R. DEEPAKCHANDRA AND COMPANY VS COMMISSIONER OF INCOME-TAX & AND ANOTHER
1992 P T D 1446
[Gujarat High Court (India)]
[195 I T R 45]
Before M.B. Shah mid .VH. Bhairavia, JJ
R. DEEPAKCHANDRA AND COMPANY
versus
COMMISSIONER OF INCOME-TAX & and another
Special Civil Application No.2121 of 1985, decided on /01/.
th
January, 1992. Income-tax--
----Penalty---Waiver of penalty---Application for waiver---Application cannot be rejected without assigning reasons for it.
Where an authority makes an order in exercise of a quasi-judicial function, it must record its reasons in support of the order it makes. The rule requiring reasons to be given in support of an order is, like the principle of audi alteram parterm, a basic principle of natural justice which must inform every quasi-judicial process and this rule must be observed in its proper spirit and a mere pretence of compliance with it would not satisfy the requirement of law. Section 273-A (4) of the Income Tax Act, 1961, enables the Chief Commissioner or Commissioner, if the conditions mentioned therein are satisfied, to reduce or waive the amount of any penalty payable by the assessee under the Act and it also empowers him to stay or compound any proceeding for recovery of any such amount.
For passing the appropriate order, the authority is required to consider.- (a) the facts and circumstances of the case; (b) whether, by not granting the relief as provided in the subsection, it is likely to cause genuine hardship to the assessee; and (c) whether the assessee has cooperated in the inquiry.
The section further requires that he should record his reasons for passing such order. This clearly shows that the Commissioner has to arrive at the conclusion on objective criteria laid down by the section. His decision would be quasi-judicial. Therefore, the reasoned order upon a finding of fact in controversy and application of law to the facts found is obligatory. It ensures that the -decision is reached according to law and is not arbitrary.
Held, that the order passed by the Commissioner of income-tax rejecting the petitioner's application without assigning reasons required to be quashed. He had to decide the petitioner's application afresh in accordance with law.
Rasiklal Ranchhodbhai Patel v. CWT (1980)121 I T R 219 (Guj.) fol.
K.H. Kaji for the Assessee.
M.J Thakore instructed by Messrs R.P. Bhatt & co- for the Commissioner.
JUDGMENT
M. B. SHAH, J:--The petitioner has challenged the order dated May 6, 1983, passed by the Commissioner of Income-tax Surat, rejecting his application under section 273-A(4) of the Income Tax Act, 1961, by merely stating that `the penalty under section 271(1)(c) of the Act for the assessment year 1980-81 cannot be reduced or waived' and also the complaint filed against the petitioner under sections 276-C and 277 of the Income Tax Act, 1961.
It is the case of the petitioner that for the assessment year 1980-81, the income Tax Officer, Circle II, Ward-E, Surat, passed an order, dated March, 30, 1982, under section 143(3) of the Income Tax Act. As per the said order, the assessee has posted a credit entry of Rs.36,000 on Kartik Sud 3 of S.Y. 2035 in the name of R.T. Shah & Co. without there being any ledger account for the said party. In the order, it is mentioned that there is no such R.T. Shah & Co. Therefore, a show-cause notice was issued under section 143(2) of the Income Tax Act. The partner of the petitioner-firm could not explain the introduction of the amount of Rs.36,000 and he admitted that it was a bona fide mistake. He also agreed that the said amount be added in the total income as income from undisclosed sources. Thereafter, Rs.36,000 were added as income and the assessment order was passed. Further, a show-cause notice was, issued under sections 271(1)(c) and 273(2)(c) of the Income Tax Act.
In reply to the show-cause notice, the assessee, vide his letter dated April 20, 1982, stated that there was an accounting mistake, which may be condoned or otherwise a minimum penalty may be imposed. The Income Tax officer rejected the explanation and arrived at the conclusion that the assessee has committed a default punishable under section 273(2)(c). Further, by an order dated September 13, 1982, a penalty of Rs.20,620 is levied on the ground that the assessee has failed to submit a return of the accrued income or has? concealed the particulars of his income or has furnished inaccurate particulars of income within the meaning of section 271(1)(c) of the Income Tax Act, 1961, and thereby has committed an offence punishable under the said section.
Against that order, the petitioner filed an application dated September 19, 1982, before respondent No. 1 (Commissioner of Income Tax) wherein it was contended that it was a bona fide accounting mistake of omission of posting the settled transaction in the ledger.. The said mistake remained unexplained and, therefore, addition was agreed to by the assessee; there was no wilful concealment of income or malaride intention. The petitioner also submitted that he had shown full cooperation by paying the challan of Rs.6,825 and also by paying the penalty ordered. Lastly, it was prayed that the firm is sufficiently and pecuniarily penalised with the added tax and the interest thereon plus penalty. For the unexplained accounting mistake of omission of posting in the ledger one transaction, the firm and the partners have suffered severe financial punishment. Therefore, it was prayed that the penalty imposed under section 271(1)(c) of the Act be waived as it was a case of only a first mistake. As stated above, that application was rejected by respondent No.1 without recording any reasons.
At the time of hearing of the matter, leaned counsel for the petitioner vehemently submitted that the order, dated May 6, 1983, passed by respondent No. l is on the face of it, illegal and against the principle of natural justice as no reasons are assigned for rejecting the application filed by the petitioner and as respondent No. l was acting as a quasi-judicial Tribunal while deciding the petitioner's application under section 273-A(4) of the Income Tax Act. He further submitted, that the impugned order passed by the Commissioner of Income-tax be set aside and, in view of section 279(1-A) of the Act, the assessee is not required to be proceeded against for an offence under section 276-C or section 277. Therefore, till the Commissioner of Income-tax passes an appropriate order on the application, which is filed by the petitioner for waiver of penalty, the respondents be directed not to proceed with the complaint filed against the petitioner.
For deciding these contentions, it would be necessary to refer to the relevant part of section 273-A (4). It reads as under:--
"273-A (4) Without prejudice to the powers conferred on him by any other provision of this Act, the Chief Commissioner or 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
(ii) the assessee has cooperated in any inquiry relating to the assessment or any proceeding for the recovery of any amount due from him."
The aforesaid section enables the Chief Commissioner or Commissioner, if the conditions mentioned therein are satisfied, to reduce or waive the amount of any penalty payable by the assessee under the Act and it also empowers him to stay or compound any proceeding for recovery of any such amount.
For passing an appropriate order, the authority is required to consider--
(a) the facts and circumstances of the case;
(b) whether, by not granting the relief as provided in the subsection, it is likely to cause genuine hardship to the assessee; and
(c) whether the assessee has cooperated in the inquiry.
The section further requires that he should record his reasons for passing such order. This clearly shows that the Commission has to arrive at the conclusion on objective criteria laid down by the section. His decision would be quasi-judicial. Therefore, the reasoned order upon a finding of fact in controversy and the application of law to the facts found is obligatory. 1t ensures that the decision is reached according to law and is not arbitrary.
Therefore, in each case, he has to verify the circumstances and also: arrive at the conclusion whether any genuine hardship would be caused to the assessee by not reducing or waiving the amount of penalty or by not compounding any proceeding for the recovery of any such amount.
While dealing with the pari materia provision under section 18(2-A) of the Wealth Tax Act in the case of Rasiklal Ranchhodbhai Patel v. CWT (1980) 121 I T R 219, the Division Bench of this Court quashed and set aside a similar type of non-speaking order and held that it is now settled law that where an authority makes an order in exercise of a quasi-judicial function, it must record its reasons in support of the order it makes. The rule requiring reasons to be given in support of an order is, like the principle of audi alteram partem, a basic principle of natural justice which must inform every quasi-judicial process and this rule must be observed in its proper spirit and mere pretence of compliance with it would not satisfy the requirement of law.
In view of the aforesaid facts and law, the order passed by the Commissioner of Income-tax rejecting the petitioner's application without assigning reasons requires to be quashed and set aside and he is also required to be directed to decide the petitioner's application afresh in accordance with law.
Considering the aforesaid law and the facts, as we set aside the order passed by the Commissioner of Income-tax rejecting the petitioner's application, till the petitioner's application is decided, the respondents arc directed not to proceed further with the complaint filed against the petitioner for an offence punishable under section 276-C or section 277 in relation to the assessment for the assessment year 1980-81 for which penalty has been imposed.
In the result, the special civil application is allowed. The order, dated May 6, 1983 (Annexure `C'), passed by the Commissioner of Income-tax, Surat, is quashed and set aside. The Commissioner of Income-tax will decide the petitioner's application under section 273-A(4) on merits and dispose of it in accordance with law. Till that application is decided, the respondents are directed not to proceed with the criminal complaint filed against the petitioner. Rule made absolute accordingly with no order as to costs.
M.BA./1630/T???????????????????????????????????????????????????????????????????????????????????? Order accordingly.