Andhra HC (Pre-Telangana)
Kakarla Krishnamurthy vs Commissioner Of Income Tax on 17 February, 1995
Equivalent citations: (1996)130CTR(AP)210, [1995]216ITR206(AP), [1996]85TAXMAN41(AP)
Author: S.S. Mohammed Quadri
Bench: S.S. Mohammed Quadri
JUDGMENT Krishna Saran Shrivastav, J.
1. By this common order Writ Petns. Nos. 3927 and 3936 of 1989 are disposed of because of the commonality of the question of law and similarity of facts.
2. By these writ petitions, under Art. 226 of the Constitution of India, the petitioners seek for an appropriate writ or direction in the nature of a writ of mandamus directing the respondent to waive fully the interest levied for the asst. yrs. 1985-86 and 1986-87 and for any further direction in the interest of justice.
3. Having regard to the limited scope of the writ petitions, it is not necessary for us to traverse at length the facts of the cases. Suffice it to say, that, on 31st March, 1987, the petitioners submitted IT returns under the amnesty scheme for the asst. yrs. 1985-86 and 1986-87 showing agricultural income and income other than from agriculture and, on 16th April, 1987, the ITO passed the assessment orders under s. 143(1) of the IT Act, 1961 (hereinafter referred to as "the Act"), accepting the income as shown in their respective returns for the aforementioned years. It appears that some enquiry was later initiated against them and anticipating the result of the enquiry against them both the petitioners, who are father and son, submitted revised returns for the aforementioned assessment years.
4. On 29th March, 1988, the petitioner of Writ Petn. No. 3927 of 1989 reduced the agricultural income from Rs. 1,38,250 to Rs. 1,10,000 and enhanced the income other than from agriculture from Rs. 33,770 to Rs. 62,020 in respect of the asst. yr. 1985-86. He reduced the agricultural income from Rs. 2,79,920 to Rs. 1,40,00 and enhanced the income other than from agriculture from Rs. 56,200 to Rs. 1,96,120 for the asst. yr. 1986-87. Notice under s. 148 of the Act was issued to regularise the revised returns and the incomes returned as per the revised returns were found to be in order and were accepted. Accordingly, the petitioner was reassessed for the aforementioned assessment years. He paid the taxes also. The ITO levied interest under 139(8) of the Act amounting to Rs. 5,670 and under s. 217 of the Act amounting to Rs. 7,560 for the asst. yr. 1985-86 and Rs. 8,670 under s. 139(8) of the Act and Rs. 10,404 under s. 217 of the Act for the asst. yr. 1986-87.
5. Similarly, the petitioner of Writ Petn. No. 3936 of 1986 reduced the agricultural income from Rs. 1,55,690 to Rs. 1,25,000 and enhanced the income other than from agriculture from Rs. 15,620 to Rs. 46,420 for the asst. yr. 1985-86. He reduced the agricultural income from Rs. 3,03,094 to Rs. 1,65,000 and enhanced the income other than from agriculture from Rs. 36,350 to Rs. 1,74,440 only for the asst. yr. 1986-87. The ITO issued notice under s. 148 of the Act to regularise the revised returns. He accepted the incomes as shown in the revised returns and assessed the tax accordingly. The petitioner paid the taxes. The ITO also levied interest under s. 139(8) of the Act amounting to Rs. 6,350 and under s. 217 of the Act amounting to Rs. 7,620 for the asst. yr. 1985-86 and Rs. 8,450 under s. 139(8) of the Act and Rs. 12,675 under s. 215 of the Act for the asst. yr. 1986-87.
6. On 30th March, 1988, both the petitioners filed separate applications under s. 273A of the Act for waiver of the interest levied on them on the ground that they had voluntarily and in good faith disclosed their correct incomes with a view to avoid further litigation and uncertainties of the result.
7. The respondent CIT in Reference No. H. Qrs. No. 1/46 of 1988-89, dt. 24th Oct., 1988, though holding that the petitioner had voluntarily filed the returns, had co-operated with the ITO in completing the assessment and had paid the taxes, on the ground that he had filed the revised returns subsequent to the enquiries conducted by the ITO after completion of the original assessments, has inferred that the petitioner has not made full disclosure of income voluntarily for the two years and, therefore, rejected the application of the petitioner of Writ Petn. No. 3927 of 1989.
Similarly, the respondent CIT in Reference No. H. Qrs. No. 1/45 of 1988-89, dt. 27th Oct., 1988, though holding that the petitioner has satisfied a portion of the conditions required for waiver, concluded that the disclosure made by him cannot be considered as full, true and in good faith since the revised returns were filed showing additional incomes after the petitioner was aware of the fact of the enquiries made by the Department and, therefore, rejected the application of the petitioner in Writ Petn. No. 3936 of 1989.
8. The petitioners have challenged the impugned orders through the aforementioned separate writ petitions alleging that the returns were filed by them voluntarily and in good faith making a full and true disclosure of their incomes and had fully co-operated with the Department, and had paid the entire taxes on incomes assessed by the ITO and, therefore, the respondent CIT should have accepted their respective applications for waiver of the whole amount of interest levied on them. The impugned orders are arbitrary, amounting to failure to exercise the discretion vested in the respondent by law and, therefore, the writ as prayed for may be issued.
9. The respondent did not file a counter-affidavit. But, the counter-affidavit was filed on his behalf by the ITO, Ward No. 1, Eluru, denying the claim of the petitioner in both the writ petitions.
It has been alleged in the counter-affidavit that after the assessment was completed for the asst. yrs. 1985-86 and 1986-87, the ITO felt that both the petitioners had inflated the agricultural income by deflating the other income and, therefore, he initiated enquiries and when the enquiries were in progress the petitioners filed the revised returns enhancing the non-agricultural income and reducing the agricultural income. Therefore, it cannot be said that the petitioners had voluntarily filed the revised returns. The CIT inferred that the assessees had not made a full disclosure while filing the returns under the amnesty scheme and, therefore, the applications for waiver of the interest of both the petitioners were rejected. The interest levied has been recovered by way of adjustment of the refunds due to them.
10. It has been urged on behalf of the petitioners that they had complied with the conditions mentioned in s. 273A of the Act and, therefore, they were entitled to waiver of interest. The respondent CIT did not give any sound reason for rejecting the applications and, therefore, the impugned orders should be quashed. On the other hand, it has been contended on behalf of the respondent that the petitioners had not voluntarily submitted the revised returns and had suppressed their incomes and, therefore, the impugned orders of the respondent are valid and legal.
11. To examine the legality of the impugned order rejecting the claim of the petitioner under s. 273A of the Act, it would be necessary to read the said provision in so far as it is relevant for our purpose here, which is in the following term :
"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) reduce or waive the amount of penalty imposed or imposable on a person under clause (i) of sub-s. (1) of s. 271 for failure, without reasonable cause, to furnish the return of total income which he was required to furnish under sub-s. (1) of s. 139; or
(ii) reduce or waive the amount of penalty imposed or impossible on a person under clause (iii) of sub-s. (1) of s. 271; or
(iii) reduce or waive the amount of interest paid or payable under sub-s. (8) of s. 139 or s. 215 or s. 217 or the penalty imposed or imposable under s. 273, if he is a satisfied that such person, -
(a) in the case referred to in clause (i), has prior to the issue of a notice to him under sub-s. (2) of s. 139, voluntarily and in good faith made full and true disclosure of his income;
(b) in the case referred to in clause (ii), has, prior to the detection by the ITO, 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) in the cases referred to in clause (iii), has prior to the issue of a notice to him under sub-s. (2) of s. 139, or where no such notice has been issued and the period for the issue of such notice has expired, prior to the issue of notice to him under s. 148, voluntarily and in good faith made full and true disclosure of his income and has paid the tax on the income so disclosed, and also has, in all the cases referred to in cls. (a), (b) and (c) 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. - 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 clause (c) of sub-s. (1) of s. 271...."
12. A plain reading of the abovequoted provision makes it evident that the conditions precedent for the exercise of discretion to waive interest under clause (iii) of sub-s. (1) are :
(1) The assessee has voluntarily and in good faith made a full and true disclosure of his income;
(2) such a disclosure should be before the issuance of the notice under sub-s. (2) of s. 139;
(3) where no notice under s. 139(2) has been issued and the period for the issuance of such notice has expired, then he has voluntarily and in good faith made a full and true disclosure of his income prior to the issuance of notice to him under s. 148;
(4) he has co-operated in the conduct of assessment proceedings; and (5) he has either paid or made satisfactory arrangement for the payment of any tax or interest payable in consequence of an order passed under the Act in respect of the relevant assessment year.
These conditions are adverted to in the judgment of a Division Bench of this Court in Anwar Ali vs. CIT to which one of us (Syed Shah Mohammed Quadri, J.) was a party and we are in entire agreement with the same.
13. A bare look at the impugned order reveals that the applications of both the petitioners were rejected mainly on the ground that the revised returns were filed by them subsequent to the enquiries conducted by the ITO, after completion of the original assessments and, therefore, it cannot be concluded that they had made a full disclosure of their incomes voluntarily. Therefore, the petitioners are not entitled for waiver of interest though they had co-operated with the ITO in completing the assessments and have paid the taxes.
14. In K. Ramulu & Bros. vs. CIT , it is held that when the revised returns furnished by the assessee are accepted in full without any further addition, it should be treated as honest disclosure made by the assessee and merely by failure to mention the full income in the original return, it cannot be said that the disclosure of income, subsequent to original assessment, was not in good faith. The expression "good faith" has not been defined under the Act. Under sub-s. (22) of s. 3 of the General Clauses Act, 1897, or in ordinary parlance, "good faith" means an act done honestly even if it is tainted with negligence or mistake.
In the case of Laxman vs. CIT , the assessee had filed his returns after the due date and made an application for waiver of penalty and interest. The CIT rejected the application on the ground that the returns were not filed voluntarily. The Inspector of Income-tax had visited the building of the assessee in the course of survey operations and thereafter the returns were filed as a consequence of fear of detection and follow-up action. The Division Bench of the Bombay High Court held that even assuming that the Inspector has visited the premises and made enquiries about the assessee's source of funds, it would not lead to the conclusion that the visit and the enquiry amounted to a compulsion on the assessee to file the returns and, therefore, the filing of returns was held to be voluntary and the CIT was directed to exercise his discretion under s. 273A of the Act.
15. In both the cases on hand the revised returns were filed by both the petitioners separately for the assessment years under reference reducing their agricultural incomes and enhancing their incomes from other sources and the incomes as shown in the revised returns were accepted as agreed by the ITO and they were reassessed accordingly. As noted above, the respondents, in the impugned orders, have found that the petitioners had co-operated with the ITO during the reassessment proceedings and have paid the taxes reassessed by him. On the strength of Laxman vs. CIT (supra), it was urged on behalf of the petitioners that merely on the ground that the revised returns were filed subsequent to the initiation of enquiry, it cannot be said that they did not voluntarily file the revised returns.
16. Faced with the aforementioned circumstances of the case, learned counsel for the respondent CIT strenuously argued that the modes of filing returns have been provided under ss. 139(1) and (2) of the Act. The assessee can also file returns in pursuance of the notice issued under s. 148 of the Act. There is no provision in the Act for filing the revised returns. Because the petitioners had filed the revised returns which were not, otherwise, permissible under the Act, the ITO had issued notices under s. 148 of the Act to regularise the filing of the revised returns and had reassessed the incomes. Under these circumstances, it can by no stretch of imagination, be said that the revised returns were voluntarily submitted by both the petitioners and, therefore, they are not entitled to claim waiver of interest levied as prayed for by them under s. 273A of the Act. These are the arguments of learned counsel for the respondent.
17. At the outset, it is to be remarked that the CIT has not filed his counter-affidavit. The counter-affidavit filed by the ITO is of no assistance to conclude that the CIT had rejected the applications on the ground that the revised returns were filed only in answer to a notice issued under s. 148of the Act. The reply in the counter-affidavit is based only on the impugned order. It has not been mentioned in the impugned order that the applications of the petitioners are not maintainable because they had filed their respective revised returns in answer to the notices issued to them under s. 148 of the Act, after completing the original assessments.
18. In Mohinder Singh Gill vs. Chief Election Commissioner , its is held that "when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. Otherwise, an order bad in the beginning may, by the time it comes to the Court on account of a challenge, get validated by additional grounds later brought out".
There is no whisper in the counter-affidavits that the applications under s. 273A of the Act have been rejected because the petitioners had filed the revised returns in answer to the notices issued to them under s. 148 of the Act. The facts disclosed above show that the notice under s. 148 of the Act was issued only after the filing of the revised return. As noted above, the respondent has not rejected the applications of the petitioners on that ground. He has not preferred to file his counter-affidavit also. Be that as it may, even if in the counter-affidavit the aforementioned allegation had been mentioned, it would have been of little consequence in view of the principle laid down in Mohinder Singh's case (supra), because the impugned orders are silent on that point.
For the foregoing reasons, we are unable to persuade ourselves to accept the contention of learned counsel for the respondent that the impugned orders of the respondent are sustainable because the revised returns had been filed in answer to the notice issued to the petitioners under s. 148 of the Act and, therefore, they cannot be treated as a voluntary act of disclosing their true income.
As noted above, the respondent has found that the petitioners had co-operated with the assessing authority at the time of assessment orders in question. They have paid all the taxes as reassessed by the ITO. We are in complete agreement with the principle laid down in Laxman's case (supra), that the revised returns cannot but be considered as voluntary merely because some enquiry was initiated subsequent to the original assessment orders.
19. In the result, both the writ petitions are allowed. The impugned orders are quashed and set aside. It is held that the conditions mentioned in s. 273A, for the exercise of discretion, do exist. We accordingly direct the respondent to decide the applications under s. 273A of the Act on the merits in the light of the observations made above. No costs.