1995 (3) TMI 70 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Commissioner of Income-tax's order rejecting the petitioner's application for waiver of penalty under section 273A(1) of the Income-tax Act, 1961, was valid.
2. Whether the principles of natural justice were violated by not providing the petitioner an opportunity of being heard.
3. Whether the power exercised by the Commissioner under section 273A is quasi-judicial, requiring adherence to principles of natural justice.

Detailed Analysis:

1. Validity of the Commissioner's Order:
The petitioner challenged the order of the Commissioner of Income-tax, which rejected his application for waiver of penalty under section 273A(1) of the Income-tax Act, 1961. The Commissioner cited three reasons for the rejection:
- The revised return was filed beyond the permissible period.
- The revised return was motivated by a search.
- The petitioner did not fulfill the conditions of full and true disclosure of income.

The court found that the first reason was inconsequential in the context of section 273A(1). The second reason lacked details about the search, such as when and where it was conducted and its relevance to the petitioner. The third reason was also unsubstantiated, as the income declared in the revised return was accepted without any additions. The court concluded that the order was not a reasoned or speaking order, lacking the necessary reasoning and material disclosure.

2. Violation of Natural Justice:
The petitioner argued that the order was violative of the principles of natural justice as no opportunity of being heard was granted. The court agreed, emphasizing that the Commissioner should have provided the petitioner an opportunity to explain why the disclosure should not be treated as motivated by the search. The absence of such an opportunity rendered the order vitiated.

3. Quasi-Judicial Nature of the Commissioner's Power:
The court examined whether the power exercised by the Commissioner under section 273A is quasi-judicial. It referred to several judgments, including:
- A. K. Kraipak v. Union of India, which highlighted that the dividing line between administrative and quasi-judicial power is thin.
- Siemens Engineering and Manufacturing Co. of India Ltd. v. Union of India, which established that quasi-judicial orders must be reasoned.
- C. B. Gautam v. Union of India, which read the requirement of a reasonable opportunity of being heard into statutory provisions.

The court concluded that the power under section 273A is quasi-judicial, requiring the Commissioner to act fairly, record reasons, and adhere to principles of natural justice, including granting a reasonable opportunity of being heard. However, an oral hearing is not always necessary; a fair opportunity to present the case suffices.

Conclusion:
The court quashed the Commissioner's order dated January 12, 1993, and remitted the matter back for fresh consideration, emphasizing the need to adhere to principles of natural justice. The petitioner was allowed to request a personal hearing, which the Commissioner should consider appropriately. The parties were directed to bear their own costs.