1984 (11) TMI 15 - HC - Income Tax

Summary

Issues: Challenge to order rejecting waiver of penalty under section 271(4A) for late returns filed for assessment years 1963-64 and 1964-65.

Analysis:
The petitioner challenged the order passed by the Commissioner of Income-tax, Delhi, rejecting the application for waiving the penalty under section 271(4A) of the Income-tax Act, 1961. The impugned order dealt with two applications by the petitioner seeking waiver of penalties for late returns filed for the assessment years 1963-64 and 1964-65. The challenge specifically focused on the return filed on April 8, 1967, for the assessment year 1964-65. The petitioner admitted the late filing of the return and acknowledged the penalty under section 271(1)(a) was leviable. However, the petitioner argued that the return was filed voluntarily and in good faith before receiving notice under sub-section (2) of section 139 of the Act, making full disclosure of income. The Commissioner rejected the application solely on the grounds that the disclosure made by the assessee was not considered a full disclosure of income as required by section 271(4A) of the Act.

The petitioner had also challenged an order of the Appellate Assistant Commissioner, which was subsequently decided by the Income-tax Appellate Tribunal. The Tribunal's order highlighted the application of the proviso to section 145, indicating that although the accounts were correct and complete, the method employed did not allow proper deduction of income. The Tribunal directed a specific sales estimate, emphasizing that the accounts were correct and complete, meeting the requirement for full disclosure. The Commissioner's finding that full disclosure was lacking and thus not warranting a penalty waiver was deemed incorrect and set aside.

Additionally, the Commissioner cited additional reasons in a counter-affidavit for rejecting the petitioner's application, including the late filing of returns and the inability to reduce or waive the penalty at that stage due to pending appeals. These reasons were found to be contradictory to the sole reason stated in the impugned order. The court held that the return was filed voluntarily, and as per the Tribunal's findings, the accounts were correct and complete, meeting the criteria for full disclosure. Consequently, the impugned order was quashed, and the matter was remanded to the Commissioner for a decision on the application related to the year 1964-65 in accordance with the law. No costs were awarded in the circumstances.