Shri Mansukhlal Pitalia vs. The Principal Commissioner Of Income Tax

W.P. No.2464/2019

1 HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE W.P. No.2464/2019 Mansukhlal Pitalia v/s The Principal Commissioner of Indome Tax & Another Indore, dated 10.04.2019 Shri P. M. Choudhary, learned senior counsel along with Shri Anand Prabhawalkar learned counsel for the petitioner. Ms. Veena Mandlik, learned counsel for the respondents. The petitioner before this Court has filed this present writ petition being aggrieved by the order dated 04.12.2018 passed by the Principal Commissioner of Income Tax, Ujjain under Section 220 (2) of the Income Tax Act, 1961. The facts of the case reveal that a search was carried out by the income tax authorities under Section 132 of the Income Tax Act, 1961 on 26-27.06.2002 at the petitioner's premises and during the search certain papers, diaries, Hundis were found in possession of the petitioner. They were seized by the income tax authorities. The Assessing Officer issued a notice under Section 158BC of the Income Tax Act, 1961 to the petitioner to file return of income for the block period 01.04.1996 to 26.06.2002. The petitioner has filed return disclosing the undisclosed income of Rs.49,68,000/- and the tax payable thereon, was worked out to Rs.30,40,416/-. An assessment order was passed on 17.06.2004 assessing income the income of the petitioner at Rs.3,26,52,820/- and the tax was determined to be payable at Rs.2,02,33,320/-. The petitioner's grievance is that assessing authority has calculated the interest at Rs.33,31,465 under Section 220 W.P. No.2464/2019

2 (2) of the Income Tax Act, 1961 and a demand has been issued for Rs.37,90,835/-. The petitioner's contention is that since the levy on interest was on the higher side, it was causing great hardship to the petitioner. The petitioner approached the Commissioner / Principal Commissioner for waiver of the interest by filing an application dated 29.12.2015 under Section 220 (2A) of the Income Tax Act, 1961 and the same has been rejected by the impugned order. Learned senior counsel for the petitioner has placed reliance upon a judgment delivered by the Hon'ble Supreme Court in the case of B.M. Malani v/s Commissioner of Income Tax reported in 306 ITR 196 (SC)/[2008]. Reliance has also been placed upon a judgment delivered by the High Court of Madras in the case of Vellor Electronics & Engineering (P.) Ltd. v/s Assistant Commissioner of Income Tax reported in [2011] 237 CTR 63 (Madras). A prayer has been made for quashment of the impugned order. A reply has been filed in the matter and it has been argued before this Court on behalf of the Income Tax Department that the petitioner is not entitled for any relief of any kind, as three conditions laid down under Section 220 (2) of the Income Tax Act, 1961 are not satisfied at all. The operative paragraph i.e. paragraphs 4, 5, 6 and 7 of the impugned order dated 04.12.2018 reads as under:- “4. Opprotunities of being heard were granted to the assessee by this office letters dated 28.02.2018 and 18.09.2018 fixing the case for hearing on 06.03.2018 and 04.10.2018 respectively. Letters were duly served upon the assessee. In compliance to the above letters, Shri I.M. Jain, AR of the assessee W.P. No.2464/2019

3 attended and filed written submission along with copy of the return of income, assessment orders, CIT(A)'s order, ITAT's order, High Court's order, appeal effect order etc. The AR of the assessee also filed copy of various case laws in his support. It is further contended that after the search & seizure operation, the assessee's only source of income is dalali and he filed return of income for the AY 2012-13 declaring total income of Rs.85,610/-. Therefore, , interest liability may be waived. 5. As per the provisions of section 220(2) of the Income Tax Act, three conditions are laid down which are as under:- (i) Payment of such amount has caused or would cause genuine hardship to 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 enquiry relating to assessment or any proceeding for recovery of any amount due from him. 6. The assessee did not furnish any evidence which could justify his request for waiver of interest. In view of the above, the assessee failed to justify that his case was falling under the conditions as mentioned in section 220(2) of the Income Tax Act, 1961. The assessed does not fulfill the conditions mentioned in sub-clauses (i), (ii) and (iii) of section 220(2A), as is evident from the facts of the case. 7. In view of the above and after looking to the facts and circumstances of the case, the request of the assessee for waiver of interest of Rs.39,40,270 is hereby rejected. This Court has carefully gone through Section 220 (2) of the Income Tax Act, 1961. The payment of amount towards interest certainly causes hardship to an assessee, but on this ground alone, the interest cannot be waived. The present case is a case of a assessee, who was a defaulter, who has suppressed his income and only after search and seizure operation, the department was able to find out the W.P. No.2464/2019

4 concealment of income by the assessee. It is a case of a person, who was with a calculative motive, evading the payment of income tax and in those circumstances, the department has carried out search and seizure operation and was able to unearth the concealed income. It is not a case where on account of some genuine bonafide mistake, the assessee was not able to pay the tax dues. In the present case, it can never be said that the assessee was not able to pay the tax due to the circumstances beyond the control of the of the assessee. It is a case of willful evasion of payment of income tax and such willful evasion can never said to be due to the circumstances beyond the control of the assessee, and therefore, this Court is of the considered opinion that the Principal Commissioner of Income Tax was justified in passing the impugned order. The Apex Court in the case of B.M. Malani (supra) in paragraph – 8 has held as under:- “8. The term `genuine' as per the New Collins Concise English Dictionary is defined as under: “Genuine' means not fake or counterfeit, real, not pretending (not bogus or merely a ruse)” For interpretation of the aforementioned provision, the principle of purposive construction should be resorted to. Levy of interest although is statutory in nature, inter alia for re-compensating the revenue from loss suffered by non-deposit of tax by the assessee within the time specified therefor. The said principle should also be applied for the purpose of determining as to whether any hardship had been caused or not. A genuine hardship would, inter alia, mean a genuine difficulty. That per se would not lead to a conclusion that a person having large assets would never be in difficulty as he can sell those assets W.P. No.2464/2019

5 and pay the amount of interest levied. The ingredients of genuine hardship must be determined keeping in view the dictionary meaning thereof and the legal conspectus attending thereto. For the said purpose, another well--known principle, namely, a person cannot take advantage of his own wrong, may also have to be borne in mind. The said principle, it is conceded, has not been applied by the courts below in this case, but we may take note of a few precedents operating in the field to highlight the aforementioned proposition of law. [See Priyanka Overseas Pvt. Ltd. & Anr. v. Union of India & ors. 1991 Suppl. (1) SCC 102, para 39, Union of India & ors. v. Major General Madan Lal Yadav (Retd.) (1996) 4 SCC 127 at 142, paras 28 and 29, Ashok Kapil v. Sana Ullah (dead) & ors. (1996) 6 SCC 342 at 345, para 7, Sushil Kumar v. Rakesh Kumar (2003) 8 SCC 673 at 692, para 65, first sentence, Kusheshwar Prasad Singh v. State of Bihar & ors. (2007) 11 scc 447, paras 13, 14 and 16). Thus, the said principle, in our opinion, should be applied even in a case of this nature. A statutory authority despite receipt of such a request could have kept mum. It should have taken some action. It should have responded to the prayer of the appellant. However, another principle should also be borne in mind, namely, that a statutory authority must act within the four corners of the statute. Indisputably, the Commissioner has the discretion not to accede to the request of the assessee, but that discretion must be judiciously exercised. He has to arrive at a satisfaction that the three conditions laid down therein have been fulfilled before passing an order waiving interest. Compulsion to pay any unjust dues per se would cause hardship. But a question, however, would further arise as to whether the default in payment of the amount was due to circumstances beyond the control of the assessee. Unfortunately, this aspect of the matter has not been considered by the learned Commissioner and the High Court in its proper perspective. The Department had taken the plea that unless the amount of tax due was ascertainable, the securities could not have been sold and the demand draft could not have been encashed. The same logic would apply to the case of the assessee in regard to levy of interest also. It is one W.P. No.2464/2019

6 thing to say that the levy of interest on the ground of non-payment of correct amount of tax by itself can be a ground for non-acceding to the request of the assessee as the levy is a statutory one but it is another thing to say that the said factor shall not be taken into consideration at all for the purpose of exercise of the discretionary jurisdiction on the part of the Commissioner. Appellant volunteered that the securities be sold. Why the said request of the appellant could not be acceded to has not been explained. It was a voluntary act on the part of the appellant. It was not even a case where sub-Section (3) of Section 226 of the Act was resorted to. As the offer was voluntary, the authorities of the Department subject to any statutory interdict could have considered the request of the appellant. It was probably in the interest of the revenue itself to realize its dues. Whether this could be done in law or not has not been gone into.” This Court has carefully gone through the judgment delivered by the Apex Court. In the present case, the assessee, at every stage, has challenged the order passed by the authorities. It is not a case where the assessee was ready to deposit the income tax. After the assessment order was passed by the Assessing Officer pursuant to the seizure operation, the Commissioner, keeping in view the conduct of the petitioner, has exercised its discretion judiciously and the three conditions laid down under Section 220 (2A) of the Income Tax Act, 1961 have not been fulfilled enabling the Commissioner to waive out the interest. Every person is having certain compulsion while paying interest and that cannot be the sole ground for allowing the application in respect of waiver of the interest. In the considered opinion of this Court, keeping in view the judgment delivered by the Apex Court as well as the parameter laid down by the Apex Court, the assessee is W.P. No.2464/2019

7 not entitled for any relief of whatsoever kind. Accordingly, the present writ petition stands dismissed. Certified copy as per rules. (S.C. SHARMA) (VIRENDER SINGH) J U D G E J U D G E Ravi Digitally signed by Ravi Prakash Date: 2019.04.16 17:23:12 +05'30'