M/S Jay Bee Industries, Malout Road, Bathinda v. Commissioner Of Income Tax, Jalandhar And Others

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. CWP No.1202/1988 Date of Decision: 17.9.2009. M/s Jay Bee Industries, Malout Road, Bathinda ..........Petitioner. Versus Commissioner of Income Tax, Jalandhar and others ..........Respondent CORAM:HON'BLE MR.JUSTICE M.M.KUMARHON'BLE MR.JUSTICE JASWANT SINGH.HON'BLE MR.JUSTICE JASWANT SINGH. Present:Mr. Karan Nehra,Advocate for the petitioner. 1. To be referred to the Reporter or not ? 2. Whether the judgement should be reported in the Digest ? JASWANT SINGH,J. Petitioner-firm has filed the present writ petition under Articles226/227 of the Constitution praying for quashing the order dated12.11.1987 (P/11) passed by Commissioner of Income Tax-respondent no.1vide which the revision petition dated 26.2.1987 (P/10) under Section 264of the Income Tax Act,1961 has been rejected; order dated 12.9.1986 (P/5),assessment order dated 14.3.1986 (P/2) and demand notice dated 17.3.1986(P/3) passed by Income Tax Officer, Ward-B, Bathinda-respondent no.3. The facts giving rise to the present writ petition are that the CWP No.1202/1988 2 petitioner firm is a registered firm and derives its income from the businessof manufacturing and sale of electrical transformers. For the assessmentyear 1983-84 the petitioner firm filed the return on 8.10.1984 and declaredits income to the tune of Rs.1,60,450/-. During the course of assessment theauthorities found that the assessee had paid an amount of Rs.1,14,727/- ascommission to one M/s K.Mohan of Patiala for liaisoning work forprocuring tenders from Punjab State Electricity Board, Patiala on behalf ofthe petitioner firm. The deduction was not permissible under the IncomeTax Act and therefore, during the enquiries assessee voluntarily offered thatout of the commission of Rs.1,14,727/- an amount of Rs. 55,000/- may bedisallowed and counted towards its income for the assessment year 1983-84.The offer made by the petitioner firm was accepted by the respondents videorder dated 14.3.1986 (P/2) and total income was assessed at Rs.2,80,075/-.In addition to this the interest amounting to Rs.22,491/- and Rs.16,571/-was also charged under Section 139(8) and 215 of the Income Tax Act.Aggrieved against the action of respondent no.3, petitioner firm filed anapplication for waiver of interest charged under Rule 117A and 40 of theIncome Tax Rules,1962 read with other circulars issued by the C.B.D.T.,under Amnesty Scheme but the same was rejected by respondent no.1 videorder dated 12.11.1987 (P/1). Hence the present writ petition. Neither any reply has been filed by the respondents nor anyoneappeared at the time of hearing of the petition. After going through the paper book carefully, we are of theconsidered opinion that this writ petition deserves to be allowed. Vide order dated 9.2.1988 while issuing notice an interim stayof penalty proceedings initiated under Section 277(1)(a) and 273 of the CWP No.1202/1988 3 Income Tax Act was granted, and subsequently made absolute vide orderdated 20.4.1988. Neither any reply has been filed by the respondents nor anyoneappeared at the time of hearing of the petition. After going through the paper book carefully, we are of theconsidered opinion that this writ petition deserves to be allowed. Vide order dated 9.2.1988 while issuing notice an interim stayof penalty proceedings initiated under Section 277(1)(a) and 273 of the CWP No.1202/1988 3 Income Tax Act was granted, and subsequently made absolute vide orderdated 20.4.1988. The dispute is only regarding the interest component amountingto Rs.39,062/- i.e. Rs.22,491/- under Section 139(8) and Rs.16,571/- underSections 215 and 217. So far as tax liability was concerned that was to thetune of Rs.31,580/- but the same was deposited before 31.3.1986. Therespondent nos. 1 and 3 declined the plea of the petitioner on the groundthat the same is not covered under the Amnesty Scheme. The reasoningadopted by the respondents is wholly baseless and untenable as the perusalof the Circular no.450 dated 13.2.1986 (P/12) especially clarification toquestion no.5 reveals that clarification was issued that even for earlierassessment years if higher income and wealth are declared suo moto before31.3.1986, the assessee was not to be liable to penalty or prosecution andfurther the Income Tax Officer would be liberal in waiver of interest in suchcases. In the present case undisputedly the petitioner-firm surrendered anadditional come of Rs.55,000/- before the respondent no.3 vide its writtenrequest/voluntary disclosure dated 5.3.1986 (P/1) and which reads asunder:- “That in furtherance to our letter dated5.3.1986 in respect of genuinity of the paymentsmade to M/s K.Mohan, Patiala and thecircumstances under which payments have beenmade otherwise than crossed cheque or crosseddraft and the confirmation of M/s K.Mohan, inorder to buy peace and avoid litigation we areready to surrender for an addition of Rs.55,000/- CWP No.1202/1988 4 subject to no penal action and subject to the rightto contest in case of non-approval of the saidsurrender. The surrender is made to buy peace andsubject to no penal action. It is, therefore, requested that the case may be finalised by taking favourable view of thematter.” A perusal of assessment order dated 14.3.1986 (P/2) passed byrespondent no.3-Income Tax Officer reveals that respondent no. 2-Inspecting Assistant Commissioner, Bathinda also vide his letter dated12.3.1986 recommended the finalisation of assessment after considering thesurrender of Rs.55,000/- made by the petitioner as reasonable for theassessment year 1983-84. The relevant extract of the aforesaidrecommendation reads as under:- “The assessee's voluntary offer to surrenderRs.55,000/- to be added in the assessment of A/Y1983-84 to cover the above contentions issued inthe light of the Chairman, CBDT's circular No.451(F.No.225/86/85-ITA-II) dated 17.2.86 appears tobe a reasonable proposal. The addition, therefore, may be made accordingly to finalise theassessment at the earliest.” In view of the above, the writ petition is allowed, impugnedorders dated 12.11.1987 (P/11) passed by Commissioner of Income Tax-respondent no.1 is quashed and respondent no.1 is directed to decide therevision petition dated 26.2.1987 (P/10) under Section 264 of the Act, CWP No.1202/1988 5 afresh by passing a speaking order after taking into consideration theCircular Nos.450 and 451 dated 13.2.1986 (P/12) issued by the C.B.D.T.,and the observations made hereinabove. The needful be done within aperiod of three months from the date of receipt of a copy of this order. (M.M.Kumar) (Jaswant Singh) Judge Judge 17.9.2009.joshi