1995 (7) TMI 24 - HC - Income Tax

Summary

Issues Involved:
1. Late filing of returns and associated penalties.
2. Levy of interest under sections 139(8) and 217.
3. Waiver or reduction of penalties and interest under section 273A(1).
4. Interpretation of the timing for payment of tax on disclosed income under section 273A(1)(c).

Detailed Analysis:

1. Late Filing of Returns and Associated Penalties:
The petitioners, engaged in the manufacture and sale of art silk cloth, filed their income tax returns for the assessment years 1973-74, 1974-75, and 1975-76 after the prescribed period under section 139 but before any notice under section 139(2) or section 148 was issued. The Income-tax Officer levied penalties under section 271(1)(a) for late filing. The Commissioner later found that the conditions under section 273A(1) were met and reduced the penalties to nil.

2. Levy of Interest Under Sections 139(8) and 217:
The Income-tax Officer also levied interest under sections 139(8) and 217, and penalties under section 273(b). The petitioners sought waiver or reduction of these penalties and interest under section 273A(1), but the Commissioner declined the request, stating that although the petitioners had made full and true disclosure of income, they had not paid the tax on the disclosed income as required by section 140A.

3. Waiver or Reduction of Penalties and Interest Under Section 273A(1):
The relevant provision, section 273A(1), allows the Commissioner to reduce or waive interest and penalties if certain conditions are met, including full and true disclosure of income and payment of tax on the disclosed income. The petitioners argued that the tax payment requirement should not be strictly tied to section 140A but should be considered fulfilled if the tax was paid before the application under section 273A(1).

4. Interpretation of the Timing for Payment of Tax on Disclosed Income Under Section 273A(1)(c):
The core issue was the interpretation of the timing for the payment of tax on disclosed income under section 273A(1)(c). The court examined whether the tax had to be paid within the timeframe specified in section 140A or if payment before the consideration of the section 273A application was sufficient. The court concluded that the provision does not explicitly require payment within the time prescribed by section 140A. The court emphasized that the statutory language should not be extended by judicial interpretation to include such a requirement. The court held that payment of tax on disclosed income at any time before the Commissioner's consideration of the waiver or reduction application fulfills the condition under section 273A(1)(c).

Conclusion:
The court ruled that the petitioners' payment of tax on disclosed income before the Commissioner's consideration of their application for waiver or reduction of interest and penalties fulfilled the conditions under section 273A(1)(c). The court modified the impugned orders to reduce the interest under section 139(8) by 50% for each assessment year and waived the interest under section 217 and penalties under section 273(b). The court emphasized the beneficial nature of section 273A and the importance of not restricting its operation beyond the expressed boundaries.