Shri Ganesh Trading Co. vs Commissioner of Income Tax

This order will dispose of three Civil Writ Petitions 1429 to 1431 of 1987 filed by Shri Ganesh Trading Company, Moga in which common questions of law and fact arise.

The relevant assessment years are 1980-81 to 1982-83. Petitioner which is a partnership firm was carrying on business during these years. It filed its Income Tax returns as per details given hereunder :

Assessment Year

Income declared (in Rs.)

Income assessed (in Rs.)

Due date of filing return

Date on which was filed

Delay in return months

1980-81

18,184

18,300

30-6-1980

7-1-1984

42

1981-82

3,79,900

3,94,654

30-6-1981

12-10-1983

27

1982-83

1,53,190

1,54,567

30-6-1982

12-10-1983

15

It is clear from the aforesaid chart that there was a delay in filing the returns for all the three years even though the income of the assessee was well above the taxable limit. It is further clear that the period of default ranges from 15 months to 42 months. The Income Tax Officer while making assessment initiated penalty proceedings u/s 271(1)(a) of the Income Tax Act, 1961 (hereinafter referred to as the Act) on account of delay in filing the returns. The petitioner then moved an application u/s 273A of the Act before the Commissioner of Income Tax with a prayer that the penalty imposable u/s 271(1)(a) and interest chargeable u/s 139(8) or under any other provision of the Act be waived. Such a prayer was made in regard to all the three assessment years. The Commissioner of Income Tax considered the prayer made by the petitioner and came to the conclusion that even though the conditions set forth in section 273A of the Act stood satisfied yet, according to him, it was a fit case for reduction rather than waiver of the penalty. Accordingly, by order dated 28-4-1986 he directed that penalty imposable u/s 271(1)(a) of the Act shall be reduced to 50 per cent of that imposable in each of the three years. He further directed that interest payable u/s 139(8) of the Act shall also be reduced to 50 per cent of that charged for all the three years. It is against this order that the present petitions have been filed under article 226 of the Constitution.

The relevant part of section 273A of the Act, as it then stood, reads as under :

"Power to reduce or waive penalty, etc., in certain cases(1) Notwithstanding anything contained in this Act, the Commissioner may, in his discretion, whether on his own 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 (1) 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 or the penalty imposed or imposable u/s 273,

if he is satisfied that such person

(a) in the case referred to in clause (i), has, prior to the issue of a notice to him under sub-section (2) of section 139, voluntarily and in good faith made full and true disclosure of his income;

(b) in the case referred to in clause (ii), has, prior to the detection by the Income Tax 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;

(c) in the cases referred to in clause (iii), has, prior to the issue of a notice to him under sub-section (2) of section 139, or where no such notice has been issued and the period for the issue of such notice has expired, prior to the issue of notice to him u/s 148, voluntarily and in good faith made full and true disclosure of his income and has paid the tax on the income so disclosed;

and also has, in all the cases referred to in clauses (a), (b) and (c), cooperated 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."

A bare reading of the aforesaid provision would show that the Commissioner has the discretion to waive the amount of penalty imposable or reduce the same under clause (i) if he is satisfied that such person had, prior to the issue of notice to him under sub-section (2) of section 139 of the Act, voluntarily and in good faith, made full and true disclosure of his income. In the instant case, the Commissioner had come to the conclusion that the requirements of section 273(1)(a) stood complied with. The grievance of the petitioner is that once the Commissioner was satisfied that the requirements of section 273(1)(a) of the Act were satisfied, he should have waived the penalty instead of reducing the same by 50 per cent. I find merit in this contention. It is true that the Commissioner has the discretion to reduce or waive the amount of penalty imposable under clause (i) of sub-section (1) of section 271 for failure to furnish the return within the time allowed u/s 139(1) of the Act but that discretion has to be exercised judiciously and not arbitrarily without recording any reasons. Once he found that the requirements of section 273A(1)(a) were satisfied, he was further to decide whether it was a fit case for reduction or waiver. A perusal of the impugned order shows that the Commissioner has to record any reasons whatsoever and in the absence of any reasons, one can only hold that the order passed by him is arbitrary. The power conferred on the Commissioner u/s 273A of the Act is a quasi-judicial power and whatever decision is taken is to be supported with reasons. In this view of the matter, I have no hesitation in quashing the impugned order. The view that I have taken finds support from the judgments in Anwar Ali v. CIT (1990) 51 Taxman 154 (AP) and Rajeshwar Pershad Vs. Commissioner of Income Tax (Central), New Delhi, .

In the result, the writ petitions are allowed and the impugned orders quashed. There is no order as to costs.