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Radhey Shyam Chandrika Prasad Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberCivil Miscellaneous Writ No. 85 of 1977
Judge
Reported in[1983]139ITR274(All)
ActsIncome Tax Act, 1961 - Sections 139(2), 148, 271(1), 273(1), 273A and 273A(1); General Clauses Act, 1897
AppellantRadhey Shyam Chandrika Prasad
RespondentCommissioner of Income-tax
Appellant AdvocateR.K Gulati, Adv.
Respondent AdvocateAshok Gupta, Adv.
Excerpt:
.....is not enough and one of the prime requirements is that the returns should have been filed in good faith. legally and otherwise, the position is well established that nobody knows better than the assessee himself what his real income is. it is obvious from the facts that the declaration of income made by the assessee in his returns or even in his revised return for the assessment year 1973-74 was not full and complete or in good faith. ' 4. these observations show that in the opinion of the commissioner, the requisite conditions for waiving penalty under section 273a, namely, that the disclosure of income by the assessee should have been in good faith and that it should also have been correct, were not satisfied and as such the request made by the petitioner could not be accepted...........is not enough and one of the prime requirements is that the returns should have been filed in good faith. in this case, for both the years, apparently the assessee did not choose to declare his correct income. the very fact that he agreed subsequently to an enhancement of his income to a higher figure shows that the assessee had no intention of declaring his correct income and was keeping back the correct information from the knowledge of the dapartment. this is not a case where the assessee has maintained regular accounts and the account version has been disbelieved. in this case, no proper accounts have been maintained. the business of the assessee is that of abkari contract. he has returned his income by estimate, which on his own admission, were not correct. legally and.....
Judgment:

H.N. Seth, J.

1. This petition under Article 226 of the Constitution, by M/s. Radhey Shyam Chandrika Prasad, hereinafter referred to as the petitioner, is directed against an order dated November 17, 1976, passed bythe Commissioner of Income-tax, Kanpur, refusing to entertain its application under Section 273-A of the I.T. Act, for waiving certain penalties imposed upon it on the ground that the condition precedent for exercise of the power under that section did not exist.

2. The petitioner carried on business in country liquor during the previous, years relevant to the assessment years 1972-73 and 1973-74. It filed income-tax returns disclosing its income as Rs.. 28,900 and Rs. 25,620, respectively, for each of the aforementioned two years. However, it revised its return for the assessment year 1973-74 and disclosed its income for that year as Rs. 30,000. In due course, the ITO, vide order dated December 13, 1971, finalised the assessment of the petitioner at Rs. 35,000 for the year 1972-73 and Rs. 39,000 for the year 1973-74. He also directed that notices be issued to the petitioner to show cause why penalty under Section 271(1)(a) for late filing of the return for the year 1972-73 and that under Section 273(b) of the I.T. Act for not paying the advance tax for the years 1972-73 and 1973-74 be not imposed. Eventually, as the ITO was not satisfied that there was any reasonable cause for the petitioner not to file its income-tax return for the year 1972-73 within time, he imposed upon it a penalty of Rs. 2,544. Likewise as he was not satisfied that there was any reasonable cause for the petitioner for not furnishing an estimate of the advance tax payable by it in accordance with the provisions of Sub-section (3) of Section 212, in either of the two assessment years, he imposed upon it a penalty of Rs. 1,733 for each of the two years. The petitioner then made an application under Section 271(4A) of the I.T. Act, as it stood then, to the Commissioner, praying that the aforementioned penalties imposed by the ITO be waived but then at a later stage it pressed the prayer made by it under Section 273(1) of the I.T. Act.

3. The Commissioner refused the request for waiving the penalties imposed upon the petitioner, vide his order dated November 17, 1976 (annex. F to the writ petition). A perusal of the order shows that he, for the purposes of disposing of the prayer made by the petitioner, assumed that the petitioners had filed the tax returns for both the years voluntarily, and made the following observations :

' For purposes of waiver under Section 273A, however, the mere voluntariness of the returns is not enough and one of the prime requirements is that the returns should have been filed in good faith. In this case, for both the years, apparently the assessee did not choose to declare his correct income. The very fact that he agreed subsequently to an enhancement of his income to a higher figure shows that the assessee had no intention of declaring his correct income and was keeping back the correct information from the knowledge of the Dapartment. This is not a case where the assessee has maintained regular accounts and the account version has been disbelieved. In this case, no proper accounts have been maintained. The business of the assessee is that of Abkari contract. He has returned his income by estimate, which on his own admission, were not correct. Legally and otherwise, the position is well established that nobody knows better than the assessee himself what his real income is. It is obvious from the facts that the declaration of income made by the assessee in his returns or even in his revised return for the assessment year 1973-74 was not full and complete or in good faith.'

4. These observations show that in the opinion of the Commissioner, the requisite conditions for waiving penalty under Section 273A, namely, that the disclosure of income by the assessee should have been in good faith and that it should also have been correct, were not satisfied and as such the request made by the petitioner could not be accepted.

5. Relevant portion of Section 273A which authorises the Commissioner to reduce or waive penalties, etc., runs thus :

' 273A.--(1) Notwithstanding anything contained in this Act, the Commissioner may, in his discretion, whether on his own motion or otherwise,--

(i) reduce or waive the amount of penalty imposed or imposable on a person under Clause (i) of Sub-section (1) of Section 271 for failure, without reasonable cause, to furnish the return of total income which he was required to furnish under Sub-section (1) of Section 139 ; or

(ii) reduce or waive the amount of penalty imposed or imposable on a person under Clause (iii) of Sub-section (1) of Section 271 ; or

(iii) reduce or waive the amount of interest paid or payable under Sub-section (8) of Section 139 or Section 215 or Section 217 or the penalty imposed or imposable under Section 273,

if he is satisfied that such person,--

(a) in the case referred to in Clause (i), has, prior to the issue of a notice to him under Sub-section (2) of Section 139, voluntarily and in good faith made full and true disclosure of his income;

(b) in the case referred to in Clause (ii), has, prior to the detection by the Income-tax Officer, of the concealment of particulars of income or of the inaccuracy of particulars furnished in respect of such income, voluntarily and in good faith, made full and true disclosure of such particulars ;

(c) in the cases referred to in Clause (iii), has, prior to the issue of a notice to him under Sub-section (2) of Section 139, or where no such notice has been issued and the period for the issue of such notice has expired, prior to the issue of notice to him under Section 148, voluntarily and in good faith made full and true disclosure of his income and has paid the tax on the income so disclosedand also has, in all the cases referred to in Clauses (a), (b) and (c), cooperated in any enquiry relating to the assessment of his income and has either paid or made satisfactory arrangements for the payment of any tax or interest payable in consequence of an order passed under this Act in respect of the relevant assessment year.

Explanation.--For the purposes of this sub-section, a person shall be deemed to have made full and true disclosure of his income or of the particulars relating thereto, in any case, where the excess of income assessed over the income returned is of such a nature as not to attract the provisions of Clause (c) of Sub-section (1) of Section 271.'

6. A perusal of the section shows that the Commissioner is enabled to exercise his discretion to reduce or waive a penalty imposed or imposable under Section 271(1)(a) for late filing of the return, if the following conditions exist:

(i) The assessee had voluntarily made a disclosure of his income before any notice under Section 139(2) of the Act had been served upon him.

(ii) the disclosure should have been a full and true disclosure of the assessee's income, made in good faith, and

(iii) the assessee had co-operated in any enquiry relating to the assessment of his income and has either paid or made satisfactory arrangement for the payment of any tax or interest payable in consequence of an order passed under the Act in respect of the relevant assessment year.

7. Likewise, in order to enable the Commissioner to exercise similar discretion in the case of penalty imposed or imposable under Section 273(1) for not paying the advance tax, not only the aforementioned conditions for exercising discretion in the case of penalty imposed or imposable under Section 271(1)(a) have to exist, but the assessee has also to pay the tax on the income so disclosed. However, where notice under Section 139(2) of the Act-has not been issued, the assessee should have voluntarily and in good faith made a disclosure of his true and full income prior to the issue of the notice under Section 148 of the Act,

8. The first condition, namely, that the assessee should have voluntarily made a full and true disclosure of his income before the issue of a notice under Section 139(2) or that issued under Section 148 of the Act, as the case may be, does not necessarily imply that in all the cases a disclosure of the true and full income should have been made at the time of filing of the initial return or that once a return showing an income which may not be true and full has been filed by the assessee, any subsequent-disclosure of true and full income by him before the issue of notice under Section 139(2) or that under Section 148, can be taken into account for considering whether or not a penalty can be waived under Section 273A of the Act. So long as the assessee has, in good faith, made a true and full disclosure of is income either before the issue ofa notice under Section 139(2) or Section 148 of the Act, as the case may be, even if such disclosure has been made at the time of assessment, condition No. 1 would be satisfied and if all other conditions mentioned in the section co-exist, the Commissioner would have ample jurisdiction to deal with the matter in his discretion.

9. Further, the Explanation added to the second proviso provides that for the purposes of the sub-section, a person shall be deemed to have made a full and true disclosure of his income or of the particulars relating thereto, in any case, where the excess of income assessed over the income returned is of such a nature as not to attract the provisions of Section 271(1)(c) of the Act. An excess of the income assessed over the income returned would be of such a nature as to attract the provisions of Section 271(1)(c) of the Act, when it can be shown that such excess represents income, particulars of which have either been concealed or inaccurately furnished by the assessee. The effect of the Explanation added to Section 273A(1), therefore, is that notwithstanding that the income ultimately assessed is more than the income returned by the assessee, it would, for the purpose of this section, be presumed that the assessee had truly and fully disclosed the particulars of his income, unless it can be shown that the income assessed in excess of the returned income is the income, particulars of which have either been concealed or inaccurately furnished by the assessee, i.e., in all cases, where there has been no concealment or inaccurate furnishing of the particulars of his income by the assessee, it will, for the purposes of Section 273A have to be taken that the assessee has truly and fully disclosed his income,

10. In the instant case, it is not disputed that the penalties which the assessee wanted to be waived were of a nature which the Commissioner could, in his discretion, waive or reduce in exercise of his power under Section 273A provided he was satisfied that the petitioner had voluntarily and in good faith made a full and true disclosure of his income as contemplated by Clauses (a) and (c) of Section 273A.

11. A provision similar to that contained in Section 273A of the I. T. Act is to be found in Section 18(2A) of the Wealth-tax Act which runs thus :

' 18(2A). Notwithstanding anything contained in Clause (i) or Clause (iii) of Sub-section (1), the Commissioner may, in his discretion,--

(i) reduce or waive the amount of minimum penalty imposable on a person under Clause (i) of Sub-section (1) for failure, without reasonable cause, to furnish the return of net wealth which such person was required to furnish under Sub-section (1) of Section 14, or

(ii) reduce or waive the amount of minimum penalty imposable on a person under Clause (iii) of Sub-section (1),

if he is satisfied that such person,-- (a) in the case referred to in Clause (i) of this sub-section, has, prior to the issue of notice to him under Sub-section (2) of Section 14, voluntarily and in good faith, made full disclosure of his net wealth.'

12. The meaning and scope of the expression, ' voluntarily and in good faith made full disclosure of his net wealth ' as used in the aforesaid section, came up for consideration before a Division Bench of this court in the case of Hasan Ahmad Khan v. CWT : [1975]99ITR414(All) , which made the following observation (pp. 417, 418):

' Section 18(2A) provides that, if along with certain other matters, the Commissioner is satisfied that the assessee had in good faith made full disclosure of his net wealth, he could, in his discretion, waive the amount of minimum penalty imposable on the assessee. This condition cannot, in our opinion, be split up into two independent conditions in the manner suggested by the learned counsel for the Department; for in a case where the disclosure of net wealth made by the assessee is ultimately found to be correct the question whether it was bona fide or not cannot arise. On the other hand, where' it is found to be incorrect, according to the counsel for the Department the question of bona fides would be irrelevant. In either case, the condition that the assessee should have acted in good faith will have no significance. In our opinion, the condition in fact is a single condition, and all it means is that before exercising jurisdiction under Section 18(2A) the Commissioner has to be satisfied that while disclosing his net wealth fully, the assessee had acted in good faith. As defined in the Central General Clauses Act, an act is deemed to be done in good faith when, whether negligently or not, it is in fact done honestly. Accordingly, the aforesaid condition precedent for exercising jurisdiction under Section 18(2A) is satisfied where an assessee, whether negligently or not, has, while making full disclosure of his net wealth, acted honestly......Theexpression ' in good faith made full disclosure of his net wealth ' merely means that the assessee should have honestly described all his assets and liabilities which go to constitute his net wealth, along with their estimated value. If this has been done, it would become possible for the Commissioner to consider the assessee's application for waiving the penalty imposable upon him under Section 18(2A) of the Act on merits. It follows that before exercising his jurisdiction to reduce or waive the amount of penalty as specified in Section 18(2A), the Commissioner should apply his mind to the fact whether the assessee had acted honestly in disclosing all the particulars required to be mentioned in the return......'

13. Likewise in Clauses (a) and (c) of Section 273A as well, the expression ' in good faith made full and true disclosure of his income' should also be interpreted as laying down a single condition which cannot be split upinto two different conditions, namely, that the disclosure should be made in good faith and that it should be a full and true disclosure. All that the expression means is that before exercising jurisdiction under Section 273A, the Commissioner must be satisfied that while disclosing his income the assessee had acted in ' good faith ', and that as defined in General Clauses Act, an act is deemed to be done in good faith whether negligently or not if it is in fact done honestly. Accordingly, where an assessee discloses his income which he honestly believes to be 'true and full, it can be said that he has, in good faith, made a full and true disclosure of his income, within the meaning of that expression as used in Clauses (a) and (c) of Section 273A. In a case, where the income ultimately assessed is the same as that returned or disclosed by the assessee, it is apparent that the assessee has made a full and true disclosure of income and no question of lack of good faith can possibly arise. In such a case, the assessee will be deemed to have made a full and true disclosure of his income in a bona fide manner and if other conditions under Section 273A are satisfied, the Commissioner would have jurisdiction to consider the assessee's application for waiver of penalty imposed or imposable either for late filing of the return or for not paying the advance tax. It is only in a case, where the ultimate assessment made by the I. T. authorities is more than the income disclosed by the assessee that the question whether the assessee honestly believed the income disclosed by' him to be true and full can possibly arise. However, as provided in the Explanation added to Section 273A, the law presumes that every disclosure of income is true and full, unless the excess of the assessed income over the returned income can be said to be the income which had either been concealed by the assessee or the particulars whereof had been inaccurately furnished by him. It is only in a case, where to begin with the assessee had at one stage concealed the particulars of his income or had furnished inaccurate particulars thereof (as contemplated by Section 271(1)(c) of the Act) but had subsequently, before the issue of notice either under Section 139(2) or Section 148 of the Act, as the case may be, disclosed his true and full income, which is different from that ultimately assessed, that the question of considering whether the disclosure made by the assessee had been made in good faith or not arises. All other cases will fall in the category where the disclosure is either in fact true and full or it will be presumed to be true and full and the question of considering whether the same had been made in good faith simply does not arise. Accordingly, the mere fact that either the income assessed was actually more than the income returned or disclosed by the assessee or that the assessee had actually agreed to a higher assessment would, by itself, not oust the jurisdiction of the Commissioner to deal with the application under Section 273A. In such cases, the Commissioner will have to find if the excess income as assessed over the returnedincome, represented income which had either been concealed or particulars whereof had been furnished inaccurately and whether at any subsequent stage, prior to the issue of the notice under Section 139(2) or Section 148, as the case may be, the assessee had, in good faith, truly and fully disclosed his income.

14. The impugned order passed by the Commissioner, merely proceeds on the basis that as the assessee had agreed to a higher assessment and as he did not maintain proper accounts it would mean that he had no intention of disclosing the income correctly and that the disclosure of income was neither full nor complete, nor was it made in good faith. He did not go into the question as to whether despite the shortcomings, in not maintaining proper account bonks, the excess of income assessed over that disclosed by the assessee in each of the two years could be said to be the assessee's concealed income or the income particulars whereof had been wrongly given or whether at any stage subsequent to the filing of the return right up to the date of making the assessment but before the issue of the notice under Section 139(2) or Section 148, as the case may be, the assessee had in good faith truly and fully disclosed his income.

15. It is true that in his counter-affidavit, the Commissioner has stated that while making the order, he had taken the Explanation to Section 273A, also into consideration. However, he did not give any reason as to why he considered that the excess of income assessed over and above that returned by the assessee, amounted to its being concealed income or income particulars whereof had been inaccurately furnished.

16. We, therefore, find that the Commissioner has not looked into the matter from a correct point of view, and the impugned order cannot be allowed to stand. The matter has to go back to the Commissioner for being decided afresh and in accordance with law.

17. Before parting with the case, we would like to point out that in his counter-affidavit, the Commissioner has asserted that in this case, the assessee did not disclose his income voluntarily and as such the condition for considering the application for waiving the penalty as laid down in Section 273A of the Act did not exist. As already stated, the impugned order proceeds on the assumption that the disclosure of income made by the petitioner was voluntary. We find that the Commissioner has not given any such finding, as is now being asserted by him in the counter-affidavit, in the impugned order passed by him.

18. Learned counsel for the Commissioner further contended that in the circumstances of the case, the filing of the return as also the disclosure of income made by the assessee could not be said to have been done voluntarily, and cited a number of cases in support of his admission. Learned counsel for the assessee urged that a disclosure of income should, in thecircumstances, be considered to have been made voluntarily. The parties also advanced arguments on the question as to whether or not the income assessed over and above the income returned by the assessee was of the nature as contemplated by Section 271(1)(c) of the I.T. Act. However, all these questions will have to be decided by the Commissioner when the matter goes back to him and he proceeds to deal with the application, for waiving the penalty, made by the petitioner. As we do not have the full facts to satisfactorily pronounce upon the aforementioned controversy, we refrain from expressing any opinion thereon.

19. The petition, therefore, succeeds and is allowed. The order dated November 17, 1976, passed by the Commissioner, Kanpur, is quashed. He will now proceed to decide the application made by the petitioner, under Section 273A of the I.T. Act, afresh and in accordance with law. In the circumstances, we make no order as to costs of this petition.


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