Court Limits Interest to 1/3rd Amount Under Tax Act Section 220(2A)

The court modified Ext.P2 order for partial waiver of interest under Section 220(2A) of the Income Tax Act, specifying that the interest levied on the petitioner should be only 1/3rd of the amount imposed. The court found that while the first respondent accepted grounds for waiver, the order lacked reasoning for limiting the waiver to 1/3rd. Considering prior levies under other sections of the Act, the court deemed it just to restrict the interest to 1/3rd of the original amount.

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Issues: Challenge against Ext.P2 order for partial waiver of interest under Section 220(2A) of the Income Tax Act.

Analysis:
1. The petitioner, an assessee under the Income Tax Act, filed returns for assessment years 1993-1994, 1994-1995, and 1995-1996, with assessments completed in 2000. The first respondent levied interest under Section 220(2) amounting to Rs.7.40 lakhs. The petitioner sought waiver of interest under Section 220(2A) through an application, resulting in Ext.P2 order granting only 1/3rd of the interest waiver.

2. The petitioner argued that since the first respondent accepted the grounds for waiver under Section 220(2A), the interest should have been waived in its entirety. Conversely, the standing counsel for the respondents contended that the grounds for cumulative waiver under Section 220(A) were not fully met, justifying the partial waiver in Ext.P2 order.

3. The court examined Ext.P2 order and noted that the first respondent exercised power under Section 220(2A) indicating satisfaction with the grounds for waiver presented by the petitioner. However, the order lacked reasoning for limiting the waiver to 1/3rd of the interest. The petitioner's representative had raised factual issues to support full interest waiver, which were not addressed in Ext.P2 order.

4. Considering the circumstances and the prior levy of interest under section 234(A, B, and C) of the Act, the court deemed it just to limit the interest to 1/3rd of the amount levied on the petitioner. Consequently, the writ petition was disposed of, modifying Ext.P2 to specify that the interest levied on the petitioner should be only 1/3rd of the Rs.7.40 lakhs imposed under Section 220(2) of the Income Tax Act.

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