1993 (6) TMI 59 - HC - Income Tax

Summary

Issues Involved:
1. Scope of the power to reduce or waive penalty under Section 273A(1) of the Income-tax Act, 1961.
2. Interpretation of sub-section (3) of Section 273A.
3. Legality of the rejection of the petitioner's application for waiver of penalties.
4. Validity of the rejection of the rectification petition under Section 154 of the Act.

Detailed Analysis:

1. Scope of the Power to Reduce or Waive Penalty under Section 273A(1) of the Income-tax Act, 1961:
The petitioner, an assessee, sought waiver of interest levied for the assessment years 1978-79 to 1981-82 under Sections 139(8) and 217 of the Act. The Commissioner of Income-tax initially waived the interest, finding that the assessee had voluntarily filed returns disclosing true income and paid taxes before the issue of notice. Subsequently, the petitioner sought waiver of penalties under Sections 271(1)(a) and 273(2)(b), which was rejected on the grounds that the Commissioner had already exercised his power under Section 273A(1) and could not pass a second order. The court noted that Section 273A(1) confers wide discretionary power on the Commissioner to reduce or waive penalties and interest, provided the conditions in clauses (a) to (c) are satisfied.

2. Interpretation of Sub-section (3) of Section 273A:
Sub-section (3) of Section 273A states that once an order is made under sub-section (1) in favor of any person, no further relief can be granted for any other assessment year. The petitioner argued that this does not prevent further orders for the same assessment year. The court interpreted that sub-section (3) only bars relief for different assessment years, not for the same year. The court emphasized that the power conferred under Section 273A(1) is distinct for various matters and can be exercised independently.

3. Legality of the Rejection of the Petitioner's Application for Waiver of Penalties:
The petitioner's application for waiver of penalties under Sections 271(1)(a) and 273(2)(b) was rejected by the Commissioner, stating that he had no power to pass a second order under Section 273A(1). The court held that the Commissioner's view was unsustainable in law. The court clarified that the power under Section 273A(1) comprises several distinct powers and exercising one does not exhaust the others. The court concluded that the Commissioner could still exercise his power for waiving penalties even after waiving interest, as they are distinct matters.

4. Validity of the Rejection of the Rectification Petition under Section 154 of the Act:
The petitioner's rectification petition under Section 154 was rejected by the Commissioner, stating there was no apparent error on the record. The court disagreed, finding that the Commissioner had failed to consider the scope of his powers under sub-section (3) of Section 273A. The court held that the rejection of the rectification petition and the subsequent order by the Central Board of Direct Taxes were illegal. The court directed the Commissioner to reconsider the petitioner's application for waiver of penalties on its merits.

Conclusion:
The court allowed the original petition, setting aside the orders rejecting the waiver of penalties and the rectification petition. The Commissioner was directed to consider and dispose of the petitioner's application for waiver of penalties in accordance with law and the court's findings. The judgment emphasized the distinct and independent nature of the powers conferred under Section 273A(1) and clarified the interpretation of sub-section (3) to allow further relief for the same assessment year.