2009 (3) TMI 528 - HC - Income Tax

Waiver of penalty - section 273A - penalty levied u/s 271(1)(c) of the Act for concealment of income - Order of the CIT u/s 273A not appealable - The petitioner filed an application under section 273A of the Act before the Commissioner of Income-tax for waiver of the penalty but by the impugned order dated September 17, 2002, the Commissioner of Income- tax rejected the application after holding that the returns of income of the petitioner have been upwardly revised by the assessee only after survey and special audit and, hence, the revised return filed by the petitioner can- not be said to be voluntary and in good faith and since the requirement of section 273A of the Act for waiver of penalty have not been met the application was liable to be rejected. - Held that - The order passed by the Commissioner, therefore suffers from non-application of mind and a grave error. - Since there was no appeal available under the Act against the impugned order passed by the Commissioner of Income-tax under section 273A of the, order of CIT quashed

Summary

Issues:
Challenge to order rejecting waiver of penalty under section 273A of the Income-tax Act, 1961.

Analysis:

Issue 1: Application for Waiver of Penalty
The petitioner, a partnership firm trading in sanitary goods, filed a writ petition challenging the Commissioner of Income-tax's order rejecting the application for waiver of penalty under section 273A of the Income-tax Act, 1961. The petitioner had revised returns after a survey, leading to penalty proceedings and imposition of a penalty. The Commissioner rejected the waiver application, deeming the revised returns not voluntary and in good faith. The petitioner contended that the revision was not solely due to the survey and special audit, as assumed by the Commissioner. The petitioner argued that relevant facts were overlooked, citing judicial precedents where similar orders were quashed due to lack of judicial discretion or reasoning by the tax authorities.

Issue 2: Legal Precedents and Discretion
The petitioner relied on legal precedents, including decisions from the Karnataka and Madras High Courts, to support the argument that the Commissioner failed to consider relevant facts and exercise judicial discretion. The petitioner emphasized the need for a fresh consideration of the application under section 273A of the Act, pointing out errors in the Commissioner's reasoning. On the other hand, the respondent-Department highlighted the availability of an appeal as an alternative remedy, citing a Calcutta High Court case where the petitioner was directed to pursue appeal routes instead of a writ petition.

Issue 3: Statutory Remedies and Non-Application of Mind
The High Court, comprising Judges A. K. Patnaik and A. M. Sapre, analyzed the statutory remedies available to the petitioner, including the option to apply under section 273A of the Act. The Court noted that the rejection of the application solely based on the timing of revised returns post-survey was legally unjustified. The judgment highlighted the petitioner's compliance with statutory procedures and the Commissioner's failure to consider the specific circumstances of the case. The Court found the Commissioner's order lacking in application of mind and containing a significant error.

Conclusion:
Given the absence of an appeal route against the Commissioner's order under section 273A of the Act, the High Court quashed the impugned order and remanded the matter for fresh consideration. The Court directed the Commissioner of Income-tax to reevaluate the petitioner's application in accordance with the law, emphasizing the need for a proper assessment of the voluntary and good faith disclosure made by the petitioner.