Rajasthan High Court - Jaipur
Public Carriers Truck Owners' ... vs Commissioner Of Income-Tax on 4 November, 1993
Equivalent citations: [1994]210ITR36(RAJ)
JUDGMENT M.R. Calla, J.
1. These two writ petitions have been filed by the assessee against the common order dated January 14, 1981, passed by the Commissioner of Income-tax, Jaipur, with regard to the assessment years 1975-76 and 1976-77, deciding the objections filed by the petitioner-association under Section 273A of the Income-tax Act, 1961 (in short, "the Act"), seeking waiver/reduction of interest charged under Sections 139(8) and 217 of the Act and the penalties leviable under Sections 271(1)(a) and 273 of the Act S. B. Civil Writ Petition No. 1629 of 1981 relates to the year 1975-76 and the other writ petition-S. B. C. W. P. No. 1631 of 1981-relates to the year 1976-77.
2. The petitioner herein is a truck owners' association at Kota. It is assessed to income-tax in the status of an association of persons. It maintains books of account and documents. It is the petitioner's own case that it could not file returns for the years 1975-76 and 1976-77 in time but the same were voluntarily filed by it for both the years, prior to the issuance of the notice under Sub-section (2) of Section 139 of the Act. It is further the case of the petitioner that for both the years, a full and true disclosure of the income was made and the petitioner had also paid tax on the income so disclosed.
3. The Income-tax Officer, Ward 'C', Kota, who completed the assessment on January 17, 1980, issued a notice under Sections 274/271(1)(a) and 273 of the Act, to the petitioner for both the years. The petitioner filed objections before the respondent under Section 273A of the Act, seeking waiver of interest charged under Sections 139(8) and 217 of the Act and penalties leviable under Sections 271(1)(a) and 273 of the Act. Separate petitions to this effect were filed by the petitioner for the years 1975-76 and 1976-77, whereupon the petitions filed by the petitioner for both the years were decided by the common order dated January 14, 1981, whereby interest and penalties were reduced for both the years to the extent mentioned and indicated in the impugned order, against the respective years. It is against this common order passed for the years 1975-76 and 1976-77 that these two separate writ petitions have been filed.
4. The grievance of the petitioner is that the amount of interest and penalties should have been waived in full. Shri N.M. Ranka, learned counsel for the petitioner, has raised the following contentions :
(i) Once it had been found by the Commissioner of Income-tax that all the conditions mentioned in Section 273A of the Act had been satisfied, then the amount of interest and penalties should have been waived in full.
(ii) The respondent, Commissioner of Income-tax, has given no reasons for not allowing the full waiver of interest and penalties nor has he given reasons as to why the interest and penalties had only been reduced.
5. No return was filed as the same was not considered necessary because only questions of law are involved and there is no dispute about the facts. However, it was submitted on behalf of the respondent that the waiver of interest or penalties, whether full or in part, cannot be claimed as a matter of right and it is the discretion of the authority charged with the power to consider the question of waiver as to whether the waiver is to be allowed in part or in full. In the facts of this case, the discretion has been judiciously exercised and it cannot be said that the Commissioner of Income-tax has acted arbitrarily in not granting full waiver and the impugned order shows that reasons have been given. It was also submitted that even if the court finds that two views are possible, the one which is taken by the authority should not be interfered with.
6. I have considered the submissions made on behalf of both the sides and I proceed to deal with the contentions raised before me ad seriatim one by one.
"(i) Once it had been found by the Commissioner of Income-tax that all the conditions mentioned in Section 273A of the Act had been satisfied, then the amount of interest and penalties should have been waived in full."
7. A look at the impugned order dated January 14, 1981, passed by the respondent, Commissioner of Income-tax, would show that the Income-tax Officer had himself reported that the returns for both the years were filed voluntarily and that all the tax had been paid and that the assessee had co-operated with the Department in the completion of the assessments. It is also reported that it was the first petition filed by the assessee under Section 273A and no notice under Section 271(1)(c) was issued by the Income-tax Officer and it was held by the Commissioner of Income-tax that the disclosure made was full and complete. The assessee had filed returns of his income on March 31, 1979, and March 21, 1979, for the assessment years 1975-76 and 1976-77, respectively. Thus, there was a delay of about 45 and 33 months in the filing of returns for the two years, respectively. Disallowance of Rs. 3,600 in each of the two years had also been made by the Income-tax Officer out of the salary payments treating the same to be not incidental to the business of the assessee and thus, interest and penalties were reduced as mentioned and indicated against each of the two years in the impugned order dated January 14, 1981, passed by the Commissioner of Income-tax, Jaipur. It would thus appear that in the instant case, the requirement of Section 273A of the Act, i.e., the filing of the return prior to the detection by the Assessing Officer and prior to the issue of the notice under Section 271(1)(c) of the Act were found to be satisfied. Shri Ranka has argued that once the requirements under Section 273A are fully satisfied, the waiver of interest and penalties must be full, even if the power is to be exercised as a discretion to reduce or waive. Shri Ranka has cited Shiv Narain Dhabhai v. CWT [1980] 121 ITR 224 (Raj). In this decision, the Division Bench has held with reference to Section 18B of the Wealth-tax Act, 1957, that though the discretion has been vested in the Commissioner to reduce or waive the amount of penalty imposed or imposable, yet the discretion must be exercised judiciously and not arbitrarily and if the conditions laid down by Section 18B are satisfied, the Commissioner cannot refuse to reduce or waive the amount of penalty imposable. Thus, this judgment only leads to the conclusion that the discretion must be exercised judiciously and not arbitrarily but it does not cover the argument of Shri Ranka that once the conditions laid down in the section are satisfied, the Commissioner should waive the amount of interest and penalty.
8. Shri Ranka has also cited Seetha Mahalakshmi Rice and Groundnut Oil Mill Contractors Co. v. CIT [19811 127 ITR 579 (AP), a Division Bench decision of the Andhra Pradesh High Court. In this judgment also, the same principle has been laid down that the discretion must be exercised judiciously, fairly and reasonably, objectively and not arbitrarily or capriciously and that as there were no proceedings taken under Section 271(1)(c), the assessee must be deemed to have made a true and full disclosure of his income even though an addition was made by the Income-tax Officer in the income returned by the assessee.
9. Indra and Co. v. CIT [1980] 122 ITR 510 (Raj) was also cited by Shri Ranka wherein it has been held that in introducing Section 273A, the object of the Legislature was to give substantial concession to the assessee and, therefore, this section must be construed liberally in favour of the subject.
10. Shri Ranka further cited Jyoti Steels v. CIT [1987] 166 ITR 558, wherein the Allahabad High Court has taken the view that when a taxpayer approaches the Commissioner under Section 273A(4), he impliedly admits his liability to penalty, but asks for remission or reduction thereof, relying upon mitigating circumstances arising in a given case and it may be that having regard to the circumstances of the case, the Commissioner may direct that penalty proceedings may be dropped, while in another case, a partial reduction of penalty alone may meet the ends of justice.
11. In Rohitkumar and Co. v. F.J. Bahadur, CIT [1991] 190 ITR 93, the Bombay High Court has taken the view that 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 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 and that Section 273A confers a discretion on the Commissioner of Income-tax to waive or reduce penalty and interest and such conditions are necessarily referred to in Clauses (b) and (c) of that section and making of a full and true disclosure of income voluntarily and in good faith is the common factor.
12. Thus, the ratio of the various decisions as aforesaid, which have been cited before me by Shri N.M. Ranka, is that the power under Section 273A to reduce or waive the amount of interest and penalties is undoubtedly discretionary but such discretion has to be exercised judiciously and objectively. Section 273A of the Act is reproduced as under :
"273A. (1) Notwithstanding anything contained in this Act, the Chief Commissioner or Commissioner may, in his discretion, whether on his own motion or otherwise,-- ....
(ii) reduce or waive the amount of penalty imposed or imposable on a person under Clause (iii) of Sub-section (1) of Section 271 ; or ....
if he is satisfied that such person-- ....
(b) in the case referred to in Clause (ii), has, prior to the detection by the Assessing Officer, 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 ; . . . .
and also has, in the case referred to in Clause (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.--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-section (1) of Section 271.
(2) Notwithstanding anything contained in Sub-section (1),-- ....
(b) if in a case falling under Clause (c) of Sub-section (1) of Section 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 year, 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-section (1) shall be made by the Chief Commissioner or Commissioner except with the previous approval of the Board.
(3) Where an order has been made under Sub-section (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-section (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 income-tax authority referred to in Sub-section (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 Chief Commissioner or Commissioner 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 that-
(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 or 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 Chief Commissioner or Commissioner except with the previous approval of the Board.
(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."
13. The words "voluntarily", "good faith" and "full and true disclosure" as occurring in Section 273A(1), Clause (b), are significant. Apart from the ordinary meaning of the words, "full and true disclosure", that is, to give a complete and truthful account of the income in the return, it has been added by way of Explanation under Section 273A that a person shall be deemed to have made full and true disclosure of his income or of the particulars relating thereto and 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-section (1) of Section 271. Thus, I need not discuss further the meaning of full and true disclosure. The word "voluntarily" is used as a word opposite to "compulsion" meaning thereby that if a return has been filed without any notice under Section 271(1)(c), it may be easily called a case of filing of the return voluntarily as the same had been filed without any compulsion. Thus, the filing of the return without any element of compulsion would mean the filing of the return voluntarily. "Good faith" is an orientation of honest intention and want of any deliberate attempt to mislead and would also include an act done with a bona fide belief, even if such belief is a mistaken belief. The framers of the law therefore included all these terms in the statute granting discretion to the Commissioner so as to reduce or waive the amount of interest and penalties and it can be safely held that the Commissioner who has been clothed with the powers to reduce or waive interest and penalties under Section 273A has to take a decision by exercising his discretion judiciously and objectively. However, the question raised by Shri N.M. Ranka has not been dealt with and does not stand answered by any of the authorities as aforesaid and this court is called upon to consider that, in a given case, if the Commissioner comes to the conclusion that all the requirements prescribed under Section 273A and all the conditions which could be conceived within the scope of the terms used in Section 273A are fulfilled, in such a case, whether it should still be left open to the Commissioner not to grant waiver and exercise his discretion to the extent of reducing the amount of interest and penalties. When all the ingredients of full and true disclosure, voluntary filing of the return, good faith, co-operation in any enquiry are co-existing and yet the waiver is denied and the discretion is exercised only to the extent of reducing the amount of interest and penalties, the question arises as to which will be those cases in which the discretion will be exercised so as to grant complete waiver. Thus, it has to be considered as to what should be the guidelines to regulate the exercise of this discretion.
14. As and when we consider the question of imposing any penalty against any party, particularly while dealing with fiscal statutes, we have to first consider the penalty decided to be imposed so as to take care of the mischief by a defrauding party. If it is found that the defaulting party has committed a mischief, it must result in punitive action against it but when it is found that it was not a case of mischief but a case of mistake only and if it is further found that it is a case of bona fide mistake, it is a case for pardon rather than penalty. When the Revenue does not come with the case that the assessee has committed any mischief and the orders passed by the assessing authority and the Commissioner of Income-tax, under Section 273A of the Act, show that it was a case of bona fide mistake and all the conditions mentioned in Section 273 of the Act are satisfied, it may be considered as an appropriate case for complete waiver and if an application is moved by the assessee for waiver under Section 273A of the Act, in the normal course, the complete waiver may be granted by the Commissioner of Income-tax and so far as the penalties are concerned, an order to waive the penalty in full may be appropriately passed, unless any reasons which are germane with reference to the language of Section 273A are assigned by the Commissioner of Income-tax, and therefore, I am inclined to hold that in a case of bona fide mistake on the part of the assessee if the Commissioner of Income-tax is satisfied that all the conditions under Section 273A of the Act were fulfilled, the penalty is to be waived in full, unless the authority gives reasons for not granting full waiver and such reasons have to be cogent and germane. So far as the question of waiver of interest is concerned, in my opinion, even if it is found that it was a case of bona fide mistake on the part of the assessee, the fact cannot be lost sight of that the amount which should have come to the Revenue in time, has remained with the assessee and, therefore, there is no question of complete and full waiver of interest even if all the conditions mentioned in Section 273A are satisfied, unless such circumstances are shown by the assessee as warrant the waiver of the interest in full. In my opinion, in the case of a bona fide mistake on the part of the assessee when all the conditions under Section 273A are satisfied, the norms to be applied for the purpose of full waiver of the penalty are different from the norms for the full waiver of the amount of interest. In case the amount of penalty is to be waived completely it should be so waived in the normal course subject to the fulfilment of all the conditions under Section 273A when there is a bona fide mistake on the part of the assessee and in such a case if at all full waiver is not granted, it is for the Commissioner of Income-tax to give reasons for not granting full waiver but for the purpose of deciding the question of waiver of interest, it is the assessee who has to show particular reasons as to why the amount of interest should be waived in full. Accordingly, I hold that in the case of a bona fide mistake when all the conditions of Section 273A are satisfied, the grant of complete and full waiver of penalty should be the rule and the denial of full waiver and grant of reduction or partial waiver should be an exception for cogent and germane reasons to be recorded by the Commissioner of Income-tax ; whereas on the question of interest, the full and complete waiver of the amount of interest should not be granted unless very strong and cogent grounds, to the satisfaction of the Commissioner of Income-tax, are given by the assessee. The first contention raised by Shri N.M. Ranka is, therefore, answered accordingly.
15. Coming to the second contention raised by Shri Ranka :
"(ii) The respondent, Commissioner of Income-tax, has given no reasons for not allowing the full waiver of interest and penalties nor has he given reasons as to why the interest and penalties had only been reduced."
16. It may be straightaway observed that it has been held in a number of cases and as has also been held in this judgment hereinabove, that reasons have to be given for not allowing the full waiver. In other words, if the amount of interest and penalties is only reduced instead of granting full waiver, the Commissioner of Income-tax is under an obligation to give reasons for his doing so. Such a duty or obligation arises out of the language of Section 273A itself inasmuch as Section 273A, at the very outset, starts with a non obstante clause and a statutory discretion has been conferred upon him to reduce or waive the amount of penalty and interest, on his own motion or otherwise. In order to test as to whether such a discretion has been properly exercised or not, the only touchstone can be the reasons given in the order passed by the Commissioner of Income-tax under Section 273A and it is only through such reasons that it can be ascertained as to whether he has passed the order after due and active application of mind and whether his satisfaction for passing such an order is based on objective facts or not. In this view of the matter, it has to be agreed on all hands that the recording of the reasons is the safeguard to test the proper exercise of discretion, more particularly when the exercise of such a discretion is certainly subject to judicial review. On the premises of the requirements of law, as aforesaid, having gone through the impugned orders passed by the Commissioner of Income-tax, in the present case with regard to the years 1975-76 and 1976-77, for the petitioner-assessee, I find that in paragraph 1 of this order, he has narrated as to what amount of interest and penalty has been imposed by the Income-tax Officer for the assessment years 1975-76 and 1976-77. In paragraph 2 of the order, he has recorded that the Income-tax Officer had reported-
(i) that returns for both the years were filed voluntarily ; (ii) that all the taxes had been paid ;
(iii) that the assessee had co-operated with the Department in the completion of the assessment ;
(iv) that this was the first application filed by the assessee under Section 273 ; and
(v) that no notice under Section 271(1)(c) was issued by the Income-tax Officer.
16. He has thus held that the disclosure made was full and final. In paragraph 3, he has recorded that there was a delay of 45 and 33 months in the filing of the returns for the two years, respectively, and that for each of the two years, disallowance of Rs. 3,600 had been made by the Income-tax Officer out of the salary payments treating the same to be not incidental to the business of the assessee, and then he proceeded to say that keeping in view all the facts of the case, the amount of interest and penalty is reduced as indicated against each of the years in the latter part of the said order. Thus a para-wise analysis of the order shows that the Commissioner of Income-tax had noted the ingredients provided under Section 273A of the Act but he has not given any reasons as to why full waiver of the penalty has not been granted nor has he given any reasons for the purpose of granting reduction of the amount of penalty and interest only to the extent indicated by him. Thus, I find the impugned order lacking in reasons for not granting full waiver of the amount of penalty and for granting the reduction only in the matter of penalty and for the extent to which the reduction has been allowed in the case of interest, for both the years. The order, therefore, does not inspire the confidence that it has been passed after due and active application of mind on the question of waiver/reduction of the amount of penalty and interest and, thus, the impugned orders, in my view, suffer from this error of law, which is apparent on the face of the record. The Commissioner of Income-tax had not recorded that the assessee had not satisfied the conditions mentioned under Section 273A of the Act nor has he recorded the reasons for not allowing full waiver of the penalty or with regard to the reduction of the amount of penalty and interest to the extent indicated in the orders.
17. In the result, both these writ petitions are allowed and the impugned orders passed by the Commissioner of Income-tax on January 14, 1981, for the assessment years 1975-76 and 1976-77 with regard to the petitioner-assessee are quashed and set aside and the matter is remanded to the Commissioner of Income-tax for passing reasoned orders for both the years, i.e., 1975-76 and 1976-77, with regard to the waiver/reduction of the amount of penalty and interest under Section 273A of the Act. In the facts and circumstances of the case, the parties are left to bear their own costs.