Court waives interest under Income Tax Act due to Assessee's genuine hardship

The court quashed the impugned order and directed the third Respondent to waive the interest levied under section 220(2) of the Income Tax Act for the specified block assessment years, finding that the default in payment was due to circumstances beyond the Assessee's control. The court held that the Assessee cooperated in the assessment process and faced genuine hardship, leading to the decision to waive the interest. The writ petition was allowed without costs.

---

---

Issues involved:
The issue involves a petition seeking direction to waive the interest levied u/s 220(2) of the Income Tax Act, 1961 for block assessment years 1987-88 to 1997-98 based on a settlement between the Petitioner and the Respondents.

Judgment Details:

1. The Petitioner requested the third Respondent to waive the interest levied u/s 220(2) of the Income Tax Act, 1961 for block assessment years 1987-88 to 1997-98, as per a settlement dated 29-7-1997. The interest amount sought to be waived was Rs. 80,58,639.

2. Following a search at the Petitioner's premises, a demand of Rs. 3,60,00,000 was raised after accepting block returns. Subsequently, interest of Rs. 80,58,639 was charged u/s 220(2) of the Income Tax Act, 1961 by the first Respondent.

3. The third Respondent, after evaluating the case, rejected the petition for interest waiver u/s 220(2) stating that the conditions u/s 220(2A) were not met. The Assessee's representation for waiver was dismissed.

4. The Petitioner argued that all conditions u/s 220(2A) were satisfied, but the third Respondent still rejected the waiver plea. The Respondents contended that the order was considered and did not require interference.

5. A settlement was reached between the department and the Petitioner after the search, leading to completion of block assessment. The Petitioner provided documents and securities to the department for debt collection and the amount was adjusted against tax demand.

6. The court found that the default in payment was due to circumstances beyond the Assessee's control. The Assessee cooperated in the assessment and recovery process, facing genuine hardship due to lack of funds, mainly from book debtors.

7. The court held that the third Respondent should have exercised discretion in waiving the interest for the block assessment period. The impugned order u/s 220(2A) was quashed, directing the third Respondent to waive the interest for the specified years. The writ petition was allowed without costs.

---