IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR FRIDAY, THE 18TH JANUARY 2008 / 28TH POUSHA 1929 OP.No. 1769 of 2001(I) ---------------------- PETITIONER: ------------ M/S.POLAKULATH TOURIST HOME, MULANTHURITHY, PARTNERSHIP FIRM REP. BY ITS MG. PARTNER MR.KRISHNA LAL. BY ADV. SRI.S.ANANTHAKRISHNAN SRI.N.K.SUBRAMANIAN RESPONDENTS: ------------- THE COMMISSIONER OF INCOME TAX, I.S.PRESS ROAD, COCHIN. BY ADV. SRI.P.K.R.MENON(SR.),SC FOR IT THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 18/01/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ORDER ON CMP NO.2969/2001 IN OP NO.1769/2001 DISMISSED: 18.1.2008 SD/-(C.N.RAMACHANDRAN NAIR, JUDGE.) APPENDIX PETITIONER'S EXHIBITS: P1: TRUE COPY OF PETITION DT.18.11.99 FILED BEFORE THE RESPONDENT. P2: TRUE COPY OF ORDER DT.26.10.2000 PASSED BY RESPONDENT. P3: TRUE COPY OF CERTIFICATE DT.25.7.2000 ISSUED BY LORD KRISHNA BANK TO THE PETITIONER. P4: TRUE COPY OF ORDER DT.6.10.99 PASSED BY THE CHIEF COMMISSIONER OF INCOME TAX. TRUE COPY PA TO JUDGE C.N.RAMACHANDRAN NAIR, J. .................................................................... O.P. No.1769 of 2001 .................................................................... 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 2 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. 3 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