1979 (9) TMI 10 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Commissioner of Income-tax was justified in refusing to entertain the application under section 273A of the Income-tax Act for waiving penalties.
2. Whether the conditions for the exercise of discretion under section 273A were satisfied.
3. Interpretation of the term "voluntarily and in good faith made full and true disclosure of income".
4. Whether the excess of assessed income over returned income constituted concealed income or inaccurately furnished particulars.

Detailed Analysis:

1. Justification in Refusing Application under Section 273A:
The petitioner, M/s. Radhey Shyam Chandrika Prasad, challenged the order dated November 17, 1976, by the Commissioner of Income-tax, Kanpur, which refused to entertain its application for waiving penalties under section 273A of the Income-tax Act. The Commissioner based his refusal on the grounds that the petitioner did not meet the condition precedent for the exercise of power under that section. Specifically, the Commissioner noted that the petitioner did not declare its correct income voluntarily and in good faith, as evidenced by the subsequent agreement to a higher income assessment.

2. Conditions for Exercise of Discretion under Section 273A:
Section 273A allows the Commissioner to reduce or waive penalties if certain conditions are met:
- The assessee must have voluntarily made a full and true disclosure of income before any notice under section 139(2) or section 148 of the Act.
- The disclosure must be made in good faith.
- The assessee must have cooperated in any inquiry related to the assessment and paid or made satisfactory arrangements for any tax or interest payable.

The court emphasized that the conditions for waiving penalties under section 273A are not met merely by voluntary filing of returns; the returns must also be made in good faith and be full and true disclosures. In this case, the Commissioner concluded that the petitioner did not meet these conditions due to discrepancies in the disclosed income and the lack of proper accounts.

3. Interpretation of "Voluntarily and in Good Faith Made Full and True Disclosure of Income":
The court referred to a similar provision under section 18(2A) of the Wealth-tax Act, which was interpreted in the case of Hasan Ahmad Khan v. CWT. The court noted that the expression "voluntarily and in good faith made full and true disclosure of income" is a single condition, meaning the assessee must have acted honestly while disclosing income. An act is deemed to be done in good faith if it is done honestly, regardless of negligence. Therefore, if an assessee discloses income honestly believed to be true and full, it is considered a good faith disclosure under section 273A.

4. Excess of Assessed Income Over Returned Income:
The court highlighted that the Explanation to section 273A(1) presumes that disclosure is true and full unless the excess assessed income over returned income represents concealed income or inaccurately furnished particulars. The Commissioner failed to examine whether the excess income assessed constituted concealed income or inaccurately furnished particulars. The court found that the Commissioner did not provide reasons for considering the excess income as concealed or inaccurately furnished.

Conclusion:
The court concluded that the Commissioner did not approach the matter correctly and failed to consider whether the excess assessed income was concealed or inaccurately furnished. The Commissioner also did not assess if the petitioner made a full and true disclosure of income in good faith at any stage before the notice under section 139(2) or section 148 was issued. Consequently, the impugned order was quashed, and the matter was remanded to the Commissioner for a fresh decision in accordance with the law. The petition was allowed without any order as to costs.