N. GOPALAKRISHNAN VS COMMISSIONER OF INCOME-TAX, 2000 PTD-MADRAS-HIGH-COURT-INDIA 2340 (1998)

Income-tax---

----Advance tax---Return---Interest---Failure to file estimate of advance tax-- Delay in filing returns---Reduction or waiver of interest---Section 273A does not lay down time within which return must be filed---Power to reduce or waive interest is discretionary but power must be exercised judiciously-- Assessee filing returns voluntarily for first time for several years including years for which assessment was barred by limitation---Tax paid on self assessment---Admission by CIT that all conditions laid down in S.273A had been fulfilled---Assessee entitled to get 100 percent. relief from interest livable under Ss.139(8) & 217---Indian Income Tax Act, 1961, Ss. 139, 217 273A.

The power granted to the Commissioner 'under section 273A of the Income Tax Act, 1961, is discretionary. A perusal of the section goes to show that if he is satisfied that the assessee has voluntarily and in good faith made full and true disclosure of his income or that it was so made prior to the detection by the Officer of the concealment of particulars of income or of the inaccuracy of particulars furnished in respect of such income or that it has been made prior to the issue of a notice to him under subsection (2) of section 139 and also that the assessee has in all the cases referred to above cooperated 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, he can reduce or waive the amount of penalty or interest imposed. Although the power under section 273A is a discretionary power that has to be used judiciously and not arbitrarily.

Section 273A does not say that the return should have been filed on or before a particular date to get the benefit of the section:

Held, that in the case on hand all these petitioners had filed the return voluntarily not only for the year 1984-85 but also from 1978-79 to 1983-84 i.e., even for the years for which limitation was over. They had paid the entire tax on self-assessment. The Commissioner of Income-tax had also admitted that all the conditions laid down under section 273A(1) were satisfied. In spite of all these factors, the Commissioner of Income-tax had given only 25 percent. waiver and the only reason stated by him was that there was a delay in filing the returns. The assessees were entitled to waiver of 100 percent. of the interest under sections 139(8) and 217.

Central Provinces Manganese Ore Co. Ltd. v. CIT (1986) 160 ITR 961 (SC); Harbans Kaur (Smt.) v. CWT (1997) 224 ITR 418 (SC) and Jaswant Rai v. CBDT and Revenue (1998) 231 ITR 745 (SC) ref.

R. Janakiraman for Petitioners.

S. V. Subramaniam for C. V. Rajan for Respondents,

JUDGMENT

Since the subject-matter involved in these writs and also the respondents herein are all one and the same, all these three writ petitions are taken up together and are disposed of by this common order with the consent of the parties concerned.

Invoking Article 226 of the Constitution of India, the petitioners herein have filed the present writ petitions, seeking for a writ of certiorarified mandamus to call for the records of the first respondent in C. No.417/-1/34 (1 to 6) of 1985-86, dated March 29, 1989, C. No.417/2/34(1) of 1985-86, dated February 27, 1989, and C. No.417/1/34(1) of 1985-86, dated March 17, 1989, respectively and to quash the same in so far as it is against the petitioners herein and further to direct the first respondent to waive the balance interest of Rs.5,957.25; Rs.10,558 and Rs.8,880, respectively, levied under sections 139(8) and 217 of the Income-tax Act for the assessment years 1978-79 to 1984 under section 273A of the Act in pursuance of the order. of the first respondent in C. Numbers mentioned above.

In support of the writ petitions, the petitioners herein have tiled separate affidavits wherein they have narrated all the facts and circumstances that forced them to file the present writ petitions and prayed that their writ petitions may be allowed as prayed for. Per contra, on behalf of the respondents, separate counter-affidavits have been filed rebutting all the material allegations leveled against them one after the other and ultimately requested this Court to dismiss the said writ petitions for want of merit Heard the arguments advanced by learned counsel appearing for the petitioners and also those of learned senior counsel appearing for the Department. I have perused the contents of the affidavits and the counter affidavits together with all the relevant material documents available on record in the form of typed set of papers. I have also taken into consideration the various points raised by learned counsel appearing for the respective parties during the course of their arguments.

In such circumstances, the only common question that arises for consideration in all these writ petitions is, as to whether there are any valid grounds to allow these writ petitions or not.

The case of the petitioners herein is that all these petitioners herein are income-tax assessees holding permanent account numbers. They have voluntarily filed their return of income for the assessment years 1978-79 to 1984-85 and paid the entire tax under the self-assessment under section 140A of the Act. The second respondent completed the assessment accepting the returned income. The second respondent, however, levied interest under section 139(8) and under section 217 for the delay in filing the return and non-filing of estimate of advance. tax. As regards the levy of interest under sections 139(8) and 217, as no' appeal is provided under -the Act, the petitioner wanted to avail of the benefit of section 273A of the Act and filed an application to the first respondent. However, the first respondent in his orders which are impugned herein has accepted that the petitioner has satisfied all the conditions prescribed under section 273A of the Act, but he has not granted the full relief to the petitioner. Therefore, it is contended the petitioners that the impugned orders of the first respondent are arbitrary, contrary to the provisions of the Act, violative of the petitioner's right under Articles 14, 19(1)(g) and 300A of the Constitution of India and illegal.

It is contended on behalf of the petitioners that they have complied with the conditions prescribed under section 273A(1) for waiver of interest levied under sections 139(8) and 217 of the Act and the first respondent has also accepted the same in his order. That being so, according to the petitioners they are entitled to the waiver of entire interest by the first respondent. But the first respondent has not exercised his discretion judiciously and hence the orders impugned are liable to be quashed in so far they are against the petitioners. It is also stated by the petitioners that the reasons given by the first respondent for not waiving the entire interest are' opposed to the provisions of section 273A of the Act. The section prescribes certain conditions, which were strictly complied-with by the petitioners. It is significant to note that this section does not say that the return should have been filed on or before a particular date to get the benefit of the section. The fact remains that the assessments have been made even after the prescribed time limit provided under the Act and the petitioner had paid tax on that assessment. Therefore, it is vehemently argued on behalf of the petitioners that the reason given by the first respondent in not allowing the full relief is arbitrary: It is also contended, by the petitioners that the object of the section itself is defeated be the impugned order of the first repentant. According to them, the petitioners get a right under section 273A provided the conditions are complied with and that the petitioner is denied this right by the impugned order of the first respondent and hence the order is violative of Articles 14 19(1)(g) and 300A of the Constitution. It is contended by the petitioners that the reasons given by the first respondent in restricting the relief to, 25 percent. of Rs.7,943. etc., is an invented. one anal not relevant for the purpose of considering the claim under section 273A of the Act and that the first respondent, for reasons best known to him did not want to grant the benefits of section 273A of the Act to the petitioners and on an irrelevant consideration he has restricted the relief to 25 percent. on the total interest.

Per contra, on behalf of the Department it is stated that for the delay in furnishing the returns, interest under section 139(8) of the Act was levied for the various years. It is also stated by them that the petitioners herein did not file any estimate of advance tax payable by them as contemplated by section 209A of the Act and hence did not make any payment as and by way of advance tax in any of the financial years relevant to the above assessment years and hence interest under section 217 of the Act was also levied. The Department also states that the first respondent while passing the impugned order granting partial waiver of interest that had been levied under the' above two sections observed that though all the conditions for grant of waiver of interest were satisfied, there was no justification for granting full waiver because the returns for the various years were filed only on October 27; 1984, and. hence granted waiver of 25 petcent. of the interest that had been levied under the two sections. Relying on decision rendered by the apex Court reported in Central Provinces Manganese Ore Co. Ltd v: CIT (1986) 160 ITR 961, it is stated by the Department that the levy of interest is only in the nature of compensation for the delay in payment of taxes within the time allowed there for resulting in denial of the use of the amount by the Department and benefit of the use thereof by the assessee and that, therefore, the respondent would have been justified in refusing to grant any waiver of the interest. However, the first respondent exercising the power of waiver granted to him by the Act, waiver 25 per cent of the interest levied under the two sections sustaining the balance 75 percent. There of. It is also their case that for the delay in furnishing the returns for the various years as well as non-furnishing of the estimate of advance tax payable and non-payment of the said estimated advance tax, only 75 percent. of the interest properly and legally livable under the statute has been levied. They state that the levy of interest being purely in the nature of compensation as laid down by the Supreme Court, the confirmation of the interest levied to the extent of 75 percent. cannot be said to be in any way illegal or unjustified as claimed by the petitioner. It is also stated by the Department that the power granted to the Commissioner under section 273A of the Act is discretionary and hence on the authority of the decision of the. Supreme Court in Harbans Kaur's case (1997) 224 ITR 418, so long as reasons have been given by the Commissioner for exercising his discretion one way or the other, the Courts should not interfere with such discretion. Therefore, it is the categoric stand of the Department that the orders impugned in these writs cannot be said to be in any way wrong or unjustified.

It is no doubt true that' the power granted to the Commissioner under section 273A of the Act is discretionary. A perusal of the said section goes to show that if he is satisfied that the assessee has voluntarily and in good faith made a full and true disclosure of his income or that it was so made prior to the detection by the Officer of the concealment of particulars of income or of the inaccuracy of particulars furnished in respect of such income or that has been made prior to the issue of a notice to him under subsection (2) of section 139 and also the assessee has in all the cases referred to above cooperated 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, he can reduce or waive the amount of penalty imposed. In this case it is significant to note that this is a case where the petitioners herein have voluntarily filed their return of income for the assessment years 1978-79 to 1984-85 and paid the entire tax under the self-assessment under section 140A of the Act. It is also pertinent to note that section 273A is to give benefits to those of the assessee like the petitioner. Further, the petitioners for the first time have filed the return, and also that they have courted assessment even for the years for which limitation was over and that they have done it in good faith, whereas the second respondent has levied interest under section 139(8) and under section 217 for the delay in filing the return and non-filing of estimate of advance tax. Even according to the respondents, all the conditions laid down under section 273A(1) are satisfied and they were of the opinion that these are fit cases for waiver. It has also been observed by the respondents that the assessee has no doubt cooperated with the Department in the completion of assessment. At this juncture it is relevant to note that the petitioners get a right under section 273A provided the conditions are complied with. In spite of all these factors, the respondent has given only 25 percent. of waiver and the only reason stated by him is there is delay in filing the returns. Here we have to remember that this is a case of voluntarily filing the returns for the first time and, under the self assessment. It is not a case where detection has been made by the Department and then only the petitioners have come forward with the assessment nor is it a case wherein the authorities have found any concealment of income. If that is so, there is every reason for the respondents to deny the 100 percent. waiver of interest. In case the petitioners were assessed already to income-tax and subsequently there is delay in filing the assessment, there is point in denying the waiver of the interest. But in the case on hand all these petitioners have filed the return voluntarily not only for the year 1984-85 but also from 19.78-79 to 1983-84, i.e., even for the years for which limitation was over. That being so, on the basis of the delay the respondents cannot deny 100 percent. waiver of interest. Therefore, it can rightly be said that the object of section 273A is defeated by the impugned orders of the first respondent. Because the authorities have forgotten the basic element behind these provisions, i.e., to induce the taxpayers to come forward voluntarily and in good faith and only in order to give benefit to those of the assessee like the petitioners.

When the first respondent himself has come to the clear conclusion that "all the conditions laid down under section 273A(1) are satisfied and he was of the opinion that this is a fit case for waiver", he should have waived the interest levied under sections 139(8) and 217 in to and there is no justification or reason at all for him to waive only 25 percent. Even though such power vested in him is a discretionary power, that has to be used judiciously and not arbitrarily. But in the facts and circumstances of this case, I am of the clear view that the said power has been used by the first respondent herein in an arbitrary manner. .

In support of the contentions raised by the petitioners, they rely on the decision reported in Jaswant Rai v. C.B.D.T. and Revenue (1998) 231 ITR 745 (SC), wherein it has been held by the Supreme Court as follows (headnote):

"Allowing the appeal, that the power under section 271(4A) is coupled with a duty to do justice and the Commissioner is under statutory obligation to exercise the power in favour of an assessee which has fulfilled all the conditions of the provisions. In deciding such a matter, therefore, he cannot take into account factors or reasons which are invalid or extraneous to the said provisions. The principal condition for grant of relief under the said provision is that the assessee should have voluntarily and in good faith made full disclosure of his income prior to the detection of the same and such disclosure could be made even otherwise than in the course of a return by submitting a petition to the Commissioner. In the present case, the assessee had made the disclosure prior to the coming into force of the voluntary disclosure scheme and long before the Department could initiate any action in respect of the concealed income. The levy of penalty under section 271(1)(c) by itself would not be a circumstance to take it out of the purview of section 271(4A) of the Act. The Commissioner of Income-tax had explained each one of the circumstances arising in the case, whether there had been concealment by the assessee and its disclosure, the extent to which they were voluntary or the same had been made prior to the detection of the same by the department. The Board had not duly applied its mind or made an cinder revealing its mind by making a speaking order. (The order of the Board was quashed and the Board was directed to restore the proceedings to its file and examine the matter once again in the light of observations made in the judgment)."

The above decision squarely applies to the facts of the case on hand and, thus, the same renders help to the petitioners' case.

Per contra, on behalf of the respondents, in support of their contentions the respondents relied on the following two decisions.

(1) Central Provinces Manganese Ore Co. Ltd. v. CIT (1986) 160 ITR 961 (SC) and (2) Smt. Harbans Kaur v. CWT (1997) 224 ITR 418 (SC).

In the case reported in Central Provinces Manganese Ore Co. Ltd. v.. CIT (1986) 160 ITR 961 (SC), it has been held that interest is levied tinder section 139(8) or section 215 of the Income Tax Act, 1961, because by reason of the omission or default mentioned in the respective provision, the Revenue is deprived of the benefit of the tax for the period during which it has remained unpaid. In that case, the return had been furnished under section 139 with delay and it will be a question merely of satisfying the relevant authority that there are circumstances calling for a reduction or waiver of the interest. It is significant to note that in that case the assessee was assessed to income-tax from the assessment year 1967-68. Interest under subsection (8) of section 139 of the Income-tax Act amounting to Rs.56,391 and interest under section 215 of that Act amounting to Rs.9,42,336 subsequently reduced to Rs.5,07,880 were levied against the appellant. According to the appellant, there was ample and clear justification for theComing to the other case relied on by the respondents, i.e.; Smt. Harbans Kaur v. CWT (1997) 224 ITR 418 (SC), it has been held as follows (headnote):

"The words 'the Commissioner may in his discretion reduce or waive the amount of penalty' in section 18B of the 'Wealth Tax Act, 1957, clearly show that the power conferred on the Commissioner is to be exercised by him. in such a manner as he deems just and proper. If the conditions stipulated in the section are satisfied, the Commissioner has a discretion in the matter. In exercise of that discretion, the Commissioner can either reduce the amount of the penalty. or he may waive the entire penalty. It is for the

Commissioner to decide on the facts of a particular case whether a waiver in entirety or a reduction alone is warranted. Of course, when the Commissioner, instead of giving a complete waiver, chooses to give only a reduction of the penalty amount, he must indicate- in his order that he has applied his mind in that regard."

In that case which fell under the Wealth Tax Act, actually there was failure to file the returns in respect of the assessment years 1970-71, 1971-72, 1972-73, 1973-74, 1974-75 and 1975-76 when Parliament amended the Act and incorporated section 18B by the Taxation Laws (Amendment) Act, 1975, i.e., Act NoA1 of 1975, the appellants therein submitted wealth tax returns and made a request for full waiver of the penalty as envisaged in the new provision. That is not the case herein in the case on hand. The petitioners herein have come forward voluntarily with the assessments. Therefore, factually both the cases are different and the respondents cannot derive any help from this decision also in their favour.

Now coming to the facts of the case on hand, this Court has already come to a conclusion that in allowing a waiver of only 25 per cent. of the interest levied, the first respondent has used his discretionary power arbitrarily without any valid reason. Such an action on the part of the first respondent defeats the main object of the section itself. It is to be once again remembered that section 273A is to give benefit to those of the assessee like the petitioners herein. Further, as rightly contended on behalf of the petitioners, the reason given by the first respondent for not waiving the entire interest is opposed to the provisions of section 273A. It is also significant to note that the said section prescribed certain conditions, which were strictly complied with by the petitioners. Above all, this section does not say that the return should have been filed on or before a particular date to get the benefit of the section. That being so there is no reason at all for the first respondent to deny the remaining 75 percent. of waiver on the basis of the delay in tiling the returns. The Department has to keep in their mind that the assessments in these cases have been made even after the prescribed time limit provided under the Act and the petitioners also had paid tax on that amount. Therefore, in. the above peculiar facts and circumstances of this case, I am of the clear view that the first respondent has no ground or reason at all to deny the remaining 75 percent. of waiver of interest and also that such denial is arbitrary.

Therefore, for all the aforesaid reasons and in the peculiar facts and circumstances of this case and also in view of my above discussion with regard to the various aspects of this case, I am of the clear view that the petitioners herein have clearly made out a case in their favour and that, therefore, all the orders impugned in these writ petitions are liable to be quashed in so far as they are against the petitioners herein. Thus, all these writ petitions succeed and they are to be allowed.

In the result, all these writ petitions are allowed. No costs and consequently all the impugned orders herein are hereby quashed in so far as they are against the petitioners herein. Further, the first respondent is also directed to waive the balance interest of Rs.5,957.25 (in. W.P. No.9962 of 1989), Rs.10,558 (in W.P. No.9963 of 1989) and Rs.8,880 (in W. P. No.9964 of 1989), respectively, levied under. sections 139(8) and 217 of the Act for the assessment years 1978-79 to 1984-85 under section 273A of the Act. Consequently, W.M.Ps. are dismissed.

M.B.A./4154/FC????????.