2008 (8) TMI 518 - HC - Income Tax

Penalty- Interest- The assessee made a full and true disclosure of his income on March 30, 1992 before the income tax officer for assessment years 1984-85 to 1988-89 before issuance of any notice by the income tax department u/s 139(2) or u/s 148 of the Act, by filing returns for those years. The assessee accordingly paid the full taxes on the income so disclosed. A notice was issued for charging interest and penalty. The assessee filed an application under section 273A for waiver of interest and penalty. The application was rejected. Held that- the order rejecting the application under section 273A was not valid.

Summary

Issues:
Challenge to order retaining interest and penalty under sections 139(8) and 217 of the Income-tax Act, 1961 for assessment years 1984-85 to 1988-89 despite a request for waiver.

Analysis:

The petitioner, as the karta of a Hindu undivided family, made a voluntary and truthful disclosure of income before any notice was issued by the Income-tax Department. The Income-tax Officer accepted the disclosed income without any changes. However, interest under section 139 and penalty under section 217 were imposed for late filing and non-payment of advance tax. The petitioner applied for waiver under section 273A, fulfilling the conditions for waiver as per section 273A(1)(c) of the Act. The Commissioner rejected the claim, stating that the returns were filed after the notice under section 148, deeming them invalid.

The petitioner relied on precedents like B. R. Sound-N-Music v. O.P. Bhardwaj and Appropriate Authority v. Tanvi Trading and Credits P. Ltd. to support their interpretation of section 273A. The Division Bench in Laxman v. CIT emphasized the discretionary nature of the power under section 273A and the duty to exercise it judiciously and objectively. Similar views were echoed in cases like Cheldas Khushaldas Patel v. CIT and Anand B. Apte v. CIT, emphasizing the importance of voluntary and truthful disclosure of income.

In Shrikrishna S. Bhagwat v. S. N. Soni, CIT, the conditions for exercising discretion under section 273A were outlined, emphasizing voluntary disclosure, full and true disclosure in good faith, cooperation in assessment proceedings, and payment of tax or interest. The court reiterated the significance of full and true disclosure according to the honest belief of the assessee.

The judgment highlighted the need for the Commissioner to exercise the waiver power judiciously, fairly, and reasonably, considering all relevant elements like voluntary disclosure, full and true income disclosure, tax payment, and cooperation. The Commissioner's rejection of the petitioner's application was based on a wrong interpretation of provisions, overlooking essential elements. The judgment quashed the Commissioner's order and directed a reconsideration of the application in accordance with the law.

In conclusion, the impugned order retaining interest and penalty was quashed, and the Commissioner was directed to review the application for waiver in light of the correct interpretation of the law.