M/S Kahan Chand v. Commissioner Of Income Tax, Amritsar2

IN THE HIGH COURT FOR THE STATES OF PUNJAB ANDHARYANA AT CHANDIGARH 1. CWP No.11 of 1990 M/s Kahan Chand ... Petitioner v. Commissioner of Income Tax, Amritsar2. CWP No.12 of 1990 Shri Harivash Lal ... Respondent ... Petitioner v. Commissioner of Income Tax, Amritsar 3.M/s Prem Parkash Khanna ... Respondent CWP No.13 of 1990 ... Petitioner v. Commissioner of Income Tax, Amritsar ... Respondent 4.Inderjeet Mehta CWP No.12904 of 1990 ... Petitioner v. Commissioner of Income Tax, Jalandhar ... Respondent 5.CWP No.3952 of 1992 M/s Punjab Bricks Supply Company ... Petitioner v. Commissioner of Income Tax, Jalandhar and another ... Respondent Date of decision: August 01, 2013. CORAM: HON'BLE MR. JUSTICE RAJIVE BHALLAHON'BLE MR. JUSTICE DR. BHARAT BHUSHAN PARSOON Present:None for the petitioners. Shri G.S. Hooda, Advocate and Shri Vivek Sethi, Advocate for the respondents. Rajive Bhalla, J. (Oral): By way of this order, we shall dispose of CWPNos.11, 12, 13, 12904 of 1990 and CWP No.3952 of 1992 asthey involve adjudication of similar questions of law. Facts incontroversy being identical, have been taken from CWP No.11of 1990. The petitioner, who is an income tax assessee, wasasked to pay various amounts as interest under Sections 139(1), 215 and 217, and penalty under Sections 271(1)(a) and273(2(c) of the Income Tax Act, 1961 (in short to be referredas the Act) for assessment years 1985-86, 1986-87 and 1987-88. The petitioner filed a petition under Section 273-A of the Act, before the Commissioner, to reduce or waive the amountof penalty imposed, by pleading that he had filed returnsvoluntarily, without issuance of any notice under Section 139(2) or Section 148 of the Act and had always cooperated withthe Department. The Commissioner of Income Tax, Amritsarconsidered the application and rejected the same by holdingas under:- “5. I have carefully considered the facts of thecase, arguments of the assessee's counsel and havealso perused the assessment records. I do not findany merit in the application of the assessee andreject the same. In rejecting the petition of theassessee, I am influenced by the followingconsiderations amongst others:-case, arguments of the assessee's counsel and havealso perused the assessment records. I do not findany merit in the application of the assessee andreject the same. In rejecting the petition of theassessee, I am influenced by the followingconsiderations amongst others:- (i) The assessee is an old assessee. He was beingassessed to tax for more than a decade havingsubstantial income. A perusal of the assessmentorder for assessment year 1978-79 shows that hewas assessed at an income for the said year atRs.51240/- and the return for the said year wasfiled on 7.9.1978. He was thus fully aware of thestatutory liability in furnishing the returns ofincome on time.assessed to tax for more than a decade havingsubstantial income. A perusal of the assessmentorder for assessment year 1978-79 shows that hewas assessed at an income for the said year atRs.51240/- and the return for the said year wasfiled on 7.9.1978. He was thus fully aware of thestatutory liability in furnishing the returns ofincome on time. (ii) The income of the assessee for all theassessment years i.e. 1985-86 to 1987-88 was farin excess of the minimum liable to tax.assessment years i.e. 1985-86 to 1987-88 was farin excess of the minimum liable to tax. (Assessment year 1985-86 Rs.59710/-, 1986-87 Rs.127660/- and 1987-88 Rs.145260/-.) (iii) The main source of income of the assessee was share from M/s Gopi Nath Kahan Chand. This firm had filed its returns of income for variousassessment years as under:-assessment years as under:- Even after the firm had filed returns of its income, the assessee failed to file his own returns of income. By delaying the filing of returns, the assessee thuswithheld the payment of government revenue for avery considerable period of time. (ii) The income of the assessee for all theassessment years i.e. 1985-86 to 1987-88 was farin excess of the minimum liable to tax.assessment years i.e. 1985-86 to 1987-88 was farin excess of the minimum liable to tax. (Assessment year 1985-86 Rs.59710/-, 1986-87 Rs.127660/- and 1987-88 Rs.145260/-.) (iii) The main source of income of the assessee was share from M/s Gopi Nath Kahan Chand. This firm had filed its returns of income for variousassessment years as under:-assessment years as under:- Even after the firm had filed returns of its income, the assessee failed to file his own returns of income. By delaying the filing of returns, the assessee thuswithheld the payment of government revenue for avery considerable period of time. (iv) The assessee is a habitual defaulter. Following are the details in respect of returns pertaining tothe earlier assessment years:- Assessment year Return when due Return whenfiled (v) For the assessment year 1984-85 the assessee availed the benefit of Amnesty Scheme. Even afteravailing the said benefit, the assessee continued to file delayed returns of income for the assessmentyears 1985-86 upto 1987-88. No leniency can beshown to such habitual defaulter.” Counsel for the petitioner is not present but as wehave perused the paper book as well as the impugned orderand have heard counsel for the respondent, are inclined todecide the petition on merits. The petitioner has pleaded that while adjudicatingan application under Section 273-A of the Act, a Commissionerof Income Tax exercises powers specially conferred by thevarious sub-sections, clauses and sub-clauses of Section 273-Aof the Act and not the powers of an Assessing Officer and,therefore, while accepting or rejecting an application underSection 273-A of the Act, a Commissioner is required to confinehis consideration to factors referred to in the sub-sections,clauses and sub-clauses of Section 273-A of the Act. TheCommissioner of Income Tax has, however, rejected theapplication by assigning reasons that fall within the domain ofan Assessing Officer, without taking into consideration factorsset out in Section 273-A of the Act. Counsel for the respondent, submits that an orderunder Section 273-A of the Act is discretionary and evenotherwise administrative in nature. The discretion exercisedby the Commissioner while dismissing the application filed bythe petitioner, is legal and valid and does not call forinterference. It is further submitted that the Commissioner is only required to assign reasons if he accepts the prayer forreduction or waiver of penalty, as in such a situation, theCommissioner is required to obtain permission from a higherauthority. It is argued that even if reasons assigned by theCommissioner are held to be incorrect, the writ petition shouldbe dismissed as the petitioner has not been able to place hiscase for grant of reduction or waiver of penalty and interestwithin parameters of sub-sections or clauses etc. of Section273-A of the Act. We have heard counsel for the respondent,considered the pleadings, the impugned order and Section273-A of the Act which reads as follows:- Power to reduce or waive penalty, etc., in certain cases. 273A. (1) Notwithstanding anything contained in this Act, theCommissioner may, in his discretion, whether on his own motionor otherwise,— (i) *** (ii) reduce or waive the amount of penalty imposed or imposableon a person under clause (iii) of sub-section (1) of section 271; *[or] (iii) 74[***] if he is satisfied that such person— (a) 74[***] (b) in the case referred to in clause (ii), has, prior to thedetection75 by the Assessing Officer, of the concealment ofparticulars of income or of the inaccuracy of particularsfurnished in respect of such income, voluntarily77 and in goodfaith,77 made full and true disclosure77 of such particulars, (c) 78[***] Power to reduce or waive penalty, etc., in certain cases. 273A. (1) Notwithstanding anything contained in this Act, theCommissioner may, in his discretion, whether on his own motionor otherwise,— (i) *** (ii) reduce or waive the amount of penalty imposed or imposableon a person under clause (iii) of sub-section (1) of section 271; *[or] (iii) 74[***] if he is satisfied that such person— (a) 74[***] (b) in the case referred to in clause (ii), has, prior to thedetection75 by the Assessing Officer, of the concealment ofparticulars of income or of the inaccuracy of particularsfurnished in respect of such income, voluntarily77 and in goodfaith,77 made full and true disclosure77 of such particulars, (c) 78[***] and also has, 79[in the case referred to in clause (b)], co-operated77 in any enquiry relating to the assessment of hisincome and has either paid or made satisfactory arrangementsfor the payment of any tax or interest payable in consequence ofan order passed under this Act in respect of the relevantassessment year. Explanation 80[***].—For the purposes of this sub-section, aperson shall be deemed to have made full and true disclosure ofhis income or of the particulars relating thereto in any casewhere the excess of income assessed over the income returned isof such a nature as not to attract the provisions of clause (c) ofsub-section (1) of section 271. 80[***] (2) Notwithstanding anything contained in sub-section(1),— (b) if in a case falling under clause (c) of sub-section (1) ofsection 271, the amount of income in respect of which the penaltyis imposed or imposable for the relevant assessment year, or,where such disclosure relates to more than one assessment year,the aggregate amount of such income for those years, exceeds asum of five hundred thousand rupees, no order reducing orwaiving the penalty under sub-section (1) shall be made by 82[the Commissioner except with the previous approval of theChief Commissioner or Director General, as the case may be]. (3) Where an order has been made under sub-section (1) infavour of any person, whether such order relates to one or moreassessment years, he shall not be entitled to any relief under this section in relation to any other assessment year at any time afterthe making of such order : 83[Provided that where an order has been made in favour of anyperson under sub-section (1) on or before the 24th day of July,1991, such person shall be entitled to further relief only once inrelation to other assessment year or years if he makes anapplication to the income-tax authority referred to in sub-section(4) at any time before the 1st day of April, 1992.] (4) Without prejudice to the powers conferred on him by anyother provision of this Act, the 84[85[***] Commissioner] may,on an application made in this behalf by an assessee, and afterrecording his reasons for so doing, reduce or waive the amountof any penalty payable by the assessee under this Act or stay orcompound any proceeding for the recovery of any such amount,if he is satisfied that— (i) to do otherwise would cause genuinehardship to the assessee, having regard to the circumstances ofthe case; and (ii) the assessee has co-operated in any inquiry relating to theassessment or any proceeding for the recovery of any amountdue from him: 86[Provided that where the amount of any penalty payable underthis Act or, where such application relates to more than onepenalty, the aggregate amount of such penalties exceeds onehundred thousand rupees, no order reducing or waiving theamount or compounding any proceeding for its recovery underthis sub-section shall be made by 87[the Commissioner except with the previous approval of the Chief Commissioner orDirector General, as the case may be]. (ii) the assessee has co-operated in any inquiry relating to theassessment or any proceeding for the recovery of any amountdue from him: 86[Provided that where the amount of any penalty payable underthis Act or, where such application relates to more than onepenalty, the aggregate amount of such penalties exceeds onehundred thousand rupees, no order reducing or waiving theamount or compounding any proceeding for its recovery underthis sub-section shall be made by 87[the Commissioner except with the previous approval of the Chief Commissioner orDirector General, as the case may be]. (5) Every order made under this section shall be final and shallnot be called into question by any court or any other authority.] (6) The provisions of this section 89[as they stood immediatelybefore their amendment by the Direct Tax Laws (Amendment)Act, 1989] shall apply to and in relation to any assessment forthe assessment year commencing on the 1st day of April, 1988,or any earlier assessment year, and references in this section tothe other provisions of this Act shall be construed as referencesto those provisions as for the time being in force and applicableto the relevant assessment year. (7) Notwithstanding anything contained in sub-section (6), theprovisions of sub-section (1), sub-section (2), or, as the case maybe, sub-section (4) [as they stood immediately before theiramendment by the Direct Tax Laws (Amendment) Act, 1989 (3 of1989)], shall apply in the case of reduction or waiver of penaltyor interest in relation to any assessment for the assessment yearcommencing on the 1st day of April, 1988 or any earlierassessment year, with the modifications that the power under thesaid sub-section (1) shall be exercisable only by theCommissioner and instead of the previous approval of the Board,the Commissioner shall obtain the previous approval of the ChiefCommissioner or Director General, as the case may be, whiledealing with such case. Section 273-A of the Act enacts a non-obstante clause which empowers the Commissioner of Income Tax,whether on his own motion or otherwise, to reduce or waivepenalty imposed or imposable. The discretion so conferredhas to be exercised within the informed parameters set out insub-clauses (a), (b), and (c) read along with Explanation I, asprevalent on the date of the application. The non-obstanteclause indicates that the power so exercised would take colourfrom the sub-sections and sub-clauses of Section 273-A of theAct, and from no other provision of the Act. The openingwords of Section 273-A of the Act, i.e., “Notwithstandinganything contained in this Act...”, confine consideration by theCommissioner of Income Tax to factors enumerated in Section273-A of the Act. An adjudication based on grounds, otherthan grounds referred to in Section 273-A, would necessarilyinvite a valid charge that the order is null and void for anillegal exercise of jurisdiction, or a failure to exercisejurisdiction in accordance with statutory parameters set out inSection 273-A of the Act. A perusal of the impugned order reveals that theassessee had, prior to issuance of notice under sub-section 2of Section 139 of the Act, voluntary made full disclosure of hisincome prior to any detection of the concealed income or theinadequacy of the particulars furnished. A perusal of theimpugned order reveals that the Commissioner of Income Taxhas assumed the role of an Assessing Officer and whiledismissing the petition and rejecting the plea for reduction/waiver of the amount of penalty imposed hasreferred to the very same factors that led the Assessing Officerto impose penalty. In this view of the matter, the writ petition isallowed, the impugned order is set aside and the matter isremitted to the Commissioner of Income Tax, Bhatinda(erstwhile Commissioner of Income Tax, Jalandhar) to decidethe application, in accordance with law, within three monthsfrom the date of receipt of a certified copy of this order. reduction/waiver of the amount of penalty imposed hasreferred to the very same factors that led the Assessing Officerto impose penalty. In this view of the matter, the writ petition isallowed, the impugned order is set aside and the matter isremitted to the Commissioner of Income Tax, Bhatinda(erstwhile Commissioner of Income Tax, Jalandhar) to decidethe application, in accordance with law, within three monthsfrom the date of receipt of a certified copy of this order. CWP No.12904 of 1990 (Inderjeet Mehta v.Commissioner of Wealth Tax, Jalandhar) has been filed tochallenge order dated 26.3.1990 passed under Section 18-B ofthe Wealth Tax Act, 1957. Section 18-B of the Wealth Tax ispari materia to Section 273-A of the Income Tax Act, 1961 and,requires the Commissioner, while considering a prayer forreduction/waiver of penalty etc., to consider parameters setout in Section 18-B of the Act. The ratio recorded whiledeciding CWP No.11 of 1990, relating to Section 273-A of theIncome Tax Act, 1961 would necessarily apply to Section 18-Bof the Wealth Tax Act. A perusal of the impugned orderreveals that the Commissioner has committed the same erroras has been noticed in cases, referred to in the precedingparagraphs, relating to Section 273-A of the Income Tax Act,1961. In this view of the matter, the impugned order is setaside and the matter is remitted to the Commissioner ofWealth Tax, Bathinda to decide the matter afresh, in CWP No.11 of 1990 accordance with law. August 01, 2013. kadyan -: 12 :- [ Rajive Bhalla ] Judge [Dr. Bharat Bhushan Parsoon] Judge