IN THE HIGH COURT OF KERALA AT ERNAKULAM
OP.No. 1769 of 2001(I)
1. POLAKULATH TOURIST HOME
... Petitioner
Vs
1. COMMR.OF INCOME TAX
... Respondent
For Petitioner :SRI.S.ANANTHAKRISHNAN
For Respondent :SRI.P.K.R.MENON(SR.),SC FOR IT
The Hon'ble MR. Justice C.N.RAMACHANDRAN NAIR
Dated :18/01/2008
O R D E R
C.N.RAMACHANDRAN NAIR, J.
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O.P. No.1769 of 2001
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Dated this the 18th day of January, 2008.
JUDGMENT
Heard Senior counsel Sri.Sarangan appearing for the petitioner and
Standing Counsel appearing for the Income Tax Department. The petitioner
is challenging Ext.P2 order whereunder the Commissioner has declined to
waive interest levied under Section 220(2) of the Income Tax Act for
belated payment of income tax assessed and demanded for the year 1992-93.
The petitioner claimed benefit of registration for the Firm which was
carrying on business in liquor. The Assessing Officer, however, declined
registration as a Firm and assessed the petitioner as an unregistered firm.
In the first appeal, the appellate authority allowed the claim which led to
revised order dated 10.11.1995 leading to nil demand. However, on
department’s appeal, the Tribunal restored the original assessment as an
unregistered firm. Consequent to this, petitioner was liable to pay
additional tax over and above the tax paid and interest under various
provisions of the Act namely, Sections 234A, 234B and 234C and 220(2) of
the Income Tax Act. Even though petitioner filed application for waiver of
interest levied under various heads, the Commissioner allowed waiver of
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interest demanded under Sections 234A, 234B and 234C vide Ext.P4 order.
However, he declined waiver application for waiver of interest levied under
Section 220(2) vide Ext.P2 order which is under challenge in this O.P.
While the petitioner has relied on decision of this court in SMT.B.INDIRA
RANI V. COMMISSIONER OF INCOME TAX & OTHERS (2004) 271
ITR 570, Standing Counsel has relied on decision of the Supreme Court in
VIKRANT TYRES LTD. V. FIRST INCOME-TAX OFFICER (2001) 247
ITR 821. If petitioner had made payment pursuant to original order and
the next demand came only after revised order was issued based on order of
the Tribunal, then of course petitioner cannot be called upon to pay interest
for the period commencing from the original demand. This is the position
laid down in the two decisions abovereferred. However, if petitioner has
not made payment pursuant to original demand and the demand remained
unsatisfied, then the mere fact that a first appellate order was in favour of
the petitioner does not absolve the petitioner from liability for interest under
Section 220 by virtue of operation of Section 3(2) of the Taxation Laws
(Continuation and Validation of Recovery Proceedings) Act, 1964. It is
stated in Ext.P2 by the Commissioner that petitioner had not made payment,
but the demands have been recovered through adjustments from refunds due
to partners of the firm. These facts are not very clear from the order.
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Moreover, the proceeding by which Section 220(2) interest is computed is
also not produced in court. In any case in view of Ext.P4 order, petitioner
cannot be called upon to pay interest under Section 220(2) of the Act for the
interest originally demanded under Section 234A, 234B and 234C of the
Act. Since full facts are not on record, the O.P. is disposed of directing the
Assessing Officer to recompute liability for interest under Section 220(2) of
the Act by taking into account Ext.P4 order and after verifying the dates on
which adjustments are made against demands. There is no ground for
interfering with the findings in Ext.P2 because petitioner has not established
any financial hardships warranting waiver of actual interest payable under
Section 220(2) of the Income Tax Act.
C.N.RAMACHANDRAN NAIR
Judge
pms