2000 (2) TMI 73 - HC - Income Tax

Court quashes denial of waiver on tax penalties, emphasizes fair discretion

The High Court allowed the writ petition, quashing the order denying waiver of interest and penalty for the assessment year 1988-89 under section 273A of ... Interest And Penalty, Waiver of Issues Involved:1. Waiver of interest and penalty for the assessment year 1988-89 under section 273A of the Income-tax Act, 1961.2. Discretionary power of the Commissioner of Income-tax in granting waivers.3. Interpretation of section 273A(3) regarding multiple assessment years.4. Requirement for reasonable and fair exercise of discretion by the Commissioner.Detailed Analysis:1. Waiver of Interest and Penalty for the Assessment Year 1988-89:The petitioner, a registered partnership firm, filed returns for the assessment years 1987-88 and 1988-89 belatedly but voluntarily, paying the taxes due along with the returns. They sought waiver of penalties and interest under section 273A of the Income-tax Act, 1961. The Commissioner waived the levies for 1987-88 but rejected the waiver for 1988-89, considering it a separate disclosure. The petitioner argued that the grounds for waiver were identical for both years and that they had complied with all conditions under section 273A.2. Discretionary Power of the Commissioner:The Commissioner has discretionary power under section 273A to waive penalties and interest if the conditions are met. The petitioner contended that they had made a full and true disclosure before any notice was issued and had paid the taxes due, thus fulfilling the conditions for waiver. The court noted that the Commissioner must exercise this discretion reasonably and fairly, providing reasons for rejecting a waiver request.3. Interpretation of Section 273A(3):Section 273A(3) indicates that once an order is made under subsection (1), the assessee cannot seek relief for other assessment years. However, judicial interpretations, such as the Karnataka High Court's decision in CIT v. Mansaram Sukhdev Gunj, suggest that an application for waiver can cover multiple years and be considered together. The court found that the Commissioner should consider the waiver request for 1988-89, as the conditions and grounds for both years were identical.4. Requirement for Reasonable and Fair Exercise of Discretion:The court emphasized that the Commissioner's discretion must be exercised in a reasonable and fair manner. The Supreme Court in Smt. Harbans Kaur v. CWT highlighted that this discretion should be exercised transparently. The petitioner had voluntarily disclosed their income and cooperated with the assessment process, satisfying the conditions under section 273A. The court concluded that the Commissioner's summary rejection of the waiver for 1988-89 was unjustified, especially when the grounds for both years were the same.Conclusion:The High Court allowed the writ petition, quashing the impugned order regarding the waiver of interest and penalty for the assessment year 1988-89. The matter was remitted to the Commissioner for fresh consideration in accordance with the law, directing the Commissioner to exercise the discretion reasonably and fairly. The court reiterated the need for the Commissioner to provide reasons for rejecting waiver requests and to consider applications covering multiple years comprehensively.