YOGENDRA KUMAR DURLABHJI vs COMMISSIONER OF INCOME TAX and Another

M. A. A. KHAN, J. :

This is a petition under Art. 226 of the Constitution of India for the issue of a writ, direction or order in the nature of mandamus, certiorari or prohibition or any other writ, direction or order quashing and setting aside the order dt. 7th November, 1990 passed by the CIT, Jaipur, under s. 273A of the IT Act, 1961 (for short the Act). By his said order the learned CIT, in his discretion, refused to waive interest charged by the ITO under ss. 139(8) and 215/217 of the Act for asst. yr. 1986-87 relevant to previous year ended on 31st March, 1986.

The petitioner is an Income Tax assessee being assessed in individual status. The main source of his income is from the share in M/s. K. S. Durlabhji, a partnership firm dealing in precious and semi-precious stones at Jaipur. The petitioner derives some income from interest and other sources and is also one of the trustees of a charitable trust known as Durlabhji Trust for Development, Jaipur settled on 28th August, 1985 by Sri Khail Shankar Durlabhji, the late father of the petitioner. The said trust is duly registered under s. 12A of the Act with the CIT and its income is exempt from tax under s. 11 of the Act. It is assessed in the status of AOP.

The petitioner filed the return of his income for asst. yr. 1986-87, relevant to previous year ending on 31st March, 1986, on 29th September, 1986 declaring his income at Rs. 12,000 only. Prior to that the return of income, in the case of the trust, for the same assessment year had been filed on 29th August, 1985 declaring a deficit income of Rs. 1,169. The only income from interest received from bank had been shown at Rs. 207 only against which office expenses had been claimed at Rs. 1,365. However, the balance sheet showed receipt of donation to the corpus of the trust at Rs. 5,58,507. The case of the trust was, therefore, taken up for scrutiny. On scrutiny it was noted that donation of Rs. 5,07,507 was shown to have been received towards the corpus fund of the trust. Notice under s. 143(2) of the Act was accordingly issued on 20th April, 1988. Enquiries made from a number of alleged donors, mainly the bank employees, disclosed that they had received cash from the trustees in exchange of the cheques issued by them in respect to the donations made. On examination of bank accounts of about 25 donors it was noticed that cash totalling to Rs. 87,400 was deposited by them in their accounts either on the same day they had issued the cheques or a day or two before that. While the investigation in the case of the trust was in progress in the above manner in the month of June, 1988, the petitioner came forward with an offer to surrender Rs. 1,90,000, representing a part of donations received by the trust, as his income for asst. yr. 1986-87. The petitioner therefore, filed a Revised Return on 7th March, 1989 declaring his revised income at Rs. 1,95,640 as against Rs. 12,000 originally declared. In the statement of the revised income, share income was shown at Rs. 12,891 as against Rs. 14,890 declared in the original return. A sum of Rs. 1,90,000 was declared as income from other sources and claim for s. 80G deduction for donation of Rs. 10,000 to the trust was enhanced to Rs. 5,000 from Rs. 631 as claimed in the original return. Interest payable at Rs. 805 under s. 139(8) and at Rs. 27,370 under ss. 215/217 of the Act was shown but only Rs. 7,045, being 25 per cent. of the aforesaid two amounts, were offered for taxation. Immunity from taxation of 75 per cent. of the rest of the balance was sought. The ITO completed the assessment under s. 143(1) of the Act on 29th March, 1989 charging interest of Rs. 962 under s. 139(8), and of Rs. 33,688 under ss. 215/217 totalling to Rs. 34,650. A demand of Rs. 77,070 was raised against which the petitioner had already paid tax at Rs. 4,284 as TDS, Rs. 8,294 by way of advance tax paid and the balance on 3rd March, 1989 on self assessment basis. It may be mentioned that the assessment in the case of the trust had already been made at Nil income on 15th March, 1989.

Though the assessment in the case of the petitioner for asst. yr. 1986-87 was completed on 29th March, 1989, yet he had already moved a petition under s. 273A of the Act on 27th February, 1989 for waiver of the interest leviable. On 17th April, 1989 further similar petitions for asst. yrs. 1982-83, 1985-86 and 1986-87 were filed. A supplementary petition under s. 273A for asst. yr. 1986-87 was also made on 7th June, 1989. The learned CIT took up the petition as filed by the petitioner on 27th February, 1989 for consideration and relying on Allahabad High Court decision in Hakam Singh and Others Vs. Commissioner of Income Tax, held that the disclosure made by the petitioner was not voluntary. Accordingly he rejected petitioners petition under s. 273A on 31st October, 1990.

The main contention of Mr. Anant Kasliwal, the learned counsel for the petitioner is that on coming to know of the investigations and enquiries being made in the case of the trust on the back of the trustees with regard to the genuineness of the donations, alleged to have been received towards the corpus fund of the trust during the year under consideration, the petitioner, in view of his ill health and in order to avoid litigation and purchase peace, voluntarily offered a sum of Rs. 1,90,000 to be taxed as his income in his personal case to cover all such donations the genuineness of which might be disputed. It was further submitted by Mr. Kasliwal that the aforesaid amount was agreed to between the parties after discussion on or about 14th February, 1989 with S/Sri B. L. Gupta, the then Asstt. CIT Ward (1) Jaipur, Girlish Dave, the then Dy. CIT and O. N. Tripathi, the then CIT. The learned counsel further submitted that after discussion it had been agreed that neither penalties under ss. 271(1)(a) or and 271(1)(c) or 273 would be levied or if levied would be waived under s. 273A nor interest under ss. 139(8), 215 and/217 exceeding 25 per cent. would be charged and if charged would be waived. It was submitted by the learned counsel that pursuant to such an agreement the petitioner voluntarily surrended a sum of Rs. 1,90,000 for taxation in good faith and co-operated with the Department in his assessment. Mr. Kasliwal pointed out at the affidavit of Mr. T. C. Jain, Chartered Accountant and a partner in the firm of M/s. Shah Patni & Co., Chartered Accountants who attended to the Income Tax and wealth-tax cases of the petitioner and the trust and submitted that the deposition of Mr. T. C. Jain in his affidavit must have been given due weight by the learned CIT before rejecting petitioners petition under s. 273A. The order passed by the learned CIT was thus claimed to be erroneous in law and on facts and the discretion exercised by him in the matter was stated to have been arbitrarily and capriciously exercised. Mr. Kasliwal supported his oral arguments by filing written arguments as well wherein reliance was placed on several decisions namely, P. Jayappan Vs. S.K. Perumal, First Income Tax Officer, Tuticorin, K. Ramulu and Brothers Vs. Commissioner of Income Tax, , Dr. P.K.P. Mohammed Vs. Central Board of Direct Taxes and Others, , Dr. Brij Mohan Bhargava Vs. Commissioner of Income Tax, Laxman Vs. Commissioner of Income Tax, , Rohitkumar and Co. and others Vs. F.J. Bahadur, Commissioner of Income Tax and others, and Smt. Ramjanki Devi, Mahaveer Kumar Jain and Nathulal Jain Vs. Commissioner of Income Tax and Others,

Mr. P. C. Jain, the learned counsel for Revenue, however, emphasised that the learned CIT, after having considered all the facts and circumstances of the case of the petitioner and taken into account the relevant evidence including that contained in the affidavit of Mr. T. C. Jain, C.A. arrived at clear and unambiguous conclusion that the disclosure made by the petitioner of his income at Rs. 1,90,000 was not voluntary. Mr. Jain stressed that the finding recorded by the learned CIT was a finding of fact and the same should not be disturbed in exercise of writ jurisdiction of this Court as, in the exercise of its said exceptional and extraordinary jurisdiction, this Court is not to act as an appellate or revisional Court in a matter. Mr. Jain further submitted that in their reply, which was duly supported with the affidavit of Mr. G. C. Bansal, ITO Ward 1(1), Jaipur, the respondents had clearly denied of entering into by the Department with the petitioner any sort of agreement regarding the levy of penalties and/or charge of interest. Mr. Jain summed up by stating that the learned CIT had exercised the discretion vested in him under s. 273A in a judicial and judicious manner and the impugned order was valid in law.

After having thoughtfully considered the arguments advanced by the learned counsel for the parties before me and on consideration of the facts and circumstances of the case I am of the opinion that this petition under Art. 226 of the Constitution of India is totally misconceived and hence, deserves to be dismissed as such.

Sec. 273A of the Act, as is relevant for our purpose, ran as under at the relevant time :

"273A. Power to reduce or waive penalty, etc., in certain cases. - (1) Notwithstanding anything contained in this Act, the CIT may, in his discretion, whether on his own motion or otherwise, -

(i) xxxxx

(ii) reduce or waive the amount of penalty imposed or imposable on a person under cl. (iii) of sub-s. (1) of s. 271; or

(iii) xxxxx

if he is satisfied that such

(a) xxxxx

(b) in the case referred to in cl. (ii), has, prior to the deduction by the AO, of the concealment of particulars of income or of the inaccuracy of particulars furnished in respect of such income, voluntarily and in good faith, made full and true disclosure of such particulars;

(c) xxxxx

and also has, in the case referred to in cls. (b) co-operated in any enquiry relating to the assessment of his income and has either paid or made satisfactory arrangements for the payment of any tax or interest payable in consequence of an order passed under this Act in respect of the relevant assessment year.

Explanation 1. - For the purposes of this sub-section, a person shall be deemed to have made full and true disclosure of his income or of the particulars relating thereto in any case where the excess of income assessed over the income returned is of such a nature as not to attract the provisions of cl. (c) of sub-s. 271.

xxxxx

(2) Notwithstanding anything contained in sub-s. (1) -

(a) xxxxx

(b) if in a case falling under cl. (c) of sub-s. (1) of s. 271, the amount of income in respect of which the penalty is imposed or imposable for the relevant assessment year, or, where such disclosure relates to more than one assessment for the aggregate amount of such income for those years, exceeds a sum of five hundred thousand rupees,

no order reducing or waiving the penalty under sub-s. (1) shall be made by the CIT except with the previous approval of the Chief CIT or Director General, as the case may be.

(3) Where an order has been made under sub-s. (1) in favour of any person, whether such order relates to one or more assessment years, he shall not be entitled to any relief under this section in relation to any other assessment year at any time after the making of such order.

Provided that where an order has been made in favour of any person under sub-s. (1) on or before the 24th day of July, 1991, such person shall be entitled to further relief only once in relation to other assessment year or years if he makes an application to the IT authority referred to in sub-s. (4) at any time before the 1st day of April, 1992.

(4) Without prejudice to the powers conferred on him by any other provision of this Act, the CIT may, on an application made in this behalf by an assessee, and after recording his reasons for so doing, reduce or waive the amount of any penalty payable by the assessee under this Act or stay or compound any proceeding for the recovery of any such amount, if he is satisfied -

(i) to do otherwise would cause genuine hardship to the assessee, having regard to the circumstances of the case; and

(ii) the assessee has co-operated in any enquiry relating to the assessment of any proceeding for the recovery of any amount due from him :

Provided that where the amount of any penalty payable under this Act or, where such application relates to more than one penalty, the aggregate amount of such penalties exceeds one hundred thousand rupees, no order reducing or waiving the amount or compounding any proceeding for its recovery under this sub-section shall be made by the CIT except with the previous approval of the Chief CIT or Director General, as the case may be.

(5) Every order made under this section shall be final and shall not be called into question by any Court or any other authority.

(6) The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1989 shall apply to and in relation to any assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, and references in this section to the other provisions of this Act shall be construed as references to those provisions as for the time being in force and applicable to the relevant assessment year.

(7) Notwithstanding anything contained in sub-s. (6), the provisions of sub-s. (1), sub-s. (2) or, as the case may be, sub-s. (4) as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1989, shall apply in the case of reduction or waiver of penalty or interest in relation to any assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, with the modification that the power under the said sub-s. (1) shall be exercisable only by the CIT and instead of the previous approval of the Board, the CIT shall obtain the previous approval of the Chief CIT or Director General as the case may be, while dealing with such case."

Sec. 273A starts with a non obstante clause and therefore, has an overriding effect on other provisions in the Act. It invests in the CIT the power to reduce or waive the amount of penalty imposed or imposable on a person under s. 271(1)(i) or 271(1)(iii) or the amount of interest paid or payable under ss. 139(8), 215/217 of the Act. The power conferred upon the CIT is a discretionary power and such power has to be exercised by him on recognised principles which govern the exercise of such powers. In other words the discretion vested in the CIT to reduce or waive or not to reduce or waive the penalty levied or leviable or interest paid or payable is to be exercised in a judicial and not in an arbitrary manner. Such power vested in the CIT being quasi-judicial in nature affecting the liability of the citizen, he is required to state the reasons in support of his conclusions. Keeping in mind that the main object of s. 273A(1) is to encourage and facilitate voluntary disclosure of their concealed incomes by the assessees by throwing a temptation of giving reliefs against penalties, prosecutions and charge of interest, the CIT is required to feel satisfied of the fulfilment of the requirements for the application of the provisions contained in s. 273A. If it is found that the assessee has made true disclosure of his concealed income in good faith and has also co-operated with the Department in his assessment and had also not otherwise disentitled himself to the grant of the discretionary relief, the relief prayed for be ordinarily granted to him. Submitting the return of income without waiting for the issuance of notice under s. 139 or under s. 148 is indicative of law-abiding conduct of a duty conscious assessee and generally the return so filed is characterised as a voluntary return. After having filed the return at a particular income, an assessee has a right to revise it upwardly or downwardly by filing a revised return. If the income has been so revised in good faith and disclosure of additional income has been made in all fairness, the assessee may be said to have acted honestly. But if the income is seen to have been upwardly revised after filing the original return under constraint of exposure or likelihood of adverse action by the Department the return so filed subsequently shall be devoid of its voluntary character as having been filed in good faith. Thus if in the revision of a petition under s. 273A the CIT is seen to have diverted his attention on these relevant aspects of the case, i.e., whether the return submitted without notice could be termed as voluntary and whether the disclosure made was in good faith, he can be said to have exercised his discretionary power under s. 273A judicially on recognised lines governing the exercise of such power.

A reading of the order made by the learned CIT in this case clearly shows that he had not only mentioned all the relevant facts of the case of the petitioner-assessee but also that of the case of the trust whereon the petitioner was a trustee. He had specifically diverted his attention to the main and relevant aspect of the case, viz., whether the revised return filed by the petitioner was voluntarily filed and had specifically referred to the affidavit filed by Mr. T. C. Jain, C.A. before him. He has held in para 7 of his order that assertion made by Mr. Jain regarding the assurance allegedly given by the officers of the Department to the petitioner were not supported by any evidence on his record. The learned CIT had then turned to the facts of the case and particularly pointed out that the record showed that investigations to ascertain the genuineness of the donations made to the trust were started as back as in June, 1988, that donations to the tune of Rs. 5,07,507 were shown to have been received from 121 persons out of whom ten were examined and six persons out of those ten examined admitted to have received cash in exchange of the cheque amounts issued by them. The learned CIT took note of the fact that the donators were salaried employees having no connection with the trust and the level of their income did not justify the extent of the donations made by them. It was on such facts and for such reasons that the learned CIT had finally concluded that the disclosure made by the petitioner of his further income at Rs. 1,90,000 was not voluntary. It is thus clear that before exercising his discretionary power under s. 273A in the way he did, the learned CIT had not only given a fair opportunity of being heard to the petitioner but had also considered all the relevant facts and circumstances of the case attending upon the disclosure made by the petitioner in the revised return. The finding recorded by him in regard to the voluntary character of the return filed subsequently and the good faith of the petitioner in making disclosure of his income from other sources at Rs. 1,90,000 are, therefore, essentially finding of facts and since such findings are based on reasonable and fair appreciation of the evidence on the record of the CIT and the circumstances of the case, those can hardly be made subject-matter of the writ jurisdiction of this Court under Art. 226 of the Constitution.

The existence of an agreement or assurance regarding waiver of interest paid or payable has been denied by the respondents in the reply filed by them. It is, therefore, a disputed issue of fact which cannot be decided without entering into the question of the existence of the relevant facts. No such enquiry into disputed facts can be and should be made in the exercise of the extraordinary jurisdiction of the Court under Art. 226. The facts of the case too do not justify such an investigation into the disputed facts. It is true that since assessment of tax is quasi-judicial procedure, certiorari or prohibition may issue in appropriate cases against orders of or proceedings for assessment. But in the exercise of its jurisdiction under Art. 226, this Court is not to ordinarily interfere where disputed facts are to be investigated before giving relief. It shall also not ordinarily interfere with the decision of a question the determination of which is within the jurisdiction of the IT authorities and such decision is not found to be violative of the fundamental right of the citizen, against principles of natural justice, apparently wrong in law and on fact on the face of record or made without jurisdiction. The order passed by the CIT in the present case suffers from no such vices. In fact, the conduct of the assessee of having declared his income at Rs. 12,000 in 1986 and then revising it to Rs. 1,95,640 on 7th March, 1989 when investigations made in the case on the trust had disclosed upon the IT authorities that in the very first year of its creation on 28th August, 1985 with settlement of Rs. 51,000 only by the settlor the trust had attracted donation to the tune of Rs. 5,07,507 and the donations so shown to have been received by the trustees appeared to be non-genuine, disentitled the petitioner to the relief of waiver of interest under s. 273A of the Act. The learned CIT is thus found to have exercised the discretion vested in him under s. 273A in a judicial and judicious manner. There is thus absolutely no occasion for this Court to issue any kind of writ or make any sort of order or direction for the benefit of the petitioner. The petition is totally misconceived and without any merits whatsoever and deserves to be dismissed as such.

In the result the petition fails and is hereby dismissed with cost at Rs. 2,500.