Harbans Kaur v. Commissioner Of Wealth Tax [1997] 224 Itr 418 (Sc),To Submit That Discretion Has To Be Exercised By The Commissioner, Byapplying The Judicial Mind

1.Present writ petition has been preferred by the petitioners,assailing the order passed by the Income Tax Settlement Commission, to theextent that the Commission has ordered to charge the interest @ 50% underSection 234-A of the Income Tax Act, 1961 (for short, ‘the Act’), and alsodirected for the interest under Section 234-B of the Act for the assessmentyear 1989-90, and similarly, it has also imposed interest under Section234-C, with respect to the five applicants before it.2.Learned counsel for the petitioners submits that the SettlementCommission has fallen in error, in imposing the interest upto 50% underSection 234-A of the Act, and similarly, has erred in imposing the interestunder Section 234-B and 234-C of the Act, as it has agreed with the contentions raised by the applicants/petitioners that for the assessment years1986-87, 1987-88, 1988-89, when the re-assessment orders were issuedunder Section 148, no interest was chargeable under Section 139(8), and theinterest under Section 234-A could have been charged on the ground that thereturns had been filed on 12.02.1991 after delay, for the Assessment Year1989-90. It is the contention raised by learned counsel for the petitioners that the petitioners were prevented from filing the returns in time, as thecopies of the seized papers were not given to the petitioners by theDepartment, in spite of various letters and requests made by theapplicants/petitioners. It is further contended that once, the Department agreed with the contention raised by the applicants/petitioners, no reasons have beenassigned for reducing the interest to 50% only, and in fact, the entire interestought to have been waived. 3. Counsel for the petitioners relied upon the judgment passed in the case ofJyotendrasinhjiv. S.I. Tripathi and others[1993] 201 ITR 611(SC), to submit that the writ petition would be maintainable in relation to theorders of the Settlement Commission. He also relied upon the judgment passed in the case of “Smt. Harbans Kaur vs. Commissioner of Wealth Tax [1997] 224 ITR 418 (SC),to submit that discretion has to be exercised by the Commissioner, byapplying the judicial mind. He further relied upon the judgment passed by this Court in thecase titled as Income-Tax Officer and others vs. R.P. Handa [1994] 206 ITR 537, to submit that the petitioners had reasonable grounds for notsubmitting their returns within time. He also relied upon the judgmentpassed by this Court in the case titled as Jagjiwan Kumar vs. Commissionerof Income Tax/Wealth Tax and others [1997] 228 ITR 229, to submit that ifthe Commissioner has been satisfied then the only option available was towaive of the penalties. Learned counsel has further relied upon the judgment passed bythis Court in the case titled as “Baso Devi and others vs. Central Board ofDirect Taxes through its Chairman and others”, decided on 22.02.2024. 4.Learned counsel for the petitioners has also relied upon thepress release/CBDT Circular dated 23.05.1996 (Annexure P-6), on waiver ofthe interest, as issued by the Department in relation to Section 234-A, B andC, to submit that if the returns were not filed for the reasons beyond thecontrol of the assessee, the interest ought not to be charged. 5.Per contra, learned counsel for the respondents – Revenue havesupported the order passed by the Income Tax Settlement Commission. 6.She has raised the preliminary objection that once the report ofthe Settlement Commission has been accepted by the petitioners, theycannot choose to challenge part of the said report which goes against them. Counsel for the respondents further submits that the assessee-petitioners approached the Income Tax Settlement Commission underSection 245-C(1) for disposing off their settlement petitions filed underSection 245-D(4) of the Act and the order is passed finally under Section245-D, which deals with all the aspects relating to the concerned assessment. 5.Per contra, learned counsel for the respondents – Revenue havesupported the order passed by the Income Tax Settlement Commission. 6.She has raised the preliminary objection that once the report ofthe Settlement Commission has been accepted by the petitioners, theycannot choose to challenge part of the said report which goes against them. Counsel for the respondents further submits that the assessee-petitioners approached the Income Tax Settlement Commission underSection 245-C(1) for disposing off their settlement petitions filed underSection 245-D(4) of the Act and the order is passed finally under Section245-D, which deals with all the aspects relating to the concerned assessment. It does not lie wrong for the petitioners to turn around and challenge thesame on the aspects which cannot be controverted by them. She has supported the order passed by the Income TaxSettlement Commission and submits that there is no indiscretion on the partof the Settlement Commission. They have applied their mind fully to thefacts of the case and reduced the interest by 50%, in terms of Section 234-Aof the Act. However, complete interest has been charged under Section234-B and similarly interest has also been charged under Section 234-C ofthe Act. It is pointed out that the Settlement Commission has after duedeliberation, waived the interest under Section 220(2) of the Act. Thus, shesubmits that there has been a complete application of mind on the part ofSettlement Commission and, thus this Court ought not to interfere with thesaid orders. 7.Learned counsel for the respondents/Revenue further submitsthat insofar as the judgments cited by the petitioners are concerned, it wouldhave their application to the facts of the concerned case(s) alone and have noapplication to the present case. 8.We have carefully gone through the order passed by the IncomeTax Settlement Commission under Section 245-d(4) of the Income Tax Act,1961. The petitioners had filed the applications for settlement of theirincome-tax and wealth tax under Section 245-C of the Act, and afterconsidering all the aspects, the Settlement Commission passed the orders. Italso granted immunity for the prosecution and at the same time, it reduced the interest chargeable under Section 234-A by 50%, while interests in termsof Section 234-B and C of the Act were directed to be charged from all thefive applicants. However, interest under Section 220(2)was waived.9.The question regarding maintainability of the present writ 9.The question regarding maintainability of the present writpetition against the order of the Income Tax Settlement Commission is nomore res integra, in view of the law as settled by Hon’ble the Supreme Courtin the case of Jyotendrasinhji v. S.I. Tripathi and others [1993] 201 ITR611 (SC) (supra),wherein Hon’ble the Supreme Court while following itsearlier judgement rendered in the case of R.B. Shreeram Durga Prasad andFatechand Nursing Das vs. Settlement Commission (I.T. and W.T.) [1989]176 ITR 169, held as under:- the interest chargeable under Section 234-A by 50%, while interests in termsof Section 234-B and C of the Act were directed to be charged from all thefive applicants. However, interest under Section 220(2)was waived.9.The question regarding maintainability of the present writ 9.The question regarding maintainability of the present writpetition against the order of the Income Tax Settlement Commission is nomore res integra, in view of the law as settled by Hon’ble the Supreme Courtin the case of Jyotendrasinhji v. S.I. Tripathi and others [1993] 201 ITR611 (SC) (supra),wherein Hon’ble the Supreme Court while following itsearlier judgement rendered in the case of R.B. Shreeram Durga Prasad andFatechand Nursing Das vs. Settlement Commission (I.T. and W.T.) [1989]176 ITR 169, held as under:- “It is true that the finality clause contained in section245-1 does not and cannot bar the jurisdiction of theHigh Court under article 226 or the jurisdiction of thiscourt under article 32 or under article 136, as the casemay be. But that does not mean that the jurisdiction ofthis court in the appeal preferred directly in this court isany different than what it would be if the assessee hadfirst approached the High Court under article 226 andthen come up in appeal to this court under article 136. Aparty does not and cannot gain any advantage byapproaching this court directly under article 136, insteadof approaching the High Court under article 226. This isnot a limitation inherent in article 136; it is a limitationwhich this court imposes on itself having regard to thenature of the function performed by the Commission andkeeping in view the principles of judicial review. May be,there is also some force in what Dr. Gauri Shankar says,viz., that the order of the Commission is in the nature of apackage deal and that it may not be possible, ordinarily speaking, to dissect its order and that the assessee shouldnot be permitted to accept what is favourable to him andreject what is not. According to learned counsel, theCommission is not even required or obligated to pass areasoned order. Be that as it may, the fact remains that itis open to the Commission to accept an amount of tax byway of settlement and to prescribe the manner in whichthe said amount shall be paid. It may condone thedefaults and lapses on the part of the assessee and maywaive interest, penalties or prosecution, where it thinksappropriate. Indeed, it would be difficult to predicate thereasons and considerations which induce the Commissionto make a particular order, unless the Commission itselfchoses to give reasons for its order. Even if it givesreasons in a given case, the scope of enquiry in theappeal remains the same as indicated above, viz.,whether it is contrary to any of the provisions of the Act.In this context, it is relevant to note that the principle ofnatural justice (audi alteram partem) has beenincorporated in section 245D itself. The sole overalllimitation upon the Commission thus appears to be that itshould act in accordance with the provisions of the Act.The scope of enquiry, whether by the High Court underarticle 226 or by this court under article 136 is also thesame-whether the order of the Commission is contrary toany of the provisions of the Act and if so, apart fromground of bias, fraud and malice which, of course,constitute a separate and independent category, has itprejudiced the petitioner/appellant. ......” 10.In view of the above, objection raised by learned counsel for therespondents regarding non-maintainability of the present writ petition, isrejected. 10.In view of the above, objection raised by learned counsel for therespondents regarding non-maintainability of the present writ petition, isrejected. 11.So far the question that whether the discretion exercised by theSettlement Commission of reducing the interest by 50% in terms of theinterest chargeable under Section 234-A of the Act is concerned, we wouldhave to examine the provisions of Section 234-A of the Act for the purpose,which provides for charging of interest for defaults in furnishing return ofincome, interest for defaults in payment of advance tax and for interest fordeferment of the advance tax, respectively. 12.On reading and examining the said provision, it has beennoticed that the provisions of imposing the interest is automatic, and if thereis a default, interest is liable to be paid. However, by the various judgments passed by Hon’ble theSupreme Court as well as by this Court as reproduced supra, the Courts havetaken a view that in circumstances which are beyond the control of theassessee in filing of the return in time, the interest can be waived. 13.In the present case, the Income Tax Settlement Commissionaccepted the version of the petitioners that the returns for the AssessmentYear 1989-90 could not been filed in time, and were delayed on account ofthe fact that the seized papers were not available with them, and were lyingwith the Department. The Settlement Commission has also noticed that theletters and requests were made by the applicants/petitioners to theDepartment and looking into the said circumstances, interest had beenreduced. 14.We find that while exercising the discretion by the SettlementCommission, no reasons have been assigned as to why the interest has been reduced by 50% only, and as to why the complete interest has not beenwaived off for the assessment year 1989-90. 15.We, accordingly, accept the present writ petition, and waive theinterest charged, in terms of Section 234-A of the Act. 16.As far as the interest chargeable under Section 234-B and 234-Care concerned, keeping in view that the advance tax was required to be paid,wherein there has been a default, in terms of the judgment passed in the caseof Gulraj Engineering Construction Co., reported as [1995] 215 ITR (AT),we do not propose to waive the interest under Section 234-B and 234-C ofthe Act. 17.We are also not impressed by the arguments raised by learnedcounsel for the petitioners in terms of the circular on waiver of interest(Annexure P-6) that the interest under Section 234-B and 234-C should bewaived, as depositing of advance tax has nothing to do with the seizure ofthe books of accounts or during the course of proceedings for search, orseizure of cash. 18.In the case of Shelly Mehta v. Commissioner of Income tax,Central Circle, Ludhiana and another, this Court has taken a view that thecash seized during the seizure cannot be a ground for waiver of advance taxor payment of tax for the subsequent year. In view thereto, we do not acceptthe contentions made by counsel for the petitioners and the present writpetition is allowed in part. Pending miscellaneous application(s), if any, also standdisposed of. 19.After the case was heard at length and judgment was dictated inthe Court, learned counsel for the petitioners complained of having not beenheard. 20.We have already recorded conclusions in detail on all aspects aswell as merits of present petition, therefore, no further arguments arerequired to be heard.