Punjab-Haryana High Court
Leader Engineering Works vs Income-Tax Officer And Anr. on 14 May, 2003
Equivalent citations: (2003)185CTR(P&H)277, [2003]264ITR65(P&H)
Author: S. S. Nijjar
Bench: S.S. Nijjar
JUDGMENT S. S. Nijjar, J.
1. In this writ petition under Article 226/227 of the Constitution of India, the prayer is made for the issuance of a writ in the nature of certiorari quashing the order dated March 6, 1981 (annexure P2), passed by respondent No. 1 and the order dated February 25, 1986, of respondent No. 2 upholding the order of respondent No. 1 passed under Rule 117A of the Income-tax Rules, 1962, read with Section 139(8) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). The petitioner is a registered firm under the Partnership Act as well as under the Income-tax Act, 1961. Shri K. K. Sehgal through whom the present writ petition has been filed, is one of the partners of the firm. The dispute relates to the assessment year 1974-75 and the previous year relevant to this assessment year is December 31, 1973. According to Section 139 of the Act, the return was to be filed on or before June 30, 1974. It was actually filed on October 30, 1974. The assessing authority imposed a penalty under Section 271(1)(a) and interest under Section 139(8) of the Act amounting to Rs. 29,915. On February 28, 1977, the petitioner moved an application under Section 139(8) of the Act for waiver of the interest. It was mentioned in the application that the accounts for the relevant period were received on or after October 19, 1974. Earlier there had been a strike in the establishment, which had commenced on April 29, 1974, and continued for about four months. Consequently, the audit work was held up. The Income-tax Officer, respondent No. 1, did not accept the application. The default was held to be without any reasonable cause. The petitioner filed a revision petition under Section 264(1) of the Act against the order of respondent No. 1, The revision petition was also dismissed on February 25, 1986.
2. A written statement has been filed on behalf of the respondent through respondent No. 2. In paragraph 3, it is categorically stated that penalty proceedings initiated under Section 271(1)(a) for late filing of the return were dropped by the Income-tax Officer vide his order dated November 13, 1980.
3. Mr. Nagpal, learned counsel for the petitioner, has submitted that the period of delay in filing the return is the same for the purposes of interest as well as penalty. The Income-tax Officer had the power under Rule 117A(5) of the Act to waive the interest payable under Section 139 of the Act. The explanation of the petitioner having been accepted for the purposes of imposition of penalty under Section 271(1)(a) could not have been disregarded while deciding the question of waiver of interest with regard to late filing of the return.
4. On the other hand, learned counsel for the respondents, has submitted that the impugned orders are speaking orders. The petitioner had failed to prove any evidence in spite of ample opportunities having been granted to the petitioner to justify the delay. Dropping of the penalty proceedings initiated under Section 271(1)(a) is not a relevant factor for the purposes of waiver of interest.
5. I have considered the submissions made by learned counsel for the parties and have perused the paper book.
6. Rule 117A(3) of the Income-tax Rules, 1962, is as under :
"The Income-tax Officer may reduce or waive the interest payable under Section 139 in the cases and in the circumstances mentioned below, namely : -- ....
(v) in cases in which the assessee produces evidence to the satisfaction of the Income-tax Officer that he was prevented by sufficient cause from furnishing the return within time."
7. A perusal of the aforesaid rule shows that the Income-tax Officer has the power to reduce or waive the interest on the assessee provided he produces evidence to the satisfaction of the Income-tax Officer that he was prevented by sufficient cause from furnishing the return in time. The explanation given by the petitioner with regard to the delay in filing of the return was accepted by the Income-tax Officer for dropping the penalty proceedings. However, the same reasoning was not accepted for granting the relief to the petitioner of waiver of interest. It is not disputed that the Income-tax Officer as well as the Commissioner of Income-tax exercise quasi-judicial functions. Therefore, the decision to drop the penalty proceedings has to be supported by valid reasons.
8. Similarly, while exercising the discretion under Rule 117A(5) of the Income-tax Rules, 1962, the Income-tax Officer cannot act arbitrarily. I, therefore, find that the respondent could not have rejected the explanation for delay in filing the return for the purpose of waiver of interest when the same had been accepted for the purpose of dropping the penalty proceedings. Accepting such a notice would negative the equality clause enshrined in Article 14 of the Constitution of India. In view of the above, I am of the considered opinion that the impugned orders, annexures P2 and P8 suffer from the vice of arbitrariness.
9. Consequently, the writ petition is allowed. The impugned orders annexures P2 and P8 passed by respondent No. 1 on March 6, 1981, and passed by respondent No. 2 on February 25, 1986, respectively, are hereby quashed. No costs.