1979 (4) TMI 9 - HC - Income Tax

Summary

Issues Involved:
1. Exercise of discretion under Section 271(4A) and Section 273A of the Income-tax Act, 1961.
2. Voluntariness and good faith in filing the income tax return.
3. Full and true disclosure of income.
4. Co-operation in the assessment inquiry.
5. Payment or arrangement for payment of tax and interest.
6. Jurisdiction of the Commissioner under Section 273A.

Detailed Analysis:

1. Exercise of Discretion under Section 271(4A) and Section 273A:
The primary legal question was whether the Commissioner of Income-tax properly exercised his discretion under Section 271(4A) of the Income-tax Act, 1961. Section 271(4A) was deleted with effect from October 1, 1975, and the power to reduce or waive penalties was conferred upon the Commissioner by Section 273A. The court noted that Section 273A(1) allows the Commissioner to reduce or waive penalties if certain conditions are met, emphasizing that this power is independent and complementary to other statutory provisions for appeals and references. The Commissioner must exercise this discretion judiciously and fairly, not arbitrarily.

2. Voluntariness and Good Faith in Filing the Return:
The court examined whether the assessee filed the return voluntarily and in good faith, as required by Section 273A(1)(a). The Commissioner had dismissed the application on the grounds that the return was not filed voluntarily and in good faith, but after considerable delay. The court, however, emphasized that the mere fact that the return was filed late does not automatically negate voluntariness and good faith. The assessee's awareness of the law and previous compliance history were also noted.

3. Full and True Disclosure of Income:
The court discussed the requirement for full and true disclosure of income. The Commissioner had argued that the assessee did not make a full and true disclosure. However, the court pointed out that the Explanation to Section 273A(1) deems an assessee to have made full and true disclosure if the excess of income assessed over the income returned does not attract the provisions of Section 271(1)(c) for concealment or furnishing inaccurate particulars. Since there were no proceedings under Section 271(1)(c) against the assessee, it was deemed to have made a full and true disclosure.

4. Co-operation in the Assessment Inquiry:
The court noted that one of the conditions for relief under Section 273A(1) is that the assessee must have co-operated in any inquiry relating to the assessment of income. The Commissioner had not specifically addressed this point, and the court directed that this should be considered afresh.

5. Payment or Arrangement for Payment of Tax and Interest:
The court highlighted that the assessee must have paid or made satisfactory arrangements for the payment of any tax or interest payable for the relevant assessment year. This condition was met by the assessee, as it had paid the imposed tax.

6. Jurisdiction of the Commissioner under Section 273A:
The court addressed the jurisdictional issue raised by the department's counsel, who argued that Section 273A, effective from October 1, 1975, should not apply to the case. The court, however, noted that the Commissioner had passed the impugned order under Section 273A without raising any jurisdictional objections. Consequently, it was not open to the Commissioner to raise this objection at this stage in the writ petition.

Conclusion:
The court quashed the impugned order of the Commissioner, holding that he did not apply his mind and exercise the statutory discretion vested in him properly. The court directed the Commissioner to reconsider the application afresh in accordance with the law and the observations made in the judgment. The writ petition was allowed without any order as to costs.