Merely Raising Dispute Before Any Authority Not A Ground To Waive Interest U/Sec 220(2A) Income Tax Act : Supreme Court

The Supreme Court observed that the levy of simple interest on non-payment of the tax @ 1% p.a. is mandatory.

Merely raising the dispute before any authority cannot be a ground not to levy the interest and/or waiver of interest under Section 220(2A) of the Income Tax Act, the bench of Justices MR Shah and MM Sundresh observed.

In this case, the Competent Authority rejected the application of the petitioner for waiver of interest while exercising the powers under Section 220(2A) of the Act.

Section 220 Income Tax Act

Section 220 provides that any amount, otherwise than by way of advance tax, specified as payable in a notice of demand under section 156 shall be paid within thirty days of the service of the notice to the assessee. Clause (2) further provides that if the amount specified in any notice of demand under section 156 is not paid within the period limited under sub-section (1), the assessee shall be liable to pay simple interest at one per cent for every month or part of a month comprised in the period commencing from the day immediately following the end of the period mentioned in sub-section (1) and ending with the day on which the amount is paid. As per Clause 2A, the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may reduce or waive the amount of interest paid or payable by an assessee 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 co-operated in any inquiry relating to the assessment or any proceeding for the recovery of any amount due from him.

The Assesee's contention was that the dispute was pending for Mutual Agreement Procedure [MAP] resolution which subsequently came to be culminated in the year 2012 and the liability to pay the tax thereafter arose and therefore he shall be entitled to the waiver of interest under Section 220(2)(A)(ii) of the Act. The Delhi High Court dismissed assessee's writ petition upholding the competent authority's order.

Expressing complete agreement with the view expressed by the High Court, the Apex court bench observed:

"Merely raising the dispute before any authority cannot be a ground not to levy the interest and/or waiver of interest under Section 220(2A) of the Act. Otherwise each and every assessee may raise a dispute and thereafter may contend that as the assessee was bona fidely litigating and therefore no interest shall be leviable. It is required to be noted that under Section 220(2) of the Act, the levy of simple interest on non-payment of the tax @ 1% p.a. is, as such, mandatory."

Case Title: Pioneer Overseas Corporation USA vs Commissioner Of Income Tax | 2022 LiveLaw (SC) 944 | SLP(C) 21488/2017 | 2 Nov 2022 | Justices MR Shah and MM Sundresh observed

For Petitioner(s) Mr. Ajay Vohra, Sr. Adv. Ms. Kavita Jha, AOR Mr. Udit Naresh, Adv. Mr. Anant Mann, Adv.

For Respondent(s) Mr. N. Venkataraman, ASG Chinmayee Chandra, Adv. Ms. Suhashini Sen, Adv. Mr. Siddhanth Kohli, Adv. Mr. V. Chandrashekhara Bharathi, Adv. Mr. Raj Bahadur Yadav, AOR

Headnotes

Income Tax Act, 1961 ; Section 220(2A) - Merely raising the dispute before any authority cannot be a ground not to levy the interest and/or waiver of interest under Section 220(2A) - Otherwise each and every assessee may raise a dispute and thereafter may contend that as the assessee was bona fidely litigating and therefore no interest shall be leviable - Under Section 220(2) of the Act, the levy of simple interest on non-payment of the tax @ 1% p.a. is, as such, mandatory.

Click here to Read/Download Order