Madras High Court
Express Newspapers Ltd. vs Commissioner Of Income-Tax And Ors. on 10 November, 2000
Equivalent citations: [2001]248ITR516(MAD), (2001)1MLJ294
Author: P. Sathasivam
Bench: P. Sathasivam
JUDGMENT P. Sathasivam, J.
1. The writ petition is directed against the order of the Commissioner of Income-tax, Tamil Nadu-V, Madras, the first respondent herein, dated October 29, 1990, passed under Section 220(2A) of the Income-tax Act, 1961.
2. The case of the petitioner-company is briefly stated hereunder :
The petitioner-company declared income of Rs. 115 lakhs under Section 3(1) of the Voluntary Disclosure of Income and Wealth Act, 1976 (Act No. 8 of 1976), in short, the Voluntary Disclosure Act, 1976. The income-tax payable thereon amounted to Rs. 69 lakhs. The said disclosure under the said Act was made on December 31, 1975. Pursuant to the said disclosure, the petitioner-company paid the tax on the disclosed income amounting to Rs. 69 lakhs on several dates over a period of 53 months. The said amount was paid under the instalment scheme as permitted by the Central Board of Direct Taxes, New Delhi. By making all efforts, the petitioner-company completed the payment of the demand of Rs. 69 lakhs by May, 1980, i.e., 16 months ahead of the instalment schedule. Thus being forced to resort to payment of the tax by instalments, the petitioner-company incurred liability towards interest of Rs. 22,23,941 for delayed payment of the income-tax under Section 220(2) of the Income-tax Act read with Section 6 of the Voluntary Disclosure Act, 1976.
3. On October 26, 1984, the petitioner-company applied to the Central Board of Direct Taxes for waiver or reduction of the said interest under Section 220(2A) of the Income-tax Act, 1961. In the meanwhile, the power to reduce or waive as contemplated was vested with the Commissioner of Income-tax by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, with effect from April 1, 1987. Ultimately, by the impugned order, the first respondent has rejected their application for waiver of interest, against which, the petitioner-company has filed the present writ petition. It is further stated that the petitioner-company had acted in good faith and after discussion with the income-tax authorities made a declaration under the Voluntary Disclosure Act, 1976. The petitioner-company had fully co-operated in the matter of assessment proceedings in its case. The impugned order passed by the first respondent is contrary to law and the scheme of the Voluntary Disclosure Act.
4. The first respondent, Commissioner of Income-tax, filed a counter affidavit disputing the various averments made by the petitioner-company. It is stated that when the appeals were pending before the Income-tax Appellate Tribunal, the Tribunal by its order in I. T. A. Nos. 1465 and 1466/(Mds) of 1974-75, dated December 31, 1975, set aside the assessments at the instance of the petitioner-company as the petitioner-company desired to avail of the benefit of the Voluntary Disclosure Act, 1976. Thereafter, the petitioner filed a declaration under Section 6 of the Voluntary Disclosure Act, 1976, declaring income of Rs. 1.15 crores on December 31, 1975, and as per the declaration, the petitioner-company was liable to pay income-tax of Rs. 69 lakhs on the income declared. The petitioner-company, however, paid income-tax of Rs. 11,17,791 in instalments up to May 4, 1976, leaving a balance of Rs. 57,82,209 remaining unpaid. As requested by the petitioner-company, the Central Board of Direct Taxes, New Delhi, agreed to the request of the petitioner-company and granted time till September, 1981. It is true that the petitioner-company paid the tax arrears by May, 1980. After completion of the payment of the entire tax by the petitioner, the then Commissioner of Income-tax, Tamil Nadu-I, Madras, by his letter dated September 29, 1980, directed the petitioner-company to pay a sum of Rs. 22,23,941 representing the interest on the belated payment of income-tax under Section 6 of the Voluntary Disclosure Act, 1976, in respect of the income disclosed voluntarily. The petitioner-company did not pay the interest amount but preferred a petition under Section 220{2A) of the Income-tax Act, 1961, on October 26, 1984, requesting for waiver of interest. By a considered order, the first respondent rejected the petitioner-company's plea of waiver of interest on October 29, 1990. Levy of interest for belated payment of income-tax is mandatory under the Voluntary Disclosure Act and therefore the petitioner-company's petition for waiver of interest itself is not maintainable. After agreeing to pay interest and after securing payment by instalments from the Central Board of Direct Taxes, the petitioner-company is estopped from making a claim for waiver of interest. Inasmuch as Section 220(2A) of the Income-tax Act, which was introduced in 1984, it has no application to the Voluntary Disclosure Act, 1976. There is no provision under the Voluntary Disclosure Act, 1976, for the reduction of interest. Further, the conditions on the fulfilment of which the interest can be waived under Section 220(2A) of the Income-tax Act, 1961, are not applicable to the voluntary disclosure of income. No material was produced before the Commissioner of Income-tax to justify the claim that the payment of interest would cause genuine hardship to the petitioner-company. There is no case for interference in favour of the petitioner under article 226 of the Constitution of India.
5. In the light of the above pleadings, I have heard Mr. V. Ramachandran, learned counsel for the petitioner-company, and Mr. C. V. Rajan, standing counsel for income-tax cases.
6. The only point for consideration is whether the first respondent is justified in rejecting the application of the petitioner-company, filed under Section 220(2A) of the Income-tax Act, 1961, for waiver of interest.
7. In view of the narration of the case of both the parties in the earlier part of my order, it is unnecessary to refer to the same once again. However, the fact remains that when the appeals were pending before the Income-tax Appellate Tribunal, the petitioner-company desired to avail of the benefit of the Voluntary Disclosure Act, 1976, and, accordingly, they filed a declaration under Section 6 of the Voluntary Disclosure Act, 1976, declaring income of Rs. 1.15 crores on December 31, 1975. There is no dispute that as per the said declaration, the petitioner-company was liable to pay income-tax of Rs. 69 lakhs on the income declared. On payment of Rs. 11,17,791 regarding the balance tax of Rs. 57,82,209, the petitioner-company made a representation to the Central Board of Direct Taxes, New Delhi, on October 25,1978, requesting for payment of tax in instalments at the rate of Rs. 1.00,000 per month. However, the petitioner-company paid the tax arrears by May, 1980, before the expiry of the instalment period. Thereafter, by proceedings dated September 29, 1980, the petitioner-company was directed to pay a sum of Rs. 22,23,941 representing the interest on the belated payment of income-tax under Section 6 of the Voluntary Disclosure Act, 1976. Section 6 of the Voluntary Disclosure Act, 1976, reads as follows (see [1976] 102 ITR (St.) 49, 51) :
"6. Interest payable by declarant.--If the amount of income-tax payable in respect of the voluntarily disclosed income is not paid on or before the 31st day of March, 1976, the declarant shall be liable to pay simple interest at twelve per cent, per annum on the amount remaining unpaid from the 1st day of April, 1976, to the date of payment and the provisions of the Income-tax Act and the rules made thereunder shall, so far as may be, apply as if the interest payable under this Section were interest payable under Sub-section (2) of Section 220 of that Act."
8. There is no dispute with regard to the payment of interest as per the above referred Section 6 of the Voluntary Disclosure Act, 1976. However, the petitioner-company preferred a petition to the Central Board of Direct Taxes for waiver or reduction of interest under Section 220(2A) of the Income-tax Act, 1961, on the ground that the delay in payment of tax was due to circumstances beyond its control and that payment of interest specified would cause genuine hardship to it. When the said application was pending, the Income-tax Act was amended vesting the powers under Section 220(2A) of the Income-tax Act, 1961, with the Commissioner of Income-tax, and, accordingly, the application for waiver was heard by the first respondent herein.
9. I have already referred to Section 6 of the Voluntary Disclosure Act, 1976. The perusal of the said provision clearly shows that for belated payment of income-tax payable in respect of voluntarily disclosed income, levy of interest is a mandatory one. Mr. V. Ramachandran, learned senior counsel for the petitioner-company, after referring to Section 220(2A) of the Income-tax Act, 1961, would contend that inasmuch as it is a beneficial provision, the request of the petitioner-company could have been considered. There is no dispute that the Voluntary Disclosure Act, 1976, was enacted in 1976 and Section 220(2A) was introduced in the Income-tax Act, 1961, by the Taxation Laws (Amendment) Act, 1984, with effect from October 1, 1984. As rightly contended on the side of the Revenue, the Voluntary Disclosure Act, 1976, was in operation for a limited period of time and was also a self-contained one and there is no provision for waiver of interest in it. Likewise, the Income-tax Act, 1961, did not contain Section 220(2A) at the time when the Voluntary Disclosure Act, 1976, was enacted. I have already stated that Section 220(2A) of the Income-tax Act, 1961, was introduced only with effect from October 1, 1984. It is clear from Section 6 of the Voluntary Disclosure Act, 1976, that the levy of interest under this Act for belated payment of income-tax is mandatory. It is further clear that the petitioner-company would not be entitled to any immunity till it discharges the entire obligation that arises under the Voluntary Disclosure Act, 1976. The reading of the entire provisions of the Voluntary Disclosure Act, 1976, shows that it is a self-contained code and there is no provision for waiver of interest in it. Further, the conditions on the fulfilment of which the interest can be waived under Section 220(2A) of the Income-tax Act, 1961, are not applicable to the Voluntary Disclosure Act, 1976. Accordingly, I am unable to accept the contra argument made by learned senior counsel for the petitioner-company and concur with the conclusion arrived at by the first respondent.
10. Even, if the petitioner-company's contention is accepted that Section 220(2A) of the Income-tax Act, 1961, is applicable to the claim of the petitioner-company, it is to be considered whether the petitioner-company satisfied the conditions laid down in Section 220(2A). Section 220(2A) of the Income-tax Act, 1961, reads as follows :
"(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."
11. In the application for waiver, it was pleaded that the delay in payment of the tax occurred due to circumstances beyond the petitioner-company's control and in spite of its best efforts to liquidate the arrears without delay, that the company had fully co-operated with the Department by coming forward with the declaration under the Voluntary Disclosure Act, 1976, and by remitting the sum of Rs. 69 lakhs well ahead of the time granted by the Central Board of Direct Taxes and, accordingly, the payment of interest of Rs. 22,23,941 would cause genuine hardship to them, which deserves liberal treatment and merits the favour of waiver. Though it is stated that the petitioner-company's attitude was one of co-operation relating to assessment proceedings there is no dispute that when the appeals were pending before the Income-tax Appellate Tribunal the peti-tioncr-assessee requested for setting aside the assessments as they desired to avail of the benefits of the Voluntary Disclosure Act, 1976. Though the first respondent-Commissioner has observed that because the petitioner-company has filed appeals, I am of the view that filing of appeal on the basis of statutory provision cannot be treated as non-co-operation by the assessee. However, as rightly observed by the first respondent, the petitioner-company has not at all explained the circumstances by which the payment of income-tax on the entire amount disclosed was not made along with the filing of the declaration itself. In other words, I am satisfied that no tangible material was produced before the Commissioner of Income-tax to justify the claim that the payment of interest would cause genuine hardship to the petitioner-company. On the other hand, the first respondent has considered and held that the assets held by the petitioner-company and the market value of such assets do not justify waiver of interest on the ground that the payment of such interest would cause genuine hardship to the assessee. In the counter affidavit filed before this court, it is stated that the records of the petitioner-company, including the return of income of the petitioner-company for the assessment year 1990-91 which was filed on September 12, 1990, revealed that the petitioner company owned immovable properties at New Delhi, Bombay and Madras from which it receives gross rent of Rs. 3,08,22,892 per annum and net rent of Rs. 1,93,90,225 per annum after all outgoings; It is further stated that the cash income returned for the said assessment year was Rs. 2,63,60,524, i.e., net profit returned of Rs. 56,19,802 plus depreciation allowance debited of Rs. 2,07,40,724 before arriving at such income. Though these particulars have not been mentioned in the impugned order, it is brought to my notice that all these materials were available before the Commissioner of Income-tax in the form of the petitioner-company's own return of income and the same was considered by him before he came to the conclusion that the assets held by the petitioner-company and the market value of the assets do not indicate that it would cause genuine hardship to the petitioner-company. Accordingly, from the statement of assets of the petitioner-company presented before the first respondent, there is clear evidence on record to show that the payment of interest of Rs. 22,23,941 would cause no genuine hardship to the petitioner. In such circumstances, the decisions referred to by learned senior counsel for the petitioner-company, namely :--
(i) Indra and Co. v. CIT ;
(ii) Fairdeal Motors v. CIT ;
(iii) P. Ramasamy v. CIT ; and (iv) J. Jayalalitha v. CIT ;
are distinguishable and not helpful to the petitioner-company's case.
12. No doubt, learned senior counsel for the petitioner, by referring to N. Subhakaran v. CIT , would contend that when the impugned order does not disclose all the relevant details, the same cannot be cured by furnishing those materials in the counter affidavit. There is no dispute with regard to the abovesaid proposition, namely, that the defect in the impugned order cannot be cured by filing affidavit. In our case, I have already referred to the reasons furnished by the first respondent in rejecting the claim of the petitioner-company. As a matter of fact, the petitioner-company has not satisfied nor furnished any material to fulfil the three Clauses in Section 220(2A) of the Income-tax Act, 1961. The other decision referred to by learned senior counsel for the petitioner company is reported in P. Ramasamy v. CIT . K. Sampath (., while considering Section 220(2A) of the Income-tax Act, 1961, has held that the power to waive interest under Section 220(2A) is a "discretionary power" and while exercising such power, the authorities are duty bound to indicate in their order that they had applied their mind in that regard. Here again, there is no dispute with regard to the said proposition. In our case, though the first respondent has stated that the petitioner-company has not co-operated with the Department by filing appeals against the assessment orders, I have already held that the said reason cannot be accepted. Further, I have already stated that the petitioner-company has failed to furnish acceptable materials for genuine hardship and the circumstances beyond their control, etc. Accordingly, the said decision is also not helpful to the petitioner-company.
13. I have already referred to that Section 220(2A) of the Income-tax Act, 1961, was inserted by the Taxation Laws (Amendment) Act, 1984, with effect from October 1, 1984. Accordingly, prior to the introduction of the said provision, there was no power to waive the interest. In other words, the power to waive interest was given to the Commissioner of Income-tax only on and after October 1, 1984, In this regard, learned standing counsel for the Revenue has very much relied on the decision of R. Jayasimha Babu J. in W. P. No. 7160 of 1997, dated November 27, 1998 (S. Subash v. CIT ), wherein the learned judge has held in paragraphs 4, 5, 6 and 7 (pages 514-515) as follows :
"Interest for the period prior to October 1, 1984, whether paid or payable was not meant to be covered by this provision, as the Section in its terms has not been given retrospective effect. The Section is not merely a procedural one, but is a substantive provision dealing with the vesting of the substantive power by which the authority could waive the recovery of monies otherwise due and payable by the assessee. That power was not available for being exercised in respect of a period during which the authority did not have the power to waive the interest.
The word 'paid' was introduced in Section 220(2A) of the Act by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, with effect from April 1, 1987. The object of introducing that term was only to make it clear that the authority is empowered to grant relief not only to those who had withheld the payment of interest in respect of the period covered by the Section, but also those who had promptly paid that interest despite their eligibility to claim relief, and thereafter, had sought relief in accordance with that provision. The addition of the word 'paid' was meant to prevent the likelihood of an honest assessee being denied relief, while a person who had failed to comply with the law would still be eligible for relief. It was not an amendment which was intended to extend the power to grant relief in respect of a period during which the authority did not have the power to waive recovery of interest. It is, therefore, not possible to agree with the submission of counsel that the provision is retroactive. The normal rule of construction of any statutory provision is that its operation is prospective. It is only in case of procedural provisions that in the absence of any intention to the contrary whether explicit or implicit, such procedural provisions are regarded as being applicable to pending proceedings, even though such proceedings may have commenced at a point of time anterior to the introduction of the relevant statutory provisions. Where the statute confers a substantive power for the first time, it cannot be held on any known principle of construction of statute that such power is meant to be exercised in respect of past periods as well, so as to undo what had been properly done, and confer a benefit which the plain words of the statute did not intend. It has always been the normal legislative practice to make explicit the intention to make a provision retrospective in operation wherever a substantive alteration is made in the law. It is only in cases where the amendment is to be regarded as clarificatory or declaratory that such provision is even in the absence of express language to that effect in the relevant provision, applied even in respect of matters relating to periods prior to the date of introduction of the provision. Section 220(2A) of the Act cannot be regarded as a clarificatory or declaratory provision. Prior to the introduction of the provision, there was no power in the authority named therein to waive interest. The question of clarifying a non-existent power, or to declare the existence of something which did not exist, therefore, does not arise for consideration."
14. I am in respectful agreement with the view expressed by the learned judge. It is true that the Commissioner has a duty to grant waiver in cases where the assessee had fulfilled all the conditions in Section 220(2A).
15. I have already observed that after considering the relevant materials, the Commissioner had concluded that the assessee has not placed any acceptable material in support of their claim in terms of the statutory provisions referred to above. Further, there is a specific finding by the Commissioner that there was no undue hardship to the assessee. I am satisfied that the first respondent has exercised his jurisdiction within the ambit of law and the said discretion cannot be interfered with by treating this writ petition as an appeal against the impugned order. Under these circumstances, I do not find any error or infirmity in the impugned order of the first respondent, dated October 29, 1990, accordingly, the writ petition fails and the same is dismissed. Consequently, connected W. M. P. No. 6619 of 1991 is also dismissed. No costs.