681/CBDT. - Income Tax - 681/CBDT

INSTRUCTION NO. 681/CBDT Dated : April 15, 1974 Section(s) Referred: 271(4A) Statute: Income - Tax Act, 1961 A reference is invited to Board's confidential letters F.No.1/33/68-IT(Inv). dated 29th September, 1969 and F.No.281/42/70-IT (Inv) dated 21st December,1972. In recent times, the Board has received number of reference from various Commissioners seeking certain clarifications about the scope and applicability of section 271(4A) of the Income-tax Act, 1961. The various points raised in these references are dealt with in the following paragraph:- (i) Whether the pendency of appeal before the AAC or the I.T Appellate Tribunal is not a bar for involving the provisions of Section 271 (4A). In Board letter of even number dated the 21st December, 1972, it was stated that the CIT is competent to exercise his power under Section 271 (4A) even after an officer subordinate to him has passed an order imposing or confirming the penalty. A question has arisen whether the pendency of appeal against order imposing penalty before the AAC. or Income Tax Appellate Tribunal is not bar for invoking the provisions of section 271 (4A) to the effect that the assessee should not have filed any appeal against the penalty order. The conditions stipulated under section 271 (4A) are entirely different from these stipulated under Section 271(1) warranting levy of penalty. The C.I.T. can, therefore, interfere under section 271 (4A) even during pendency of appeal. However, if the assessee has filed an appeal against the penalty order, he cannot be forced to withdraw it and then only come to the Commissioner under Section 271(4A). The proper course would be for the Commissioner to entertain an application under section 271(4A) and if he is satisfied that all the conditions of this section are applicable he may inform the assessee that he is prepared to reduce/waive the penalty by a formal order under section 271 (4A) if the appeal is withdrawn. (ii) Can an order under section 271 (3A) be passed even though the penalty levied has been confirmed by the AAC or the Tribunal or where the order has become final because the assessee has not gone in appeal or revision within the prescribed period? The tests laid down under section 271(1)(a) and 271 (1)(c) are different from the tests laid down in section 271 (4A). For instance, under section 271(4A) of the Income Tax Act, 1961, the Commissioner is not to consider whether the assessee was prevented by sufficient cause from filing the return within time. Again, whether a cash credit appearing in the assessee's books is a bonafide loan or concealed income for the purpose of levy of penalty under clause (c) of sub-section (1) of Section 271 is a matter which has to be established by the Income-tax Officer or the I.A.C as the case may be and it is for the appellate authorities to satisfy themselves in appeal whether the conclusion arrived at the authority imposing the penalty is correct. But, if the assessee comes under section 271(4A), these considerations are not relevant. What the Commissioner of Income-tax is to see before considering the applicability of section 271(4A) is whether there has been prior detection by the Income-tax Officer and whether other conditions mentioned in that section are entirely satisfied. The question whether the penalty to be levied should be nil for something below the minimum by invoking section 271(4A) is a matter which is entirely within the discretion of the Commissioner or the Board as the case may be. In view of this, the Commissioner can been confirmed by an appellate authority. (iii) Can the Commissioner interfere under section 271 (4A) where the penalty order has already been confirmed by him or by the Additional Commissioner of Incometax in a revision application under section 264? The reply to this should follow the same lines as in the case of reply to (ii) above, since there is a similarity between the revisional powers of the Commissioner under section 264 and the appellate power of the A.A.C. or the Appellate Tribunal. It would, therefore, follow that the Commissioner or Board can exercise discretion under section 271 (4A) even after the penalty has been confirmed earlier by the Commissioner or by the Additional Commissioner in a revision application preferred by the assessee under section 264. (iv) Can the assessee go in appeal to the AAC or Tribunal on merits even after the Commissioner of Income-tax decline to waive or reduce the penalty under section 271 (4A)? This query has been raised in view of the wording of section 271 (4B). Section 271 (4B) states that an order under sub-section (4A) of Section 271 shall be final and shall not be called in question before any court or any other authority. It has to be noted that the restriction imposed by section 271 (4B) is only in respect of an order passed by the Commissioner under section 271 (4A). Whether it is open to the party to go up in appeal after the Commissioner of Income-tax had declined to interfere under section 271 4(A) is primarily a matter for the assessee themselves to determine and the matter may be left to be decided by the appellate authorities. (v) If the Commissioner of Income-tax has already rejected the petition under section 271(4A) in accordance with the Board's Letter F.No.1-33/68-IT(Inv) dated 29th September, 1969, inviting or accepting another application under Section 271(4A), would amount to reviewing his own orders. Is there any power to the Commissioner of Income-tax for such review? The question that has been raised is whether it would be open to the Commissioner to pass an order under section 271 (4A) after he had rejected an earlier application from the assessee under this section on the ground that he had no jurisdiction to entertain it, a penalty having already been imposed by the Income-tax Officer. The Ministry of Law to whom the matter was referred has advised that the general rule is that there is no inherent right of review unless it is granted specifically by statue. But this does not apply to an order passed without jurisdiction and an authority has a right and duty to recall an invalid order. When the Commissioner of Income-tax had rejected an application on the erroneous understanding of the legal position, he was declining to exercise a jurisdiction vested in him under the law on the erroneous assumption that he was not competent to decide it. This assumption itself was invalid. Consequently, now that the legal position is known, the Commissioner of Income-tax can entertain an application and decide the case on its merits. This would not be a case of review of an original order, for strictly speaking, he had passed no order on the earlier application except to hold that he was not competent to dispose of it. Now that he has realised that he has jurisdiction, it is open to him to decide the application on merits. (vi) In a case where the assessment has been completed, if the assessee comes forward and makes an application under section 271(4A), declaring therein some income which was not shown in the original return, can there be a reduction or waiver? The answer to the question is in the affirmative. So long as the concealment disclosed by the assessee has not been detected by the Income-tax Officer and other conditions stipulated in Section 271(4A) are satisfied, the Commissioner can exercise the discretion under section 271(4A). (vii) Is it not necessary to lay down a time limit for filing an application under section 271(4A) Otherwise will it not become administratively impossible to deal with such applications? The law as it stands at present does not lay down any time limit. It would not be appropriate for the Board to lay down a general rule fixing a time limit when this has not been done by the statute. In civil litigation, the court generally apply the principle of laches. In other words, if a person comes to the court of equity after considerable delay, the court denies him the relief. Then the question will arise as to what extent the delay can be condemned. No hard and fast rule can be laid for this purpose. It would be open to the authority exercising the discretion under section 271(4A) to come to a decision in each individual case taking into account all relevant circumstances including delay, if any on the part of the applicant. 2. These clarifications would mutatis mutandis apply to Section 18(2A) of the Wealth Tax Act 1957, as well.