Whether when pursuant to Search operation, assessee fails to pay taxes but does so after coercive measures are taken, its petition seeking waiver of interest u/s 220(2) deserves to be entertained - NO

THE issue before the Bench is - Whether when pursuant to Search operation, assessee fails to pay taxes but does so after coercive measures are taken, its petition seeking waiver of interest u/s 220(2) deserves to be entertained. NO is the verdict.

Facts of the case

The assessee, a partnership firm with the object of carrying on business of real estate did not file within time its return for the AYs 2006-2007 and 2007-2008. The income tax authorities conducted a search of the assessee's premises u/s 132 followed by a notice u/s 153(c) whereafter, the assessee filed return of income for AY 2006-2007 and 2007- 2008 stating that the assessee had not commenced trading business, but purchased immovable properties during the AY 2006-07, however did not disclosed the source of consideration for purchase of the immovable properties. The return for the year 2006-2007 was accepted u/s 143(3), while the return for AY 2007-2008 income when assessed at Rs.2,06,00,000/- on 30.12.2010 made a demand for Rs.1,26,75,366/-. The Prl. CIT issued notice demanding Rs.63,79,085/- as interest levied u/s 220(2) for the AY 2007-2008. Assessee filed an application requesting waiver of interest u/s 220(2) whereafter a report was called from AO, as per which assessee had not made payment of the demand after assessment was completed, but went in appeal and further that it was only after taking coercive action, by attaching the bank account and properties of the assessee, payment of Rs.15,00,000/- was made on 11.9.2014 and Rs.1,11,75,366/- on 20.01.2015, and the assessee did not cooperate during the recovery of tax despite having extended ample opportunities. Prl. CIT declined to accept the cause shown for hardship to waive interest u/s 220(2) and rejected application.

Held that,

++ assessee, a partnership firm, did not submit its returns for the year 2006-07 and 2007-08 within the time stipulated but did so only after the machinery provided under the Income Tax Act was put into force i.e. a search conducted and notice issued, pursuant to which returns were filed on 20.9.2010. The conduct of the petitioner speaks volumes of its commitment to rule of law. The fact that returns submitted when accepted, petitioner was required to pay tax of Rs.74,74,229/- for the AY 2006-07 and Rs.2,06,00,000 for AY 2007-08. Petitioner did not make the payments immediately thereafter but did so only after coercive steps were taken by attaching the Bank accounts and property of the petitioner, whence Rs.35 lakhs was paid on 8.5.2014 and the balance of Rs.75,21,573/- on 20.1.2015 for the AY 2006-07, while for the AY 2007-08 Rs.15 lakhs was paid on 11.9.2014 and Rs.1,11,75,366/- on 20.1.2015. Despite the laxity on the part of the Department in the matter of recovery of the taxes by reason of which assessee was in possession of the amounts due and payable as tax for almost ten years from AY 2006-07, yet again speaks volumes of the conduct of the assessee in the matter of payment of taxes. If regard is had to the aforesaid facts and material dates, the contention that petitioner suffers from hardship hence entitled to waiver of interest u/s 220(2) is far from acceptance. "Hardship" when pressed into service must be genuine and must smack of a conduct of a worthy citizen. In the facts and circumstances hardship cannot be comprehended in favour of the assessee. Suffice it to state that the Prl. CIT Act-V, Bangalore was fully justified in declining waiver of interest at the request of the petitioner. The orders impugned cannot be characterized as perverse or arbitrary calling for interference in exercise of extraordinary writ jurisdiction under Article 226 of the Constitution. Petitions devoid of merit are rejected