Kerala High Court
N. Subhakaran vs Commissioner Of Income-Tax And Ors. on 25 October, 1991
Equivalent citations: [1992]198ITR720(KER)
ORDER--Cannot be cured by affidavit. HELD : 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 an affidavit or otherwise. APPLICATION : Also to current assessment years. Income Tax Act 1961 s.143 Interest--WAIVER UNDER S. 273A--Disclosure of reasons for non-full waiver--Assessee disclosing share income from firm--Firm Subsequently filed revised return showing higher income--Interest on firm waived in full--Order not granting complete waiver to assessee a partner thereof-- HELD : The contention of the assessee that when the return was filed by the petitioner, he could not have anticipated the revised return filed by the firm, the further fact that the other officer had completely waived the interest in the case of the firm as well as the other points raised in the revision have not been adverted to by the CIT who only partly waived the interest in case of assessee. The waiver or reduction order under s. 273A should ex facie disclose the application of mind and should contain reasons in support of the order. When the order is sought to be impugned on the ground that the officer concerned has not exercised his discretion properly in the sense that the reason in support of the order has not been disclosed in the order, the defect cannot be cured by furnishing reasons by an affidavit. APPLICATION : Also to current assessment years but regarding waiver of penalty only as s. 273A no longer allows waiver of interest. Income Tax Act 1961 s.273A JUDGMENT K.A. Nayar, J.
1. The challenge in this writ petition is against the imposition of interest under Section 139(8) and Section 215 of the Income-tax Act, 1961, for belated filing of return and non-payment of advance tax against the orders passed by the Inspecting Assistant Commissioner of Income tax and the Commissioner of Income-tax on petitions filed under Rule 40(6) and Rule 117A of the Income-tax Rules, refusing to waive the interest in full.
2. For the assessment year 1983-84, the petitioner filed his return on January 30, 1085, disclosing his total income at Rs. 52,418 stated to be the share incomes from four firms of which one is D. K. B. and Company, Quilon. The income returned was based on the share income of the firms as originally disclosed in the return. We are not concerned with the other firms except D. K. B. and Company, for, only the income disclosed by that firm proved to be erroneous. The petitioner filed the return based on the figures furnished by that firm. But, consequent on a raid, that firm filed a revised return on April 2, 1985, disclosing a further sum of Rs. 41 lakhs.
which was accepted by the third respondent, Income-tax Officer, and the assessment of the firm was made on April 11, 1985. Thereafter, the petitioner's assessment was completed by the third respondent making suitable additions to the share income disclosed by the petitioner from D. K. B. and Company, Quilon, on the basis of the revised return filed by that firm. The assessment was completed on the petitioner on a total income of Rs. 3,64,250, In completing the assessment, the third respondent levied interest under Section 139(8) amounting to Rs. 34,897 and interest under Section 215 amounting to Rs. 55,048. The levy of interest was occasioned only because of the enhanced share income from D. K. B. and Company, Quilon, adopted for the assessment year 1983-84. On receipt of the assessment order, the petitioner approached the second respondent for waiver of interest charged under Section 139(8) and under Section 215 of the Income tax Act. The Inspecting Assistant Commissioner, by his order dated July 15, 1987, waived 50 per cent. of the interest charged under Section 139(8) and 25 per cent. of the interest charged under Section 215 of the Act. The assessment order is produced by the petitioner as exhibit P-2 and the order of the Inspecting Assistant Commissioner reducing the interest as above is produced as exhibit P-3. The petitioner, thereafter, filed a revision petition against the order, exhibit P-3, before the first respondent Commissioner of Income-tax, and the first respondent confirmed the levy of interest and dismissed the revision petition. The order of the Commissioner is produced as exhibit P-4. It is the said orders, exhibits P-2, P-3 and P-4, that are challenged in this writ petition.
3. The contention on behalf of the petitioner was that the enhanced demand and interest arose only because of the revised return filed by the firm, D. K. B. and Company, Quilon, after submitting the return by the petitioner on the basis of the original share income furnished by the firm. The petitioner also remitted the entire dues in instalments as directed by the third respondent. The advance tax payments were also made. It was also contended that at the time of filing the return, the petitioner could not have anticipated the extra share income because of the additions made subsequently in the assessment of the firm, Messrs. D. K. B. and Company, Quilon. In the case of the firm, the second respondent had waived the entire interest.
4. This contention is not seen to have been considered either in exhibit P-3 or in exhibit P-4. The Inspecting Assistant Commissioner passed a laconic order stating that :
"..... Considering the facts and circumstances of the case, the interest charged under Section 215 is restricted to 75 per cent. applying the provision of Rule 40(5) and the balance due may be collected."
5. Similar statement regarding Section 139 interest is also made restricting interest under that section to 50 per cent. Even though several contentions have been raised in the revision petition, the Commissioner of Income tax only stated that the Income-tax Officer/Inspecting Assistant Commissioner has already reduced the interest by 25 per cent. Moreover, the entire interest payable by the firm has also been waived by the Income-tax Officer/Inspecting Assistant Commissioner and that any further reduction in the interest levied under Section 139 or 215 is inappropriate.
6. If exhibit P-4 was a considered order and this court was satisfied that all the points raised in the revision petition have been adverted to, this court, naturally, would be slow to interfere with the discretion exercised by the Commissioner. It is also seen that the interest levied for the year 1982-83 under Section 139(8) and Section 217 had been cancelled. But the first respondent only stated that the request of the assessee to waive the interest in full for the year 1983-84 cannot be considered fair and reasonable, and thereafter, confirmed the order of the Inspecting Assistant Commissioner. If the order of the Inspecting Assistant Commissioner itself was a considered order, I would not have interfered with the order passed in revision by the first respondent. The contention of the petitioner that when the return is filed by the petitioner, he could not have anticipated the revised return filed by the firm, the further fact that the second respondent had completely waived the interest in the case of the firm as well as the other points raised in the revision have not been adverted to by the Commissioner. No doubt, in the counter-affidavit filed on behalf of the third respondent in paragraph 7, the circumstances under which the limited waiver of interest has been made has been detailed. But this is a matter to be considered by the first respondent in disposing of the revision petition, for, discretion has to be exercised by the Commissioner. The order should ex facie disclose the application of mind and should contain reasons in support of the order. When the order is sought to be impugned on the ground that the officer concerned has not exercised his discretion properly in the sense that the reason in support of the order has not been disclosed in the order, the defect cannot be cured by furnishing reasons by an affidavit. If that is allowed, an order which is bad in the beginning may, by the time it comes to the court when challenged, gets validated by the grounds supplied in the affidavit. In the decision in Mohinder Singh Gill v. Chief Election Commissioner, AIR 1978 SC 851, it was 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 an affidavit or otherwise. In any case, the affidavit of the third respondent cannot cure the defect in the order of the first respondent.
7. In the circumstances, I quash exhibit P-4 order to the extent it relates to the assessment year 1983-84 and direct the first respondent to pass appropriate orders on the revision petition filed by the petitioner for the assessment year 1983-84 after giving the petitioner an opportunity of being heard.
8. The original petition is allowed as above.