2008 (8) TMI 525 - HC - Income Tax

Penalty- Interest- The assessee received rental income from property and voluntarily filed the returns of income for the assessment years. The assessee filed a petition for the waiver of penalty u/s 273A and interest. Revenue reject the claim. Held that- since the assessee had complied with all other elements as required merely because the interest was not paid thus the rejection of application solely for failure to pay interest was not correct.

Summary

Issues:
Jurisdiction under section 273A of the Income-tax Act for waiver of interest under sections 139(8) and 217 for income-tax assessment years 1983-84 to 1985-86.

Analysis:
The petitioner, a co-owner, sought waiver of interest charged under sections 139(8) and 217 of the Income-tax Act for the years 1983-84 to 1985-86. The petitioner voluntarily filed income-tax returns before receiving any notice under section 139(2) or 148 of the Act. Despite making full tax payments, interest was not paid pending the waiver application. The respondent rejected the petitioner's application on May 24, 2001. The court referred to previous judgments emphasizing the discretionary nature of section 273A and the importance of judicious exercise of discretion by public authorities. The court highlighted the need for full and true voluntary disclosure for waiver applications, even through belated returns.

The court noted that the rejection of the petitioner's application solely based on non-payment of interest, despite fulfilling other requirements, was incorrect. It was emphasized that the Department failed to prove the service of notices under section 139 for the relevant assessment years. The burden to show proper notice service lay with the Department, which it failed to discharge. The court concluded that there was no evidence of proper notice service before the petitioner's voluntary disclosure of income.

Considering the above factors, the court quashed and set aside the impugned order dated May 24, 2001, for the assessment years 1983-84 to 1985-86. The respondents were directed to reconsider the petitioner's application after providing a full opportunity of hearing and in compliance with the law. The matter was remanded accordingly, and the petition was allowed with no order as to costs.