P.D. Varghese and E.J. Davis vs Commissioner of Income Tax

K. Sukumaran, J.—The petitioner complains about the order passed by the Commissioner of Income Tax, exhibit P-2, in a matter in which he had invoked Section 273A of the Income Tax Act, 1961. That section has a specific statutory content, emphasising that it is a matter of discretion for the Commissioner of Income Tax. Just like any other discretion, this one, statutorily stated to be such a discretion, has to be judicially exercised. Very many aspects have to be naturally looked into while the function is discharged.

The question for this court to consider is whether there could be any legitimate complaint about a perverse exercise of discretion at the hands of the Commissioner. If two views are possible and one view has been taken by the Commissioner, this court will not be justified in interfering with the exercise of that power. Even if another view could have been taken by this court, that would hardly be a good ground for interfering with the discretion already exercised ; the various relevant facts have to be taken note of, considered and decided upon.

The contention which had been urged before the Commissioner is summarised in paragraph 6 of the order. That relates to one point'' only, namely, that the assumption about the returns having been filed only after the search and seizure on the business premises of the assessee, was not fully justified. The point highlighted was that a return was due, if at all income exceeded the permissible limit for which the return is to be filed, only as regards the year 1976-77. The search was on February 22, 1977. As regards the assessment years 1977-78 and 1978-79, the returns filed on February 13, 1978, and March 14, 1980, respectively, could not be characterised as having been unduly delayed. This was the only argument which had been apparently urged before the Commissioner of Income Tax, That had been dealt with in the succeeding paragraph in exhibit P-2 order. The Commissioner assumed that that point is valid. Even then, according to him, it could not be said that the assessee had filed full and true disclosure of its income for the years. This particular matter was demonstrated with reference to a chart as indicated in paragraph 8. For the year 1976-77, the income returned was Rs. 20,000. The income ultimately fixed by the Appellate Assistant Commissioner was Rs. 45,000, a little over 200% of the income returned. As for the year 1977-78, the income returned was Rs. 21,000 and the income assessed was Rs. 1,85,200 and the income affirmed in the appeal was also Rs. 1,85,200. No doubt, the Appellate Tribunal has set aside the assessment and the income was thereafter determined at Rs. 48,000. Here again, the assessed income has been a little over 200% of the income returned. The facts for the year 1978-79 are not widely variant from the antecedent years. As regards the income of Rs. 9,860 returned for the year 1978-79, the ultimate income upheld by the Appellate Tribunal is Rs. 45,000. It is a little over 400%. It would, therefore, be evident that it is not a case of marginal variation in the assessment of income that had taken place. This is an aspect which has to be rightly and correctly given due weight by the Commissioner of Income Tax. No doubt, there is an Explanation which furnishes a statutory fiction for the purpose of finding out, whether there had been full and true disclosure of income. The crux of the matter is, if the particulars relating to income where the excess of income assessed over the income returned is of such a nature as not to attract the provisions of Clause (c) of Sub-section (1) of Section 271, there is an imputation of the concept of full and true disclosure of income. Here again, it has to be noted that this is a main aspect which has to be considered by the Commissioner of Income Tax while exercising discretion u/s 273A. The nature of the income is the crucial matter. Whether the Commissioner feels that the nature of the income ultimately assessed is such that there is concealment which could be posited u/s 271(1)(c) is the question. The reference to the facts and data in the order of the Commissioner would clearly indicate that he did have in mind those aspects when he passed the order that there was no full and true disclosure of income. It cannot be assumed that the Commissioner of Income Tax is not familiar with the handling of similar matters. I would have accepted a pointed, specific and forceful plea if the arguments based on the Explanation had been highlighted before the Commissioner and yet he had omitted to discuss it in the order. I have searched the order, more than once, to find out whether there is any grievance made as regards the non-consideration of his grievances. I have no hesitation in holding that the ingredients of the section including the components of the Explanation were really in the mind of the Commissioner when he passed the order.

One other aspect which had been emphasised about the order of the Commissioner is that the entire movement started with a search of the premises of the petitioner on February 22, 1977. That also is not without significance. The approach is in consonance with the view expressed by this court in Commissioner of Income Tax Vs. K. Mahim, . Ultimately, the Commissioner of Income Tax has entered a factual finding that there was not even proper co-operation of the assessee with the Department. It is sufficient to note that the matters referred to and considered by the Commissioner is after taking into consideration all the relevant facts and materials in the case. If that be so, this court will not be justified in interfering with the exercise of .such a discretion.

Counsel for the petitioner presented before me the decisions of the Gujarat High Court and the Andhra Pradesh High Court in Navnitlal K. Zaveri v. CIT [1980] 125 ITR 385 and in Seetha Mahalakshmi Rice and Groundnut Oil Mill Contractors Co. Vs. Commissioner of Income Tax, , sketching the scope and ambit of Section 273A. I am not in agreement with the very wide observation contained in the latter. The principles will have to be understood in the factual background of each case. The factual matters referred to above, to my mind, would justify the view taken by the Commissioner of Income Tax.

Counsel further relied on the decision of this court in CIT v. Saraf Trading Corporation [1987] 167 ITR 909, in relation to the interpretation to be placed and the principles to be borne in mind, linked with Section 271(1)(c). The decision certainly incorporates all that has been stated by the decisions which have been rendered earlier and summarises those principles correctly and cogently.

The result may be that the petitioner has necessarily to face the consequences when he conducted his tax affairs in the manner he had done.

The writ petition is dismissed.