IMPORTANT POINT
Ingredients for determining genuine hardship discussed.

JUDGMENT

S.B. Sinha, J. —

1. Leave granted.

2. This appeal is directed against the judgment and order dated 27.7.2006 passed by the High Court of Judicature of Andhra Pradesh at Hyderabad in Writ Petition No. 2672 of 2003 whereby and whereunder the Writ Petition filed by the appellant herein against an order dated 26.11.2002 passed by the Commissioner of Income Tax rejecting the application filed by the appellant herein under Section 220 (2-A) of the Income Tax Act, was dismissed.

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 as under :

“Please refer 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 and oblige.”

Indisputably, the 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:

“Assessment Date of Amount (Rs.) Year Payment

1993-94 17.01.1995 7,50,000/-

1994-95 17.01.1995 7,50,000/-

1992-93 18.01.1995 50,000/-

1991-92 20.03.1995 10,00,000/-

1991-92 24.03.1995 10,00,000/-

Total 40,00,000/-”

Indisputably, 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 pa