9911796707
TMI Blog1993 (5) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... the net profit at eight per cent. The petitioner also prayed for leave to pay the tax in six equal monthly instalments or in such other manner as may be settled. The firm also filed an application before the Commissioner for waiver of interest and penalty for the assessment years in question. According to the petitioner, the settlement petition had been filed after discussions were held between the partners of the firm and the Commissioner. It is also said that the partners of the firm were assured by the Commissioner that if a true disclosure were made and the petitioners fully co-operated with the Department and also made satisfactory arrangements for payment of tax for the assessment years in question, interest and penalty would be waived and no prosecution would be launched. It is the petitioner's case that the settlement petition was filed pursuant to such assurance. The Commissioner accepted the firm's settlement petition but suggested that it should offer ten per cent. of the gross receipts for taxation. It is stated by the petitioners that the Commissioner again assured the petitioners that interest and penalty would be waived and no prosecution would be launched. By ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der refusing to waive penalty and interest in view of the decision of the Board, the petitioner filed this writ application challenging the refusal of the Board to grant waiver of penalty. An interim order was passed on March 3, 1987, allowing penalty proceedings and other proceedings in respect of the assessment years in question to continue but injuncting the respondents from passing any final order until the orders of the court. On April 30, 1987, the interim order was varied by allowing the respondent authorities to pass final orders but restraining them from communicating or acting on the same. The respondents have raised several preliminary issues, which, according to the respondents, warrant the dismissal of the writ petition in limine. The first point raised is that the copy of the petition which was served did not contain the verification. The submission is untenable. The original writ petition has been duly verified. The action of not supplying a completed copy of the petition containing the verification clause shows a lack of efficiency on the part of the advocate for the petitioners, but this could not make a writ petition itself not maintainable. No prejudice has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent compliance with rule 20. The next point raised by the respondents is that there was an alternative remedy available to the petitioner and that they could have preferred an appeal from the orders imposing penalty and interest passed by the Income-tax Officer. Reliance on the decision of the Supreme Court in Union of India v. Cottage Arts Emporium, AIR 1992 SC 2218 ; [1991] SCW 492 is inapposite. In that case, there was a search and seizure. The petitioners had sought for and obtained return of the articles seized by virtue of an interim order passed during the pendency of the writ application. The interim order was challenged before the Supreme Court. In the meanwhile, on the basis of the seizures made, final assessment orders were passed. In that view of the matter, the Supreme Court held that the writ application had become infructuous and that the remedy lay in preferring appeals from the orders of assessment. In the case before me the petitioners have not challenged the orders imposing penalty or interest. Having admitted their liability to pay both, they have sought for waiver. The subject-matter of challenge is the decision of the Board in refusing to grant approval to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich he was required to furnish under sub-section (1) of section 139 ; (ii) reduce or waive the amount of penalty imposed or imposable on a person under clause (iii) of sub-section (1) of section 271 ; or (iii) reduce or waive the amount of interest paid or payable under sub-section (8) of section 139 or section 215 or section 217 or the penalty imposed or imposable under section 273, if he is satisfied that such person- (a) in the case referred to in clause (i), has, prior to the issue of a notice to him under sub-section (2) of section 139, voluntarily and in good faith made full and true disclosure of his income; (b) in the case referred to in clause (ii), has, prior to the detection by the Income-tax Officer, of the concealment of particulars of income or of the inaccuracy of particulars furnished in respect of such income, voluntarily and in good faith, made full and true disclosure of such particulars ; (c) in the cases referred to in clause (iii), has, prior to the issue of a notice to him under sub-section (2) of section 139, or where no such notice has been issued and the period for the issue of such notice has expired, prior to the issue of notice to him under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay 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 (ii) the assessee has co-operated in any enquiry relating to the assessment or any proceeding for the recovery of any amount due from him. (5) Every order made under this section shall be final and shall not be called into question by any court or any other authority. " Therefore, the pre-conditions for waiver of penalty under section 271(1)(i) and penalty and interest under sections 273 and 139(8), 215, 217 are : (a) The disclosure should be made prior to the issue of a notice under section 139(2) of the Act. (b) The disclosure must be voluntary. (c) The disclosure must be in good faith. (d) The disclosure must be a full disclosure. (e) The disclosure must be a true one. (f) The assessee must have co-operated in any enquiry relating to the assessment. (g) The assessee must have either paid or made satisfactory arrangements for the payment of tax or interest payable in consequence of an order passed under the Act. The pre-conditions for waiver of pena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons could be considered. The court is handicapped in considering which of the pre-conditions, according to the Board, had not been fulfilled by the firm. No copy of the Board's decision has been annexed to its affidavit. On April 27, 1993, the court passed an order directing the respondents to produce the following documents : 1. The recommendation of the Commissioner for the Board's approval relating to the waiver of penalty. 2. The order of the Board rejecting the Commissioner's recommendation for waiving the penalty. 3. The order of the Board rejecting the petitioner's application for review. The documents were required to be produced by May 4, 1993. On May 4, 1993, the matter could not be heard by this court. It was taken up for hearing on May 10, 1993, and was heard on that date as well as on the next day. However, the documents directed to be produced were not produced by the respondents. The respondents handed over a letter written by Mrs. Pratima Das, Income-tax Officer, Ward-3(2), Calcutta, to the learned advocate for the respondents stating that the requisite papers were "not readily available". The court then questioned the Income-tax Officer who stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the onus was on the firm to prove that it had complied with all the pre-conditions for grant of waiver of penalty and interest under section 273A. It is contended that the petitioner had failed to discharge this onus. The respondents have relied upon Sint. Kherunissa Allibhai v. CIT [1978] 113 ITR 443 (Guj) and Jyoti Steels v. CIT [1987] 166 ITR 558 (All). Reliance on the decision of Kherunissa Allibhai's case [1978] 113 ITR 443 (Guj) by the respondents is misplaced. In that case, the assessee had applied for waiver of penalty and at the same time preferred an appeal against the order of penalty. The Commissioner had rejected the application for waiver on the ground that the assessee had preferred an appeal. The Gujarat High Court held that the Commissioner had proceeded incorrectly and that merely because an assessee had challenged the order of penalty it did not mean that the assessee could not show that he was entitled to relief under section 273A. In the decision of Jyoti Steel's case [1987] 166 ITR 558, the Allahabad High Court held that the discretion of the Commissioner in either waiving or merely reducing the penalty or interest under section 273A would not be in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the pre-conditions for waiver had been fulfilled, at least to the Commissioner's satisfaction. The Board, on the other hand, has not disclosed its reasons for disagreeing with the Commissioner's stand. At the hearing, although no one has said so on affidavit, the respondents have argued that the undisclosed income of the firm had been detected when the search and seizure took place at the company's office and the residence of the directors. According to the respondents, they have also said that the firm had not made the disclosure voluntarily prior to the detection and that the detection had taken place when the search and seizure was made in 1981. The disclosure had been made in 1985. It is further stated that a disclosure in order to come within the phrase (prior to detection), would have to be made within 15 days of the search and seizure. The respondents have relied upon a circular issued by the Department in this context. In Mool Chand's case [1978] 115 ITR 1 (All), it has been said : "The word 'detection' has not been defined in the Act. It does not, therefore, have a rigid meaning. When a word is not defined in an Act itself, it is permissible to refer to the dicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rior to the assessments and that this was not a factor which weighed with him in recommending the firm's case for waiver. I have already stated that, in this case, the Commissioner was satisfied that all the pre-conditions were met and, therefore, the matter was referred to the Board for its approval. This is also clear from paragraph 6 of the affidavit of the Board. The respondents have also said that the petitioners had not co-operated with the Income-tax Department. This submission again is contradicted by the affidavit of the Commissioner in which he categorically affirmed that the petitioner had co-operated with the Department. Also the non-co-operation alleged is that the petitioners had filed this writ application. This submission is misconceived. The co-operation required under section 273A is in the matter of the assessment. It must precede the assessment order. The facts relating to the co-operation must be established before the Commissioner can even consider the waiver of the proposed penalty or interest. Any subsequent action on the part of the assessee cannot be material. Finally this ground has not been stated in the affidavit of the Board as being the reason for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner of Income-tax, it cannot be construed as conferring absolute discretion upon the Commissioner of Income-tax to pass any order which he pleases to make. The Commissioner is required to consider the application on merits and if the conditions for the exercise of the powers are made out, he is obliged to exercise the discretion in favour of such an assessee. It is not permissible that the Commissioner of Income-tax may reject an application under section 273A although the grounds for granting the relief have been made out. Whether he would reduce or waive the amount of penalty imposed or imposable is of course a matter of discretion but that too will have to be exercised keeping in view the facts of the case, and not arbitrarily. The power has to be exercised only in conformity with the provisions of the section and the Act." In Mool Chand's case [1978] 115 ITR 1, the Allahabad High Court found that cogent and sufficient reason had been given by the Commissioner for rejecting the application for waiver. In my view, the limitations placed on the exercise of power of the Commissioner under section 273A are equally applicable to the exercise of power by the Board. That is to say ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the principles of law. In this case no clear grounds have been disclosed by the respondent Board for the exercise of its discretion against the firm. The court can only hold that there was no reason for the Board to have acted nor the manner it did. The action was therefore unreasonable. Furthermore, the decision having been passed in violation of the principles of natural justice cannot be sustained. It was then argued by the respondents that the Commissioner, in spite of having himself proposed waiver of penalty to the Board, could take a different view on the merits. In my opinion, the reference to the Board being required to be made after the Commissioner is satisfied as to the merits, it would not be open to the Commissioner to change this satisfaction unless there were some new factor which could persuade him to do so. It is nobody's case that there is such a new factor which would justify the Commissioner jettisoning the satisfaction reached by him earlier. Reliance has been placed on the decision in Shree Singhvi Bros. v. Union of India [1991] 187 ITR 219 (Raj) in this connection. In that case, it was held that the Commissioner's assurance that the case of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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