2013 (10) TMI 3 - HC - Income Tax

Waiver/ reduction of penalty imposed u/s 273A - poser of commissioner to reduce or waive penalty imposed under sections 271(1)(a) and 273(2(c) - CIT rejected the application Held that - Section 273-A of the Act enacts a non-obstante clause which empowers the Commissioner of Income Tax, whether on his own motion or otherwise, to reduce or waive penalty imposed or imposable. The discretion so conferred has to be exercised within the informed parameters set out in sub-clauses (a), (b), and (c) read along with Explanation I, as prevalent on the date of the application. The non-obstante clause indicates that the power so exercised would take colour from the sub-sections and sub-clauses of Section 273-A of the Act, and from no other provision of the Act. The opening words of Section 273-A of the Act, i.e., Notwithstanding anything contained in this Act... , confine consideration by the Commissioner of Income Tax to factors enumerated in Section 273-A of the Act. An adjudication based on grounds, other than grounds referred to in Section 273-A, would necessarily invite a valid charge that the order is null and void for an illegal exercise of jurisdiction, or a failure to exercise jurisdiction in accordance with statutory parameters set out in Section 273-A of the Act. Assessee had, prior to issuance of notice under sub-section 2 of Section 139 of the Act, voluntary made full disclosure of his income prior to any detection of the concealed income or the inadequacy of the particulars furnished - A perusal of the impugned order reveals that the Commissioner of Income Tax has assumed the role of an Assessing Officer and while dismissing the petition and rejecting the plea for reduction/waiver of the amount of penalty imposed has referred to the very same factors that led the Assessing Officer to impose penalty - Impugned order is set aside and the matter is remitted to the Commissioner of Income Tax, Bhatinda Decided in favor of Assessee.

Summary

Issues:
1. Application of penalty and interest under Sections 139(1), 215, 217, 271(1)(a), and 273(2)(c) of the Income Tax Act, 1961.
2. Rejection of application under Section 273-A of the Act by the Commissioner of Income Tax.
3. Interpretation of Section 273-A of the Act and the powers of the Commissioner in reducing or waiving penalties.
4. Challenge of order under Section 18-B of the Wealth Tax Act, 1957.

Issue 1:
The petitioner, an income tax assessee, was asked to pay interest and penalties for assessment years 1985-86, 1986-87, and 1987-88 under various sections of the Income Tax Act, 1961. The Commissioner of Income Tax rejected the petitioner's application under Section 273-A of the Act, citing reasons such as the petitioner's substantial income, habitual default in filing returns, and delayed payments of government revenue.

Issue 2:
The petitioner argued that the Commissioner, while deciding on applications under Section 273-A, should consider factors specified in the Act and not those typically considered by an Assessing Officer. The Commissioner's rejection was based on grounds that fell within an Assessing Officer's domain rather than those outlined in Section 273-A. The respondent contended that the Commissioner's discretion in dismissing the application was legal and valid, emphasizing that reasons need only be provided if the penalty reduction is accepted.

Issue 3:
Section 273-A of the Act empowers the Commissioner to reduce or waive penalties within specified parameters. The judgment emphasized that the Commissioner's discretion must align with the factors outlined in sub-clauses (a), (b), and (c) of Section 273-A, and any decision must be based solely on the provisions of that section. The judgment highlighted that an order based on factors outside Section 273-A would be deemed invalid for exceeding statutory jurisdiction.

Issue 4:
A separate case challenged an order under Section 18-B of the Wealth Tax Act, similar to Section 273-A of the Income Tax Act. The judgment set aside the order, remitting the matter to the Commissioner of Wealth Tax for a fresh decision in accordance with the law, mirroring the decision made for the Income Tax Act case. The judgment reiterated that the same legal principles applied to both Acts regarding penalty reduction or waiver applications, emphasizing the need for adherence to statutory provisions.