SRI GOVINDACHARY v. THE PRL. COMMISSIONER OF INCOME TAX

THE PRL. COMMISSIONER OF INCOME TAX, BENGALURU-4, 5TH FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, BENGALURU-560 095. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1 (1), C.R. BUILDINGS, QUEENS ROAD, BENGALURU-560 001. THE TAX RECOVERY OFFICER, CENTRAL RANGE-1, 4TH FLOOR, C.R. BUILDINGS ANNEXE, QUEENS ROAD, BENGALURU-560 001.

Location: HIGH COURT OF KARNATAKA (BY SRI E.I SANMATHI, ADVOCATE FOR R-1 TO 3) …RESPONDENTS THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER PASSED BY THE R-1 FOR BOTH THE ASSESSMENT YEARS 2004-05 AND 2005-06 BEARING DATED A COMMON ORDER

14.3.2019, UNDER - 2 - NC: 2025:KHC:41058 WP No. 22079 of 2019 HC-KAR 'F.NO.1/PR.CIT/BENGALURU-4/ORDER U/S 220(2A)/2018-19" PRODUCED AS ANNEXURE-J. THIS PETITION, COMING ON FOR ORDERS, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR ORAL ORDER

1. In this petition, the petitioner seeks the following reliefs: "WHEREFORE, it is respectfully prayed that this Hon'ble Court may be pleased to: a. Issue a writ of certiorari quashing the order passed by the 1st respondent for both the assessment years 2004-05 and 2005-06

14.3.2019, a common bearing 'F.No.1/Pr.CIT/Bengaluru-4/Order U/s 220(2A)/2018-19" produced as Annexure-J; b. Pass such other suitable order as this Hon'ble Court deems fit to grant in the facts and circumstances of the present case. "

2. Heard learned Senior counsel for the petitioner, learned counsel for respondents and perused the material on record.

3. A perusal of the material on record will indicate that the petitioner herein had filed an application seeking waiver of interest under Section 220 (2A) of Income Tax Act, 1961, for the assessment year 2004-2005 and 2005-2006, the respondents proceeded to pass the impugned order rejecting the said request - 3 - NC: 2025:KHC:41058 WP No. 22079 of 2019 HC-KAR without correctly considering the said provisions or the judgment of Apex Court the case of B M. MALANI VS. COMMISSIONER OF INCOME TAX AND ANOTHER REPORTED IN (2008) 76 CCH 1146 I SCC, wherein, at para 8, it is 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 recompensating 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 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 - 4 - NC: 2025:KHC:41058 WP No. 22079 of 2019 HC-KAR 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 to highlight the aforementioned proposition of law. [See Priyanka Overseas (P) Ltd. & Anr. vs.

Union of India & Ors. 1991 Suppl. (1) SCC 102, para 39, Union of India & Ors. vs. Maj. Gen. (Retd.) Madan Lal Yadav (1996) 4 SCC 127 at 142, paras 28 and 29, Ashok Kapil vs. Sana Ullah (Dead.) & Ors. (1996) 6 SCC 342 at 345, para 7, Sushil Kumar vs. Rakesh Kumar (2003) 8 SCC 673 at 692, para 65, first sentence, Kusheshwar Prasad Singh vs. 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 (not) 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 CIT 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 - 5 - NC: 2025:KHC:41058 WP No. 22079 of 2019 HC-KAR 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 CIT 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 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 CIT. Appellant volunteered that the securities be sold.

Why the said request of the appellant Sell could not be acceded to has not been explained. It was a voluntary act on the part of the Hached Prop appellant. It was not even a case where sub-s. (3) of s. 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. "

As held by the Apex Court in the aforesaid judgment, the impugned order deserves to be set aside and the matter has to be - 6 - NC: 2025:KHC:41058 WP No. 22079 of 2019 HC-KAR remitted back to the respondents for reconsideration afresh in accordance with law.