2003 (10) TMI 37 - HC - Income Tax

Order passed by Commissioner u/s 273A - Delay in filing the returns - ITO initiated penalty proceedings under section 271(1)(a) - The petitioner then moved an application under section 273A before the Commissioner of Income-tax with a prayer that the penalty imposable u/s 271(1)(a) and interest chargeable u/s 139(8) or under any other provision of the Act be waived - Commissioner came to the conclusion that even though the conditions set forth in section 273A stood satisfied yet according to him it was a fit case for reduction rather than waiver of the penalty - grievance of the petitioner is that once the Commissioner was satisfied that the requirements of section 273A(1)(a) were satisfied he should have waived the penalty instead of reducing the same by 50 per cent - impugned order shows that the Commissioner has not recorded any reasons whatsoever and in the absence of any reasons one can only hold that the order passed by him is arbitrary

Summary

Issues:
1. Penalty imposed under section 271(1)(a) of the Income-tax Act for delay in filing returns.
2. Application under section 273A of the Act for waiver or reduction of penalty.
3. Commissioner's discretion in reducing or waiving penalties under section 273A.
4. Judicial review of Commissioner's decision on penalty reduction.

Analysis:
1. The judgment deals with three Civil Writ Petitions concerning penalty proceedings under section 271(1)(a) of the Income-tax Act for delays in filing returns for the assessment years 1980-81 to 1982-83. The petitioner, a partnership firm, filed returns after significant delays ranging from 15 to 42 months despite income exceeding taxable limits, leading to penalty initiation by the Income-tax Officer.

2. The petitioner invoked section 273A of the Act before the Commissioner of Income-tax, seeking waiver of penalties and interest. The Commissioner, after considering the case, decided to reduce the penalty to 50% of the imposable amount for each year, along with a similar reduction in interest. Dissatisfied with the reduction, the petitioner filed writ petitions under article 226 of the Constitution challenging the Commissioner's decision.

3. Section 273A grants the Commissioner discretionary powers to reduce or waive penalties under specific circumstances, such as voluntary and good faith disclosure of income before notice issuance. In this case, the Commissioner found the conditions of section 273A(1)(a) fulfilled but opted for a reduction instead of a complete waiver, leading to the petitioner's contention that once the conditions were met, full waiver should have been granted.

4. The High Court, in its analysis, emphasized that the Commissioner's discretion under section 273A must be exercised judiciously with recorded reasons. The court found the lack of reasoning in the Commissioner's order as arbitrary, highlighting the quasi-judicial nature of the power conferred and the necessity for supported decisions. Citing precedents like Anwar Ali v. CIT and Harjas Rai v. CIT, the court quashed the Commissioner's order, emphasizing the requirement for reasoned decisions in exercising discretionary powers.

In conclusion, the High Court allowed the writ petitions, quashing the impugned orders, and made no ruling on costs in the matter.