2015 (9) TMI 1245 - HC - Income Tax

High Court affirms extended waiver of interest, rejecting Commissioner's limitation.

The Commissioner of Income Tax, The Assistant Commissioner of Income Tax Versus M/s Muthappan Enterprises

The appeal was dismissed, affirming the decision to grant the benefit of waiver of interest up to the relevant date specified in the revised order issued ... Waiver of interest as provided under section 220 (2A) - single Judge upheld the claim of the respondent and directed him entitled to the benefit of waiver of interest for the period up to the date provided for payment of tax under the revised order and demand issued on the basis of the Tribunal's order - Held that:- Though the Commissioner has accepted that the three conditions provided for in section 220(2A) are satisfied, he has chosen to limit the benefit of waiver to a particular period. While examining the validity of that order, what is relevant to be examined is whether the reason assigned by the Commissioner for restricting waiver is valid or not. On such examination, it is seen that in March, 1996, though this Court decided the case of Narayanan (1996 (3) TMI 81 - KERALA High Court), the favourable appellate order obtained by the assessee herein in an appeal filed by them, entitling them for assessment treating the firm as a registered one, was remaining valid. That order was invalidated by the Tribunal only on 20.5.1998, in the appeal filed by the Revenue. In other words, it was only on 20.5.1998, the assessee became disentitled to assessment on the status of a registered firm. The fact that this court has decided the issue in the case of Narayanan (supra) is of no consequence at all till 20.5.1998 when the appeal was decided by the Tribunal. This, therefore, shows that the reason which weighed with the Commissioner to restrict the benefit of waiver till March, 1996 is absolutely untenable. It was in the aforesaid circumstances that the learned single Judge interfered with the order and directed that the assessee be given the benefit of waiver up to the date provided for payment under the revised order and demand issued on the basis of the Tribunal's order. In our view, this conclusion of the learned single Judge does not suffer from any illegality justifying interference in appeal. Issues:Challenge to Ext.P8 order under section 220(2A) of the Income Tax Act for waiver of interest; Interpretation of conditions under section 220(2A) for reducing or waiving interest; Validity of limiting waiver of interest to a specific period by the Commissioner.Analysis:1. The case involved a writ appeal filed by the respondents challenging Ext.P8 order passed under section 220(2A) of the Income Tax Act, which limited the waiver of interest up to March 1996. The original petition sought to challenge this order, and the learned single Judge upheld the respondent's claim, directing the benefit of waiver of interest up to the date provided for payment under the revised order and demand issued based on the Tribunal's order.2. The facts of the case revealed that the respondent firm, engaged in the business of arrack, was initially assessed as a registered firm but later assessed as unregistered for the years 1991-92 and 1992-93. The Commissioner of Income Tax (Appeals) allowed registration for the assessee, which was later reversed by the Tribunal, leading to a demand for interest under section 220(2) of the Act.3. Section 220(2A) sets out three conditions for reducing or waiving interest, including genuine hardship to the assessee, default beyond the assessee's control, and cooperation in related proceedings. The Commissioner accepted that these conditions were met in the respondent's case but limited the waiver up to March 1996 based on a previous court judgment.4. The Commissioner's decision to restrict the benefit of waiver to March 1996 was deemed invalid upon examination. The Court noted that the appellate order in favor of the assessee, treating the firm as registered, remained valid until invalidated by the Tribunal in May 1998. Therefore, the reason given by the Commissioner for limiting the waiver was considered untenable.5. The learned single Judge intervened in the matter, directing that the assessee should receive the benefit of waiver up to the date specified for payment under the revised order based on the Tribunal's decision. The High Court upheld this decision, stating that the single Judge's conclusion was legally sound and did not warrant interference on appeal.6. Ultimately, the appeal was dismissed, affirming the decision to grant the benefit of waiver of interest up to the relevant date specified in the revised order issued following the Tribunal's decision.