1973 (2) TMI 51 - HC - Wealth-tax

Court clarifies discretionary power under Wealth-tax Act; emphasizes service of notices for compliance

The court held that the discretionary power of the Commissioner under section 18(2A) of the Wealth-tax Act must be exercised if conditions exist, ... Waiver or reduction of penalty under section 18(2A) - 'Issue' construed as 'serve' in relation to notices - Discretion coupled with a duty to exercise statutory power - Writ of mandamus directing exercise of statutory discretionDiscretion coupled with a duty to exercise statutory power - Waiver or reduction of penalty under section 18(2A) - Whether the Commissioner's power under section 18(2A) is purely discretionary and non-justiciable or is a discretion coupled with a duty amenable to judicial review - HELD THAT: - The Court held that the power under section 18(2A) is conferred for the benefit of an assessee and, where the statutory circumstances calling for its exercise exist, the Commissioner cannot refuse to exercise it merely because the provision uses permissive language. Precedents were relied upon to show that enabling words may nonetheless create a duty to act where rights of citizens are involved. The consequence is that the exercise or refusal to exercise the power is amenable to writ jurisdiction under Article 226 if exercised contrary to law or arbitrarily. The Court rejected the contention that the provision is immune from judicial review as purely administrative.Power under section 18(2A) is a discretion coupled with a duty and amenable to judicial review; the Commissioner must exercise the jurisdiction lawfully when the conditions for relief are shown to exist.'Issue' construed as 'serve' in relation to notices - Waiver or reduction of penalty under section 18(2A) - Whether the word 'issue' in section 18(2A) means mere awareness of the department or requires actual service of the notice - HELD THAT: - The Court reviewed earlier judicial interpretations and concluded that 'issue' should be read to mean 'serve'. The legislature was aware of the judicial meaning and there is no indication it intended a different sense. Accordingly, an assessee who makes a full and voluntary disclosure before a notice under section 17 is served on him remains, subject to other conditions, entitled to have the Commissioner consider waiver or reduction of penalty under section 18(2A). The Court rejected the narrower construction urged by the Commissioner that 'issue' equated to departmental awareness.The word 'issue' in section 18(2A) means 'serve', and service of a notice under section 17, not mere awareness, is the operative event for depriving an assessee of the benefit under section 18(2A).Writ of mandamus directing exercise of statutory discretion - Waiver or reduction of penalty under section 18(2A) - Whether the Commissioner's order rejecting the petitioner's application under section 18(2A) should be quashed and the matter remitted for fresh decision in accordance with law - HELD THAT: - Applying the legal conclusions on construction and on the nature of the discretion, the Court found that the Commissioner had applied an incorrect principle by treating 'issue' as departmental awareness and thereby declined to exercise jurisdiction. The Court observed that the Commissioner did not record that the other statutory conditions (voluntary and full disclosure, good faith, cooperation, arrangements for tax payment) were absent; indeed, the Commissioner had waived penalty for 1964-65 on the same factual matrix. In these circumstances the Commissioner was directed by writ of certiorari to quash his order, restore the application to its original number and decide it afresh in accordance with the law and the observations made by the Court.Impugned order quashed; Commissioner directed to restore and re-decide the application under section 18(2A) afresh in accordance with law and the Court's observations.Final Conclusion: The Commissioner's order dated September 7, 1972 is quashed; the petitioner's application under section 18(2A) is to be restored and decided afresh in accordance with law (including the construction that 'issue' means 'serve'), and the petitioner is awarded costs. Issues Involved:1. Discretionary power of the Commissioner under section 18(2A) of the Wealth-tax Act.2. Timing and validity of notices issued under section 17 of the Wealth-tax Act.3. Interpretation of the term 'issue' in section 18(2A) of the Wealth-tax Act.4. Requirement of notice under section 14(2) of the Wealth-tax Act.5. Administrative vs. quasi-judicial nature of the Commissioner's order under section 18(2A).Comprehensive, Issue-wise Detailed Analysis:1. Discretionary Power of the Commissioner under Section 18(2A) of the Wealth-tax Act:The petitioner argued that the Commissioner's power under section 18(2A) is discretionary but must be exercised if the conditions for its exercise exist, as the power is coupled with a duty. The court agreed, stating that the power conferred under section 18(2A) is for the benefit of the assessee, and if the circumstances calling for its exercise exist, the Commissioner cannot refuse to exercise it on the ground that it is discretionary. The court cited several precedents, including Goverdhan Lal Jagadish Kumar v. Commissioner of Income-tax and L. Hirday Narain v. Income-tax Officer, to support this view.2. Timing and Validity of Notices Issued under Section 17 of the Wealth-tax Act:The petitioner contended that the notices under section 17 were issued after he had filed his returns and were ante-dated. The court found no material evidence to support this claim and dismissed it. The court emphasized that mere declaration of intention to file returns does not amount to full disclosure of net wealth as required by section 18(2A).3. Interpretation of the Term 'Issue' in Section 18(2A) of the Wealth-tax Act:The petitioner argued that the term 'issue' in section 18(2A) should be interpreted to mean 'serve.' The court agreed, citing judicial interpretations where 'issue' has been held to mean 'serve,' including Sri Nivas v. Income-tax Officer and Banarsi Debi v. Income-tax Officer. The court reasoned that Parliament must have been aware of these interpretations and used the term in that sense. Consequently, the court concluded that a notice cannot be said to have been issued unless it is served, and if an assessee makes a disclosure before a notice is served, he is entitled to the benefit under section 18(2A).4. Requirement of Notice under Section 14(2) of the Wealth-tax Act:The petitioner claimed that no notices under section 14(2) were issued to him. The court found no material difference between a notice under section 17 and a notice under section 14(2), as both require an assessee to file a return. Therefore, this contention was dismissed.5. Administrative vs. Quasi-judicial Nature of the Commissioner's Order under Section 18(2A):The department argued that the order under section 18(2A) is administrative and not subject to writ jurisdiction. The court found this contention without merit, stating that even administrative orders are amenable to writ jurisdiction if they are contrary to law. The court noted that the impugned order was passed after an oral hearing, making the distinction between administrative and quasi-judicial orders less relevant in this case.Conclusion:The court allowed the writ petition, quashed the Commissioner's order dated September 7, 1972, and directed the Commissioner to restore the petitioner's application under section 18(2A) and decide it afresh in accordance with the law and the court's observations. The petitioner was awarded costs.