1993 (11) TMI 21 - HC - Income Tax

Court quashes orders, remands for reasoned assessments. Emphasizes transparency in penalty waivers. Parties bear own costs.

The court allowed the writ petitions, quashing the impugned orders and remanding the matter to the Commissioner of Income-tax for passing reasoned orders ... Bona Fide, Waiver Of Penalty And Interest Issues Involved:1. Full waiver of interest and penalties under Section 273A of the Income-tax Act.2. Absence of reasons for partial waiver of interest and penalties by the Commissioner of Income-tax.Issue-wise Detailed Analysis:1. Full Waiver of Interest and Penalties Under Section 273A of the Income-tax Act:The petitioner, a truck owners' association, filed writ petitions against the common order dated January 14, 1981, passed by the Commissioner of Income-tax, Jaipur, for the assessment years 1975-76 and 1976-77. The petitioner sought a full waiver of interest charged under Sections 139(8) and 217 of the Income-tax Act, 1961, and penalties under Sections 271(1)(a) and 273 of the Act. The Commissioner reduced but did not fully waive the interest and penalties.The petitioner argued that since the Commissioner found all conditions under Section 273A satisfied, the interest and penalties should have been waived in full. The conditions included voluntary filing of returns before detection by the Assessing Officer, full and true disclosure, and cooperation with the Department. The petitioner cited several judgments to support the argument that discretion under Section 273A must be exercised judiciously and not arbitrarily.The court examined the statutory discretion under Section 273A, emphasizing that while the Commissioner has the discretion to reduce or waive penalties and interest, this discretion must be exercised judiciously and with cogent reasons. The court noted that the terms 'voluntarily,' 'good faith,' and 'full and true disclosure' are significant and must be considered in the context of the statute.The court concluded that in cases of bona fide mistakes where all conditions under Section 273A are met, the norm should be a full waiver of penalties, with partial waiver being an exception requiring cogent reasons. For interest, full waiver should not be granted unless the assessee provides strong grounds justifying such a waiver.2. Absence of Reasons for Partial Waiver of Interest and Penalties by the Commissioner of Income-tax:The petitioner contended that the Commissioner did not provide reasons for not granting a full waiver of interest and penalties. The court agreed, stating that the Commissioner must give reasons for exercising discretion to reduce rather than fully waive penalties and interest. This duty arises from the statutory language of Section 273A, which requires the Commissioner to exercise discretion judiciously and transparently.Upon reviewing the impugned order, the court found that while the Commissioner noted the conditions under Section 273A, he did not provide reasons for the partial waiver. The absence of reasons indicated a lack of due and active application of mind, rendering the order legally deficient.Conclusion:The court allowed the writ petitions, quashing the impugned orders and remanding the matter to the Commissioner of Income-tax for passing reasoned orders for the assessment years 1975-76 and 1976-77. The court emphasized the necessity of providing reasons for any decision to partially waive penalties and interest, ensuring that such discretion is exercised judiciously and transparently. Each party was directed to bear its own costs.