Bombay H.C : the interest under s. 139(8) of the IT Act (for short ‘Act’) and penalties under s. 271(1)(a) for the asst. yrs. 1985-86 to 1989-90 have been retained though prayed for waiving the same

High Court Of Bombay, Nagpur Bench

Madhuri vs. CIT & Anr.

Section 139(8), 271(1)(a), 273A

Asst. Year 1985-86 to 1989-90

Anoop V. Mohta & C.L. Pangarkar, JJ.

Writ Petn. No. 1787 of 1994

7th August, 2008

Counsel appeared :

G.B. Lohia & R.S. Agrawal, for the Petitioner : A.S. Jaiswal, for the Respondents

JUDGMENT

Anoop V. Mohta, J. :

The petitioner has challenged the order dt. 21st Oct., 1993 passed by the CIT, Vidarbha Region, Nagpur, whereby the interest under s. 139(8) of the IT Act (for short ‘Act’) and penalties under s. 271(1)(a) for the asst. yrs. 1985-86 to 1989-90 have been retained though prayed for waiving the same. Therefore, the petition.

2. The petitioner is a housewife and earning through the private tuitions. She voluntarily submitted the returns of income-tax for the asst. yrs. 1985-86 to 1989-90 on 25th Oct., 1989. The returns were submitted in good faith. There was no prior notice under s. 139(2) or 148 or 142(1) of the Act received by the petitioner. On the date of submission of her returns, she disclosed full and true income. She was unable to file the returns earlier as she was not aware of the provisions of the Act. Anyhow, voluntarily and in good faith she submitted the returns. She rendered co-operation to the IT Department during assessment proceedings. She paid the requisite tax also. The returns were duly accepted by respondent No. 2 under s.143(1) of the Act.

The petitioner submitted the returns in response to the general representation by the Dy. CIT, Akola that Department would be waiving interest and penalty of those who have not filed returns though have assessable income. As averred, this assurance was given in the meeting held by Tax Bar Association, Akola. The petitioner, therefore, requested for waiver of interest and penalties, however, the same was rejected. The petitioner, therefore, moved respondent No. 1 an application under s. 273A of the Act. After hearing, an order dt. 21st Oct., 1993 was passed. The said order is final and conclusive under s. 273A(5) of the Act.

The relevant section of the Act, i.e. s. 273A is reproduced as under : “273A. Power to reduce or waive penalty, etc., in certain cases—(1) Notwithstanding anything contained in this Act, the Chief CIT or CIT 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 cl. (i) of sub-s. (1) of s. 271 for failure, without reasonable cause, to furnish the return of total income which he was required to furnish under sub-s. (1) of s. 139; or (ii) reduce or waive the amount of penalty imposed or imposable on a person under cl. (iii) of subs. (1) of s. 271; or (iii) reduce or waive the amount of interest paid or payable under sub-s. (8) of s. 139 or s. 215 or s. 217 or the penalty imposed or imposable under s. 273, if he is satisfied that such person— (a) in the case referred to in cl. (i), has, prior to the issue of a notice to him under sub-s. (2) of s. 139, voluntarily and in good faith made full and true disclosure of his income; (b) in the case referred to in cl. (ii), has prior to the detection by the AO, 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 cl. (iii), has, prior to the issue of a notice to him under sub-s. (2) of s. 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 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 cls. (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 1 : 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 cl. (c) of sub-s. (1) of s. 271. Explanation 2 : (Inserted by TLA Act, 1984, w.e.f. 1st Oct., 1984 and omitted by Finance Act, 1985 w.e.f. 24th May, 1985).”

5. The Division Bench of Bombay High Court in Laxman vs. CIT (1989) 75 CTR (Bom) 76 : (1988) 174 ITR 465 (Bom) has explained the scheme and purpose of the section in following words :

“12. On behalf of the respondent, it was contended that the power under s. 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 CIT to entertain the application and to proceed to exercise the discretion within the limits specified by law.”

6. The same view was taken in case of Cheldas Khushaldas Patel & Ors. vs. CIT (1992) 103 CTR (Guj) 1 : (1992)196 ITR 200 (Guj).

7. The Bombay High Court in Anand B. Apte L/H of Late Smt. Kamalaben B. Apte vs. CIT (2004) 188 CTR (Bom) 416 : (2004) 270 ITR 581 (Bom) further observed that s. 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 s. 273A of the Act cannot be rejected on the ground that there was no voluntary disclosure, and as such order of CIT was quashed and set aside and the matter was remanded to decide the application on merit.

8. In Shrikrishna S. Bhagwat vs. S.N. Soni, CIT (2004) 188 CTR (Bom) 396 : (2004) 270 ITR 186 (Bom), this Court while considering ss. 139(8), 217 and 273(1)(b) and specially s. 273A has observed as under : “Dissection of the above provisions would spell out the condition precedent for exercise of discretion to waive the penalty or interest under s. 273A of the Act, which can be cataloged as under : (a) voluntary disclosure of income before issuance of notice under s. 139(2); (b) making of full and true disclosure of the income in good faith; (c) co- operation in the conduct of income-tax assessment proceedings; (d) payment or satisfactory arrangement for payment of tax or interest payable in consequence of an order passed with respect to the relevant assessment year.

The Division Bench of this Court in the case of Laxman vs. CIT (1989) 75 CTR (Bom) 76 : (1988) 174 ITR 465 (Bom) had also an occasion to deal with the interpretation of s. 273A of the Act, wherein the Division Bench observed that the most important facet of s. 273A 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 though ‘good faith’ is not defined under the Act, considering the definition given under s. 2(22) of the General Clauses Act it 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.” And thereby in that matter also the order of the CIT was quashed and the matter was remanded back to decide application under s. 273A of the Act by a reasoned order as expeditiously as possible. It is necessary for the CIT to take into consideration all the material available on the record [Sangram Singh Mehta vs. ITO (2006) 200 CTR (Raj) 93 : (2008) 296 ITR 483 (Raj)]. In Sukhdev Hargopal Puri vs. Union of India & Ors. (2006) 200 CTR (Bom) 340 : (2005) 279 ITR 591 (Bom), this Court has considered the power of CIT to grant waiver as a one time measure can grant relief with regard to any number of assessment years based upon the s. 273A(3) of the Act.

In the present case, there is no dispute that the return was filed before any demand notice was issued by the Department. The returns were admittedly filed late but considering the scheme of s. 273A as explained and as all the ingredients are available, the concerned respondent ought to have considered the case in view of the scheme and purpose of s. 273A as observed above. In our view, all those ingredients are available in favour of the petitioner. There is amendment to s. 273A of the Act w.e.f. 1st April, 1989. The said new sub-section, however, is applicable to asst. yr. 1989-90 onwards. The case of the petitioner, therefore, is in no way affected by the said amendment as returns pertain to years 1985-86 to 1988-89.

The Supreme Court judgment, as cited by the leaned counsel appearing for the respondent, in Addl. CIT vs. I.M. Patel & Co. (1992) 105 CTR (SC) 1951 : (1992) 196 ITR 297 (SC) deals with s. 271(1)(a) of the Act which provides that reasonable cause for delay in filing the return needs to be explained by the assessee. That was not the case of filing of return voluntarily and in good faith. In that case, the assessee was unable to explain the delay in filing the return. The facts and circumstances, therefore, are quite distinct and distinguishable. The second judgment as cited by the respondent is CIT vs. Abdul Hamid Shah Mohamed (1982) 27 CTR (Bom) 201 : (1983) 141 ITR 413 (Bom). In that case also s. 139 r/w s. 271 were involved. However, liberty was granted to the assessee to file application under s. 273A for appropriate relief. Therefore, this case is also of no assistance to the petitioner in view of the issue as raised in the present case, dealing with principally the scheme and object of s. 273A of the Act.

The non obstante clause of s. 273A makes the provision single out of lot. The power/discretion so provided to the CIT to waive/reduce penalty and interest needs to be exercised judiciously, fairly, reasonably, objectively and not arbitrarily. The CIT, essentially after applying his mind to facts and circumstances of the case needs to pass speaking and reasoned order after taking into consideration the scheme and object of the s. 273A including the elements like voluntary act of filing return in good faith, full and true disclosure of income, payment of the tax, and co-operation. Once the case is made out for waiver/reduction, the CIT needs to exercise the powers in favour of the assessee.

The reason given by respondent to reject petitioner’s application is insufficient and there is failure to consider all the elements to exercise the power and discretion as contemplated under scheme of the s. 273A. The late filing of return by itself cannot be the only reason to reject the application in case of return filed voluntarily and in good faith like present one, as those were filed even prior to the notice or any such demand. Taking all these into account, we quash and set aside the order of the CIT passed in case No. 410004/273A/14D/1990-91 dt. 21st Oct., 1993. The application filed by the petitioner be reconsidered, in view of above, on merit, expeditiously. The petition is allowed with no order as to costs.

[Citation : 325 ITR 268]