Nimmi John Chackola v. Chief Commissioner of Income Tax and Others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE** **THURSDAY, THE 11TH DAY OF AUGUST 2016/20TH SRAVANA, 1938** **WP(C).No. 16821 of 2013 (C)** **-------------------------------------------** **PETITIONER(S) : --------------------------** **SMT. NIMMI JOHN CHACKOLA, LEGAL HEIR OF LATE JOHN J.CHACKOLA, "CHACKOLA", CHACKOLA COLONY, PERUMANOOR, THEVARA, KOCHI-682 015.** **BY SRI.T.M.SREEDHARAN (SENIOR ADVOCATE) ADVS. SRI.V.P.NARAYANAN** **SMT.BOBY M.SEKHAR SMT.DIVYA RAVINDRAN** **RESPONDENT(S) :** **-----------------------------** **1. THE CHIEF COMMISSIONER OF INCOME TAX, 2ND FLOOR, C.R.BUILDINGS, I.S.PRESS ROAD, COCHIN-682 018.** **2. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-2(1), 3RD FLOOR, C.R.BUILDINGS, I.S.PRESS ROAD, KOCHI-682 018.** **3. THE COMMISSIONER OF INCOME TAX-II, C.R.BUILDING, I.S.PRESS ROAD, KOCHI-682 018.** **4. THE TAX RECOVERY OFFICER, ALUVA RANGE, K.A.P. COMMERCIAL COMPLEX, RAILWAY STATION ROAD, ALUVA-1.** **BY ADV. SRI.JOSE JOSEPH, S.C** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 03-08-2016, THE COURT ON 11-08-2016 DELIVERED THE FOLLOWING:** Msd. ## **WP(C).No. 16821 of 2013 (C)** ## **------------------------------------------** ## **APPENDIX** ## **PETITIONER(S)' EXHIBITS :** - **EXHIBIT P1: TRUE COPY OF THE ASSESSMENT ORDER DATED 28.03.2001 ISSUED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, DIVISION-II, ERNAKULAM.** - **EXHIBIT P2: TRUE COPY OF THE ORDER DATED 21.11.2011 PASSED BY THE FIRST RESPONDENT.** - **EXHIBIT P3: TRUE COPY OF THE ORDER DATED 01.12.2011 PASSED BY THE SECOND RESPONDENT.** - **EXHIBIT P4: TRUE COPY OF THE APPLICATION DATED 09.02.2012 SUBMITTED BY THE PETITIONER BEFORE THE THIRD RESPONDENT.** - **EXHIBIT P5: TRUE COPY OF THE ORDER DATED 19.03.2012 PASSED BY THE 2ND RESPONDENT.** - **EXHIBIT P6: TRUE COPY OF ORDER U/S.220(2A) DATED 23.04.2012 PASSED BY THE 3RD RESPONDENT.** - **EXHIBIT P7: TRUE COPY OF PETITION DATED 29.06.2012 SUBMITTED BY THE PETITIONER TO THE 3RD RESPONDENT.** - **EXHIBIT P8: TRUE COPY OF LETTER DATED 31.05.2013 ISSUED BY THE 3RD RESPONDENT.** - **EXHIBIT P9: TRUE COPY OF LETTER DARTED 21.06.2013 SUBMITTED TO THE 4TH RESPONDENT BY THE PETITIONER.** ## **RESPONDENT(S)' EXHIBITS :** ## **NIL** **//TRUE COPY//** **P.A.TO JUDGE.** Msd. ## **A.M.SHAFFIQUE, J * * * * * * * * * * * *** W.P.C.No.16821 of 2013 ---------------------------------------Dated this the 11[th] day of August 2016 ## **J U D G M E N T** This writ petition is filed seeking for a direction to the 3[rd] respondent to allow waiver of interest amounting to Rs.15,06,296/- and for other consequential benefits. 2. The short facts involved in the writ petition would disclose that the assessment was completed with respect to the return filed by late John J.Chackola in respect of assessment year 1994-95. Ext.P1 is the assessment order dated 28/03/2001. Petitioner, being the legal heir, was prosecuting the matter. Ext.P1 order was modified by a further order dated 17/05/2004. Petitioner remitted the amounts in monthly instalments during September 2004 to May 2008 aggregating to Rs.26,53,624/-. Thereafter, the petitioner filed application for waiver of interest before the 1[st] respondent under Section 234A of the Income Tax of 1961 (hereinafter referred to as the 'IT Act') amounting to Rs.3,75,256/- and interest under Section 234B of the Act amounting to Rs.9,38,140/-. The 1[st] respondent, as per Ext.P2 order dated 21/11/2011, granted waiver of interest charged under W.P.C.No.16821/2013 2 Section 234A of the Act amounting to Rs.3,75,256/-. The claim for waiver of interest under Section 234B of the Act was rejected. By Ext.P3 order dated 01/12/2011, the total amount payable was computed at Rs.22,24,894/- inclusive of interest of Rs.12,86,754/under Section 220(2) of the Act. Petitioner submitted Ext.P4 representation for waiver of interest under Section 220(2) of the Act. In the meantime, petitioner was served with Ext.P5 showing the computation of amounts pursuant to Ext.P2 order. As per Ext.P5, the interest under Section 220(2) of the Act was shown as 15,06,296/-. In the meantime, the assessee had already paid Rs.22,53,624/-. After waiving the interest under Section 234A, the balance amount payable was 11,31,040/-. The application under Section 220(2A) was allowed as per Ext.P6 order dated 23/04/2012. It was observed in Ext.P6 order that the levy of interest under Section 220(2) has caused genuine hardship to the petitioner and the defaulted payment of interest was beyond the control of the petitioner and therefore the balance interest payable under Section 220(2) of the Act is waived in full. Pursuant to Ext.P6, petitioner submitted a letter dated 29/06/2012 to the 3[rd] respondent requesting for waiver of the interest charged, that W.P.C.No.16821/2013 3 is, Rs.15,06,296/-. This was replied by Ext.P8 dated 31/05/2013 indicating that waiver was permitted only in respect of the balance amount payable and therefore petitioner is not entitled for any relief. 3. The main contention urged by the petitioner is that when interest is waived under Section 220(2A) of the IT Act, the entire interest charged has to be waived. In other words, there cannot be any limit in granting the waiver. 4. Learned counsel for the petitioner also placed reliance on the following judgments: i) **E.M.Joseph v. Chief Commissioner of Income Tax and Others** _[(2012) 342 ITR 379]._ In this case, _the_ writ petition was filed challenging the action of the Commissioner of Income Tax in limiting the waiver to an amount of Rs.24,408/- which was the balance amount due from the deceased assessee. Perusal of the judgment indicates that the contention urged in the case is that no specific reason had been stated to limit the waiver to the amount which remained due and payable. It was held at paragraph 9 as under: W.P.C.No.16821/2013 4 _“9. In the instant case, what was stated by the Chief CIT was that certain amounts were already paid by way of adjustment or otherwise and that certain amounts remained unpaid. The standing counsel for the Revenue would also contend that the waiver of interest was limited to that remaining unpaidsince the amount adjusted cannot be taken to be having been paid. The section not having made any such distinction, as found earlier, and by virtue of the amendment entitling both paid and unpaid interest to be considered for waiver; I am of the opinion that the discretion has not been properly exercised by the Chief CIT.”_ ii) Another judgment relied upon is **B.M.Malani v. Commissioner of Income Tax and Another** _[(2008) 306 ITR_ _196 (SC)]._ In the above case, the Apex Court considered the question as to what would cause genuine hardship. It was held that the ingredients of genuine hardship must be determined keeping in view the dictionary meaning thereof and the legal conspectus attending thereto. 5. On the other hand, learned counsel for the Revenue placed reliance on the judgment of the **Kerala State Cashew Development Corporation Ltd. v Income Tax Officer and** W.P.C.No.16821/2013 5 **Another** _[1990 (186) ITR 521]_ . It was held that, if the circumstances are such that a total waiver is called for, that has to be allowed and it will not be open thereafter to the Income Tax Officer to deny waiver. It is also held that the quantum of deduction to be allowed in a given case must be arrived at objectively and fairly and that the reduction or waiver is not a right or a matter of course whereas it has to be made on sufficient cause being made out after considering all relevant circumstances. The levy of interest being compensatory, it has to be verified whether the delay in filing the returns was on account of sufficient reasons being shown. 6. There is no doubt regarding the proposition laid down in the cases cited above. Even the learned Single Judge of this Court in **E.M.Joseph** (supra) observed that the Section does not make any distinction by which there is any restriction imposed on the Commissioner of Income Tax to consider waiver of the interest that has been paid and unpaid. In the said case, the learned Single Judge proceeded on the basis that the discretion has not been exercised properly by the Chief Commissioner of Income Tax and therefore the matter was remitted back. W.P.C.No.16821/2013 6 7. In **Kerala State Cashew Development Corporation Ltd** (supra), a Division Bench of this Court was concerned with the question when the Commissioner of Income Tax refused the prayer of the assessee for waiver of interest levied under Section 139(8) of the IT Act, 1961. It was held that when the interest under Section 139(8) is levied by way of compensation and not by way of penalty, the Officer could waive the interest in its entirety or reduce the quantum of interest. It was further held that when the interest is compensated, it must necessarily follow that the loss sustained by the State is a relevant factor. 8. The Apex Court in **B.M.Malani** (supra) had considered the scope of Section 220(2A) and held at paragraphs 21 and 22 as under: _“21. For interpretation of the aforementioned provision, the principle of purposive construction should be resorted to. Levy of interest 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 there for. The said principle should also be applied for the purpose of determining as to whether any hardship had been_ W.P.C.No.16821/2013 7 _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._ _22. 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. and Anr. v. Union of India and Ors. 1991 Suppl. (1) SCC 102, para 39; Union of India and Ors. v. Major General Madan Lal Yadav (Retd.) MANU/SC/0355/1996 : [1996] 4 SCC 127 at 142, paragraphs 28 and 29, Ashok Kapil v. Sana Ullah (1996)6 SCC 342 at 345, paragraph 7; Sushil Kumar v. Rakesh Kumar [2003] 8 SCC 673 at 692, paragraph 65, first sentence, Kusheshwar Prasad Singh v. State of Bihar [2007] 11 SCC 447, paragraphs 13 , 14 and 16.”_ W.P.C.No.16821/2013 8 ## 9. Section 220(2A) reads as under: ## _“_ _**220. When tax payable and when assessee demand in default.**_ _xxxx_ _(2A) Notwithstanding anything contained in sub-section (2), the Chief Commissioner or Commissioner 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.”_ 10. There is no doubt about the proposition that the interest being charged is compensatory in nature. The power given under sub Section (2A) of Section 220 is to reduce or to waive the interest paid or payable. The reasons to reduce or waive interest, should be either the payment of such amount has caused or would cause genuine hardship, whether the default in W.P.C.No.16821/2013 9 payment of the amount on which interest has been paid or was payable was due to the circumstances beyond the control of the assessee and the assessee has co-operated with the enquiry relating to the assessment or any proceeding for the recovery of any amount due from him. All these three conditions have to be satisfied. On facts, it has to be verified whether these conditions have been fulfilled. In Ext.P6 order, it is found that all the conditions under Section 220(2A) for reduction or waiver of interest has been satisfied. This was a case in which payment was already made in instalments and what remained to be paid was a portion of interest. The Commissioner, having arrived at a finding, granted waiver for the balance interest payable i.e. Rs.11,31,040/- and did not waive the entire interest, though it was found that the petitioner had satisfied all the conditions. As already indicated, statute permits reduction of interest or waiver of interest in full. This is a case in which the Commissioner has found that the interest payable can be waived thereby reducing the quantum of interest. Waiver itself is a discretion to be exercised in terms with the statute, and once such a discretion has been exercised, the scope of judicial review is very limited. I W.P.C.No.16821/2013 10 do not find any arbitrariness in the discretion exercised by the Commissioner warranting interference. Hence the writ petition is dismissed. (sd/-) **==> picture [258 x 13] intentionally omitted <==** jsr