Shrinath Ceramics vs Commissioner of Income Tax

A.K. Patnaik, C.J.

This writ petition has been filed by the petitioner under Article 226/227 of the Constitution challenging the order passed by the Commissioner of income tax-II, Indore, rejecting the application of the petitioner for waiver of the penalty u/s 273A of the Income Tax Act, 1961 (for short, "the Act").

The relevant facts briefly are that the petitioner is a registered partnership firm carrying on the business of trading in sanitary goods. There was a survey of the business premises of the petitioner u/s 133A of the Act on October 6, 1994, and pursuant to the survey, the petitioner filed revised returns of income for the assessment years 1992-93, 1993-94 and 1994-95. Thereafter, the petitioner also filed a return for the assessment year 1995-96 on October 31, 1995, declaring an income of Rs. 3,96,130. The Assessing Officer made an addition of Rs. 1,40,690 under the head of unaccounted income from sales outside the books in the assessment order dated March 31, 1998, and initiated penalty proceedings u/s 271(1)(c) of the Act for concealment of income and thereafter imposed penalty of Rs. 56,360 by order dated September 25, 1998. The petitioner, thereafter filed an application u/s 273A of the Act before the Commissioner of Income Tax for waiver of the penalty but by the impugned order dated September 17, 2002, the Commissioner of Income Tax rejected the application after holding that the returns of income of the petitioner have been upwardly revised by the assessee only after survey and special audit and, hence, the revised return filed by the petitioner cannot be said to be voluntary and in good faith and since the requirement of Section 273A of the Act for waiver of penalty have not been met the application was liable to be rejected. Aggrieved, the petitioner has filed this petition under Article 226/227 of the Constitution of India.

Mr. Satish Chandra Bagadia, senior counsel appearing for the petitioner submitted that for the assessment year 1995-96, the petitioner has not filed any revised return for the assessment years 1992-93, 1993-94 and 1994-95 the petitioner had filed revised returns on the survey of the business premises of the petitioner on October 6, 1995, and the Commissioner of Income Tax has erroneously held that the petitioner had revised its return for the assessment year 1995-96 only after survey of special audit report and hence, the return was not voluntary and in good faith and did not satisfy the requirements u/s 273A of the Act. He further submitted that in the impugned order, the Commissioner of Income Tax has recorded the submissions of the Assessing Officer in his report dated December 18, 1998, for the assessment year 1995-96 and from the said report of the Assessing Officer, it is clear that the Assessing Officer has taken a view that the return has been filed voluntarily and the disclosure has been made by the petitioner in good faith and the disclosure was full and true. He submitted that the Commissioner of Income Tax had not taken these relevant facts into consideration and proceeded on an erroneous assumption that the petitioner had filed a revised return for the assessment year 1995-96 on the basis of the survey and special audit which took place on October 6, 1994.

Mr. Bagadia cited the decision of the Karnataka High Court in P.V. Athanimath Vs. Commissioner of Wealth Tax, Karnataka-I and Another, in which a learned single judge of the High Court has quashed the order passed by the Commissioner of Income Tax rejecting the application for reduction or waiver of penalty on the ground that he had failed to exercise judicial discretion vested in him by taking into account relevant considerations. He also cited the decision of a single judge of the Madras High Court in K.M. Radha Krishna Chettiar and Company Vs. Commissioner of Income Tax and Another, in which a learned single judge of the High Court found that the Commissioner of Income Tax had not applied his mind and not recorded any finding as to the compliance or otherwise of the conditions imposed u/s 273A of the Act and he had not assigned any reason whatsoever for refusing the relief sought for by the petitioner u/s 273A while exercising his discretion and held that the order passed by the Commissioner was not valid and was liable to be quashed. He submitted that considering the aforesaid authorities, this is a fit case in which the High Court exercises its discretion under Article 226/227 of the Constitution should quash the impugned order and remand the matter to the Commissioner of Income Tax for fresh consideration in accordance with the provisions of Section 273Aof the Act.

Mr. R. L. Jain, senior counsel appearing for the respondent-Department, on the other hand, submitted that an alternative remedy of an appeal was available to the petitioner against the order of penalty u/s 246(1) of the Act. He further submitted that a reading of the application of the petitioner would go to show that the petitioner had taken a stand in the application that pursuant to the survey u/s 133A of the Act conducted at its business premises the returns were voluntarily revised in good faith making full and true disclosure of income and it is perhaps for this reason that the Commissioner of Income Tax had come to the conclusion in the impugned order that returns of income have been upwardly revised by the assessee only after the survey and special audit, and the filing of revised return cannot be said to be voluntary and in good faith and hence, requirement laid down in Section 273A of the Act for waiver of the penalty have not been met. He cited the decision of the Calcutta High Court in Satish Kapoor Vs. Commissioner of Income Tax and Others, in which a learned single judge of the High Court after having found that the petitioner in that case had a right to prefer an appeal from the order passed by the authorities held that the petitioner has no right to file the writ petition and the remedy is to prefer an appeal before the appropriate forum and not by way of this writ petition.

We have considered the submissions of learned Counsel for the parties and we are unable to accept the submission of Mr. Jain that we should not entertain this petition under Article 226/227 of the Constitution of India because a remedy of appeal was available to the petitioner. Against the order of penalty imposed u/s 271(1) (c) of the Act it is true the petitioner had remedy of appeal u/s 246(1) (1) of the Act but he also had a remedy of an application u/s 273A of the Act under which the Commissioner has a discretion whether on his own motion or otherwise to reduce or waive the amount of penalty imposed on a person under Clause (iii) of Sub-section (1) of Section 273A of the Act, if he was satisfied that 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, the assessee voluntarily and in good faith, made full and true disclosure of such particulars. This application u/s 273A of the Act was also ordinary statutory remedy which was available to the petitioner and the petitioner availed of this statutory remedy but the Commissioner rejected the application of the petitioner on the ground that the petitioner had revised the return only after the survey and special audit and hence the revision of the return could not be said to be voluntary or in good faith. Since the petitioner had not filed any revised return for the assessment year 1995-96 in respect of which the application u/s 273A of the Act was filed, the rejection of the application on the ground that the petitioner had revised the returns only after the survey and special audit and had thus not disclosed his income voluntarily and in good faith was not legally justified. It is true that in certain paragraphs of the application filed by the petitioner u/s 273A of the Act the petitioner had stated that it had revised its returns after the survey u/s 133A of the Act conducted in the business premises of the petitioner but revision of return by the petitioner was for the assessment years 1992-93, 1993-94, and 1994-95 and not for the assessment year 1995-96. The order passed by the Commissioner, therefore suffers from non-application of mind and a grave error.

Since there was no appeal available under the Act against the impugned order passed by the Commissioner of Income Tax u/s 273A of the Act, we quash the impugned order and remand the matter to the Commissioner of Income Tax, to reconsider the application of the petitioner u/s 273A of the Act and pass fresh orders in accordance with law.