2001 PLP 613 (PTD)

(iii) the assessee has cooperated in any inquiry relating to the assessment or any proceeding for the recovery of any amount due from him." The assessee has to satisfy the conditions set out. Before the introduction of this section by the Taxation Laws (Amendment) Act, 1984, with effect from October 1, 1984, the Court was exercising powers disallowing interest if the assessee made out a case for waiver. In Official Liquidator, High Court, Calcutta v. ITO (1981) 130 ITR 790 (Cal.), the Court purported to exercise powers under section 446(2)(b) of the Companies Act read with rule 9 of the Companies (Court) Rules, 1959, of the Calcutta High Court and disallowed interest on being satisfied that the claim for statutory interest under the Act, 1961, would amount to hardship, cause grave miscarriage of justice and injury to the contributories. In section 220(2A) the power to waive interest was originally given to the Central Board of Direct Taxes. Dealing with a case arising under section 220(2A) of the Act as it then stood in Carborundum Universal Ltd. v. CBDT (1989) 180 ITR 171, the Supreme Court held that (headnote): "Since the power of the Board under section 220(2A) to waive interest was discretionary, the petitioner had an opportunity to represent its case in writing and the Board had taken into consideration the report of the Commissioner and it was not the case of the petitioner that the Commissioner's recommendations were different; the petitioner was not entitled to the right of being personally heard by the Board before its petition under section 220(2A) was disposed of by the Board." In that case, on the basis of the tax demand as finally raised for the assessment years 1979‑80 and 1982‑83, the Income‑tax Officer raised a demand under section 220(2) of the Act from the petitioner. A written representation to the Central Board was given under section 220(2A) for waiver of the demand for interest. After considering the report of the Commissioner, the Board declined to waive the demand for interest. Petitions for special leave to appeal were filed before the Supreme Court. The petitioner also did not claim that the Commissioner's report had not been considered. In those circumstances, the Supreme Court held that the petitioner was not entitled to the right of being personally heard by the Board. That case arose at a time when the Board was exercising ‑the powers of waiver or reduction of tax on a recommendation of the Commissioner. The present provision gives the power to the Commissioner. The Supreme Court observed that the question of the procedural safeguard of the notice of the Commissioner's Report and an opportunity to canvass its contents would be examined as and when it arose in a different situation. The Supreme Court held that the power under section 220(2A) was discretionary. The next question is whether this discretion can be called in question under Article 226 of the Constitution of India. In Apex Finance and Leasing Ltd. v. CIT (1994) 207 ITR 781, the Supreme Court observed as follows (headnote): "The question whether the Commissioner was justified on the facts and in the circumstances of the case, in refusing to exercise his power under section 273A of the Income Tax Act, 1961, to waive interest and penalty where the assessee has disclosed income voluntarily in a revised return, is a question to be examined on the merits and the High Court, on a writ petition challenging such a refusal, ought not to dismiss the petition on the ground that the order was not liable to interference in exercise of its extraordinary jurisdiction." The Supreme Court set aside the order of the High Court refusing to interfere and remanded the case for fresh disposal. In a matter arising under the Wealth Tax Act in Smt. Harbans Kaur v., CWT (1997) 224 ITR 418, where waiver in full was not ordered, the Supreme Court observed as follows (headnote): "The words 'the Commissioner may in his discretion

reduce or waive the amount of penalty' in section 18B of the Wealth Tax Act, 1957, clearly show that the power conferred on the Commissioner is to be exercised by him in such a manner as he deems just and proper. If the conditions stipulated in the section are satisfied, the Commissioner has a discretion in the matter. In exercise of that discretion, the Commissioner can either reduce the amount of the penalty or he may waive the entire penalty. It is for the Commissioner to decide on the facts of a particular case whether a waiver in entirety or a reduction alone is warranted. Of course, when the Commissioner, instead of giving a complete waiver, chooses to give only a reduction of the penalty amount, he must indicate in his order that he has applied his mind in that regard." From the various decisions referred to above already it can be stated without fear of contradiction that the power vested under section 220(2A) of the Act is a discretionary power and it is one coupled with the duty to be exercised judicially and reasonably based on relevant facts. The authority concerned should not act as a mere tax gatherer, but as a quasi‑judicial authority vested with the power of mitigating hardship to the petitioner. In G.T.N. Textiles Ltd. v. Deputy CIT (1993) 199 ITR 347 (Ker.), it was held rejecting the contention of the assessee that the Commissioner had looked into the fact as to whether genuine hardship would be caused to the assessee and found that that was not a case where the payment of interest caused undue hardship to the assessee and the discretion vested in the Commissioner had, therefore, been properly exercised. No error was committed warranting interference by the High Court under Article 226 of the Constitution. In Central Provinces Manganese Ore Co. v. CIT (1986) 160 ITR 961 already referred to, the Supreme Court has observed as follows (page 968): "Since the statute provides for the waiver or reduction of interest, it is open to the Income‑tax Officer before imposing a levy under section 139(8) and to the Inspecting Assistant Commissioner before doing so under section 215 to issue notice to the assessee and hear him in the matter. In case where the jurisdictional fact attracting the levy cannot be, disputed, for example, that the return has been furnished under section 139 with delay, it will be a question merely of satisfying the relevant authority that there are circumstances calling for a reduction or waiver of the Interest." In that case, the assessee had not made any application for waiver or reduction. Hence, no question arose of the concerned authority denying an opportunity to the assessee. The Supreme Court directed the assessee to file an application within a period of six weeks to be considered by the Commissioner of Income‑tax. It admits of no doubt and it is also admitted on all hands that all the three conditions set out in section 220(2A) of the Act have to be cumulatively satisfied. Now, let us examine whether the petitioner‑company has made out a case satisfying those requirements. As already stated, the petitioner‑company had stressed before the Commissioner that it was in a tight financial position due to, (a) its modernization and expansion, (b) the non‑availability of wheat on favourable terms from the Government with a result that wheat had to be purchased in the open market at very high rates, and (c) borrowings made in earlier years and invested in the new units had not yet started yielding results. By no stretch of imagination can reason (a) be taken as satisfying any of the requirements set out in section 220(2A), particularly when the petitioner‑company is not in the doldrums or in financial hardship. It has been doing well and it has ventured to modernize and expand its activities. So far as Condition No.2 in section 220(2A) of the Act is concerned, the petitioner‑company cannot say that the default in the payment of the amount was due to circumstances beyond its control. In Mahalakshmi Rice Mills v. CIT (1981) 129 ITR 53, the Karnatka High Court held that the expression "cooperation" in any enquiry relating to the assessment should be held to mean that the assessee did not resort to any litigation, obstruction or evasive tactics in concluding the assessment and no more. It is on record that the petitioner‑company had gone up to the Supreme Court challenging the earlier assessment order and by so doing, the petitioner‑company had not co operated with the Income‑tax Officer in completing the assessment. I have already referred to some of the decisions relied on by learned counsel for the petitioner‑company. The other decisions relied on by learned counsel are: (1) P.M. Manuel v. ITO (1997) 226 ITR 616 (Ker); (2) R.P. David v. Agrl. ITO (1972) 86 ITR 699 (Mad.); (3) A. V. Thomas & Co. Ltd. v. ITO (1982) 138 ITR 275 (Ker.); (4) Lohia Machines Ltd. v. Union of India (1985) 152 ITR 308 (SC); and (5) Birla Cotton Spinning and Weaving Mills Ltd. v. ITO (1995) 211 ITR 610 (Cal.) In the first of the decisions, the Kerala High Court held that where an application is made for waiver of interest levied under section 215 of the Income Tax Act, 1961, the Income‑tax Authorities have to objectively consider the circumstances and find out whether the assessee is entitled to it. There should not be a mechanical consideration of the claim put forward by the assessee and it should not be that if some benefit is given to the assessee, he will be satisfied. If the conditions laid down for the exercise of discretion are satisfied, the authority has no discretion to refuse to exercise the discretion. If there is omission to exercise the discretion on account of the failure on the part of the authority to genuinely address itself to the matter before it, mandamus can be issued directing such authority to rehear and determine the matter afresh according to law. There is no quarrel over the proposition of law laid down. In my view, the first respondent has exercised his discretion properly and no exception can be taken to the order passed by the first respondent. May be he has not written several pages giving in extenso the basis of his reasons for dismissal. The facts of the present case do not require any elaborate discussion for arriving at the conclusion that the petitioner‑company is not entitled to waiver of interest as claimed by it. The decision of the Kerala High Court does not in any way help the writ petitioner. In the second decision cited by learned counsel, the matter arose under the Agricultural Income‑tax Act. A Bench of this Court held that (headnote of 86 ITR): "Wherever a statute invests a discretionary power in a public officer, it is normally for exercise in favour of the person concerned unless there is some sound and relevant reason for denying the benefit of the discretionary power. The intention of the proviso to section 40 of the Madras Agricultural Income Tax Act, 1955; appears to be that if an appeal is filed, that will be a ground for treating the assessee as not being in default to the extent of the tax covered by the appeal. Normally once the officer is satisfied that an appeal has been filed, he has to treat the assessee as not being in default. Though the proviso does not indicate in what cases denial of discretion will be justified, the fact that the assessees are financially sound and in a position to pay is not in itself a ground for refusing to exercise the discretion under the proviso." In my view, this decision has no application to the facts of the present case. It is not the reasoning of the first respondent that he is disallowing wavier because at the time he decided the question, the petitioner company was financially sound and in a position to pay the interest demanded. The question in that case was whether the filing of the appeal by an assessee under the Agricultural Income‑tax Act would show whether the assessee was in default. The Agricultural Income‑tax Officer has been given a discretion to treat the assessee as not being in default so long as such appeal is un-disposed of. The third decision relied on by learned counsel does not also help the petitioner‑company. In that case the tax computed by the Income‑tax Officer was paid in full and within time by the assessee and a portion of the tax was refunded to the assessee consequent to the order of the Appellate Assistant Commissioner, but, on further appeal, the Tribunal reversed the order of the Appellate Assistant Commissioner and restored that of the Income‑tax Officer and thereafter a fresh notice of demand was served on the assessee calling upon him to pay back to the Department, the tax refunded to him. It was held that the liability to pay interest to the Department under section 220(2) of the Income Tax Act, 1961, arose only from the date when the fresh notice of demand was issued to the assessee and not from the date when the tax was refunded to the assessee. That case also does not in any way advance the case of the petitioner‑company. The fourth decision relied on by learned counsel for the petitioner company relates to exemption of portion of profits and gains derived from new industrial undertaking. I am afraid that the decision has no application to the facts of the present case. It related to the exclusion of borrowed monies and debts and particularly long‑term borrowings in the computation of the capital employed by a new industrial undertaking for the purposes of the tax exemption. Section 801(1) of the Act was upheld as a perfectly valid piece of subordinate legislation. The Supreme Court held that rule 19A of the Income‑tax Rules, 1962, in so far as it provided for computation of the "capital employed" as on the first day of the computation period, was within the rule‑making authority of the Central Board under section 80J(l). It also held that the Finance (No.2) Act, 1980, in so far as it amended section 801 by incorporating the provisions of rule 19A as subsection (IA) in section 801 with retrospective effect from April 1, 1972, was merely clarificatory in nature and was accordingly valid. The next decision is that of Calcutta High Court in Birla Cotton Spinning and Weaving Mills Ltd. v. ITO (1995) 211 ITR

610. It does not support the case of the petitioner‑company. It held that (headnote): " ....interest cannot be levied in rectification proceedings. Section 220(2) has to be strictly construed. Liability to pay interest would arise under section 220(2) only in cases where the amount specified in the notice of demand is not paid within the period specified under subsection (1) of section 220 ....Where the amount specified in the notice of demand is either already paid or no longer payable or subsisting, .no liability to pay interest under section 220(2) arise." The situation in the present case is entirely different. The writ petitioner has invited the problem on itself by not cooperating with the Department by taking proceedings challenging the assessment. Granting that pursuit of legal remedies by the petitioner could not be construed as non cooperation with the Department, the writ petitioner not having satisfied the other two criteria, the first respondent has rightly rejected the petitioner's claim for waiver. The first respondent has exercised his discretion properly and rejected the claim of the writ petitioner for waiver of interest. In these circumstances, I have no alternative except to dismiss the writ petition. The writ petition is, therefore, dismissed. There will, however, be no order as to costs. Consequently, the Injunction Petition W.M.P. No.22728 of 1988 is also dismissed. M.B.A./216/FC Petition dismissed.