By TIOL News Service

BANGALORE, JAN 06, 2017: THE ISSUE IS - Whether coercive exercise of statutory power by AO for enforcement of recovery proceedings under law, can be viewed as hardship, when the assessee has continuously defaulted in payment of demand resulted out of search proceedings. NO IS THE VERDICT.

Facts of the case:

The assessee concern has filed an application u/s 220(2), which was rejected. It was argued by assessee that no reasons were allocated in respect thereof. It was pointed out that the Income Tax Department had attached the property in the year 2010, for a period of five years until the attachment was lifted, the assessee could not continue with the business activity and on account of the same, if the assessee was called upon to pay the interest, such would cause hardship to the assessee. It had been held by the Court that though return was required to be filed by assessee but he did not file. It was only after search proceeding, the returns were filed u/s 153-C. The assessment was made in the year 2010 but the assesseee even thereafter did not pay the amount as per the demand made. Inspite of coercive steps for attachment of the property being taken, after a period of about five years, the amount of tax as per the assessment order which includes interest prior to the assessment had been paid.

On appeal, the HC held that,

++ The relevant material considered by the authority is that there is no proof produced to show that the payment of interest would cause genuine hardship to the assessee. The matter rests on the aspect of no proof. Even the assessee, in the application has not produced any documentary evidence to show the genuine hardship was to be caused. Even if it is considered for the sake of examination that the Income-tax Department attached the property and freezed the bank account and the attachment continued until the amount as per the assessment order was paid, then also the exercise of statutory power for enforcement of the recovery by attachment of property or by freezing of bank account cannot be said as a valid ground to treat it as genuine hardship. Such hardship as pleaded has to be due to circumstances other than enforcement of any law. If the enforcement of law is to be treated as hardship, the very purpose of rule of law would be frustrated. Therefore, we are inclined to observe that such hardship should be on the ground other than enforcement of law. The only ground contended in the application was with regard to attachment of property by way of enforcement of law by the department. No other ground which may fall under the head of genuine hardship was contended;

++ In the present case, it cannot be said that no reasons are recorded touching upon the ground germane to the exercise of power. One is for non-cooperation of assessee in the recovery proceedings and another is no proof produced to show genuine hardship to the assessee. Hence, the said decision would be of no help to the assessee. If the aforesaid is considered, read with the reasons recorded by the Single Judge, we do not find that the view taken by the single Judge can be said to be an erroneous exercise of the judicial discretion which may call for interference in an intra-Court appeal. Hence, no case is made out for interference.

(See 2017-TIOL-39-HC-KAR-IT)