Haji Ismail and Co. vs Commissioner of Income Tax and Another

Haji Ismail and Company has preferred this writ petition under Article 226 of the Constitution seeking certiorari for quashing of the order of the Commissioner of Income Tax, Allahabad, dated October 14, 1987, passed u/s 273A of the Income Tax Act.

The assessee (petitioner) voluntarily filed the return for the assessment year 1983-84 on March 31, 1986, whereas it should have been filed by June 30, 1983. It showed an income of Rs. 1,04,300. The return was filed without initiation of any notice u/s 139(2) or 148 of the Income Tax Act. Income Tax was imposed on the petitioner, which it stated in the writ petition, was deposited by it in time. Thereafter, the petitioner applied for waiver of interest and penalty. The petitioner''s case was that, for reasons beyond its control, it could not submit the return in time.

Relying on Section 271 of the Act, the petitioner submitted that since the return had been filed by the petitioner without initiation of proceedings u/s 139(2), and as it cooperated in the assessment proceedings, it was entitled to waiver both of interest and penalty. The application was allowed in part by the Commissioner of Income Tax by order dated October 14, 1987. The Commissioner held that the petitioner was entitled to deduction of recovery of tax (?) and not penalty. Against that order, the present writ petition has been filed.

Counsel cited a number of rulings before us to which reference is not required to be made. We are not required to go into various authorities cited. The Commissioner has held on erroneous grounds that penalty could not be waived on account of the delay in filing the return by the petitioner. He was required to consider and take into account all other relevant circumstances and to decide then whether he could reduce the penalty or waive the same. The Commissioner did not apply his mind to this aspect of the matter. The refusal to do so has resulted in the erroneous exercise of jurisdiction by him. It is settled and needs no elaboration that the power of discretion conferred on an authority has to be exercised for the purpose u/s 273A(1)(ii), which reads as under :

"reduce or waive the amount of penalty imposed or imposable on a person under Clause (iii) of Sub-section (1) of Section 271 ; or".

Under this provision, the Commissioner could waive the amount of penalty imposed or reduce it. The Commissioner passed the aforesaid order arbitrarily and capriciously without applying his mind to the relevant provisions. Consequently, we allow the writ petition and quash the order rejecting the prayer for waiver of penalty. The Commissioner of Income Tax, Allahabad, is directed to consider the matter de novo. There shall be no order as to costs.