2011 (3) TMI 1392 - HC - Income Tax

Waiver of interest and penalty - Powers under section 273A of the Act - held that - Though it is true that powers under section 273A of the Act are discretionary powers, it is equally true that powers conferred under a statute are required to be exercised in consonance with the provisions of the said statute. In the present case, as discussed hereinabove, the Commissioner instead of recording satisfaction or otherwise in respect of the grounds prescribed under section 273A of the Act, has rejected the petition on irrelevant grounds - application made by the petitioner under section 273A of the Act shall stand restored to the file of the Commissioner who shall decided the same afresh in accordance with law keeping in mind the provisions of section 273A of the Act

Summary

Issues:
Challenge to order rejecting application for waiver of interest and penalty under section 273A of the Income Tax Act, 1961.

Analysis:
1. The petitioner challenged the order rejecting the application for waiver of interest and penalty under section 273A of the Income Tax Act, 1961. The petitioner had fulfilled conditions for total waiver, including voluntary disclosure of income and cooperation in assessment. The Commissioner rejected the application after eight years, citing unreasonable reasons for not filing the return on time and already paid penalties and interest. The petitioner argued that the Commissioner failed to consider relevant factors under section 273A and relied on a previous court decision for support.

2. The respondent contended that the Commissioner's powers under section 273A are discretionary, and the court should not interfere with that discretion. Section 273A empowers the Commissioner to reduce or waive penalties or interest under specific circumstances. The provision requires satisfaction that the assessee made full disclosure of income, cooperated in assessment, and paid taxes or interest. The respondent argued that the court should not substitute its opinion for the Commissioner's discretionary powers.

3. The court analyzed the provisions of section 273A, emphasizing that waiver applies when there is a failure to furnish the return of total income without reasonable cause. The court clarified that the Commissioner should be satisfied that the assessee made full disclosure of income, cooperated in assessment, and paid taxes or interest. The court noted that the Commissioner's rejection was based on irrelevant grounds, such as lack of reasonable cause for late filing and already paid penalties, which should have favored the petitioner under section 273A.

4. The court concluded that the Commissioner's rejection was flawed as it did not consider the relevant factors under section 273A. The court highlighted that discretionary powers must align with statutory provisions. The impugned order was quashed, and the application was restored to the Commissioner for a fresh decision within three months, emphasizing timely resolution due to the matter's prolonged pendency. The court ruled in favor of the petitioner, emphasizing the importance of applying the law correctly and promptly in such cases.