2004 (2) TMI 7 - HC - Income Tax

Order passed under section 273A - petitioner moved an application under section 273A for waiver of interest and penalty. The said application was rejected by the CIT holding that the income declared on estimate was without any basis and that no proof or details in support thereof was filed. - Commissioner hold that the petitioner s disclosure could not be said to be full and true for all these years and went on to reject the application - Held; that impugned order is quashed and set aside. The petition is allowed and the matter is remanded back to the Commissioner of Income-tax to consider the application for waiver of the amount of penalty on the premise that the petitioner has complied with all the conditions of section 273A(1)

Summary

Issues Involved:
1. Legality of the rejection of the application under section 273A of the Income-tax Act, 1961.
2. Compliance with the requirements of section 273A(1) by the petitioner.
3. Validity of the findings regarding voluntary and good faith disclosure of income.
4. Applicability of the Explanation to section 273A(1).
5. Admissibility of new reasons introduced through an affidavit-in-reply.

Detailed Analysis:

1. Legality of the Rejection of the Application under Section 273A:
The petition challenges the order dated November 3, 1992, passed under section 273A of the Income-tax Act, 1961. The Commissioner of Income-tax rejected the petitioner's application for waiver of interest and penalty, citing that the income declared was without basis and lacked supporting proof. The Commissioner also noted the absence of details regarding sales, purchases, closing stock, household expenses, and foreign tour expenditures, concluding that the disclosure was not full and true.

2. Compliance with the Requirements of Section 273A(1):
The petitioner argued that the requirements of section 273A(1) were fully met, emphasizing that no finding was recorded against her to indicate that the returns were not voluntary and in good faith. The petitioner contended that the only adverse finding was the lack of full and true disclosure, which she argued was unsustainable based on the text of section 273A(1).

3. Validity of the Findings Regarding Voluntary and Good Faith Disclosure of Income:
The Revenue argued that the returns were filed after a search by customs officials, implying that the disclosure was not voluntary or in good faith. However, the court noted that the Commissioner did not record any adverse findings regarding the voluntariness and good faith of the returns in the adjudication order. The court emphasized that new reasons could not be introduced through an affidavit-in-reply, referencing the principle established in Mohinder Singh Gill v. Chief Election Commissioner.

4. Applicability of the Explanation to Section 273A(1):
The court examined the Explanation to section 273A(1), which deems full and true disclosure if the excess income assessed does not attract the provisions of section 271(1)(c). The court noted that the Commissioner of Income-tax (Appeals) had quashed the penalties under section 271(1)(c) for the assessment years 1982-83 and 1983-84, indicating that the petitioner had not concealed income or furnished inaccurate particulars. Consequently, the Explanation to section 273A(1) applied, and the deeming fiction of full and true disclosure came into play.

5. Admissibility of New Reasons Introduced Through an Affidavit-in-Reply:
The court rejected the Revenue's attempt to introduce new reasons through an affidavit-in-reply, reiterating the principle that an order's validity must be judged by the reasons mentioned in the order itself. The court held that the absence of adverse findings regarding voluntariness and good faith in the impugned order implied that the returns were filed voluntarily and in good faith.

Conclusion:
The court quashed and set aside the impugned order, remanding the matter back to the Commissioner of Income-tax to reconsider the application for waiver of the penalty, based on the premise that the petitioner had complied with all the conditions of section 273A(1) of the Act. The petition was allowed, and the rule was made absolute, with no order as to costs.