- Bookmark
- Share
- CaseIQ
Smt. Prakashkumari v. Commissioner Of Income-Tax
Case Summary: Anoop V. Mohta, J.
Factual and Procedural Background
The petition challenges an order in which respondent No. 1 refused to exercise jurisdiction under section 273A of the Income-tax Act, 1961 for waiver of interest under sections 139(8) and 217 for the assessment years 1983-84 to 1985-86. The petitioner, a co-owner, received rental income for the relevant years and voluntarily filed income-tax returns for those years before receipt of any notice under section 139(2) or section 148. On May 4, 1988, the petitioner applied under section 273A for waiver of interest and penalties (restricted to the years 1983-84 to 1985-86). The petitioner paid the assessed taxes but did not pay the interest pending the waiver application. The respondent rejected the petitioner's application by order dated May 24, 2001. The present writ petition sought relief against that rejection.
Legal Issues Presented
- Whether the Commissioner erred in refusing to exercise jurisdiction under section 273A of the Income-tax Act to consider the petitioner’s application for waiver of interest and penalties for the years 1983-84 to 1985-86.
- Whether the petitioner’s voluntary filing of returns (and accompanying disclosure) before receipt of any notice precluded rejection of an application under section 273A.
- Whether rejection of the waiver application on the ground that interest had not been paid was legally tenable.
Arguments of the Parties
Petitioner's Arguments
- The petitioner voluntarily filed income-tax returns for the years 1983-84 to 1985-86 before receiving any notice under section 139(2) or section 148.
- An application for waiver under section 273A was filed on May 4, 1988, restricted to those years; the petitioner had paid the assessed taxes and sought waiver of interest and penalties.
- The petitioner filed an affidavit denying receipt of any notice under section 139 or other sections for the relevant years.
Department's / Respondent's Arguments
- The respondent rejected the petitioner's application (order dated May 24, 2001); the rejection relied, at least in part, on the fact that interest had not been paid.
- The Department contended (or the record reflects a contention) that notices may have been served before the application — the court notes that the Department failed to prove service of notices for the assessment years in question.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Writ Petition No. 311 of 1996 (Vasantbhai Jethalal Lathiwala v. Commissioner Of Income-Tax), [2010] 325 ITR 41 | Elaboration of the scheme and purpose of section 273A of the Income-tax Act (referenced paragraphs 7, 9, 11 and 13). | Relied upon as authoritative exposition of s.273A and as foundation for the court's review of the Commissioner’s exercise/refusal of discretion. |
| Laxman v. CIT, [1988] 174 ITR 465 (Bom); [1989] 75 CTR (Bom) | Holdings that discretion under section 273A, while discretionary, must not be arbitrary or capricious; where conditions for exercise are met, the authority has a duty to exercise the power judicially and objectively. | Applied to conclude that refusal to exercise discretion based on misconception of the scope of power can be interfered with by writ jurisdiction and that the Commissioner must entertain and properly consider applications. |
| Arnnd B. Apte v. CIT, [2004] 270 ITR 581 (Bom) | Section 273A contemplates full and true disclosure made voluntarily and in good faith, even if by belated returns; waiver applications should not be rejected solely on ground of belated disclosure if disclosure is voluntary. | Used to support the proposition that voluntary disclosure through returns warrants consideration under s.273A and that rejection for lack of 'voluntary disclosure' in such circumstances is inappropriate. |
| Sukhdev Hargopal Puri v. Union of India, [2005] 279 ITR 591 (Bom) | The Commissioner, under section 273A(3), can grant waiver as a one-time measure for any number of assessment years. | Invoked to show that the statutory power permits consideration of relief across multiple years and is not confined to a single year as a matter of principle. |
| Sangram Singh Mehta v. ITO, [2008] 296 ITR 483 (Raj) | The Commissioner must take into consideration all material available on the record. | Applied to emphasize the duty of the Commissioner to examine the record and materials before deciding on a waiver application. |
Court's Reasoning and Analysis
The court noted the factual matrix: the petitioner voluntarily filed returns, disclosed rental income, paid the assessed taxes, and applied for waiver of interest and penalties under section 273A. The impugned rejection dated May 24, 2001, was considered against the statutory scheme of section 273A as explained in the cited authorities.
The court analysed the propriety of the rejection on two principal axes evident in the record:
- Whether rejection on the ground that interest had not been paid was a valid basis to refuse to exercise jurisdiction under section 273A. Relying on precedent, the court held that merely because interest remained unpaid does not justify outright rejection where the statute permits an assessee to apply for waiver and other conditions (such as voluntary disclosure) are satisfied.
- Whether the Department had discharged the burden of proving that notices were served on the petitioner prior to the voluntary returns. The court found that the Department failed to prove service of notices for the years in question; the petitioner filed an affidavit denying receipt, and the Department produced no detailed material or evidence to establish service. On this basis the court concluded that the returns were voluntary disclosures made prior to any notice.
Taking these aspects together and guided by the cited authorities (which require that discretion under s.273A be exercised judiciously, and that voluntary and full disclosure merits consideration), the court concluded that the Commissioner’s refusal must be quashed and the matter remanded for fresh consideration with an opportunity of hearing.
Holding and Implications
Impugned order dated May 24, 2001 quashed and set aside; matter remanded for reconsideration.
Direct consequences:
- The impugned order rejecting the petitioner's section 273A application (restricted to assessment years 1983-84 to 1985-86) is quashed and set aside.
- The respondents are directed to pass a fresh order after giving the petitioner a full opportunity of hearing and to reconsider the application in accordance with law.
- The petition is allowed to that extent only, with no order as to costs.
No broader or novel precedent was announced beyond applying established principles governing exercise of discretion under section 273A as reflected in the cited authorities.
Anoop V. Mohta, J.:— The present petition is against an order whereby respondent No. 1 refused to exercise jurisdiction under section 273A of the Income-tax Act, 1961 (for short “the Act”) for waiver of interest under sections 139(8) and 217 of the Act for the income-tax assessment years 1983-84 to 1985-86.
2. The petitioner being a co-owner received rental income from the property during the relevant years.
3. The petitioner voluntarily filed her income-tax returns for the above years before receipt of any notice under section 139(2) or 148 of the Act. The petitioner filed a petition on May 4, 1988, under section 273A for waiver of interest charged and for waiver of penalties and restricted the same only for the years 1983-84 to 1985-86. The petitioner had made full payment of taxes on the income as assessed but not paid interest as an application was filed for waiver of the interest. The respondent, however, by order dated May 24, 2001, rejected the petitioner's application.
4. This court in Writ Petition No. 311 of 1996 (Vasantbhai Jethalal Lathiwala v. Commissioner Of Income-Tax, [2010] 325 ITR 41) elaborated the scheme and purpose of section 273A of the Income-tax Act in paragraph Nos. 7, 9, 11 and 13 as under (pages 43, 44 and 46):
“The Division Bench of the Bombay High Court in Laxman v. CIT, [1988] 174 ITR 465 (Bom); [1989] 75 CTR (Bom) has explained the scheme and purpose of the section in the following words (page 474):
‘On behalf of the respondent, it was contended that the power under section 273A of the Act is purely discretionary in character and, under the circumstances, no interference in writ jurisdiction is called for. We find it difficult to accept this contention. Once the conditions required for exercise of discretion in any judicial or quasi-judicial proceedings are satisfied, exercise of discretion cannot be either arbitrary or capricious and has to be judicious and objective. When the power is given to a public authority for being used for the benefit of a class of persons and the conditions precedent for the exercise are well defined, there is a duty to exercise such power and on failure to perform that duty, courts are not only empowered but are duty bound to interfere. In the instant case, refusal to exercise discretion is for no other reason than misconception of the scope of the power and hence a writ of mandamus can be issued directing the Commissioner of Income-tax to entertain the application and to proceed to exercise the discretion within the limits specified by law…’
The Bombay High Court in Arnnd B. Apte v. CIT, [2004] 270 ITR 581 (Bom) further observed that section 273A of the Act contemplates full and true disclosure made voluntarily and in good faith even though such a disclosure is made through belated returns. In that case, the application of waiver under section 273 of the Act cannot be rejected on the ground that there was no voluntary disclosure, and thereby such order of the Commissioner was quashed and set aside and remanded the matter to decide the application on the merits…
In Sukhdev Hargopal Puri v. Union of India, [2005] 279 ITR 591 (Bom) this court has considered the power of the Commissioner to grant waiver as a one-time measure can grant relief with regard to any number of assessment years based upon the section 273A(3) of the Act….
It is necessary for the Commissioner to take into consideration all the material available on the record (Sangram Singh Mehta v. ITO, [2008] 296 ITR 483 (Raj)).”
5. In the present case as the section itself provides that such an assessee can apply for waiver of interest and penalty and accordingly applied also. Therefore, merely because the interest amount was not paid but complied with all other elements as required the rejection of application on that ground, in our view, is not correct.
6. The Department failed to prove that the application was filed only after service of notice. There is an affidavit to show that the petitioner never received any notice under section 139 or such other section. The return was filed voluntarily disclosing the full facts and material. The burden lies upon the Department to show that the notices were duly served for the assessment years 1983-84 to 1985-86 which they failed to discharge. In view of the affidavit of denial, detailed material and evidence to support the case of service is missing in the present case. Therefore, we are of the view that there were no notices served before the voluntary disclosure of the income by the petitioner.
7. Taking all these aspects into account, we are of the view that the impugned order dated May 24, 2001, for the assessment years 1983-84 to 1985-86 as restricted, needs to be quashed and set aside, the respondents to pass order after giving full opportunity of hearing and reconsider the application filed by the petitioner in accordance with law. The matter is remanded accordingly. The petition is allowed to that extent only with no order as to costs.
Alert