High Court Of Bombay
Vasantbhai Jethalal Lathiwala vs. CIT : Nagpur Bench
Section 139(8), 217, 273A
Asst. Year 1984-85 to 1988-89
Anoop V. Mohta & C.L. Pangarkar, JJ.
Writ Petn. No. 311 of 1996
7th August, 2008
Counsel Appeared :
C.J. Thakkar, for the Petitioner : A.S. Jaiswal, for the Respondent
Anoop V. Mohta, J. :
The petitioner has challenged the order dt. 28th Dec., 1995 passed by the CIT, Vidarbha Region, Nagpur, whereby the interest under s. 139(8) and penalty under s. 217 of the IT Act (for short ‘Act’) for the asst. yrs. 1984-85 to 1988-89 have been retained though prayed for waiving the same. Therefore, the present petition.
The petitioner is a Karta of HUF. He voluntarily and in good faith pursuant to the assurance given by the IT Department made a full and true disclosure of his income on 30th March, 1992 before the ITO at Yavatmal for asst. yrs. 1984-85 to 1988-89 before issuance of any notice by the IT Department under s. 139(2) or under s. 148 of the Act, by filing returns for those years. The assessee accordingly paid the full taxes on the income so disclosed.
The respondent issued notice under s. 148 on 31st March, 1992. The petitioner informed about the filing of voluntary returns prior to the date and requested to consider the same accordingly. The ITO, Yavatmal accepted the income so declared and made assessment by intimation order under s. 143(1)(a) of the Act on 22nd June, 1992. The income so declared, therefore, was accepted by the Department without any change or valuation.
The ITO, however, charged the interest for all the years under s. 139 of the Act for late filing of the returns and charged the interest under s. 217 for non-payment of advance tax for those years. The petitioner, therefore, filed an application dt. 12th Aug., 1992 under s. 273A of the Act for waiver of interest and penalty as petitioner fulfills the conditions for waiver as contemplated under s. 273A(1)(c) of the Act.
5. The CIT, however, rejected the said claim by holding that the returns were filed beyond the period and therefore were invalid and further holding that returns were being filed after issue of notice under s. 148 and therefore, rejected the application by order dt. 28th Dec., 1995.
6. The petitioner has relied on the interpretation and scheme and object of s. 273A of the Act, as elaborated in B.R. Sound-N-Music vs. O.P. Bhardwaj & Anr. (1988) 70 CTR (Bom) 43 : (1988) 173 ITR 433 (Bom). The special leave petition filed by the Department against the above judgment of Bombay High Court was dismissed by the Supreme Court in (1991) 191 ITR (St) 306.
7. 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.”
8. The same view was taken in case of Cheldas Khushaldas Patel & Ors. vs. CIT (1992) 103 CTR (Guj) 1 : (1992) 196 ITR 200 (Guj).
9. 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. 273 of the Act cannot be rejected on the ground that there was no voluntarily disclosure, and thereby such order of CIT was quashed and set aside and remanded the matter to decide the application on merit.
10. In Shrikrishna S. Bhagwat vs. S.N. Soni, CIT (2004) 188 CTR (Bom) 396 : (2004) 270 ITR 186 (Bom), while considering ss. 139(8), 217 and 273(1)(b) and specially s. 273A (The Court) 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. 273 of the Act by a reasoned order as expeditiously as possible. 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.
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.
In the present case, we have observed that based upon wrong interpretation of provisions and by overlooking the above elements, the CIT has rejected the application filed by the petitioner. The CIT has relied on the case of Saberaj Industries vs. F.J. Bahadur, CIT (1995) 127 CTR (Bom) 395, in holding that since the returns filed by the assessee on 13th March, 1992 were regularised subsequent to issue of notice under s. 148, the precondition of disclosure of income before issue of notice under s. 273A was not fulfilled and thereby not gone into the merits of matter, but the CIT failed to consider that in that case returns for three years were true and complete out of eight years returns and therefore, the Court refused to interfere with the said order under Art. 226 of the Constitution. The CIT, however, wrongly overlooked the judgment passed in B.R. Sound-N-Music (supra) by this Court against which the Special Leave Petition was dismissed by the Supreme Court. In B.R. Sound-N-Music (supra), it is specifically observed that s. 273A(1)(a) requires a disclosure of full and true income and not the filing of valid returns in time before issue of notice under s. 139(2) or s. 148 of the Act. It is necessary for the CIT to take into consideration all the material available on the record [Sangram Singh Mehta & Ors. vs. ITO & Ors. (2006) 200 CTR (Raj) 93 : (2008) 296 ITR 483 (Raj)].
In view of this, the impugned order dt. 28th Dec., 1995 passed by respondent CIT, Vidarbh Region, Nagpur is quashed and set aside. We further direct to consider the application filed by the petitioner in view of above, in accordance with law, on merit as expeditiously as possible.
Rule is made absolute in terms of prayer cl. (i) with no order as to costs.
[Citation : 325 ITR 41]