TaxTMI 
TaxTMI 
1990 (4) TMI 41
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....er-firm filed returns of income for the assessment years 1972-73 to 1976-77 and the assessments in respect of the said years were completed by the Income-tax Officer by December 31, 1976. The total income originally assessed for the assessment years 1972-73 to 1976-77 aggregated to Rs. 60,000. After the completion of the said assessments, the partners of the petitioner-firm felt that the incomes returned by them were low and did not represent the actual income earned by them for each of the above years and, therefore, filed revised returns on May 2, 1977, declaring fresh income for each of the years. Under the revised returns, the petitioner declared an additional income of Rs. 2,35,000 for the said five years. According to the petitioner, prior to the filing of the said revised returns, the partners met the Commissioner and explained to him the complete position, and he agreed that if the petitioner filed returns declaring the correct income, the department would not levy any penalties or interest amounts under the various provisions of the Act and that he would waive all penalties by taking recourse to section 273A of the Act. Thereafter, on May 2, 1977, the petitioner-firm de....
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....its real income did not care to disclose the real incomes when it filed the original returns under section 139(1)/139(4). It chose to file the revised returns after the completion of the original assessments on the basis of the original returns with the sole motive of explaining the purchase of a house for which purpose cash of Rs. 2,20,000 was Drought into the books of account by crediting each partner's account with Rs. 44,000 on May 11, 1977. The agreement for the purchase of the house for Rs. 3,25,000 was entered into on February 12, 1977. One of the conditions to be satisfied for the purpose of invoking the powers of waiver or reduction under section 273A is that the disclosure must be in good faith. In the instant case, the assessee deliberately filed returns originally declaring very small incomes compared to the incomes disclosed later and allowed itself to be assessed on small incomes in spite of the fact that all along the assessee was fully aware of its real income because the income as claimed was available with the assessee in the form of cash. Three of the assessments, namely, 1974-75, 1975-76 and 1976-77, were completed on November 30, 1976, December 31, 1976, and De....
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....lusion that the revised returns were not filed in good faith, even though full disclosure of income for all the five assessment years was made and they were accepted by the Income-tax Officer. The petitioner submits that if the assessee honestly disclosed all its income liable to tax, the requirement of "good faith" under section 273A of the Act was satisfied and, therefore, the Commissioner was duty bound to consider the petitioner's application under section 273A by waiving the penalty imposed on it. The petitioner further submits that the fact that before making the disclosure, the petitioner's conduct was dishonest and that it did not act in good faith is irrelevant for purpose of applying the provisions of section 273A of the Act. In the counter-affidavit given by the Commissioner himself, he denied that any assurance was given by him to the petitioner to the effect that levy of penalties and interest would be waived under section 273A of the Act. He also denied that he acted arbitrarily in rejecting the petitioner's waiver petition. It was asserted by the Commissioner that, for the reasons stated by him in his order dated March 12, 1985, he came to the conclusion that the ....
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....tion, the Commissioner has to be satisfied, among others, that the person disclosing the particulars of income has voluntarily and in good faith, made a full and true disclosure of such particulars. A Division Bench of this court considered at length section 273A(1) in Seetha Mahalakshmi Rice and Groundnut Oil Mill Contractors Co. v: CIT [1981] 127 ITR 579, 583, and observed as follows: "Further, this provision would come into play only when the liability of the, assessee to pay penalty is established. If there is no case for the imposition of penalty or that it is not a case where the penalty is imposable under clause (a) of section 271(1), this provision will not be attracted at all. Having found that there is a liability for the assessee to pay penalty under section (1)(i), the Commissioner under the special circumstances indicated therein may exercise his power to either reduce or waive the amount of penalty imposed or imposable on the assessee. This power is a discretionary one to be exercised in appropriate cases judiciously and fairly and in the interest of justice." In that case, the Division Bench was considering reduction/waiver of penalty under section 271(1)(a) an....
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....de a full and true disclosure of the particulars of income which were concealed or earlier inaccurately furnished. In arriving at the conclusion that the petitioner's disclosure of the income was not in good faith, the Commissioner mainly took into consideration the fact that the petitioner did not disclose its full income in its original returns and that it came forward to disclose the concealed income only after the assessments based on the original returns were completed. This cannot be a valid basis for not being satisfied that the petitioner made the said disclosures in May, 1977, in good faith. It is not disputed that the said revised returns were accepted in full without any further additions when the revised assessments were finally made on March 19, 1982, after lapse of nearly five years. This is a pointer to the fact that the disclosures made by the petitioner in respect of the said five assessment years were honest and frank. As observed by the Allahabad High Court in Radhey Shyam Chandrika Prasad v. CIT [1983] 139 ITR 274, 282: "In a case where the income ultimately assessed is the same as that returned or disclosed by the assessee, it is apparent that the assesse....
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....nd concealed the same is immaterial." The other aspect taken into consideration by the Commissioner in arriving at the conclusion that the petitioner's disclosures could not be considered to have been made in good faith was that the said disclosures were made after entering into an agreement for the purchase of a house for Rs. 3,25,000 on February 12, 1977, for which purpose cash of Rs. 2,20,000 was brought into the books of account by crediting each partner's account with Rs. 44,000 on May 11, 1977. It is an admitted fact that, as on the date when the disclosures were made in May, 1977, there was no sale deed executed in respect of the said purchase and in fact even subsequently the said agreement was not pursued further and there was no investment made. We are constrained to observe that the Commissioner was carried away by hyphothetical and imaginary considerations in observing that : "after the investment was made, the assessee became aware that the Department would have knowledge of the transaction as under the provisions of section 230A of Income-tax Act, 1961, the seller who would be presenting the sale deed for registration had to obtain a tax clearance certificate fr....
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.... prefer to follow the decision of the Division Bench of this court and it is observed therein as follows : "The very fact that Parliament designedly empowered the Commissioner to exercise the power suo motu, indicates that this power has to be exercised to do real and substantial justice wherever possible and the discretion vested in him under the section must be exercised judiciously, fairly, reasonably and objectively and to meet the ends of justice, and not arbitrarily or capriciously. The satisfaction of the requirements of the power to be exercised under the section must be an objective satisfaction and not a subjective satisfaction. This satisfaction intended being statutory it can be tested by the courts under article 226 of the Constitution of India. This satisfaction can, by no stretch of imagination, be considered to be subjective one depending upon the view of an individual Commissioner." We are, therefore, satisfied that the conclusion of the Commissioner that the petitioner did not make the disclosure in question in good faith is without any valid basis and is vitiated by extraneous considerations. The Commissioner is not justified in holding that the petitioner ....