2008 (8) TMI 520 - HC - Income Tax

Penalty- The petitioner is a house wife and earning through private tuitions. In response to the general representation by the Deputy Commissioner of Income-tax Akola that the Department would be waiving interest and penalty of those who have not filed returns though having assessable income. As averred this assurance was given in the meeting held by the Tax Bar Association Akola. The petitioner therefore requested for waiver of interest and penalties however the same was rejected. Held that- the late filing of the returns by itself could not be the only reason to reject the application in case of returns filed voluntarily and in good faith like present one as those were filed even prior to the notice or any such demand. The rejection of the application under section 273A was not valid. Thus allow the petition.

Summary

Issues:
Challenge to order retaining interest and penalties under sections 139(8) and 271(1)(a) for assessment years 1985-86 to 1989-90 despite a request for waiver.

Analysis:

Issue 1: Challenge to Retention of Interest and Penalties
The petitioner, a housewife earning through private tuitions, voluntarily submitted income tax returns for the relevant assessment years in good faith without prior notice under sections 139(2), 148, or 142(1) of the Income-tax Act. Despite cooperation during assessment proceedings and payment of requisite tax, the interest and penalties were retained. The petitioner sought waiver based on a general representation by the Deputy Commissioner of Income-tax, Akola, promising waiver for non-filers with assessable income. The rejection of the waiver request led to an application under section 273A of the Act, resulting in the final order dated October 21, 1993.

Issue 2: Interpretation of Section 273A
Section 273A empowers the Chief Commissioner or Commissioner to reduce or waive penalties or interest under specified conditions, including voluntary and good faith disclosure of income before notice issuance, cooperation in assessment proceedings, and payment of due tax. Previous judgments like Laxman v. CIT and Anand B. Apte v. CIT emphasized the importance of full and true disclosure made voluntarily and in good faith, even through belated returns. The court in Shrikrishna S. Bhagwat v. S. N. Soni highlighted conditions for waiving penalties or interest, stressing on voluntary disclosure, good faith, cooperation, and tax payment.

Issue 3: Judicial Review and Discretion
The court emphasized that the discretion under section 273A must be exercised judiciously, fairly, and objectively, considering all relevant elements like voluntary filing, full disclosure, tax payment, and cooperation. Refusal to exercise discretion without proper consideration of these elements warrants judicial intervention. The court, citing Sukhdev Hargopal Puri v. Union of India, clarified that the Commissioner can grant relief for multiple assessment years as a one-time measure under section 273A(3).

Conclusion
The court quashed the Commissioner's order retaining interest and penalties and remanded the application for waiver to be reconsidered on its merits, emphasizing the need for a reasoned decision based on the scheme and purpose of section 273A. The judgment underscores the importance of voluntary disclosure, good faith, and cooperation in income tax matters, requiring the Commissioner to exercise discretion in favor of the assessee when warranted by the circumstances.