitioner has not satisfied the three conditions required for
waiver of interest under Section 220 (2A) of the Income Tax Act viz.,
a) payment of such amount has caused or would cause genuine
hardship to the assessee;
b) default in the payment of the amount on which interest was
payable under the said Sub-Section was due to circumstances beyond the
control of the assessee; and
c) the assessee has not cooperated in any inquiry relating to the
assessment or any proceeding for the recovery of any amount due from him;
the first respondent ought to have granted full waiver of the interest to the
petitioner, but, instead, erroneously has granted only 20% waiver by passing
non speaking orders.
14. However, this Court will also have to take note of the fact that the
petitioner has already got the benefit of interest while the respondents had
refunded a sum of Rs.3,59,300/- and Rs.1,59,500/- under Section 244A of
the Income Tax Act. Certainly that amount has to be adjusted from and out
of the waiver of interest under Section 220(2A) of the Income Tax Act. The
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petitioner had sought for waiver of Rs.12,20,380/- and Rs.8,15,179/- under
Section 220 (2A) of the Income Tax Act which has been partially allowed by
granting 20% waiver to the petitioner under the impugned orders which
work out to Rs.2,44,076 and Rs.1,63,036/- and the balance 80% amount is
Rs.9,76,304/- and Rs.6,52,143/- respectively. This Writ Petition is partly
allowed by modifying the impugned order by granting full waiver of interest
to the petitioner under Section 220 (2A) of the Income Tax Act and by
directing the petitioner to pay a sum of Rs.3,59,300/- and Rs.1,59,500/-
respectively which he has received towards refund of interest under Section
244A of the Income Tax Act from the respondents within a period of four
weeks from the date of receipt of a copy of this order.
15. In the result, these Writ Petitions are partly allowed in terms of the
aforementioned directions. No Costs. Consequently, the connected Writ
Miscellaneous Petitions are closed.
09.02.2023
Index : Yes/No
Speaking Order : Yes / No
Neutral Citation Case: Yes / No
ab
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To
1.The Principal Commissioner of Income Tax,
Income Tax Department,
Room No.301, Wanarpathy Block II Floor,
Wanaparthy Block No.121, Mahatma Gandhi Road,
Nungambakkam,
Chennai - 600 034.
2.The Joint Commissioner / Deputy Commissioner of Income Tax,
Non-Corp Range-3,
Chennai - 600 034.
3.The Commissioner of Income Tax,
Centralized Processing Center (ITR),
Post Bag No.1, Electronic City Post Office,
Bangalore - 560 100.
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W.P.Nos.34902 and 34905 of 2022
ABDUL QUDDHOSE. J.,
ab
W.P.Nos.34902 and 34905 of 2022
09.02.2023
(1/2)
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