2001 (8) TMI 87 - HC - Income Tax

Court quashes Commissioner's rejection of waiver applications under Income-tax Act, emphasizes need for judicious discretion.

The court quashed the Commissioner's rejection of applications u/s 273A of the Income-tax Act, 1961 for waiver of interest and penalty by the partners of ... Judicial Discretion, Search And Seizure In Business Premises Of Third Party, Jurisdiction Issues Involved:1. Validity of the rejection of applications u/s 273A of the Income-tax Act, 1961 for waiver of interest and penalty.2. Whether the disclosure of income by the petitioners was voluntary and in good faith.3. Whether the Commissioner properly exercised discretion under section 273A.Summary:1. Validity of the rejection of applications u/s 273A of the Income-tax Act, 1961 for waiver of interest and penalty:The petitioners, partners of Durga Lorry Transporters, challenged the rejection of their applications u/s 273A by the Commissioner of Income-tax, Karnataka (Central), Bangalore. The applications sought waiver of interest and penalty imposed for delayed filing of returns and concealment of income. The Commissioner rejected the applications, stating that the disclosure was made subsequent to a search in the premises of Andhra Cements Limited, indicating it was not voluntary and in good faith.2. Whether the disclosure of income by the petitioners was voluntary and in good faith:The court examined whether the disclosure made by the petitioners on March 30, 1988, was voluntary and in good faith. The term 'voluntary' was interpreted as done without compulsion, and 'good faith' as an honest act. The court noted that the disclosure was made after a search in the premises of a third party (ACC Limited), not directly in the petitioners' premises. The court referred to precedents, including Sujatha Rubbers v. ITO and Anand Kumar Saraf v. CIT, to conclude that a disclosure made under fear of detection does not necessarily negate voluntariness if it is full and true.3. Whether the Commissioner properly exercised discretion under section 273A:The court emphasized that the power u/s 273A is discretionary but must be exercised judiciously and not arbitrarily. The Commissioner must consider all relevant facts and not base the decision on irrelevant factors. The court found that the Commissioner failed to consider the mitigating circumstances and did not provide adequate reasons for concluding that the disclosure was not in good faith. The court held that the Commissioner's order lacked due application of mind and did not reflect a proper understanding of the legal principles governing section 273A.Conclusion:The court quashed the impugned order and remitted the matter to the Commissioner for reconsideration of the applications de novo, in light of the judgment and relevant legal principles. The court directed that the Commissioner must take into account all relevant factors and provide a reasoned decision. The adjustment or refund of monies deposited by the petitioners would await the Commissioner's decision.