K.M. Mehaboob vs Chief Commissioner of Income Tax and Others

S. Siri Jagan, J.—The petitioner was the erstwhile partner of a firm which became defunct. The firm was dissolved in the year 1993. By Ext. P1 certificate dt. 27-7-2005 arrears of income tax due from the firm for the assessment year 1987-88 was demanded from the petitioner. The petitioner submits that the firm was managed by the erstwhile managing partner and the petitioner was under the impression that at the time of dissolution of the firm, all taxes payable were duly paid. The petitioner could not also trace out any documents after 17 years in respect of the assessment as well. The petitioner immediately paid the tax demanded and submitted an application u/s 220(2A) of the IT Act for waiver from the interest demanded u/s 220(2) of the IT Act, 1961. But the same was rejected by Ext. P6 order. It is challenging that order, the petitioner has filed this writ petition. The learned counsel for the petitioner submits that he does not dispute the liability to pay. The petitioner submits that all the ingredients of section 220(2A) of the IT Act have been satisfied in the petitioners case and therefore rejection of the petitioners application for waiver of interest u/s 220(2A) is clearly unsustainable.

With the help of a statement filed on behalf of the respondents, counsel for the IT Department vehemently opposes the prayer of the petitioner. He would submit that none of the ingredients of section 220(2A) are satisfied in this case and even in Ext. P4 application before the CIT, the petitioner had no such case. He would therefore submit that the petitioner is not entitled to waiver of interest.

I have considered the rival contentions in detail. Section 220(2A) of the IT Act reads as follows:

(2A) Notwithstanding anything contained in sub-section (2) the Chief CIT or CIT 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 inquiry relating to the assessment or any proceeding for the recovery of any amount due from him.

I am of opinion that the question as to whether these ingredients have been satisfied in the petitioners case has to be considered in the background of the delay in recovery itself. Admittedly, the tax demanded is for the assessment year 1987-88. Exhibit P1 certificate u/s 222 of the IT Act was served on the petitioner only on 27-7-2005. It is not disputed before me that the firm was dissolved in 1993. Of course, the petitioner was one of the erstwhile partners of the firm. He would submit that he was not aware of the arrears of tax insofar as the firm was being managed by the erstwhile managing partner and the petitioner is not in possession of any records in relation to that assessment. He has specifically stated that he was under the impression that at the time of dissolution of the firm, all taxes due have been duly paid. Therefore, there cannot be any doubt that payment of such amount would cause genuine hardship to the assessee insofar as the petitioner has to suffer the burden of the tax by himself. Needless to say, the very same circumstance is more than sufficient to hold that the default in payment was due to the circumstances beyond the control of the assessee. The petitioner immediately on receipt of Ext. P1, paid the tax also and did co-operate with the proceedings for recovery. There is no case for the respondents that the petitioner had not co-operated with the enquiry relating to the assessment as well. Therefore, I am satisfied that all the three ingredients of section 220(2A) are fully satisfied in this case. That being so, the petitioner is entitled to waiver of interest under that section. Accordingly, Ext. P6 order is quashed. It is declared that the petitioner is entitled to waiver of interest u/s 220(2A) of the IT Act. Therefore, the respondents shall pass appropriate orders in tune with the above declaration expeditiously. The petitioner shall be given all consequential reliefs also.

The writ petition is disposed of as above.