Sangam Plastic Centre vs P.K. Tiwari, Commissioner of Income Tax

Rajesh Balia, J.—Rule. Service of rule is waived by learned counsel for the respondent. Heard learned counsel for the parties.

Petition is directed against the order dt. 19th Jan., 1996 passed by the CIT, Gujarat under S. 273A of the IT Act, 1961 rejecting the petitioner''s application for waiver of interest under S. 139(8) and S. 215 and levy of penalty for late filing of return under S. 271(1)(a) in respect of asst. yrs. 1979-80 to 1983-84 for various sums on each count detailed in the order.

It has been found in the order itself that the assessee had filed returns of income voluntarily, and without issue of any notice under S. 139(2) or S. 148 of the Act. It is also found that the assessee co-operated in the finalisation of the proceedings under the IT Act. The only reason given in the order for rejecting it was that amount due on account of the penalties and interests have not been paid by the assessee and stay was operating only upto 25th May, 1990. According to the CIT the pleadings of the assessee about making satisfactory arrangement for the payment of interest cannot be accepted because such satisfactory arrangement would require not just moving a stay petition, but more than that, that is taking an instalment facility and abiding by it and/or furnishing security to cover the demand, which has not been in this case. It was also observed that in any case after moving the stay petition for the last five years the assessee has not displayed absolutely any cooperation in the matter of payment of interest.

It is well settled that though power under S. 273A is discretionary, but discretion has to be exercised judiciously and the vesting of this power is also coupled with duty to exercise it when condition for exercise of such power is shown to be existing. The three conditions which are required to be seen before power under S. 273A can be exercised are that firstly the assessee must have filed the returns voluntarily and without issuance of any notice under S. 139(2) or S. 148 of the Act and must have made full and true disclosure of his income. The second condition is that the he must have co-operated in the investigation of the proceedings under the IT Act and the third condition is that either the assessee must have paid the demand or must have made satisfactory arrangements for its payment. Admittedly first two conditions have been satisfied. So far as the third condition is concerned, it is to be noticed that the assessee must have either made payment or made satisfactory arrangement for the payment of any tax or interest payable in consequence of the order passed under this Act in respect of relevant assessment year. This clearly goes to show that payment of the demands in respect of of which wavier is sought is not a sine qua non and the assessee is entitled to claim the benefit of the provisions even if it has made satisfactory arrangement for its payment. Whether the assessee has made payment or not has to be determined by the CIT himself that is to say the satisfaction about the satisfactory arrangement of payment has to be determined by the CIT with reference to whether in his opinion any satisfactory arrangements have been made or not. This necessarily requires application of mind as to what arrangement assessee ought to have been made or can make to his satisfaction which would satisfy this requirement. The fact that as assessee has moved an application before the ITO and has not been disposed of or an interim order passed in that respect has expired without extension does not detract from the fact that before disposition of the application, the CIT has to apply his mind and give an opportunity to the assessee to make arrangement for its payment to his satisfaction. In the present case, apparently this has not been done and the only ground which weighed with the CIT is that the assessee has not made any payment or has secured extension of the interim order after its expiry in February, 1990. In this connection it may also be noticed that application for waiver was moved on 26th March, 1987. Before moving application under S. 273A the assessee had already moved the ITO on 19th Feb., 1987 for grant of stay of recovery of the sums due. Once that application for stay has been made it was for the appropriate authority to have decided that application and it was not within the domain of the assessee to secure any particular order on that. It has also come on the record that in pursuance of that application written order was made only on 18th Dec., 1989 informing that stay order has been granted upto 25th Feb., 1990 but no attempt for recovery of the sum during that period has been made. On the contrary the assessee had made applications on 1st June, 1988, 6th Oct., 1988 and 30th March, 1989 before the CIT for deciding his application on 26th March, 1987. That application was not be decided until January, 1996. It is apparent that upto 25th Feb., 1990 there was an interim order in favour of the assessee from the recovery of the amounts due during this period and it could not have been said that assessee could still be required to make payment during that period. Inspite of repeated requests by the assessee no attempt was made by the CIT to disposes of the application under S. 273A and it was kept pending and it was only in January, 1996 the authority awakened to dispose of the application and on finding that after February, 1990 there is no interim order in writing was made, hastened to dismiss the application on that ground. If this is permitted it would always be possible for an authority to keep the matter pending during the period when the conditions for exercise of the discretion are satisfied on the fact of record and then to take up the matter for hearing only after something happened to warrant its rejection. It is neither the spirit nor the object of the provisions. Admittedly the application has not been dealt with in a reasonable manner to warrant its sustenance.

The petitioner is accordingly allowed. The impugned order is quashed order is quashed and the CIT is directed to decide the application afresh in accordance with law within a period of two weeks after giving an opportunity to the assessee to make satisfactory arrangement for the payment of the sums due to his satisfaction.

Rule made absolute with no order as to costs.