Vypin Liquors v. Commissioner of Income Tax — 1997 DIGILAW 233 (KER)

Judgment :- P.A. Mohammed, J. The question involved in this Writ Petition relates to the refusal to waive the interest levied under Ss.139(8) and 217 of the Income tax Act (for short'the act). The material facts which require for the decision of the above point are thus: For the assessment year 1984-1985 petitioner has filed a return on 27.3.1987, though normally it should have been filed on 31.7.1984. There was a delay of 31 months in submitting the return. The first respondent completed the assessment of the petitioner -firm by order dated 24.2.1988. Ext. P1 is a copy of the assessment order as per which income was fixed at Rs. 4,72,750/-. However, by Ext. P3 order Ext. P1 order was rectified and the correct interest pay able under S.139(8) of the Act was determined as Rs. 1,06,395/- as against Rs. 37,086/- demanded originally. The petitioner filed a petition before the Commissioner under S.273A of the Act for waiver of interest levied under Ss.139(8) and 217 for the assessment year 1984-85. That revision petition was dismissed by the Commissioner as per Ext. P5 order dated 1.3.1991. Again the petitioner filed Ext. P6 petition to review the order passed by the Commissioner evidenced by Ext. P5. That petition was rejected by Ext. P7 holding that there was no mistake apparent on the face of the record. Ext. P5 order is mainly challenged in this writ petition. 2. Ext. P5 order has been passed by the Commissioner under S.273A of the Act, which confers power on the Commissioner to reduce or waive the penalty in certain cases. S.273A as it stood at the relevant time, is as follows: "273A. Power to reduce or waive penalty, etc. Ext. P5 order is mainly challenged in this writ petition. 2. Ext. P5 order has been passed by the Commissioner under S.273A of the Act, which confers power on the Commissioner to reduce or waive the penalty in certain cases. S.273A as it stood at the relevant time, is as follows: "273A. Power to reduce or waive penalty, etc. in certain cases - (1) Notwithstanding anything contained in this Act, the Commissioner may, in his discretion, whether on his own motion or otherwise, (i) (ii) (iii) reduce or waive the amount of interest paid or payable under sub-s.(8) of S.139 or S.215 of S.217 or the penalty imposed or imposable under S.273, If he is satisfied that such person - (a) (b) (c) In the cases referred to in clause (iii), has, prior to the issue of a notice to him under sub-s.(2) of S.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 S.148, voluntarily and in good faith made full and true disclosure of his income and has paid the tax on the income so disclosed. and also has, in all the cases referred to in clauses (a), (b) and (c), co-operated in any enquiry relating to the assessment of his income and has either paid or made satisfactory arrangements for the payment of any tax or interest payable in consequence of an order passed under this Act in respect of the relevant assessment year. Explanation I - For the purposes of this sub-section, a person shall be deemed to have made full and true disclosure of his income or of the particulars relating thereto in any case where the excess of income assessed over the income returned is of such a nature as not to attract the provisions of clause (c) of sub-s.(1) of S.271". Counsel for the petitioner places reliance on clause (iii) of sub (1) of S.273A which authorises the Commissioner to reduce or waive the,amount of interest paid or payable under sub-s.(8) of S.139 or S.215 or S.217 or the penalty imposed or imposable under S.273. But, this power will be exercised only when the Commissioner is satisfied that the assessee has voluntarily and in good faith made full and true disclosure of his income and has paid the tax on the income so disclosed. But, this power will be exercised only when the Commissioner is satisfied that the assessee has voluntarily and in good faith made full and true disclosure of his income and has paid the tax on the income so disclosed. This must have been done by the assessee prior to the issue of a notice under sub-s.(2) of S.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 S.148. 3. The case of the assessee is that he had voluntarily and in good faith made full true disclosure of his income prior to the issue of notice to him under S.148 and that he had co-operated with the department in finalising the assessment. However, the Commissioner had refused to waive the interest on the ground that there was an enhancement of income in the assessment and therefore the return had been filed not in good faith making full and true disclosure of income. In this context, it is necessary to examine the impact of the Explanation to sub-s.(i) which says that a person shall be deemed to have made full and true disclosure of his income or of the particulars relating thereto in any case where the excess of income assessed over the income returned is of such a nature as not to attract the provisions of clause (c) of sub- s.(1) of S.271. It could be seen from Ext. P1 order of assessment that an amount of Rs. 18,000/- was added on an estimate basis on the ground that the assessee was not keeping proper bills and vouchers. Thus, in view of this addition the officer could have levied penalty under clause (c) of sub-s.(1) of S.271. But it is pertinent to note that the officer had not levied any penalty as contemplated in clause (c) of sub-s.(1) of S.271 of the Act. That means the excess income assessed over the income returned by the assessee is of such a nature as not to attract the provisions of clause (c) of subs. (1) of S.271. The result is that the assessee shall be deemed to have made full and true disclosure of his income in respect of the year 1984-85. But the Commissioner while passing Ext. (1) of S.271. The result is that the assessee shall be deemed to have made full and true disclosure of his income in respect of the year 1984-85. But the Commissioner while passing Ext. P5 did not examine the applicability of the above Explanation to sub-s.(1) of S.273A in the facts of the present case. This appears to be a serious omission on the part of the Commissioner. 4. Counsel for the petitioner brings to my notice the decision of a Division Bench of the Gujarat High Court in Navnitlal K. Zaveri v. C.I.T. (1980) 125 ITR 385 in support of his contention. The following observation contained in the above decision is relevant in the present context. "As to the correct position under S.273 A, a Division Bench of this High Court has in Smt. KherunnissaAUbhai v. CIT (1978) 133 ITR 443 mentioned that the whole concept of S.273A is that the assessee concerned admits his liability to penalty but relies upon certain mitigating circumstances or certain circumstances specified in the Section for the purpose of getting the penalty or penal interest waived or reduced. It is in the context of mitigating circumstances that the Commissioner has to consider the case under S.273A and has to apply his mind, first, whether the conditions of S.273 A(1), cl.(c) are satisfied or not, and secondly, if they are satisfied whether he would waive the interest or whether he would reduce the amount of interest under S.139(8) and/or S.217. One of the conditions is that the assessee should have made in good faith full and true disclosure of his income. Because of the wide variation between the income disclosed and the income ultimately determined, it cannot be said that, on the facts and circumstances of this case, there is no full and true disclosure of the income by the assessee". 5. On the other hand, standing Counsel for the Income tax Department relies on the decision of the Supreme Court in Smt. Harbans Kaur etc. v. Commr. of Wealth-tax (1997) 138 CTR 211). That was a case where the Commissioner of Wealth-tax indicated his own reasons for resorting to the power of reduction of penalty in preference to the granting of waiver of the full penalty. v. Commr. of Wealth-tax (1997) 138 CTR 211). That was a case where the Commissioner of Wealth-tax indicated his own reasons for resorting to the power of reduction of penalty in preference to the granting of waiver of the full penalty. The conclusion of the court was were the conditions of S.18B are satisfied, the Commissioner of Wealth-tax has discretion either to waive or to reduce the penalty and the Commissioner having indicated his own reasons for resorting to the reduction of penalty in preference to giving full waiver, which reasons cannot be said to be in any manner unjust and unreasonable. Ultimately the Supreme Court refused to interfere on the ground that the reasons indicated in the orders by the Commissioner are in any manner unjust or irrelevant. The position in the present case cannot be said to be similar to the one decided by the Supreme Court and observations contained therein cannot be applied in the present context. 6. I do aware, this court is called upon to exercise the power under Art.226 of the Constitution as against an order passed by the Commissioner in exercise of his discretionary power under S.273A. The order passed by the Commissioner is final and the assessee has no other remedy available to him under the provisions of the Act. The above statutory finality does not affect the jurisdiction of this Court under Art.226 of the Constitution. This power is conferred not to disturb each and every discretionary order passed by an authority empowered to do so under a statute. If there is manifest injustice in exercising the discretionary power by the statutory authority the power of this Court to interfere with such situation shall not be denied under any circumstance. I am convinced that the commissioner has grossly failed to take note of a relevant provision which has crucial bearing on the ultimate decision in this case. This has no doubt resulted in manifest injustice as against the assessee. 7. As observed earlier, this is a case where the Commissioner has failed to take note of Explanation to sub-s.(1) of S.273A as it stood then. The Commissioner has also not taken note of the circumstances that the officer has not levied penalty under clause (c) of sub-s.(1) of S.271. 7. As observed earlier, this is a case where the Commissioner has failed to take note of Explanation to sub-s.(1) of S.273A as it stood then. The Commissioner has also not taken note of the circumstances that the officer has not levied penalty under clause (c) of sub-s.(1) of S.271. In the aforesaid premise, I think this is a fit case to be remanded to the Commissioner for fresh disposal after affording a reasonable opportunity of being heard to the petitioner. Ext. P5 order is therefore, set aside. I direct the Commissioner to consider Ext. P4 petition filed under S.173 of the Act on merits and in accordance with law and in view of the observations made above. The Original Petition is allowed.