TaxTMI 
TaxTMI 
2006 (6) TMI 82
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....earched on December 24, 1985. FDRs worth Rs. 1,05,000 in the name of the wife of the petitioner apart from jewellery belonging to his wife were found in search. The Department seized the FDRs and jewellery. The petitioner negotiated with the Department and agreed to surrender an income of Rs. 70,000 out of the FDRs that were in the name of his wife. He wrote a letter to the Department to the following effect: "You have been very kind to me in giving that assurance and the Inspecting Assistant Commissioner also that if I surrender Rs. 70,000 on account of investment in FDRs purchased by my wife from her Stridhan, as my income for the assessment years 1985-86 and 1986-87, the cases will be completed on the basis of the declared income and no penalty, interest, prosecution, matters will follow. It was also assured that you would be kind enough to accept the valuation of jewellery as belong to my wife." In response to this letter the Department also wrote a letter which reads as under: "This is in response to your letter No. Nil dated April 10, 1987, received on the same date, regarding settlement and waiver of penalty proceedings. Your application for the same has been accept....
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....ns of the Income-tax Act in view of specific rules 40 and 117A of the Income-tax Rules. The question relating to initiation and levy of penalty or dropping the same, is also covered within the scope of powers of the Assessing Officer. Hence, the acceptance of the offer by the Assessing Officer was fully within the legislative competence. Neither the assessee nor the Assessing Officer could retract from the said offer duly accepted by the Assessing Officer by exchange of the abovereferred letter dated 10th April, 1987." Counsel for the petitioner submitted that the Assessing Officer was liable to consider the waiver of interest even without making an application by him in view of the observations of the Tribunal. However, interest was not waived by the Assessing Officer and the petitioner made an application for waiving of interest on March 25, 2004. No action was taken on this application. The petitioner sent repeated reminders and the impugned orders dated December 12, 2005, were passed which are reproduced as under: Order I Income Tax Department Name of the assessee : Shri R.C. Gupta Assessment year &....
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....tioner's application for waiver was rejected without assigning any reason, much less good and sufficient reason. The grounds given by the petitioner in the written arguments were not at all considered and the respondent in a mechanical manner, rejected the application. The respondent was liable to allow the waiver of interest in view of the letter written by the Department to the petitioner at the time of the petitioner conditionally agreeing to surrender income of Rs. 70,000 out of the FDRs of his wife. The respondent was bound by the promise made to the petitioner and principle of promissory estoppel would apply. It is contended by the Department that the orders passed by the Assessing Officer give sufficient reasons. The interest of Rs. 2,609 only was charged from April 1, 1986 to March 31, 1987. Although the assessment was made after one year from the date of filing of return, the interest was charged less as per rule 40(1) and the application was therefore rejected. The case of the appellant was not covered under any of the five sub-rules of rule 40 or rule 117A of the Income-tax Rules. It is submitted by the respondent that this court should not exercise its power under....
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.... of India [2002] 255 ITR 476 observed as under: "Although the Commissioner is a high dignitary but it is trite that he must exercise his discretion judicially. Discretion cannot be exercised in a whimsical or fanciful manner. The Commissioner while exercising his jurisdiction under section 264 of the Income-tax Act exercises a judicial function and assignment of reasons is one of the basic ingredients of natural justice." In Chaitnya Charan Das v. State of West Bengal, AIR 1995 Cal 336 the Calcutta High Court held: "50. The submission of learned counsel appearing on behalf of the respondents to the effect that the Central Government has an unfettered discretion in the matter of grant of pension and thus, these writ applications should not be entertained cannot again be accepted. 51. Discretion as is well known must be exercised by the State in a reasonable manner. 52. In Ramji Dayawala and Sons P. Ltd. v. Invest Import, AIR 1981 SC 2085, the Supreme Court while considering the exercise of discretion by a court observed: 'Discretion, said Lord Mansfield in R v. Wikes [1770] 98 ER 327, "when applied to a court of justice, means sound discretion guided by law. It mus....