Case: B.M. Malani Vs. Commr. of Income Tax &amp; Another

3. Appellant had been carrying on money-lending business and trading in shares and securities. On or about 4.9.1994, a raid was conducted in his residential premises by the authorities in exercise of their power under Section 132 of the Income Tax Act (for short, "the Act"). Amongst others, shares worth market value of Rs. 61.38 lakhs and a demand draft worth Rs. 10 lakhs in the name of PAN Clothing Company Limited were seized. By a letter dated 15.12.1994, a declaration was made by the appellant in terms of sub-Section (4) of Section 132 of the Act, by reason whereof he opted to pay taxes from out of the seized shares and securities stating that the shares be expeditiously disposed of and the sale proceeds therefrom be appropriated towards taxes. The said letter dated 15.12.1994 reads asrefer to your letter cited in reference above in the matter of payment of taxes. I had made declaration U/s. 132(4) of the Act and pursuant declaration opted to pay taxes from out of the assets namely shares and securities under seizure, as I have no further funds. I have therefore delivered my consent and requested the Asst. Director of Income Tax (Inv.) Unit-2 (3), to dispose of the shares as expeditiously as possible for appropriating the proceeds towards taxes and advance tax. In the above circumstances I request you sir to arrange for sale of Shares, Securities under seizure to meet the tax liabilities andthe said request of the appellant was not acceded to. However, the fact that such an offer had been made by the appellant is not denied or disputed. It is furthermore not disputed that the Income Tax Department demanded and recovered a sum of Rs.40 lakhs in between the period January and March 1995, the details whereof are as under:TABLEIndisputably, the appellant filed an application in terms of sub-Section (1) of Section 245C before the Settlement Commission on 2.1.1996 whereupon an order was passed by the Settlement Commission on 2.12.1999.The demand draft drawn in the name of PAN Clothing Company Limited worth Rs. 10 lakhs which was seized during the course of search was encashed by the Income Tax Department in July 2000 after the same was got revalidated.By an order dated 8.3.2002, the Income Tax Officer, Ward - 10(1), Hyderabad levied interest for a sum of Rs. 31,41,106/- under Section 220 (2) of the Act for the assessment years 1990-91 to 1995-96.Appellant thereafter filed an application for waiver of interest on diverse dates i.e. 3.4.2002, 14.5.2002 and 16.9.2002. The same was rejected by the Commissioner of Income Tax reason of an order dated 26.11.2002 opining that the appellant did not satisfy all the three conditions which were required for allowing a waiver petition. It was, however, accepted that the appellant cooperated with the Department. So far as the request of the appellant to sell the shares and securities is concerned, it was opined that the levy of interest did not cause any genuine hardship to him and the default in payment of the amount of tax on which interest has been paid or was payable under Section 220(2A) was due to circumstances beyond his control. It was furthermore opined that the dues as against the appellant could be crystallized only after passing of the order of the Settlement Commission 2.12.1999. The Commissioneras per the enquiry report dated 22.11.2002, obtained from the Income Tax Officer Ward-10 (1), indicates that Sri B.M.Malani has been residing in a house bearing No. 1-11-219, Begumpet, Hyderabad. The property is located in posh area near Airport in Begumpet. The area of the property is about 6000 sq. yds., and value will be around Rs. 2 crores. Thus, property as referred above belongs to HUF and the assessments under consideration were passed in the status of HUF. From the details gathered by the Department, it was revealed that the assessee possesses good resources and he is financially sound and it willnot cause any hardship in discharging legitimate tax liability which is in the form of interest u/s 220 (2A) and the tax liability that would have arisen out of his inordinate delay in liquidation ofreason of the impugned judgment, the High Courthardship claimed by the petitioner is on account of lack of resources either moveable or immoveable. Even after the conclusion of this Court that the finding of the 1st respondent regarding the property at Begumpet is justified, the fact remains that the petitioner had assets by way of units in the Unit Trust of India by the date of the Settlement Commission determined his liability of tax. The fact that a distress sale conducted by the Unit Trust fetched a lower rate in our view does not make any difference for the consideration of the application of the petitioner for the waiver of interest. The UTI did not follow according to the Division Bench of this Court the requisite procedure in resorting to distress sale. That is a different matter. But, nothing prevented the petitioner from encashing the said units and pay the tax liability in time. The submission of the learned counsel for the petitioner that such a premature sale of the units would result in a financial loss to the petitioner is irrelevant in the context of the application for waiver of interest. If the petitioner is already found liable and due to pay tax under the Income Tax Act, the petitioner cannot choose the time for encashing the assets he had to get the post price for the asset and still complain that the levy of interest would cause undue hardship to him. Apart from that by virtue of the Division Bench judgment of this Court, the UTI is already directed to make good the loss suffered by the petitioner by virtue of the distress sale undertaken by theof the second condition specified in Section 220(2A) of the Act was not gone into on the premise that the appellant had not been able to establish that payment of interest would cause any genuine hardship to him.

Reasoning:
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 ofthe said principle, in our opinion, should be applied even in a case of this nature. A statutory authority despite receipt of such a request could have kept mum. It should have taken some action. It should have responded to the prayer of the appellant.However, another principle should also be borne in mind, namely, that a statutory authority must act within the four corners of the statute. Indisputably, the Commissioner has the discretion not to accede to the request of the assessee, but that discretion must be judiciously exercised. He has to arrive at a satisfaction that the three conditions laid down therein have been fulfilled before passing an order waiving interest. Compulsion to pay any unjust dues per se would cause hardship. But a question, however, would further arise as to whether the default in payment of the amount was due to circumstances beyond the control of the assessee.Unfortunately, this aspect of the matter has not been considered by the learned Commissioner and the High Court in its proper perspective. The Department had taken the plea that unless the amount of tax due was ascertainable, the securities could not have been sold and the demand draft could not have been encashed. The same logic would apply to the case of the assessee in regard to levy of interest also. It is one thing to say that the levy of interest on the ground of non-payment of correct amount of tax by itself can be a ground for non-acceding to the request of the assessee as the levy is a statutory one but it is another thing to say that the said factor shall not be taken into consideration at all for the purpose of exercise of the discretionary jurisdiction on the part of the Commissioner. Appellant volunteered that the securities be sold. Why the said request of the appellant could not be acceded to has not been explained. It was a voluntary act on the part of the appellant. It was not even a case where sub-Section (3) of Section 226 of the Act was resorted to. As the offer was voluntary, the authorities of the Department subject to any statutory interdict could have considered the request of the appellant. It was probably in the interest of the revenue itself to realize its dues. Whether this could be done in law or not has not been gone into.9. The same ground, however, was not available to the appellant in respect of the demand draft, as in relation thereto no such request was made. The demand draft was in the name of a Company. It may be true that when any document is seized, a presumption is raised that the same belongs to the person from whose possession or control it was seized as is laid down in sub-Section (4A) of Section 132 of the Act, but such a presumption is a rebuttable one. In the absence of any request made by the Assessee himself, probably at that point of time, the same could not have been encashed. Appellant did not own the same in law. He did not make any request for its enchashment. Whether such a presumption should be raised or not was the subject matter of consideration by the Assessing Officer at the time of making its final assessment as the appellant himself filed an application before the Settlement Commission in terms of Section 245C(1) of the