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TMI Blog1995 (7) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... under sections 139(8) and 217 of the Income-tax Act, 1961, and levied penalty under section 273(b) of the Act. The petitioners filed an application on January 11, 1979, under section 273A(1) of the Act of 1961 for waiving or reducing the penalty levied under sections 271(a) and 273(b) and for interest charged under section 139(8) and under section 217 of the Act. So far as levy of penalty under section 271(1)(a) is concerned, the Commissioner found that the requisite conditions laid down in section 273A(1) were fulfilled and, therefore, penalties levied under section 271(1)(a) for all the three assessment years including assessment years 1974-75 and 1975-76 were reduced to nil. However, while considering the prayer for waiver or reduction of interest charged under sections 139(8) and 217 of the Act and waiver of penalty under section 273(b), the prayer was declined on the ground that though the assessee had made full and true disclosure of the income before issuing to him a notice under section 139(2) and/or under section 148 of the Act, the assessee had not paid tax on income disclosed in its return in accordance with the provisions of section 140A, he cannot be said to have fulfi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of which the penalty is imposed or imposable for the relevant assessment year, or, where such disclosure relates to more than one assessment year, the aggregate amount of such income for those years, exceeds a sum of five hundred thousand rupees, no order reducing or waiving the penalty under sub-section (1) shall be made by the Commissioner except with the previous approval of the Board. (3) Where an order has been made under sub-section (1) in favour of any person, whether such order relates to one or more assessment years, he shall not be entitled to any relief under this section in relation to any other assessment year at any time after the making of such order. (4) Without prejudice to the powers conferred on him by any other provision of this Act, the Commissioner may, on an application made in this behalf by an assessee, and after recording his reasons for so doing, reduce or waive the amount of any penalty payable by the assessee under this Act or stay or compound any proceeding for the recovery of any such amount, if he is satisfied that-- (i) to do otherwise would cause genuine hardship to the assessee, having regard to the circumstances of the case ; and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the return is due up to the date of filing of the return. In case no return is filed interest is chargeable up to the date of completion of assessment under section 144, that is to say, up to best judgment assessment. Interest in either case is to be calculated on the actual amount of tax determined and to be adjusted by advance tax paid if any. It further authorises the Income-tax Officer himself to reduce or waive the interest payable under that section under circumstances specified in the rules. Rule 117A prescribes such circumstances in which the Assessing Officer himself can reduce or waive the interest. While sub-rules (i), (ii), (iii) prescribe the class of persons in whose case of late filing of return interest payable can be waived or reduced, sub-rule (iv) prescribes for such benefit in case a return has been furnished in pursuance of notice under section 148 and sub-rule (v) provides for such reduction or waiver in case the assessee shows sufficient cause on account of which he was prevented from filing the return in time. Vis-a-vis the above provision, section 273A(1)(iii) is an additional provision conferring benefit on the assessee concerning reduction or waiver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 140A or otherwise. Likewise under section 217 an assessee incurs liability to pay interest on the assessed tax in case the assessee fails to submit an estimate of his income in terms of section 209A. The interest payable up to the regular assessment is also to be adjusted in case any tax has been paid under section 140A or otherwise as per the provisions of section 215(2) of the Act. Under sub-section (4) of section 215 read with rule 40 which has also been made applicable in the case of levy of interest under section 217, the Assessing Officer has been empowered to reduce or waive the interest payable under section 215 or section 217 in the circumstances enumerated in rule 40, viz., (1) Where the assessment has been completed more than one year after the submission of the return and for such delay, the assessee is not responsible, (2) where a person is under section 163 the agent of another person, or (3) where the assessee has income from an unregistered firm assessed under section 183(b) or where the assessee has made large profits after 15th March (if the assessee's previous year is the financial year) in unforeseeable circumstances. Apart from the assessing auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 273 as well, though not in respect of interest. This we notice for the reason that power under section 273A(1) is subject to the same conditions regarding interest payable under sections 139(8), 215 and 217 and penalty under section 273, under clause (iii) and (c) of sub-section (1) of section 273A. Reduction or waiver of amount of penalty under section 273, while under sub-section (1) is subject to voluntarily full and true disclosure of income and payment of tax on such disclosed income, the same is not subject to such conditions for the exercise of such power of reduction or waiver or stay under sub-section (4) of that section. We may also notice another two conditions for the exercise of the power under section 273A(1) : firstly in all cases in which power is sought to be exercised, whether under clause (a), (b) or (c) of sub-section (1), the assessee must have co-operated in any enquiry relating to the assessment of his income and, secondly, he must have either paid or made satisfactory arrangement for the payment of tax or interest payable in consequence of an order passed under the Act in respect of the relevant assessment year. All in all, the object of these provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 SC 459, the Supreme Court was considering the provisions of the Bombay Tenancy and Agricultural Lands (Amendment) Act, 1956, which provided for extinguishment or modification of rights in estates. Vis-a-vis article 31A the contention was raised that protection under article 31A(1)(a) was extended only to extinguishment or modification of rights through the mechanism of compulsory acquisition of those rights. Repelling the contention, Bhagwati J., speaking for the Constitution Bench, said (at page 470) : " Acceptance of the interpretation which is sought to be put upon these words by the petitioners would involve the addition of words ' in the process of the acquisition by the State of any estate or of any rights therein ' or ' in the process of such acquisition ', which according to the well-known canons of construction cannot be done. If the language of the enactment is clear and unambiguous it would not be legitimate for the courts to add any words thereto and evolve therefrom some sense which may be said to carry out the supposed intentions of the Legislature. The intention of the Legislature is to be gathered only from the words used by it and no such liberties can be taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds which are not there, and in the absence of clear necessity it is a wrong thing to do." and the principle enunciated by Lord Loreborn L. C. in Vickers Sons and Maxim Ltd. v. Evans [1910] AC 444, 445 (HL), that (see page 1615 of AIR 1981 SC) : " We are not entitled to read words into an Act of Parliament unless clear reason for it is to be found within the four corners of the Act itself. " The court was considering construction of expression in section 8(3)(b) of the Central Sales Tax Act " for use .... in the manufacture .... of goods for sale ". Whether it meant the goods manufactured by a registered dealer must be intended for sale by himself or it also included where goods are manufactured by a registered dealer under a job contract and are intended for sale by such third party. Applying the above test the court held (at page 1615) : " Now, here we find that the expression used by the Legislature as also the rule-making authority is simpliciter 'for use .... in the manufacture .... of goods for sale ' without any addition of words indicating that the sale must be by any particular individual.... The court must construe the language of section 8(3)(b) according to its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income. Thirdly, when assessment orders have been made, the person must have either paid the tax or interest in consequence of such order or must have made satisfactory arrangements for payment of such tax or interest. This actual payment of assessed tax and interest is an alternative to making satisfactory arrangements for such payment and is not a sine qua non for exercise of the powers. However, clause (c) when it says that such person must have paid the tax on income so disclosed means that in cases falling in clause (iii), actual payment of the amount of tax on the admitted income is a sine qua non for the exercise of the beneficial power in favour of the assessee for reducing or waiving the amount of interest payable under section 139(8), 215 or 217 and penalty under section 273. But for this condition in clause (c), the actual payment of tax on the admitted income would also have been subject to the same alternatives of being either paid or being subject to satisfactory arrangements for making such payments. Therefore, it cannot be said that if the meaning suggested by learned counsel for the Revenue is not accepted, the words will become meaningless or otiose. On the oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue, on the other hand, will lead to putting limitations and restrictions on the operation of the provision other than those expressly provided therein. It was also contended that while cases falling under clauses (a) and (b) are not subjected to the condition of payment as in clause (c), the condition should be given special sanctity by construing it as a condition precedent before concluding paragraph of section 273A(1) becomes operative. It was argued that if not under section 140A, but at least payment must be made by the person concerned before the stage is reached for co-operating in the enquiry, that is to say, before notice of proceedings is issued. We are unable to agree. Firstly, we do not find any indication to read such two stages in the process of exercise of the power relating to reduction or waiver of certain consequences following from breach of certain provision of the Act. So far as levy of penalties for late filing of the return or for concealment is concerned, the levy itself is always in the discretion of the assessing authority and is penal in nature. The levy and quantum are not determinate before the assessment and in the very nature of things its pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has waived penalty levied under section 271(1)(a) for the late filing of the return. Obviously, the decision has proceeded on the footing that tax required to be paid in terms of section 273A(1)(c) is to be paid prior to issue of notice under section 139(2) or section 148. The case does not deal with the question with which we are concerned, viz., whether the tax is to be paid in terms of section 140A of the Act, in order to fall within the scope of section 273A(1)(c). Moreover, with great respect, we are unable to persuade ourselves to the conclusion reached in that case. No date on which disclosure of income was made appears from the report. We presume that it must have been made before the issuance of notice under section 139(2) or section 148, because the Commissioner of Income-tax has waived penalty under section 271(1)(a). A disclosure of income prior to the issuance of notice under section 139(2) or section 148 is also a condition precedent for reduction or waiver of penalty under section 271(1)(a). Such condition being common for exercise of the power under section 273A(1)(a) or (c), it cannot but be held that such condition was fulfilled for both clauses. If that be so, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the technical clerical mistake when in fact all conditions of clause (c) were complied with. In A. C. Gopinatha Menon's case [1988] 173 ITR 404 (Ker), the assessee has filed a return on November 23, 1978. The court held that disclosure in the instant case was made through the medium of a return. So in this case, no question of issuing a notice under section 139(2) or section 148 of the Act can arise. Yet, the view of the Commissioner of Income-tax that the assessee failed to pay the tax on the income so disclosed prior to the issue of notice under section 139(2) or section 148 (in this case, along with the return) was endorsed as justified in law. No discussion for endorsing the view we find in report. Once it is held that there was no occasion for breach of the condition of making a disclosure before issuance of notice under section 139(2) or section 148 stood satisfied, now the conclusion that tax is to be paid along with the return is reached to satisfy the test of paying tax before issuance of notice, assuming it to be so. The expression in the section nowhere suggests that prior to the issuance of notice means along with the return. As we have noticed, even under section 140 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed before the court, the common features were that the petitioners had applied to the Commissioner under section 273A of the Income-tax Act for waiver or reduction of penalty and interest which had become payable because of late filing of the returns and late payment of tax. Regarding penalty for late filing of the returns, the Commissioner of Income-tax was satisfied that all the conditions for waiver have been satisfied, penalties for late filing were waived. However, while considering the question regarding relief in the matter of interest he held that as the tax due was not paid prior to the making of disclosure interest did not deserve to be waived. The court held as under (at page 235) : " The question which arises for consideration is whether the two common conditions which are applicable to all the three clauses, viz., (a), (b) and (c), can be said to have been satisfied in respect of both the claims, viz., the claim of waiver of penalty and the claim of waiver of interest. The two conditions are that : (i) the assessee should have co-operated in any enquiry relating to the assessment of his income ; and (ii) the assessee should have paid or made satisfactory arrangements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g which is not already there and the introduction of which will lead to imposing a restriction upon the rights of this class of tenants by judicial interpretation." The principle aptly governs the present case. Clearly section 273A is a piece of beneficial legislation for the benefit of the assessees, who have defaulted but are co-operative. By reading into the provision the condition of payment of tax on disclosed income as per section 140A which is not there in the provision we will be restricting the scope of operation of the provision by judicial interpretation, a situation which, in our opinion, is clearly ruled out by well-established canons of construction, viewed from any angle. We, therefore, hold that on a plain reading of the provisions of clause (c) of section 273A(1), which is unambiguous in its terms, it cannot be said that payment of tax on the income disclosed is required to be made within the time prescribed under section 140A or before the commencement of enquiry in assessment. Such payments, if made at any time before the Commissioner is to consider the reduction or waiver of amount of interest payable under section 139(8), 215 or 217 or penalty under section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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