Salil Kumar Roy Chowdhury, J. - (1.) This is an application by the official liquidator for a direction on the I.T. authority to condone the payment of interest by the company (in liquidation) being Haralal Harendra Lal Roy Estate Ltd. (in liquidation) for the assessment years 1955-56 to 1976-77. The application is made with notices to all the contributories of the company. This is one of the instances which shows how, due to maladministration by the official liquidator, a solvent estate can be burdened with unnecessary liabilities particularly income-tax. Due to the internecine equable between the directors and shareholders of the company, the said company was wound up by an order dated the 20th of February, 1963. The company held a large number of immovable properties, particularly house properties in Calcutta, which fetched by way of monthly rent a considerable sum of money. Originally, Mr. S.N. Bhattacharya, since deceased, was appointed the official liquidator of the company and by a subsequent order the official receiver was appointed liquidator in place and stead of Mr. S.N. Bhattacharya after his death. By an order dated the 17th of December, 1962, the official receiver was discharged and the official liquidator attached to the High Court, Calcutta, was appointed in the place and stead of the said official liquidator of the said company. By an order dated the 10th of April, 1961, this court appointed Mr. Dhiren Dey, Bar-at-Law, since deceased, as special officer to frame a scheme of partition of the assets of the company. The said Dhiren Dey submitted a report to this court which was filed on the 31st of July, 1961. By an order dated the 23rd of February, 1962, made by this court, the assets were allotted to the contributories of the company and the income was directed to be distributed to the said contributories of the company as mentioned in the order except that certain properties were kept earmarked for meeting the liabilities of the company. Several attempts were made by the official liquidator to sell the said properties to meet the liabilities of the company but due to objections made by the contributories from time to time and also due to the price offered being not considered to be enough, the sale of most of the properties could not be held. There was lack of fund for payment of income-tax liabilities which accumulated from year to year. The income by way of rent of the buildings belonging to the company was being distributed after meeting the expenses like corporation taxes, etc., to the contributories of the company in terms of the said order of this court. In these circumstances, the income-tax demands from time to time could not be paid. It may be mentioned that in the course of administration of the company it was discovered that a large amount had been defalcated by the officers and the employees of the official liquidator out of the rents collected from the tenants of the properties belonging to the company and, ultimately, a suit had been filed and criminal cases had been lodged against some of the employees who were alleged to have defalcated the said amount. Subsequently, from time to time various properties of the company were sold leaving only a few properties which could not be sold due to lack of proper offer and also pendency of certain litigations relating thereto. The I.T. Dept. has been paid all its outstanding dues out of the sale proceeds but a sum of Rs. 9,56,780 is charged by way of interest under Section 220(2) of the I.T. Act, 1961. After the sale of the various properties belonging to the company, the court directed the official liquidator to pay all the arrears of income-tax payable by the company (in liquidation), and apply before the appropriate ITO for determination of the question whether the interest charged by the department under Section 220(2) of the I.T. Act, 1961, is to be paid or may be waived. Such application was directed to be made upon notice to the Central Govt. and the contributories. It appeared that there was some delay in payment of the income-tax and, as such, the interest under Section 220(2) of the I.T. Act, 1961, became due and payable being a statutory liability. As admittedly some of the demands made by the I.T. authority were not paid in time, the liability to pay interest under Section 220(2) of the I.T. Act, 1961, became payable. It was also contended on behalf of the company (in liquidation), that the said interest was charged without taking leave of this court and, as such, was illegal and invalid. The Commissioner referred the matter to the CBDT directing the Commissioner to move this court for permission for charging interest under Section 220(2) of the I.T. Act, 1961. In these circumstances, the present application is made by the official liquidator for condoning the delay in the payment of income-tax and for remission of the said income-tax for the assessment years as mentioned above.
(2.) Mr. Pallab Banerjee, appearing for the official liquidator, submitted that the present case is an unfortunate one and very peculiar, where for no fault of the contributories who are the only beneficiaries in the winding-up of the company to get refund of the capital by way of dividends out of the sale proceeds of the properties of the company, most of which have already been sold leaving behind only a few. It is admitted that all the arrears of income-tax have been paid out of the sale proceeds and it is further admitted that pursuant to the previous order dated the 23rd February, 1962, of Mr. Justice S.P. Mitra, as he then was, the assets of the company were allotted pursuant to the report of the Commissioner of Partition appointed by the court on the 10th of April, 1961, and the contributories were paid the income of the assets of their respective portions allotted to them. But for some quarrel between the parties the said scheme of partition could not be given effect to by the court and, ultimately, the properties were sold and out of the sale proceeds the dividends were declared from time to time after payment of the liabilities of the I.T. Dept. in respect of the arrears of tax. It may be noted that all attempts were made by the company for remission of the interest by the I.T. authority and the Commissioner took a sympathetic view having regard to the peculiar and unfortunate condition of the company particularly mismanagement of the company by the liquidators successively for no fault of the contributories. Mr. Pallab Banerjee rightly submitted that had the scheme of partition been given effect to by the contributories, the income-tax liability would not have been there at all due to apportionment of the income among the contributories, but due to the unfortunate quarrel between the contributories, the same could not be given effect to.
(3.) But on the other hand the liquidator had to pay to the contributories all the income out of their respective shares allotted under the report of the Commissioner of Partition pursuant to an order of the court dated the 3rd of February, 1962, as hereinbefore stated and, as such, he had no fund to pay the income-tax which accrued from time to time on the basis of the income of the company as a whole. It is really amounting to carelessness; default or, to put it mildly, oversight of the official liquidator in not paying the income-tax dues in time after the demands were raised by the department. It is also a fact that a considerable period of time has elapsed due to a scheme which the I.T. Dept. was asked to implement by taking over one of the most valuable properties of the company which remained still unsold being 42, Strand Road, Calcutta, and to take over the same by the I.T. Dept. in full settlement of all claims and dues of the company in respect of the income-tax. That negotiation consumed a considerable portion of the time and, ultimately, this court was informed that the I.T. Dept. is not interested in purchasing the said properties and in this way time passed and the income-tax dues became chargeable by the I.T. Dept., under Section 220(2) of the I.T. Act, 1961. Mr. Banerjee submitted that, in these circumstances, it will be gross injustice and hardship on the contributories if the said penalty is imposed and the company is made liable to pay the same for no fault of the contributories. It is purely due to mismanagement and misunderstanding to which the I.T. authority has contributed considerably. Therefore, Mr. Banerjee submitted that this is a fit case where the court should direct the I.T. authority to remit the interest and condone the delay in payment in the interests of justice and the contributories should not be penalised for no fault of their own for non-payment of their income-tax dues of the company by the official liquidator.;