Kherunissa Allibhai vs Commissioner of Income Tax

B.J. Divan, C.J.—The petitioner herein challenges the order of the Commissioner of Income Tax, Gujarat III, the respondent herein, in

respect of an application made by the petitioner for waiving the penalty in exercise of the power conferred by section 273A of the Income Tax

Act, 1961. The petitioner is an Income Tax assessee and for assessment years 1969-70, 1970-71 and 19711-72, certain penalties were imposed

by the Income Tax Officer after passing the assessment orders. For each of three years 1969-70, 1970-71 and 1971-72, penalties u/s 273(b)

were imposed and for the year 1970-71, in addition to the penalty u/s 237(b), penalty u/s 271(1)(a) was imposed. The Income Tax Act was

amended with effect from October 1, 1975, and from that day section 273A was inserted. Under that section, the Commissioner of Income Tax

has the power to reduce or waive penalties u/s 271(1)(a) and also, u/s 273(b) if the conditions mentioned in section 273A are satisfied. The

petitioner contended before the respondent that all the conditions prescribed by section 273A have been fulfilled in her case and, therefore, she

should be given relief in respect of these penalties u/s 273A. By his order dated November 26, 1976, a copy of which is annexed as annexure ""B

to the petition, the respondent rejected the application and the ground for ejection of the application was that the assessee had filed appeals to the

Appellate Assistant Commissioner of Income Tax against the Income Tax Officer''s orders imposing the penalties for these three different

assessment years. The Appellate Assistant Commissioner had dismissed the appeals and confirmed the penalties imposed by the Income Tax

Officer and the order of the respondent proceeds :

Since the assessee had taken recourse to the other remedy, i.e., appeal to the AAC, her application to me for waiver of penalties u/s 271(1) for

the a.y. 1970-71, and u/s 273(b) of the I.T. Act, 1961, for the assessment years 1969-70, 1970-71 and 1971-72 becomes redundant and not

feasible.

It is this order of the Commissioner of Income Tax, the respondent herein, which has been challenged by the petitioner.

Section 273A of the Income Tax Act provides :

273A. (1) Notwithstanding anything contained in this Act, the Commissioner may, in his discretion, whether on his motion or otherwise -

(i) reduce or waive the amount of penalty imposed or imposable on a person under clause (i) of sub-section (1) of section 271 for failure, without

reasonable cause, to furnish the return of total income which he was required to furnish under sub-section (1) of section 139; or

(ii) reduce or waive the amount of penalty imposed or imposable on a person under clause (iii) of sub-section (10 of section 271; or

(iii) reduce or waive the amount of interest paid or payable under sub-section (8) of section 139 or section 215 or section 217 of the penalty

imposed or imposable u/s 273......

If he is satisfied that such person meets with the requirements of clauses (a), (b) or (c) and also has, in the cases referred to in clauses (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. Nowhere in section

273A is there any provision prescribing that in the event of an appeal having been preferred against the order of penalty, the provisions of section

273A cannot be invoked. It may be pointed out that where the legislature wants to so provide, it in terms says that in the case of an appeal having

been preferred or an appeal being available, revision would not lie. For example u/s 264, sub-section (4), which provides for revision of the orders

at the instance of an assessee, the Commissioner shall not revise any order u/s 264 where an appeal against the order lies to the Appellate

Assistant Commissioner or to the Appellate Tribunal but has not been made and the time within which such appeal may be made has not expired

or, in the case of an appeal to the Appellate Tribunal, the assessee has not waived his right of appeal, or where the order is pending on an appeal

before the Appellate Assistant Commissioner, or where the order has been made the subject of an appeal to the Appellate Tribunal. Similar

provisions are also to be found in the Code of Civil Procedure, section 115, and also in the Code of Criminal Procedure. There is no similar

provision so far as the exercise of the power u/s 273A is concerned. The whole concept u/s 273A is that the assessee concerned admits his

liability to penalty by relies upon certain mitigating circumstances or certain circumstances specified in the section for the purpose of getting the

penalty waived or reduced. When the assessee approaches the Commissioner u/s 273A he does not dispute his liability to pay the penalty. All that

he says is that he should be given the relief of reduction or waiver by the fact that the conditions specified in section 273A are satisfied. However,

when an assessee files an appeal against the order of penalty, he is challenging the very imposition of penalty and his effort in the appeal is to show

that, in the circumstances of his particular case, penalty was not imposable at all. This distinction between what can be urged in an appeal and what

can be urged in proceedings u/s 273A must be clearly borne in mind. The respondent, in the order under challenge, has not borne that distinction in

mind. In the absence of any specific provision similar to sub-section (4) of section 264, it must be held that the respondent was in error when he

refused to exercise the jurisdiction bested in him by law on the ground that an appeal had been preferred to the Appellate Assistant Commissioner.

Merely because the penalty was confirmed by the Appellate Assistant Commissioner, it was not open to the respondent to refuse to entertain the

application because all that he has to satisfy in proceedings u/s 273A is whether the conditions specified in section 273A are fulfilled or not and, if

they are fulfilled, to what extent relief against the penalty imposed, either in the form of waiver or reduction, can be given to the assessee

concerned.

Since the grounds given by the respondent for not exercising the jurisdiction u/s 273A are extraneous to the section and are not available to him

in law, this special civil application must be allowed.

We may point out that Mr. G. N. Desai, learned advocate for the respondent, had urged several contentions before us regarding the scheme of

section 273A and the operation of that section but since it is not necessary for the purposes of this judgment, we are not referring to those

contentions or dealing with them.

In the result the special civil application is allowed and the order, annexure ""B"" to the petition dated November 26, 1976, is quashed and set

aside. The Commissioner will now proceed to deal with the application u/s 273A on merits and dispose it of in accordance with law. In view of the

special circumstances of the case, there will be no order as to costs. Rule made absolute accordingly.