Shri Builders vs R.B.L. Aggarwal, Commissioner of Income Tax

C.K. Thakker, J.—Rule. -Mr. M.J. Thakore appears and waives service of rule on behalf of the respondents. In the facts and circumstances of the case, the petitions are taken up for final hearing. Both these petitions are filed for quashing and setting aside orders dated 31-10-1994 and 19-1-1995, passed by the Commissioner, Gujarat-III, Ahmedabad, insofar as they do not waive interest and penalty in their entirety levied on the petitioners by directing the respondents to waive interest and penalty totally.

Both the petitioners are partnership firms. For the assessment years 1985-86 and 1986-87, the Assessing Officer had levied interest on the petitioners for late filing of income tax returns as also for non-payment of advance tax. Penalty was also imposed. According to the petitioners, they had fulfilled all the conditions prescribed u/s 273A of the income tax Act, 1961 (''the Act''), and they were entitled to waiver of interest and penalty levied upon them. The petitioners, therefore, submitted applications to the respondent requesting him to waive levy of interest and penalty. It is contended by the petitioners that no opportunity of hearing was afforded to them. But the respondent was satisfied about fulfillment of the conditions laid down in section 273A. Hence, he granted the benefit and waived interest and penalty partly. In the impugned order, in paragraph 2, it was stated:

After considering the facts of the case and the conditions laid down u/s 273A of the income tax Act, 1961, I, Commissioner of income tax, Gujarat-III, Ahmedabad, hereby waive interest/penalty as per details given below.

Mr. Soparkar, the learned counsel for the petitioners, submitted that when the conditions mentioned in section 273A have been satisfied, it was not open to the respondent to waive only a part of the interest and penalty, as has been done in the instant cases. He submitted that no reasons are recorded; no speaking order is passed; no opportunity of hearing is afforded, and the order is made which is contrary to law. According to the learned counsel, the impugned order requires to be quashed and set aside by directing the respondent to waive interest and penalty in its entirety. Reliance is placed in this connection by Mr. Soparkar on the decision of the Supreme Court in the case of Apex Finance and Leasing Ltd. Vs. Commissioner of Income Tax, Delhi and Others, and the decision of this Court in Kantilal Ishwarlal Chael Vs. Commissioner of Wealth Tax, . In Kantilal Ishwarlal Chael''s case (supra) this Court held while considering similar provisions of section 18B of the Wealth-tax Act, 1957 that once the authority is satisfied that the case is covered for grant of waiver of interest and penalty, in the absence of sound and convincing reasons, it is not open to him to waive only a part thereof.

In our opinion, the submission of Mr. Soparkar is well-founded. No doubt, section 273A confers discretionary power on the respondent to waive interest and penalty on the fulfillment of certain conditions. At the same time, however, it cannot be gainsaid that such discretionary power requires to be exercised judicially, judiciously and on sound principles. An officer cannot, at his sweet will, arbitrarily grant power of waiver. Again, the power is coupled with a duty and when conditions for exercise of such powers are established, the authority cannot refuse to exercise it. In the instant cases, it is the assertion of the petitioners, not refuted by the respondent, that the requisite conditions were present. The respondent himself has granted benefit by reducing interest and penalty partly. He, however, did not apply his mind and no reason/ground whatsoever has been recorded as to why he did not grant the prayer of the petitioners in its entirety. The impugned orders, hence, suffer from non-application of mind. The point is also concluded by a decision of the Apex Court as well as of this Court. The petitions, therefore, require to be allowed by quashing the impugned orders and by directing the respondent to pass fresh orders in accordance with law. For the aforesaid reasons, the petitions are allowed by making the rule absolute, the impugned orders are quashed and set aside. It is directed that the respondents will pass fresh orders in accordance with law. In the facts and circumstances of the case, no order as to costs.