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Judgment
Anoop V. Mohta, J.—The petitioner has challenged the order dated 28/12/1995 passed by the Commissioner, Income Tax Vidarbha Region, Nagpur, whereby the interest u/s 139(8) and penalty u/s 217 of the Income Tax Act (for short ''Act'') for the assessment year 1984-85 to 1988-89 have been retained though prayed for waiving the same. Therefore, the present petition.
The petitioner is a Karta of HUF. He voluntarily and in good faith pursuant to the assurance given by the Income Tax Department made a full and true disclosure of his income on 30/3/1992 before the Income Tax Officer at Yavatmal for assessment years 1984-85 to 1988-89 before issuance of any notice by the Income Tax Department u/s 139(2) or u/s 148 of the Act, by filing returns for those years. The assessee accordingly paid the full taxes on the income so disclosed.
The respondent issued notice u/s 148 on 31/3/1992. The petitioner informed about the filing of voluntary returns prior to the date and requested to consider the same accordingly. The Income Tax Officer, Yavatmal accepted the income so declared and made assessment by intimation order u/s 143(1)(a) of the Act on 22/6/1992. The income so declared, therefore, was accepted by the department without any change or valuation.
The Income Tax Officer, however, charged the interest for all the years u/s 139 of the Act for late filing of the returns and charged the interest u/s 217 for nonpayment of advance tax for those years. The petitioner, therefore, filed an application dated 12/8/1992 u/s 273A of the Act for waiver of interest and penalty as petitioner fulfills the conditions for waiver as contemplated u/s 273A(1)(c) of the Act.
The Commissioner of Income Tax, however, rejected the said claim by holding that the returns were filed beyond the period and therefore were invalid and further holding that returns were being filed after issue of notice u/s 148 and therefore, rejected the application by order dated 28/12/1995.
The petitioner has relied on the interpretation and scheme and object of Section 273A of the Act, as elaborated in B.R. Sound-n-music Vs. O.P. Bhardwaj and another, . The SLP filed by the department against the above judgment of Bombay High Court was dismissed by the Supreme Court in Appropriate Authority and Another Vs. Tanvi Trading and Credits P. Ltd. and Others, .
The Division Bench of Bombay High Court in Laxman Vs. Commissioner of Income Tax, Laxman Vs. Commissioner of Income Tax, has explained the scheme and purpose of the Section in following words.
On behalf of the respondent, it was contended that the power u/s 273A of the Act is purely discretionary in character and, under the circumstances, no interference in writ jurisdiction is called for. We find it difficult to accept this contention. Once the conditions required for exercise of discretion in any judicial or quasi judicial proceedings are satisfied, exercise of discretion cannot be either arbitrary or capricious and has to be judicious and objective. When the power is given to a public authority for being used for the benefit of a class of persons and the conditions precedent for the exercise are well defined, there is a duty to exercise such power and on failure to perform that duty, Courts are not only empowered but are duty bound to interfere. In the instant case, refusal to exercise discretion is for no other reason than misconception of the scope of the power and hence a writ of mandamus can be issued directing the CIT to entertain the application and to proceed to exercise the discretion within the limits specified by law.
The same view was taken in case of Cheldas Khushaldas Patel and Others Vs. Commissioner of Income Tax, .
The Bombay High Court in Shri Anand B. Apte, legal heir of late Smt. Kamalaben B. Apte Vs. Commissioner of Income Tax, further observed that Section 273A of the Act contemplates full and true disclosure made voluntarily and in good faith even though such a disclosure is made through belated returns. In that case, the application of waiver u/s 273 of the Act cannot be rejected on the ground that there was no voluntarily disclosure, and thereby such order of Commissioner was quashed and set aside and remanded the matter to decide the application on merit.
In Shrikrishna S. Bhagwat Vs. S.N. Soni, Commissioner of Income Tax, ,while considering Section 139(8), 217 and 273(1)(b) and specially Section 273A has observed as under -
Dissection of the above provisions would spell out the condition precedent for exercise of discretion to waive the penalty or interest u/s 273A of the Act, which can be cataloged as under:
(a) voluntary disclosure of income before issuance of notice u/s 139(2);
(b) making of full and true disclosure of the income in good faith;
(c) co-operation in the conduct of income tax assessment proceedings;
(d) payment or satisfactory arrangement for payment of tax or interest payable in consequence of an order passed with respect to the relevant assessment year.
The Division Bench of th is court in the case of Laxman Vs. Commissioner of Income Tax, had also an occasion to deal with the interpretation of Section 273A of the Act, wherein the Division Bench observed that the most important facet of Section 273A is furnishing of return in respect of income voluntarily and in good faith with full and true disclosure of particulars thereof. According to the Division Bench ''voluntary'' means ''without compulsion''. Secondly, according to the Division Bench though ''good faith'' is not defined under the Act, considering the definition given u/s 2(22) of the General Clauses Act it means an act done honestly even if it is tainted with negligence or mistake. According to the Division Bench all that is required is that disclosure of income must be full and true according to the honest belief of the assessee.
And thereby in that matter also the order of the Commissioner was quashed and the matter was remanded back to decide application u/s 273 of the Act by a reasoned order as expeditiously as possible.
In Sukhdev Hargopal Puri Vs. Union of India (UOI) and Others, this Court has considered the power of Commissioner to grant waiver as a one time measure can grant relief with regard to any number of assessment years based upon the Section 273A(3) of the Act.
The non-obstante clause of Section 273A makes the provision single out of lot. The power/discretion so provided to the Commissioner to waive/reduce penalty and interest needs to be exercised judiciously, fairly, reasonably, objectively and not arbitrarily. The Commissioner, essentially after applying his mind to facts and circumstances of the case needs to pass speaking and reasoned order after taking into consideration the scheme and object of the Section 273A including the elements like; voluntary act of filing return in good faith; full and true disclosure of income; payment of the tax; and cooperation. Once the case is made out for waiver/reduction, the Commissioner needs to exercise the powers in favour of the assessee.
In the present case, we have observed that based upon wrong interpretation of provisions and by overlooking the above elements, the Commissioner has rejected the application filed by the petitioner. The Commissioner has relied on the case of Saberaj Industries v. F.J. Bahadur C.I.T. reported in 1995 (127) CTR (Bom) .395, in holding that since the returns filed by the assessee on 13/3/1992 were regularised subsequent to issue of notice u/s 148, the precondition of disclosure of income before issue of notice u/s 273A was not fulfilled and thereby not gone into the merits of matter, but the Commissioner failed to consider that in that case returns for three years were true and complete out of eight years returns and therefore, the court refused to interfere with the said order under Article 226 of the Constitution. The Commissioner, however, wrongly overlooked the judgment passed in B.R.Sound-N-Music (supra) by this Court against which the SLP was dismissed by the Supreme Court. In B.R.Sound- N-Music (Supra), it is specifically observed that Section 273A(1)(a) requires a disclosure of full and true income and not the filing of valid returns in time before issue of notice u/s 139(2) or Section 148 of the Act. It is necessary for the commissioner to take into consideration all the material available on the record Sangram Singh Mehta and Others Vs. Income Tax Officer and Others,
In view of this, the impugned order dated 28/12/1995 passed by respondent- Commissioner of Income Tax, Vidarbh Region, Nagpur is quashed and set aside. We further direct to consider the application filed by the petitioner in view of above, in accordance with law, on merit as expeditiously as possible.
Rule is made absolute in terms of prayer Clause (i) with no order as to cost.