1. The petitioner is a legal heir of the late Sri Gopal Krishna Singhania, who, it is stated, died on January 3, 1980. On the return filed by the petitioner disclosing the net value of the estate at Rs. 74,90,302, the First Assistant Controller of Estate Duty, Bombay, provisionally assessed the demand under the Estate Duty Act, 1953, at Rs. 53,38,373 which the petitioner was required to pay, being the accountable person of the deceased. It is said that in order to liquidate the said demand certain equity shares of the face value of Rs. 1,29,276 which formed part of the estate of the deceased, were sold for a total consideration of Rs. 52,84,710. The sale of equity shares resulted in a long-term capital gain of Rs. 51,55,434 and after claiming certain statutory deductions a return of net income at Rs. 34,55,150 was filed by the petitioner for the assessment year 1981-82. It is said that a sum of Rs. 17,945 under the self-assessment was also deposited in respect of the returned income aforesaid. In doing so, the petitioner claims that he adjusted an amount of Rs. 20,19,108 from the tax liability on the said returned income, allegedly on the belief that the petitioner was entitled to refund of that amount from the Assistant Controller, Estate Duty, Bombay, under Section 50B of the Estate Duty Act. In due course, the assessment was completed on an income of Rs.34,86,390 on March 27, 1984, and the petitioner was served with notice of demand for Rs. 21,06,876 under Section 156 of the Income-tax Act (hereinafter referred to as 'the Act'), requiring him to pay the amount within thirty-five days of the service of notice of demand, failing which, the petitioner would be liable to pay interest under Section 220(2) and penalty under Section 221 of the Income-tax Act. Penalty proceedings were also initiated under Section 140A(3) and it was also proposed to charge interest under Sections 139(8) and 216 of the Income-tax Act. The petitioner preferred an appeal and challenged the order of the Income-tax Officer on the grounds amongst others that the petitioner was entitled to the adjustment of the amount allegedly due to him under Section 50 B of the Estate Duty Act in the self-assessment tax, which was wrongly denied to him. However, the appeal on this score was dismissed. The petitioner also took up the matter before the Assistant Controller of Estate Duty to allow the relief under Section 50B of the Estate Duty Act, but no relief was granted on the ground that it was admissible subject to tax on long-term capital gains, first being paid by the petitioner. It was only when the Tax Recovery Officer issued a letter dated July 18, 1986, requiring the petitioner to pay the outstanding demand in respect of the assessment year 1981-82 for which the notice of demand had already been served, that the petitioner paid an amount of Rs.17,32,698 in instalments between September 13 and December 11, 1986.
2. The petitioner thereafter on December 10, 1985, filed an application before the Central Board of Direct Taxes under Sub-section (2A) of Section 220 of the Income-tax Act for waiver of the interest of Rs. 7,24,365 charged from the petitioner under Sub-section (2) of that Section. The application was rejected by the Board and an intimation was sent to the petitioner vide letter dated September 26/30, 1986 (annexure-A to the writ petition), stating that having considered the application filed by the petitioner and the report of the Commissioner of Income-tax in the matter, the Board was of the view that all the conditions of Section 220(2A) were not satisfied, hence, no interference was called for.
3. Almost after nine months thereafter the petitioner filed another application dated August 25, 1987, before the Commissioner of Income-tax (Central), Kanpur, seeking the same relief as was sought before the Central Board of Direct Taxes. That application was also rejected by the Commissioner of Income-tax by his order dated November 9, 1987.
4. Feeling still aggrieved, the petitioner has preferred this writ petition, seeking quashing of the aforesaid two orders through this writ petition. A further relief has also been sought for a mandamus directing the respondents to allow the petitioner's application for waiver of interest and not to recover the outstanding demand of interest during the pendency of the writ petition.
5. We have heard learned counsel for the parties.
6. The broad submission of learned counsel for the petitioner was that the Central Board of Direct Taxes (for short 'the Board'), and the Commissioner of Income-tax (Central), Kanpur, in passing the impugned orders have failed to appreciate that the conditions/requirements prescribed under Sub-section (2A) of Section 220 of the Act were fully made out and there was no occasion for those authorities to reject the waiver applications. Learned counsel went on to argue that the powers conferred under the said provision, though discretionary were quasi-judicial in nature and that discretion was conferred with a view to mitigate the hardship caused to the genuine taxpayer and, as such, before rejecting the application for waiver of interest the Board and the Commissioner ought to have applied their mind to the totality of the circumstances under which the petitioner failed to pay the tax liability within the pre-scribed period and became liable to pay interest under Sub-section (2) of Section 220 of the Act.
7. We have considered these submissions carefully. Sub-section (2) of the Act provides that if the amount specified in any notice of demand under Section 156 is not paid within the period specified under Sub-section (1) of Section 220, the assessee shall be liable to pay simple interest at the specified rate from the date commencing after the end of the period specified in Sub-section (1) of Section 220 of the Act. It is not in dispute that the petitioner did not pay the amount for which he was served with a notice under Section 156 within the prescribed period and, admittedly, there was a default on his part. Sub-section (2A) was inserted in Section 220 of the Act by the Taxation Laws (Amendment) Act, 1984, with effect from October 1, 1984. That provision initially provided that notwithstanding anything contained in Sub-section (2), the Board may reduce or waive the amount of interest payable by an assessee under the Sub-section if on the recommendation made by the Commissioner in this behalf, it is satisfied that : (i) payment of such amount would cause genuine hardship to the assessee ; (ii) the default in the payment of the amount on which the interest 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 recovery of any amount due from him,
8. The said provision came to be amended by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, with effect from April 1, 1987, and amongst other amendments with which we are not concerned in this writ petition, in the opening portion the word 'Commissioner' was substituted for 'Board' and the words 'he is satisfied' were substituted for 'on the recommendation made by the Commissioner in this behalf, it is satisfied'. The effect of this amendment was that the powers to reduce or waive the interest under Sub-section (2A) of Section 220 paid or payable, were entrusted to the Commissioner instead of the Board. The application for waiver before the Commissioner of Income-tax according to the petitioner was filed because of the amendment made in 1986. When questioned about the maintainability of that application, the earlier application having been rejected by the Board on the same set of facts, learned counsel for the petitioner was unable to furnish any acceptable reply. We are clearly of the opinion that a second application on the facts of the case was clearly not maintainable and the amendment relied upon did not entitle the petitioner to file such an application. The Commissioner, in our opinion, had rightly rejected the application for waiver though the order proceeded to reject the same on the merits.
9. The order of the Board rejecting the application for waiver was not challenged and the petitioner kept quiet about it for a long time. Taking advantage of the amendment referred to earlier, a second application was filed before the Commissioner of Income-tax which was totally unmaintainable. In the pleadings of the writ petition or in the grounds set out therein there is no challenge to the order passed by the Board except for a prayer for quashing of that order. The petitioner has not even filed a copy of the order passed by the Board. The letter dated September 26/30, 1986, of which quashing has been prayed, is only the communication letter about the rejection of waiver application by the Board. For these reasons alone the petitioner is not entitled to any relief against the order passed by the Board.
10. However, we have examined the matter on the merits and find that the petitioner is not entitled to any relief. There can be no dispute with the proposition that the discretion given under Section 220(2A) of the Act has to be exercised by the authority reasonably and objectively, inasmuch as, it exercises quasi-judicial functions while acting under those provisions. At the same time, to avail of the benefit, it is for the person seeking the relief to make out a case that the requirements of those provisions are fulfilled. On a plain reading of that provision, it is evident that all the three conditions set out therein must be satisfied cumulatively and if any of those requirements are wanting in a given case, the discretion to reduce or waive, may be legitimately refused. Learned counsel took pains to emphasize that payment of tax on capital gains without permitting the set off of the amount to which the petitioner was entitled under Section 50 B of the Estate Duty Act, would have caused genuine hardship and thus the petitioner was justified in not making the payment in time. We are afraid that the submission is misconceived. The condition whether the payment of such amount has caused or would cause genuine hardship to the assessee, envisaged under Section 220(2A), refers to the payment of interest and not to the payment of principal on which the interest was demanded. Despite our repeated query, learned counsel for the petitioner could not place any material before the court either in the writ petition or in the application for waiver made before the Board or the Commissioner or otherwise, as to how that condition was satisfied in the instant case.
11. Likewise, the other condition that the default in payment of the amount on which the interest has been paid or was payable under subSection (2) of Section 220 was due to circumstances beyond the control of the assessee, is not satisfied on the facts of the case. The outstanding demand on which the interest has been demanded from the petitioner, it is said, was paid by raising short-term loan. In the counter affidavit filed on behalf of the respondents it is averred that the payment in dispute was not beyond the control of the petitioner which was made by takingloan from a family concern, J, K. Bankers at the rate of 6 per cent, interest whereas, the interest payable to the Department under Section 220(2)was 15 percent, with effect from October 1, 1984. There is also an averment in the counter affidavit that the loan could have been taken earlieralso when the tax for payment fell due. In the writ petition or in the twowaiver applications, no material has been set out from which it could beconcluded that the default in payment of the amount on which interestwas charged, was due to circumstances beyond the control of the asses-see. The insistence of the petitioner that he was entitled to the reliefunder Section 50 B of the Estate Duty Act and, thus, he was not liable topay the said amount on which the interest was charged, was of no helpto the petitioner and indeed, this point was not argued before this court.The Commissioner of Income-tax in his report to the Board submitted inconnection with the waiver application of the petitioner, had clearlypointed out that the conditions precedent for exercise of discretion infavour of the petitioner as envisaged under Section 220(2A) were notmade out. A copy of the report is filed as annexure CA-2 to the counteraffidavit. Although in the counter affidavit it has been emphasized thateven the third condition referred to in Sub-section (2A) of Section 220 ofthe Act is also not satisfied in the present case, but we do not feel it necessary to deal with it.
12. In view of the above, the writ petition is devoid of merit and is, accordingly, dismissed. There shall be no order as to costs.