New Light Electric Co. and another vs G.K. Mishra, >Commissioner of Income Tax and another

T.D. Sugla, J.—By this petition under article 226 of the Constitution of India, the petitioners have challenged the legality and validity of the impugned order dated October 20, 1987, passed by the Commissioner u/s 273A of the Income Tax Act, 1961.

The petitioners were assessed to Income Tax for the assessment years 1976-77 to 1981-82 u/s 143(3). Since the returns of income were filed beyond the time prescribed under the Act, the Income Tax Officer had imposed penalty u/s 271(1)(a) and charged interest u/s 139(8) for the assessment years 1979-80 to 1981-82. The proceedings for the assessment years 1976-77 to 1978-79 were pending. At that stage, the petitioners made an application dated January 29, 1985, to the Commissioner of Income Tax for reduction and/or waiver of interest u/s 139(8) and penalty u/s 271(1)(a) levied for the assessment years 1979-80 to 1981-82. A request was made for the dropping of penalty proceedings u/s 271(1)(a) and waiver or reduction of interest chargeable u/s 139(8) or 217 for the assessment years 1976-77 to 1978-79. Subsequently, the petitioners filed revised returns for these very years under the Voluntary Disclosure Scheme in or about the last quarter of 1986. The only addition made to the income in the revised returns was that of interest paid to Pioneer Trading Co. A proprietary concern of Chandanmal Seshmal Doshi, one of the partners of the petitioner firm. As per the uncontroverted averments in the petition, the particulars of payment of interest to that concern were furnished during the original assessment proceedings with a note that the said amount of interest was not required to be added u/s 40(b). The revised returns, it was stated, were filed under the advice of their tax adviser that the interest so paid should have been added back u/s 40(b). Reassessments were completed accepting the revised returns The fact that the petitioners had filed revised returns under the Voluntary Disclosure Scheme, according to the Commissioner, was itself proof of the fact that the petitioners had not voluntarily and in good faith made a full and true disclosure of their income in the original proceedings. Accordingly, the Commissioner held that the provisions of section 273A were not applicable in this case and rejected the application.

The first question is whether this conclusion of the Commissioner of Income Tax should be reviewed by this court in writ jurisdiction. It is common ground that if the view taken by the Commissioner is a possible view, this court may not like to interfere. The order of the Commissioner, thus, requires to be examined in this background. The only reason given by the Commissioner for holding that the returns filed originally were not voluntary and in good faith and that full and true disclosure of income was made is that the petitioners filed revised returns under the Amnesty Scheme disclosing a higher income. In my judgment, the Commissioner failed to consider relevant and important aspects of the case namely, (i) revised returns were filed merely to add back the amount of interest paid by the firm to a proprietary concern of one of the partners, and (ii) interest paid to that concern was duly shown in the accounts and full details were furnished during the course of the original assessment proceedings.

Add back of such interest u/s 40(b), in the circumstances, does not at all warrant the conclusion that the petitioners had not made a true and full disclosure of income voluntarily and in good faith. In fact, the question whether such interest is or is not to be added back u/s 40(b) is itself a doubtful proposition.

In the above view of the matter. The impugned order of the commissioner dismissing the application u/s 273A on the ground that the petitioners had not voluntarily and in good faith made a full and true disclosure of their income requires to be and is hereby quashed. The Commissioner of Income Tax is, accordingly, directed to consider the application u/s 273A afresh and pass fresh orders according to law.

In the result. The rule is made absolute in terms of prayer clauses (a) and (b).

No order as to costs.