Dr. C. Krishnasamy and another vs Commissioner of Income Tax

Srinivasan J.

The petitioner in W. P. No. 12777 of 1992 is the husband and the petitioner in W. P. No. 12778 of 1992 is the wife. Both of them are

practising the medical profession. They got a plot of land at Erode from the Tamil Nadu Housing Board and started construction of a nursing home

at the plot at a cost of Rs. 7,74,000. The construction was commenced in the year 1984 and was completed in 1986. The petitioners filed returns

periodically stating that they were meeting the cost of construction from the savings out of the income earned from the profession. There was a

survey by the Income Tax officials at the nursing home, and at that time it was found that there were other incomes which had not been disclosed.

The petitioners then put forward a case that they got those monies by obtaining loans from relatives who were agriculturists. But they were not able

to prove the same. According to the petitioners, it was suggested that they could file revised returns and, accordingly, they filed revised returns.

The revised returns were filed on November 28, 1988, after the survey of the premises, on July 14, 1988, u/s 133A of the Income Tax Act, 1961.

The return were accepted and tax was levied. Besides the same, the petitioners were also directed to pay interest though no penalty was imposed.

For the year 1985-86, the petitioners were directed to pay a sum of Rs. 3,348 u/s 139(8) and a sum of Rs. 11,812 u/s 217 of the Act. For the

year 1986-87, they were directed to pay Rs. 950 and Rs. 1,750, respectively, and for the year 1987-88, they were directed to pay Rs. 1,671 and

Rs. 5,491, respectively. The petitioners applied for waiver of the interest under the provisions of section 273A of the Act. The Deputy

Commissioner of Income Tax passed an order on March 25, 1991, holding that the petitioners do not deserve full waiver but they were entitled to

only partial reduction having regard to the facts of the case. The Deputy Commissioner found as a fact that there was a delayed attempt on the part

of the petitioners to make good the omissions found in the original returns. The relevant passage in the order of the Deputy Commissioner is as

follows :

The survey did not result in the discovery of any discrepancy regarding the construction itself as one can see from the fact that the total cost of

construction of the building was Rs. 7,74,000 only. The assessee had probably agreed to offer the loans as additional income only because

production of strict proof was insisted upon then and there during the course of the survey. It is, however, seen that what was offered was not just

the loans of Rs. 2,47,000 but something more than that (i.e., Rs. 4,50,000). The extra sum of Rs. 2,03,000 was obviously for other sins of

omission and commission in the original returns. Here, it is worthwhile to note that, in the return for 1985-86, though the assessee had stated that a

sum of Rs. 4,11,000 had been spent on the construction up to March 31, 1985, he significantly refrained from explaining the sources. One is led to

believe that such omission was deliberate because the assessee was well aware then itself that he did not have acceptable proof regarding the

sources. He ought to have, therefore, taken care of show higher income in those returns themselves. The offer made during the course of the

survey was a rather delayed effort at making good the earlier omission. Having regard to all these facts and circumstances, I am of the view that the

assessee does not deserve full waiver but only a partial reduction. Accordingly, I order reduction of the interest under rules 117A(v) and 40(5) of

the Income Tax Rules, 1962, by 50 per cent. as indicated below.

The said order was confirmed by the Commissioner of Income Tax by order dated March 6, 1992. The Commissioner has agreed with the

Deputy Commissioner and observed that the disclosure cannot be termed to be voluntary and in good faith and it is only a delayed attempt on the

part of the petitioner to make good the omissions. Consequently, the Commissioner confirmed the order of the Deputy Commissioner. It is this

order which is challenged in these writ petitions by the petitioners.

Learned counsel for the petitioner contends that the petitioners have complied with the conditions imposed by section 273A of the Act which

are as follows :

(1) The petitioners have, prior to the issue of notice u/s 139(2) or where no such notice is issued, and the period for the issue of notice has expired,

prior to the issue of notice to him u/s 148, voluntarily and in good faith made full and true disclosure of the income,

(2) the petitioners co-operated in any enquiry relating to the assessment of the income, and

(3) paid or made satisfactory arrangements for the payment of any tax or interest. It is contended by learned counsel that all the conditions set out

in the section having been satisfied, there is a duty on the part of the Commissioner to waive the interest in full. According to learned counsel, the

discretion given by the section is a statutory discretion to be exercised in accordance with law and more or less duty is cast on the official

concerned to grant waiver is prayed for.

I do not agree with this contention. The relevant part of the section itself reads that the Commissioner may, in his discretion, reduce or waive the

amount of interest paid or payable under sub-section (8) of section 139 or section 215 or section 217 or the penalty imposed or imposable u/s

273 of the Act. The aid section has to be read along with sections 139(8) and 217 of the Act. Section 139(8) of the Act provides that, where the

return under sub-section (1) or sub-section (2) or sub-section (4) for an assessment year is furnished after the specified date, or is not furnished,

then, whether or not the Assessing Officer has extended the date for furnishing the return under sub-section (1) or sub-section (2), the assessee

shall be liable to pay simple interest at 15 per cent. per annum, reckoned from the day immediately following the specified date for the furnishing of

the return. The proviso to the sub-section empowers the Assessing Officer in such cases and under such circumstances as may be prescribed to

reduce or waive the interest payable by any assessee under the sub-section. Similarly, section 217 of the Act provides for simple interest at the

rate of 15 per cent, per annum from the 1st day of April next following the financial year in which the advance tax was payable in accordance with

the said sub-section (4), or, as the case may be, sub-section (3A) up to the date of the regular assessment, if the same is not paid by the assessee.

Reading the three sections together, it is very clear that the discretion conferred u/s 273A of the Act is either to reduce the interest or to waive the

same in full. In this case, the Deputy Commissioner and the Commissioner have chosen to reduce the interest in view of the fact that the petitioners

have come forward with disclosure of full details only after the survey by the Income Tax Department u/s 133A of the Act. It cannot be said that

the officials have not exercised their discretion properly in this case. The relevant facts and circumstances have been taken into account by the

officials and they have exercised their discretion in the proper way.

Learned counsel for the petitioner refers to the judgment in A.N. Sarvaria Vs. Commissioner of Wealth Tax, Delhi I and another, . That is a

case under the Wealth-tax Act. There is a similar provision u/s 18 of the Wealth-tax Act. It was found on the facts that there was a survey of

agricultural properties showing that the petitioner therein owned agricultural lands also. After that survey, the petitioner filed a revised return

disclosing all the relevant facts. The court held that such a disclosure was voluntary within the meaning of the section and there was no question of

any compulsion because of the survey of agricultural lands. The facts are entirely different. Merely because the petitioner therein owned certain

agricultural properties which were surveyed by the Department Officials, he was not bound to disclose the net wealth under the Wealth-tax Act.

Hence, that case has no bearing on the present case.

Learned counsel refers to the judgment in Laxman Vs. Commissioner of Income Tax, . On the facts of that case, the court found that there was

no evidence to show that the Inspector of Income Tax visited the assessee''s premises. On that footing, the court held that the disclosure was

voluntary and all the conditions prescribed by section 273A of the Act had been satisfied. But the Bench proceeded to obseve that, even assuming

that the Inspector of Income Tax had visited the premises and made inquiries about the assessee''s source of funds, such visit and the inquiry by

itself did not amount to a compulsion on the assessee to file the returns due to fear and detection. The observation is entirely obiter dicta and it is

not necessary to consider the correctness of the same. Once the court found on the facts that there was nothing to prove the inspection by the

Inspector of Income Tax, the decision rested on that fact and that will not help the petitioner in the present case. Admittedly, there was a survey u/s

133A of the Act by the Department officials.

Reliance is placed on a judgment in A.V. Joy, Alukkas Jewellery Vs. Commissioner of Income Tax and Others, . A Division Bench of the

Kerala High Court has set out in detail the provisions of section 273A of the Act and considered the law on the subject. It is seen from the facts of

the case that the disclosure in that case was not in any way related to matters revealed from the search in the space and time. Hence, the disclosure

was held to be voluntary. It is also found by the Bench that there was no detailed consideration of the various aspects of the facts of the case by

the Commissioner in his order. Hence, the order of the Commissioner was set aside and the matter was sent back for fresh disposal by the

Commissioner. The ruling in that case will not help the petitioners herein as the facts which were disclosed by the petitioner related to the matters

which were discovered at the time of survey by the Income Tax officials.

I do not find any error whatever in the impugned order of the Commissioner and there is no justification for interfering under article 226 of the

Constitution of India. The writ petitions are dismissed.