Waiver of penalty requires consideration of statutory discretion; rejection for late return alone was quashed and remanded.

The High Court held that rejection of a waiver application under section 273A was unsustainable where the Commissioner declined relief only because the return was filed after the assessment year, without considering the statutory power to reduce or waive penalty under section 271(1)(iii). The court noted that the petitioner had filed the return before initiation of proceedings under section 139(2), and that failure to exercise the relevant discretion vitiated the order. The rejection was quashed and the matter remitted for fresh decision after giving the petitioner an opportunity of hearing.

---

---

Issues: Whether the Commissioner was justified in rejecting the application for waiver of penalty under section 273A of the Income-tax Act, 1961 on the ground that the return was filed beyond the assessment year and whether the order suffered from non-consideration of the statutory power to reduce or waive penalty.

Analysis: The petitioner had filed the return before initiation of proceedings under section 139(2) of the Income-tax Act, 1961 and sought waiver after penalty and interest were imposed. The Commissioner rejected the waiver application mainly because the return was filed after the assessment year had expired, but did not advert to the power under section 273A(1)(ii) to reduce or waive penalty imposed or imposable under section 271(1)(iii). The omission to consider the relevant statutory discretion vitiated the order.

Conclusion: The rejection order was unsustainable and was quashed. The matter was sent back to the Commissioner for fresh decision after giving the petitioner an opportunity of hearing.

---