HOTEL AMBASSADOR vs. THE DEPUTY COMMISSIONER OF INCOME TAX

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WP(C)/29840/2017HC KeralaKLHC01077785201706 July 2023Author: HONOURABLE MRS. JUSTICE ANU SIVARAMAN8 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the impugned order (Ext.P6) was passed in breach of the requirements of notice and the passing of a speaking order, as mandated by Section 220(2A) of the Income Tax Act, 1961. The Court found that the petitioner's waiver application, filed in 2013, was scheduled for a hearing for the first time in May 2017, and the request for a short adjournment was rejected due to the deadline imposed by the Finance Act, 2016. The Court noted that the petitioner was not given a proper opportunity to be heard, nor were their specific contentions considered. Consequently, the Court set aside Ext.P6 and directed the appropriate authority to reconsider the waiver application (Ext.P3). The petitioner is to be issued notice, heard, and allowed to produce all supporting materials. The Court explicitly stated it was not going into other contentions raised by the parties, leaving all contentions open for decision in the subsequent proceedings.

What were the facts?

The petitioner, Hotel Ambassador, filed a writ petition challenging an order (Ext.P6) concerning the collection of interest under Section 220(2) of the Income Tax Act, 1961, for the assessment year 1981-1982. The interest was demanded on a penalty previously imposed. The petitioner had filed an application (Ext.P3) under Section 220(2A) seeking waiver of this interest due to genuine hardship. The penalty was later set aside in appeal, with the Tribunal and High Court passing orders giving effect to this. The petitioner's waiver application, filed in June 2013, remained unconsidered until a notice was issued in May 2017 for a hearing on May 31, 2017. The petitioner requested an adjournment, which was rejected, and the impugned order (Ext.P6) was passed on July 14, 2017, without considering the petitioner's contentions.

What were the issues?

1. Whether the order rejecting the waiver of interest under Section 220(2A) of the Income Tax Act, 1961, is liable to be quashed for non-consideration of the assessee's contentions and for not being a speaking order? (Question of law and fact, turning on Section 220(2A)) Assessee's contentions: The petitioner argued that the waiver application was not considered properly and that the order (Ext.P6) was not a speaking order, failing to address the specific contentions raised. They also contended that a personal hearing, mandatory under Section 220(2A), was not granted, preventing them from producing necessary documents. The petitioner relied on the principle that the application should be deemed allowed due to non-consideration within the time fixed by the Finance Act, 2016. Revenue's contentions: The respondents stated that the delay was due to a heavy workload. They submitted that the waiver application was considered and rejected because the assessee failed to provide evidence of genuine hardship, circumstances beyond control, or cooperation in proceedings. They noted that the application was posted for hearing on May 31, 2017, as per the Finance Act, 2016 amendment, but the petitioner sought an adjournment and did not attend.

Which sections of the Income-tax Act were involved?

Section 220(2),Section 220(2A),Section 256(2)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MRS. JUSTICE ANU SIVARAMAN THURSDAY, THE 6TH DAY OF JULY 2023 / 15TH ASHADHA, 1945 WP(C) NO. 29840 OF 2017 PETITIONER: HOTEL AMBASSADOR K.K.ROAD, KOTTAYAM,REPRESENTED BY ITS MANAGING PARTNER,MR.JACOB KURIAN BY ADV SRI.RAMESH CHERIAN JOHN RESPONDENTS: 1 THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE I, PUBLIC LIBRARY BUILDING, KOTTAYAM PIN-686001 2 PRINCIPAL COMMISSIONER OF INCOME TAX OFFICE OF THE PRINCIPAL COMMISSIONER OF INCOME TAX PUBLIC LIBRARYBUILDING, SASTRI ROAD,KOTTAYAM PIN-686001 BY ADVS. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 06.07.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C) NO. 29840 OF 2017 2 JUDGMENT Dated this the 6th day of July, 2023 This writ petition is filed seeking the following reliefs:- i. issue a writ of ceritiorari or other appropriate writ or direction quashing Ext.P6. ii) declare that the application for waiver of interest filed as per Es P3 is deemed to be allowed in view of the non- consideration of the waiver petition within the time fixed by Finance Act, 2016. iii) issue a writ of mandamus or other appropriate writ or direction the 1st respondent to keep in abeyance all further proceedings for collection of interest pursuant to Exts.P2 and P6. 2. Heard the learned counsel for the petitioner and the learned Counsel appearing for the respondents. 3. It is submitted by the learned counsel for the petitioner that the matter arises under the Income Tax Act, 1961 and the assessment year involved is 1981-1982. It is submitted that pursuant to Ext.P2 order demanding interest under Section WP(C) NO. 29840 OF 2017 3 220(2) on the penalty ordered against the petitioner, the petitioner had preferred Ext.P3 application under Section 220(2A) of the Income Tax Act, 1961 seeking waiver of the interest on the ground that the payment of the amount would cause genuine hardship to him. 4. It is contended by the learned counsel for the petitioner that the penalty imposed against the petitioner had been set aside in appeal which was confirmed by the Tribunal. The High Court in reference under Section 256(2) of the Income Tax Act had held that penalty would be justified in respect of income which was not voluntarily disclosed by the assessee, but that assessee would be entitled to immunity from penalty in respect of income which was voluntarily disclosed. It is submitted that thereafter, a common order was passed by the Tribunal with regard to the assessment years 1981-1982, 1982-1983 and 1984-1985 giving effect to the judgment of the High Court. It is submitted that Ext.P2 proceedings had been issued pursuant to Ext.P1 order dated 11/11/2010 demanding interest. After Ext.P3, which was submitted on 22/6/2013 nothing was heard for long. By Ext.P4 notice dated 26/5/2017, the petitioner was required to WP(C) NO. 29840 OF 2017 4 appear in person or through authorised representative on 31/5/2017 before the Commissioner. It is submitted that the petitioner could not appear on the said day and Ext.P5 request dated 30/5/2017 for a short adjournment was therefore submitted. However, without considering the said request Ext.P6 order was passed on 14/7/2017. It is submitted that the order discloses that the specific contentions raised by the assessee were not considered and that the order was not a speaking

order.

5.

The learned counsel for the petitioner submits that in case the petitioner had been granted an opportunity for a personal hearing which is mandatory in terms of Section 220(2A) the facts of the matter with necessary documents could have been produced by the petitioner.

6.

A statement has been placed on record by the respondents stating that the competent authority to waive the interest under Section 220(2) is the Principal Commissioner of Income Tax and that the delay occurred only due to the fact that he could not complete the proceedings because of the heavy workload. It is submitted that all applications as per the WP(C) NO. 29840 OF 2017 5 amendments in Finance Act, 2016, all applications received in respect of waiver of interest as on 1/6/2016 had to be disposed of before 31/5/2017 and therefore the application of the petitioner was also posted for hearing on 31/5/2017 and notice issued to the petitioner. However, the petitioner had applied for adjournment on 30/5/2017 and there was no attendance on behalf of the assessee on the date of posting that is 31/5/2017. The waiver application was therefore considered and rejected on the ground that the assessee had not produced anything to show that the payment of interest would cause any genuine hardship to the assessee or that the default of the payment was due to circumstances beyond the control of the assessee or that he had co-operated in the enquiry related to the assessment or proceedings for recovery. It is submitted that though Ext.P3 had been submitted, there was nothing on record to show that the contentions of the assessee were substantiated in any manner.

7.

Section 220(2A) provides for reduction or waiver of the amount of interest on the concerned authority being satisfied of the existence of the three conditions. The second proviso to Section 220(2A) specifically provides that no order rejecting the WP(C) NO. 29840 OF 2017 6 application, either in full or in part, shall be passed unless the assessee has been given an opportunity of being heard. There is a further proviso that where any application is pending as on the 1st day of June, 2016, the order shall be passed on or before the 31st day of May, 2017. 8. In the instant case, it is clear that Ext.P3 application was one submitted on 22/6/2013. A notice was issued for a hearing for the first time on 26/5/2017 and the hearing was scheduled on 31/5/2017. It is not in dispute that the petitioner had submitted a request for a short adjournment which was rejected because the proceedings had to be completed before 31/5/2017. 9. In the above view of the matter, it is clear that the requirement of notice and the requirement for the passing of a speaking order have been observed only in their breach in the instant case. I am of the opinion that the issue requires a reconsideration with proper notice and opportunities of hearing to the petitioner. I am not going into any of the other contentions raised, in view of the directions being issued. Ext.P6 order is set aside. There will be a direction to the appropriate authority under the Income Tax Act to take up

WP(C) NO. 29840 OF 2017 7 Ext.P3 application submitted by the petitioner, issue notice to him, hear him and pass orders in accordance with law. The petitioner will be given an opportunity to produce all materials that he may wish to rely on in support of his contentions. All the contentions are left open to be decided in the proceedings. This writ petition is ordered accordingly. ANU SIVARAMAN JUDGE ska

WP(C) NO. 29840 OF 2017 8

Appendix — schedule of exhibits
APPENDIX OF WP(C) 29840/2017 PETITIONER EXHIBITS EXHIBIT P1: TRUE COPY OF THE COMMON ORDER OF THE TRIBUNAL DT. 11.11.2010 EXHIBIT P2: TRUE COPY OF THE ORDER DT. NIL GIVING EFFECT TO EXPT 1 ORDER EXHIBIT P3: TRUE OCPY OF THE APPLICATION/PETITION FOR WAIVER OF INTEREST DT. 22.6.2013(WITHOUT ANNEXURES) EXHIBIT P4: TRUE COPY OF THE POSTING NOTICE DT.26.05.2017 EXHIBIT P5: TRUE COPY OF THE REQUEST DT.30.5.2017 SEEKING FOR A SHORT ADJOURNMENT EXHIBIT P6: TRUE COPY OF THE ORDER DT.14.7.2017 PASSED BY THE 2ND RESPONDENT

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