Daga V.C, J.:— These petitions involving a short question of law and fact were taken up for hearing together and are being disposed of by this common judgment.
BACKGROUND FACTS:
2. The admitted facts giving rise to both these petitions in nutshell are that Shri S.S Bhagwat became Karta of the Joint Hindu Family on the death of his father late Shri S.K Bhagwat, who left for heavenly abode on 23rd November, 1980. The joint family had been assessed to income tax right from the assessment year 1961-1962 till the assessment year 1980-1981. All the tax matters having been attended by the late father of the petitioner; who was Karta of the family, and the petitioner being abroad in U.S.A was not familiar with any of the affairs of the family, consequently, the returns of the income of the family for the assessment years 1981-1982 to 1987-1988 remain to be filed on due dates after the death of father of the petitioner. Even returns in the status of individual were filed by the petitioner belatedly.
3. According to the petitioner he was too much overburdened with the work after the death of his father and as soon as the particulars were gathered, he filed returns on his own initiative without their being any statutory notice from the Income Tax Department under section 139(2) or 148 of the Income Tax Act, 1961 (the Act for short). In other words, without their being any communication or notice from the Assessing Officer, prior to the filing of the returns, the petitioner filed returns suo moto. The Assessing Officer completed the assessment on the basis of the returns and accepted the returns filed by the petitioner in his individual as well as in the capacity of Karta of his H.U.F as correct. However, while passing the assessment orders, Assessing Officer levied penal interest under section 139(8) for delayed submission of returns of income and penal interest under section 217 for non-payment of advance tax and initiated penalty proceedings under section 271(1)(a) and 273(1)(b) for the said defaults.
4. The petitioner approached the Commissioner of Income-tax, Pune respondent herein; by written applications one; dated 27th April, 1987 on his own behalf, and another; on behalf of his H.U.F on 10th October, 1988 requesting him to exercise discretion vested in him under section 273-A of the Act to waive or reduce interest levied and the penalties leviable, arising out of the assessments in question, on the ground that the petitioner has satisfied all the preconditions laid down under section 273-A of the Act to justify the grant of the reliefs prayed for.
5. The petitioner after having argued his applications, sent a written synopsis of his submissions dated 7th May, 1990 in support of the contentions raised in his own application. He also forwarded similar synopsis dated 24th September, 1990, in support of the application moved by him on behalf of the H.U.F, and also placed relevant case laws on the issues to emphasize his submissions. The respondent, however, rejected the prayers made by the petitioner in both applications by impugned orders both dated 21st December, 1990. The petitioner moved rectification applications on 11th June, 1991 and 13th June, 1991 pointing out omissions on the part of the Commissioner of Income-tax, in not considering the issues in the light of the case laws cited. However, the said applications also came to be rejected vide letter dated 8th August, 1991.
6. The aforesaid orders which are more or less based on the similar law and facts are the subject-matter of challenge in the both these petitions filed under Articles 226 and 227 of the Constitution of India.
SUBMISSIONS:
7. In these petitions, it is contended that the discretion conferred under section 273-A has not been properly exercised by the Commissioner of Income Tax keeping in view the settled legal position. It is further contended that it is not in dispute that the returns were filed suo moto and the same were accepted and that the petitioner has fully paid the taxes of the returned income and that he co-operated in the assessment proceedings. On this premise, the petitioner seeks to impugn the orders passed by the Commissioner/respondent herein.
8. The respondents herein have filed counter affidavit to support the impugned orders and opposed these petitions. It is submitted that the Commissioner has acted in accordance with law and exercised his discretion properly and that the petitions are devoid of any merit.
9. Mr. Inamdar, learned Counsel for the petitioner urged that once the conditions required for exercise of discretion in any judicial of quasi judicial proceedings are satisfied, exercise of discretion cannot be either arbitrary or capricious. It has to be exercised judicially and objectively. He also referred to certain decided cases in support of his submissions and prayed for setting aside the impugned orders.
10. Mr. R.V Desai, learned Senior Counsel appearing for the Revenue tried to support the impugned orders contending that the petitioner has failed to explain sufficient cause for delay in filing returns. He further contended that the petitioner could not be said to be unaware of the necessity of filing returns since he was looking after the business of H.U.F He further submits that so far as bona fides of the petitioner is concerned, the same must be taken into account and his conduct should be examined right from the date of omission to file the returns till the date returns are actually filed. He further submits that no advance tax was paid by the petitioner and that by itself was a sufficient ground to hold that the petitioner did not comply with the requisite requirements of section 273-A of the Act. He, thus, prayed for dismissal of the petition.
STATUTORY PROVISIONS:
11. In order to decide the issues involved, it is necessary to have a look to the text of section 273-A of the Income Tax Act, 1961, which at the relevant time was under:
“273-A. (1) Notwithstanding anything contained in this Act, the Chief Commissioner or 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 (iii) of sub-section (1) of section 271; or
(ii) 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 under section 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 Assessing 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 under section 48, 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), 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.
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.
(2) Notwithstanding anything contained in sub-section (1)—
(a) if in a case the penalty imposed or imposable under Clause (1) of sub-section (1) of section 271 or the minimum penalty imposable under section 273 for the relevant assessment year, or, where such disclosure relates to more than one assessment year, the aggregate of the penalty imposed or imposable under the said clause or of the minimum penalty imposable under the said section for those years, exceeds a sum of one hundred thousand rupees,
(b) if in a case falling under Clause (c) of sub-section (1) of section 271, the amount of income in respect of which the penalty is imposed or imposable for the relevant assessment year, or, where such disclosure relates to more than one assessment year, the aggregate amount of such income for those years, exceeds a sum of five hundred thousand rupees,
no order reducing or waiving the penalty under sub-section (1) shall be made by the Chief Commissioner or Commissioner except with the previous approval of the Board.
(3) Where an order has been made under sub-section (1) in favour of any person, whether such order relates to one or more assessment years, he shall not be entitled to any relief under this section in relation to any other assessment year at any time after the making of such order.
(4) Without prejudice to the powers conferred on him by any other provision of this Act, the Chief Commissioner or Commissioner may, on an application made in this behalf by an assessee, and after recording his reasons for so doing, reduce or waive the amount of any penalty payable by the assessee under this Act or stay or compound any proceeding for the recovery of any such amount, if he is satisfied that—
(i) to do otherwise would cause genuine hardship to the assessee, having regard to the circumstances of the case; and
(ii) the assessee has co-operated in any enquiry relating to the assessment or any proceeding for the recovery of any amount due from him:
Provided that where the amount of any penalty payable under this Act or, where such application relates to more than one penalty, the aggregate amount of such penalties exceeds one hundred thousand rupees, no order reducing or waiving the amount or compounding any proceeding for its recovery under this sub-section shall be made by the Chief Commissioner or Commissioner except with the previous approval of the Board.
(5) Every order made under this section shall be final and shall not be called into question by any Court or any other authority.”
It is plain that in view of the absence of initiation of penalty proceedings for concealment of income under section 271(1)(c), Clause (b) of sub-section (1) of section 273-A is not attracted in this matter, and that the word “detection” is to be found only in Clause (b) and not in the relevant Clauses (a) and (c).
12. Dissection of above provisions would spell out the condition precedence for exercise of discretion to waive the penalty or interest under section 273-A of the Act, which can be catalogued as under:
(a) voluntary disclosure of income before issuance of notice under section 139(2);
(b) making of full and true disclosure of the income in goods faith;
(c) co-operation in the conduct of income-tax assessment proceedings;
(d) payment of satisfactory arrangement for payment of tax or interest payable in consequence of an order passed with respect to the relevant assessment year.
THE ISSUE:
13. Undisputedly, there is no grievance about non fulfilment of the above conditions of the section. In the above backdrop, the crucial issues which needs consideration are whether the Commissioner of Income Tax has exercised his discretion in consonance with the provisions of Election 273-A of the Act and whether the impugned order is in accordance with law.
CONSIDERATION:
14. At this juncture, it will not be out of place to mention that section 273-A has been a subject-matter of judicial interpretation in number of reported cases. A number of cases were cited at the Bar. Few of them can be referred. In the case of (Krishnan Gopi v. P.S Bhaskaran, Commissioner Of Income-Tax)1, reported in 161 I.T.R 631 the learned Single Judge of this Court had an occasion to deal with section 273-A and to interpret the provision of the said section. While interpreting the said section, the learned Judge observed that where interest and penalty have been levied for failure to pay advance tax, delay in filing return and/or for non-payment of a part of the tax on self-assessment and the assessee applies for waiver of the penalty and interest, in that event such application cannot be rejected on the ground that the assessee has committed various acts which attracted penalty and interest. Such an action would amount to refusal to exercise the discretion to waive penalty and interest. The question of exercising discretion arises only when there are circumstances which invite imposition of interest and penalty. In such cases, looking to the conduct of the assessee and other relevant circumstances, the Commissioner has to decide whether or not he should exercise his powers under section 273-A of the Act.
15. The Division Bench of this Court in the case of (Laxman v. Commissioner of Income-Tax)2, reported in 174 I.T.R 465 had also an occasion to deal with the interpretation of section 273-A of the Act, wherein the Division Bench observed that the most important facet of section 273-A is furnishing of return in respect of income voluntarily and in good faith with full and true disclosure of particulars thereof. According to the Division Bench “voluntary” means “without compulsion”. Secondly according to the Division Bench “good faith”; though not defined under the Act, but considering the definition given under section 2(22) of the General. Clauses Act means; an act done honestly even if it is tainted with negligence or mistake. According to the Division Bench all that is required is that disclosure of income must be full and true according to the honest belief of the assessee.
16. With the aforesaid understanding of law. Let us turn to the submissions advanced by Mr. Desai on behalf of the revenue. If one has to test the submissions made on the touchstone of the above law laid down by this Court, then the submissions advanced by Mr. Desai run counter to the law laid down by this Court. In our opinion the Division Bench of this Court has rightly ruled that good faith is to be seen with respect to the disclosure of income and not with respect to the period anterior to the filing of the return. If that be so, it is not in dispute that the returns were voluntarily filed by the petitioner/assessee before issuance of notice under section 139(2) or even before receipt of any notice or intimation from the Income-Tax Department. It is also not in dispute that full and true disclosures of income in good faith were made by the petitioner and that those returns were accepted under section 143(1) and 143(3) of the Act. It is not the case of the respondents that where the returns are accepted under section 143, the petitioner has not cooperated with the department. There was no question to co-operate with the department where the returns were accepted without their being any notice to the assessee. There is also no material on record to presume that had there been notice issued to the petitioner-assessee, the petitioner would not have co-operated with the department. It is also not in dispute that after filing of the returns; the petitioner has paid amount of tax. Under these circumstances, the petitioner has, unequivocally, established that he has complied with the necessary requirements of section 273-A of the Act.
17. On the background of the aforesaid facts, if one turns to the impugned orders passed by the Commissioner of Income Tax, Pune, he has taken into account unawareness of the petitioner with respect to the H.U.F status and went on to record findings that it cannot be believed that the petitioner was not aware of his H.U.F status. At this juncture it will not be out of place to mention that at no point of time it was the case of the petitioner that he was not aware of H.U.F status. On the contrary the case set out by the petitioner was that after the death of his father he was over-burdened with other obligations as such he could not file the returns within the stipulated time. This fact has been completely ignored by the Commissioner, while considering the applications under section 273-A of the Act. As against this, he has relied on extraneous circumstances which were never pleaded by the petitioner. Thus, the impugned orders suffer from non-application of mind on the part of the respondent/Commissioner.
18. The Commissioner has also taken into account one more extraneous aspect of the matter leading to absence of payment of advance tax to defeat the applications of the petitioner. At this juncture it will not out of place to mention that while considering the application under section 273-A the non-payment of advance tax is a irrelevant consideration, So far as one another aspect of the matter taken into account by the Commissioner is with respect to the absence of explanation for delayed filing of returns. In our opinion this is extraneous to section 273-A of the Act. As held by the Division Bench of this Court in the case of Laxman (supra) only four ingredients of section 273-A ought to have been looked into and if those ingredients are found to be complied with, then the assessee is bound to succeed. In the present case it is not in dispute that the petitioner has proved his case falling well within four comers of the provisions in question. Under these circumstances, the petitioner has proved that he was and is entitled to have the discretionary relief exercised in his favour under section 273-A of the Act.
19. In the above view of the matter, we quash and set aside the impugned order dated 21st November, 1990, in both petitions, passed by the Commissioner of Income-Tax, Pune and remand the proceedings to the Commissioner for quantification of the amount treating that the petitioner has proved his case, in both capacities under section 273-A of the Act. The respondent Commissioner of Income Tax, Pune, is directed to decide the remanded proceedings by a reasoned order as expeditiously as possible at any rate within eight weeks from the date of receipt of this order, following principles of natural justice.
20. With this order the petition is allowed. Rule is made absolute in terms of prayer Clause (a), with no order as to costs.
21. Petition allowed.