SANGAM PLASTIC CENTRE VS P.K. TIWARY, COMMISSIONER OF INCOME-TAX
1999 P T D 1423
[226 I T R 260]
[Gujarat high Court (India)]
Before R. K. Abichandani and Rajesh Balia, JJ
SANGAM PLASTIC CENTRE
Versus
P.K. TIWARY, COMMISSIONER OF INCOME-TAX
Special Civil Application No.5809 of 1996, decided on 24/01/1997.
Income-tax---
----Penalty---Interest---Delay in filing returns---Commissioner---Waiver of penalty and interest---Conditions precedent---Other conditions satisfied-- Amount demanded need not be paid---Sufficient if satisfactory arrangements have been made for its payment---Commissioner to determine whether satisfactory arrangements made---Indian Income Tax Act, 1961, Ss. 139, 215, 271(1)(a) & 273-A.
Section 273-A of the Income Tax Act, 1961, gives the Commissioner of Income-tax discretion to waive interest under section 139(8) and section 215 and levy of penalty for late filing of returns under section 271(1)(a). The power under section 273-A is discretionary, but discretion has to be exercised judiciously and the vesting of this power is also coupled with the duty of exercise it when the conditions for exercise of such power are shown to be existing. The three conditions which are required to be satisfied before power under section 273-A can be exercised, are that firstly, the assessee must have filed the returns voluntarily and without issuance of any notice under section 139(2) or section 148 of the Act and must have made full and true disclosure of his income. The second condition is that he must have cooperated in the investigation of the proceedings under the Income-tax Act and the third condition is that either the assessee must have paid the demand or must have made satisfactory arrangements for its payment. So far as the third condition is concerned, it is to be noticed that the assessee must have either made the payment, or made satisfactory arrangements for the payment of any tax or interest payable in consequence of the order passed under this Act in respect of the relevant assessment year. This clearly goes to show that payment of the demands in respect of which waiver is sought, is not a sine qua non and the assessee is entitled to claim the benefit of the provisions even if it has made satisfactory arrangements for its payment. The satisfaction about the satisfactory arrangements for payment has to be determined by the Commissioner. This, necessarily, requires application of mind as to what arrangements the assessee ought to have made or can make which would satisfy this
requirement. The fact that the assessee has moved an application before the Income-tax Officer which has not been disposed of or that an interim order passed in that respect has expired without extension, does not detract from the fact that before disposing of the application, the Commissioner has to apply his mind and give an opportunity to the assessee to make arrangements for its payment to his satisfaction:
Held, that it had been found in the order itself that the assessee had filed returns of income voluntarily, and without issue of any notice under section 139(2) or 148. It was also found that the assessee cooperated in the finalisation of the proceedings under the Income-tax Act. The only reason for rejection of the application for waiver of penalty and interest was that the amount due on account of the penalties and interest had not been paid by the assessee and the assessee had obtained a stay order which operated up to February 25, 1990. The application for waiver was moved on March 26, 1987. In spite of repeated requests by the assessee, no attempt was made by the Commissioner to dispose of the application under section 273-A and it was kept pending and it was only in January 1996, that the authority dismissed it. Admittedly, the application had not been dealt with in a reasonable manner. The order of rejection was not valid and was liable to be quashed.
[Commissioner directed to consider the application afresh.]
S.N. Soparkar and Dhiresh T. Shah for Applicant. Manish R. Bhatt for Respondent No. 1.
JUDGMENT
RAJESH BALIA, J.---Rule. Service of rule is waived by learned counsel for the respondent. Heard learned counsel for the parties.
The petition is directed against the order, dated January 19, 1996, passed by the Commissioner of Income-tax, Gujarat, under section 273-A of the Income Tax Act, 1961, rejecting the petitioner's application for waiver of interest under section 139(8) and section 215 and levy of penalty for late filing of returns under section 271(1)(a) in respect of the assessment years 1979-80 to 1983-84 for various sums on each count detailed in the order.
It has been found in the order itself that the assesee had filed returns of income voluntarily, and without issue of any notice under section 139(2) or 148 of the Act. It is also found that the assessee cooperated in the finalisation of the proceedings under the Income-tax Act. The only reason given in the order for rejecting it was that the amount due on account of the penalties and interest have not been paid by the assessee and stay was operating only up to February 25, 1990. According to the Commissioner, the pleadings of the assessee about making satisfactory arrangements for the payment of interest cannot be accepted because such satisfactory arrangements would require not just moving a stay petition, but more than that, that is taking an instalment facility and abiding by it and/or furnishing security to cover the demand, which has not been done in this case. It was also observed that in any case after moving the stay petition for the last 6e' years the assessee has not displayed absolutely any cooperation in the matter of payment of interest.
It is well-settled that though power under section 273-A is discretionary, the discretion has to be exercised judiciously and the vesting of this power is also coupled with the duty to exercise it when the conditions for the exercise of such power are shown to be existing. The three conditions which are required to be seen before power under section 273-A can be exercised are that firstly the assessee must have tiled the returns voluntarily and without issuance of any notice under section 139(2) or section 148 of the Act and must have made full and true disclosure of his income. The second condition is that he must have cooperated in the investigation of the proceedings under the Income-tax Act and the third condition is that either the assessee must have paid the demand or must have made satisfactory arrangements for its payment. Admittedly, the first two conditions have been satisfied. So far as the third condition is concerned it is to be noticed that the assessee must have either made payment or made satisfactory arrangements for the payment of any tax or interest payable in consequence of the order passed under this Act in respect of the relevant assessment year. This clearly goes to show that payment of the demands in respect of which waiver is sought is not a sine qua non and the assessee is entitled to claim the benefit of the provisions even if it has made satisfactory arrangements for its payment. Whether the assessee has made payment or not has to be determined by the Commissioner himself, that is to say, the satisfaction about the satisfactory arrangements of payment has to be determined by the Commissioner with reference to whether in his opinion any satisfactory arrangements have been made or not. This necessarily requires application of mind as to what arrangements the assessee ought to have made or can make to his satisfaction which would satisfy this requirement. The fact that the assessee has moved an application before the Income-tax Officer which has not been disposed of or an interim order passed in that respect has expired without extension does not detract from the fact that before disposition of the application, the Commissioner has to apply his mind and give an opportunity to the assessee to make arrangements for its payment to his satisfaction. In the present case, apparently, this has not been done and the only ground which weighed with the Commissioner is that the assessee has not made any payment or has secured extension of the interim order after its expiry of February, 1990. In this connection, it may also be noticed that the application for waiver was moved on March 26, 1987. Before moving the application under section 273-A, the assessee had already moved the Income tax Officer on February 19, 1987, for grant of stay of recovery of the sums due. Once that application for stay has been made it was for the appropriate authority to have decided that application and it was not within the domain of the assessee to secure any particular order on that. It has also come on the record that in pursuance of that application, a written order was made only on December 18, 1989, informing that a stay order has been granted up to February 25, 1990, but no attempt for recovery of the sum during that period has been made. On the contrary, the assessee had made applications on June 1, 1988, October 6, 1988, and March 30, 1989, before the Commissioner for deciding his application on March 26, 1987. That application was not to be decided until January, 1996. It is apparent that up to February 25, 1990, there was an interim order in favour of the assessee from the recovery of the amounts due during this period and it could not have been said that the assessee could still be required to make payment during that period. In spite of repeated requests by the assessee no attempt was made by the Commissioner to dispose of the application under section 273-A and it was kept pending and it was only in January, 1996, that the authority awakened to dispose of the application and on finding that after February, 1990, there is no interim order in writing hastened to dismiss the application on that ground. If this is permitted it would always be possible for an authority to keep the matter pending during the period when the conditions for exercise of the discretion are satisfied on the face of record and then to take up the matter for hearing only after something happened to warrant its rejection. It is neither the spirit nor the object of the provisions. Admittedly, the application has not been dealt with in a reasonable manner to warrant its sustenance.
The petition is accordingly allowed. The impugned order is quashed and the Commissioner is directed to decide the application afresh in accordance with law within a period of two weeks after giving an opportunity to the assessee to make satisfactory arrangements for the payment of the sums due to his satisfaction.
Rule made absolute with no order as to costs.
M.B.A./1899/FC Rule made absolute.