NAV NIRMAN (PVT.) LTD VS COMMISSIONER OF INCOME-TAX
1999 P T D 3958
[232 I T R 119]
[Madhya Pradesh High Court (India)]
Before R. S. Garg, J
NAV NIRMAN (PVT.) LTD
Versus
COMMISSIONER OF INCOME-TAX and another
M. P. No. 3002 of 1985, decided on 20/11/1996.
Income-tax---
----Penalty---Reduction or waiver---Return filed declaring loss---Assessing Officer imposing penalty for concealment of income---Commissioner rejecting application of assessee for reduction or waiver of penalty ---Assessee making full and complete disclosure voluntarily and in good faith---No finding given by Commissioner regarding genuine hardship caused to assessee when penalty imposed on a loss return---No recovery proceedings to be initiated when there was a loss return---Observation of Commissioner that assessee. not cooperating in recovery proceedings contrary to record and showed non-application of mind on part of Commissioner---Commissioner taking into consideration irrelevant material---Order of Commissioner liable to be quashed---Indian Income Tax Act, 1961, S.271(4A) [before deletion by T.L. (Amendment) Act, 1975, w.e.f. 1-10-1975], S. 273A(4).
For the assessment year 1971-72; the petitioner filed a return of loss. The Assessing Officer while passing the assessment order on November 29; 1971, issued notice of penalty for concealment of an amount of Rs.16,000. The petitioner filed an application before the Commissioner under section 271(4A) of the Income Tax Act, 1961, for reduction or waiver of the penalty on the ground that it had made full and complete disclosure voluntarily and in good faith but the said application was rejected by the Commissioner. In reply to the notice issued to the petitioner for imposition of penalty, it submitted that there were no mala fides on its part and merely because of default of concealment had been committed, penalty was not required to be imposed unless the petitioner had acted with some ulterior motives. The Income-tax Officer passed an order, dated July 7, 1975, and imposed a penalty of Rs.13,000. The said order became final and after the coming into force of section 273A(4) with effect from October 1, 1975, the petitioner again filed an application on January 14, 1980, and stated therein that the levy of penalty had caused genuine hardship to it but it had fully cooperated in the assessment. The Commissioner, however, by his order, dated March 19, 1985, rejected the application of the petitioner. On a writ petition challenging the order of the Commissioner, the petitioner contended that the order passed by the Commissioner was patently illegal, because he had taken into account extraneous material, that an application under section 273A(4) could be filed on different ground or grounds which were not available for filing an application under section 271(4A), that the observation of the Commissioner that the assessee was not cooperating in the recovery proceedings was wrong, because no recovery proceedings were required when a loss return was filed and that no finding had been given by the Commissioner regarding the genuine hardship which would be caused to an assessee when penalty was imposed on a loss return filed by the assessee:
Held, (i) that the consideration of the rejection of the petitioner's application filed under section 273A(4) showed that the Commissioner had taken into consideration irrelevant material because be was not required to consider the facts regarding full and complete disclosure and good faith while considering the application under section 273A(4),
(ii) That when a loss return was filed, no proceedings for recovery of tax was required to be initiated against the petitioner. The observation made by the Commissioner that the assessee was not cooperating in recovery proceedings was contrary to the record and showed non-application of mind. So far as question of hardship was concerned, except employing the language as provided under section 273A(4), the Commissioner had not given any reason.
(iii) That, therefore, the order of the Commissioner was liable to be quashed. The Commissioner was directed to reconsider the matter to accordance with law after giving an opportunity of hearing to the petitioner.
B.L. Nema and Aditya Sanghi for Petitioner.
Vivak Tankha for Respondents.
JUDGMENT
By this petition under Article 227 of the Constitution of India, the petitioner challenges the legality, correctness and validity of the order, dated March 19, 1985, passed by the Commissioner of Income-tax, Bhopal, in case NV.D/HORS/IT/98 of 1978 for the assessment year 1971-72 on the ground that the learned Commissioner did not exercise his powers in accordance with law nor has considered the legal position for attraction of section 273A(4) of the Act.
According to the petitioner, he had filed the return of loss and while passing the assessment order on November 29, 1971, the Assessing Officer had directed issuance of penalty notice for concealment of the amount of Rs.16,000. Immediately thereafter, the petitioner filed an application under section 271(4A) of the Act on the ground that he had made full and complete disclosure voluntarily and in good faith but the said application happened to be rejected on February 14, 1975, by the Commissioner of :,come-tax, Bhopal. In reply to the notice issued to the petitioner for imposition of the penalty, he submitted by his reply, dated June 25, 1975, that there were no mala fides on his part and merely because default of concealment has been committed penalty is not required to be imposed unless the petitioner had acted with some ulterior motives.
After hearing the petitioner by order, dated July 7, 1975, the Income-tax Officer rejected the plea of the petitioner and directed imposition of penalty of Rs.13,000. The said order became final but after the coming to force of section 273A(4) with effect from October 1, 1975, the petitioner again moved an application on January 14, 1980, stating therein that the levy of the penalty had cause genuine hardship to the assessee and the assessee had fully cooperated in the assessment. The learned Commissioner by his order, dated March 19, 1985, rejected the application of the petitioner.
Shri Nema, learned counsel for the petitioner, submits that the order passed by the Commissioner of Income-tax is patently illegal because he has taken into consideration extraneous material which other wise he could not. According to him, an application under section 273A(4) of the Act, could be filed on different grounds or grounds which were not available for filing an application under section 271(4A). He further submits that the observation made by the Commissioner that the assessee was not cooperative in the recovery proceeding is also bad because of his return of loss, recovery proceedings were not required to be initiated. Regarding the observations that the petitioner would not suffer any genuine hardship, he submits that the learned Commissioner has merely employed the language of the provision of law but has not given his finding nor has he considered that in the return of loss where the assessee has already suffered loss, imposition of the penalty would in fact be a genuine hardship. On the other hand, Shri Tankha, learned counsel for the respondents, submits that the order passed under section 271(4A) having become final the petitioner was not entitled to file an application under section 273A(4) of the Income-tax Act and even if it was a return of loss and there were no recovery proceedings the petitioner was required to prove that he would in fact suffer a genuine hardship. He submits that the order passed by the Commissioner does not call for any interference.
According to section 271(4A), a party could move an application before the Commissioner for waiver/reduction of the penalty on the grounds that he had disclosed the full material and had given full disclosure voluntarily and in good faith. Section 273A(4) came on the statute book with effect from October 1, 1975. The petitioner seeking protection under this provision filed another application and while deciding the application the Department never raised the objection that the provisions would not be applicable by the Direct Tax Laws (Amendment) Act, 1989, subsection (6) of section 273A has been amended with effect from April 1, 1989, according to which the provisions of section 273A as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1989, shall apply to and in relation to any assessment for the assessment year, commencing on April 1,1988 or any earlier assessment year, and references in this section to the other provisions of this Act shall be construed as references to those provisions as for the time being in -force and applicable to the relevant assessment year.
The consideration of the rejection of the petitioner's application filed under section .273A(4.) would certainly show that the Commissioner had taken into consideration irrelevant material because he was not required to consider, the facts regarding full and complete disclosure and good faith while considering the application under section 273A(4). According to subsection (41 of section 273A 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 if he is satisfied that to do otherwise would cause genuine hardship to the assessee, having regard to the circumstances- of; the case and the assessee has cooperated in any enquiry relating to the assessment or any proceeding for the recovery of any amount due from him.
It is not disputed before me that in the instant case when the return was a return of loss no recovery of the tax was required to be started against the petitioner. The observation made by the Commissioner that assessee was riot co-operative in recovery proceeding would certainly be contrary to the record and would show non-application of mind. So far as the question of hardship is concerned except employing the language as provided under section 273A(4), the Commissioner has not given any reasons.
Considering the totality of the circumstances, I am of the opinion that the order, dated March 19, 1985, passed by the Commissioner of Income-tax, Bhopal, deserves to be quashed. It is accordingly quashed. The learned Commissioner is directed to reconsider the matter in accordance with raw after giving an opportunity of hearing to the petitioner. There shad be no orders as to costs. Security amount, if any, deposited by the petitioner be refunded after due verification.
M.B.A./4219/FCOrder accordingly.