1992 (1) TMI 72 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Commissioner was justified in rejecting the applications for waiver of penalty and interest for the assessment years 1976-77 and 1977-78.
2. Whether the Commissioner was justified in rejecting the prayer for waiver of interest levied under section 139(8) and section 215 for the assessment year 1978-79.

Detailed Analysis:

Issue 1: Rejection of Applications for Waiver of Penalty and Interest for the Assessment Years 1976-77 and 1977-78

The primary issue was whether the Commissioner was justified in rejecting the applications for waiver of penalty and interest for the assessment years 1976-77 and 1977-78 on the grounds that the returns filed beyond the period of two years could not be treated as returns in the eye of law. The Commissioner held that since the assessments were made after issuing notices under section 148, the necessary conditions for waiver of penalty and interest laid down in section 273A were not fulfilled.

Legal Provisions and Interpretation:

- Section 273A(1) of the Income-tax Act, 1961: This section empowers the Commissioner to reduce or waive the amount of penalty imposed or imposable on a person under section 271(1)(i) for failure to furnish the return of total income under section 139(1), or to reduce or waive the amount of interest paid or payable under section 139(8) or section 215 or section 217 or the penalty imposed or imposable under section 273.
- Disclosure Requirement: The provision requires that the person seeking reduction or waiver must have, prior to the issue of notice under section 139(2) or section 148, voluntarily and in good faith made full and true disclosure of his income and paid the tax on the income so disclosed.

Court's Analysis:

- The court found that the Commissioner was wrong in not treating the returns of income filed by the petitioners for the assessment years 1976-77 and 1977-78 as a disclosure.
- The court held that the provision does not require the filing of a valid return for making disclosure. It emphasized that disclosure could be made by various means, including a return filed beyond the period prescribed for making assessments.
- The court referenced the decision of the Allahabad High Court in Dhan Raj v. CIT [1983] 140 ITR 652, which supported the view that a full and true disclosure of income can be made by means other than a valid return.

Conclusion:

The court concluded that the Commissioner ought to have given relief to the petitioners for the assessment years 1976-77 and 1977-78, as the returns filed, though beyond the prescribed period, did disclose the petitioners' total income.

Issue 2: Rejection of Waiver of Interest for the Assessment Year 1978-79

The second issue was whether the Commissioner was justified in rejecting the prayer for waiver of interest levied under section 139(8) and section 215 for the assessment year 1978-79 for the two partners, Chandulal Cheldas Patel and Mahendrakumar Chandulal Patel.

Commissioner's Decision:

- For the assessment year 1978-79, the Commissioner had waived the penalty but refused to waive the interest under section 139(8) and section 215 for the two partners.
- The Commissioner had held that the firm had paid advance tax more than the tax demanded and the return had been filed voluntarily, thus waiving the penalty and interest for the firm for the assessment year 1978-79.

Court's Analysis:

- The court found no reason or justification for not waiving the interest under section 139(8) and section 215 for the assessment year 1978-79 for the two partners.
- The court noted that the partner, Cheldas Khushaldas Patel, in whose case no order under section 273A had been passed, was entitled to the same treatment as the firm and the other two partners.

Conclusion:

The court directed the Commissioner to waive the interest under section 139(8) and section 215 for the assessment year 1978-79 for the two partners, Chandulal Cheldas Patel and Mahendrakumar Chandulal Patel. Additionally, the court directed that penalty and interest for the partner, Cheldas Khushaldas Patel, for the assessment years 1976-77 to 1979-80 should also be waived.

Final Judgment:

The court allowed the petitions and directed the Commissioner to waive penalty and interest for the assessment years 1976-77 and 1977-78 in the case of the firm and the partners. The Commissioner was further directed to waive interest under section 139(8) and section 215 for the assessment year 1978-79 in the case of the partners, Chandulal Cheldas Patel and Mahendrakumar Chandulal Patel. The partner, Cheldas Khushaldas Patel, was also entitled to a waiver of penalty and interest for the assessment years 1976-77 to 1979-80. The rule was made absolute in each of these petitions with no order as to costs.