The interpretation of financial hardship under Section 220(2A) requires considering the entirety of the taxpayer's financial situation, not merely an isolated assessment of conditions.

1 The issue raised in this writ petition pertains to the request made by the petitioner for waiver of interest under S.220(2A) of the Income tax Act, 1961. The assessment year is 1988-89. Ext. P1 is the assessment order. After adjustments the net liability towards interest is Rs. 1,27,772/-. Petitioner filed Ext. P7 application under S.220(2A) for waiver of interest. The same was rejected as per Ext. P8. The said order passed by the Commissioner is under challenge in the writ petition.

2 Sri. Balachandran, learned senior counsel appearing for the petitioner, submits that the Commissioner has not properly applied the law governing S.220(2A) to the fact situation. According to the learned senior counsel irrelevant factors have been taken into consideration while leaving out the relevant. Sri. Raveendranatha Menon, learned senior counsel appearing for the Revenue submits that Ext. P8 order is passed after taking into consideration all the relevant factors and that the Commissioner has exercised his power in accordance with law and has passed a proper order.

3 S.220(2A) reads as follows:-
"220(2A) Notwithstanding anything contained in sub-s.(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 cooperated in any inquiry relating to the assessment or any proceeding for the recovery of any amount due from him."
The three ingredients for the invocation of the power are (1) the payment of the amount of interest causes or has caused genuine hardship to the assessee; (2) payment of the amount of tax leading to the levy of interest was defaulted due to circumstances beyond the control of the assessee; and (3) the assessee has cooperated with the enquiry relating to the assessment/proceedings for recovery. The Commissioner has found in Ext. P8 that of the three conditions only the third one was satisfied; the petitioner cooperated with the enquiry/proceedings. According to the Commissioner the default in payment of the tax amount which led to the levy of interest was not fully due to circumstances beyond the control of the assessee and that the payment of interest would not cause any genuine hardship. Referring to the accounts from 1992 to 1994 the Commissioner has observed that during the said period there was excess payment made by the petitioner and remaining with the Department to be adjusted and after such adjustment the liability was only Rs. 2,50,000/- and in such circumstances it cannot be said that payment of interest world cause any genuine hardship to the assessee.

4 A perusal of the statement of accounts of the petitioner would show that the petitioner had been continuously running on loss upto 1991-92. It is also stated in the writ petition that the petitioner was in serious financial crisis at the relevant time, being burdened with liabilities to Provident Fund, ESI etc. This crucial aspect of the loss being accumulated for over a period from 1985 to 1992 has missed the notice of the Commissioner. The relevance of such continuous loss on both conditions, regarding genuine hardship and the default being referable to circumstances beyond the control of the assessee has certainly to be looked into. That there was excess payment remaining to be adjusted is necessarily not a conclusive indicator to hold that there was no financial difficulty and that there is no genuine hardship. Only in view of the demands made by the Department the payments were made lest other consequences should have followed. If owing to the statutory remedies there were certain amounts liable to be adjusted and when such adjustment is actually made, it cannot