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Mool Chand Mahesh Chand Vs. Commissioner of Income-tax and anr. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberCivil Miscellaneous Writ No. 325 (Tax) of 1977
Judge
Reported in[1978]115ITR1(All)
ActsIncome Tax Act, 1961 - Sections 271(1), 271(1A), 273 and 273A
AppellantMool Chand Mahesh Chand
RespondentCommissioner of Income-tax and anr.
Appellant AdvocateR.K. Gulati, Adv.
Respondent AdvocateAshok Gupta, Adv.
Excerpt:
.....as the petitioner had concealed the income with reference to the years 1963-64 to 1970-71, he filed an application for the waiver of penalty before the income-tax officer. along with the application for waiver the petitioner had also filed an application for disclosure requesting that the income disclosed by him be permitted to be spread over the years 1963-64 to 1971-72. this application was subsequently revised by the petitioner and the disclosure application for spreading over the entire income was restricted to the years 1965-66 to 1971-72. the final position with reference to the various years along with the particulars of the revised returns as well as the initial returns would appear from the chart given below: , the returns should have been filed voluntarily, are not..........as the initial returns would appear from the chart given below:assessment yeardate of filing the returnsincome returnedrevised return filedfirst timesecond time rs. 1963-6424-3-7216,500--1964-6525-3-671,508--1965-6624-3-7218,60014,200/ 1-3-75-1966-6724-3-7219,65014,850/ 1-3-75-1967-6824-3-7220,90016,200/ 1-3-75-1968-6924-3-7222,44028,150/ 1-3-75-1969-7025-3-708,09626,490/24-3-7248,600/5-5-751970-71 6-3-717,19126,090/24-3-7237,600/5-5-751971-7224-3-7225,54026,550/ 5-5-75-4. the petitioner again filed a fresh application for the waiver of the penalty under section 271(4a) of the act. however, before this application forwaiver was moved the income-tax officer had already issued notices under section 148 for the assessment years 1965-66 to 1968-69 and 1970-71. so far as the assessment.....
Judgment:

K.C. Agrawal, J.

1. This is a petition under Article 226 of the Constitution for a writ of certiorari quashing the order of the Commissioner of Income-tax dated 18th May, 1977, rejecting the application filed by the petitioner under Section 273A(i)(ii)(b) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act').

2. The petitioner is a Hindu undivided family carrying on business in sarafa and money-lending. It was assessed to income-tax for the assessment year 1964-65. It, however, did not file returns in respect of the assessment years 1965-66 to 1968-69. For the assessment years 1969-70 and 1970-71 returns were filed on 25th March, 1970, and 6th March, 1971, respectively. It appears that while dealing with the case of the year 1969-70, the Income-tax Officer concerned considered it necessary to verify the correctness and completeness of the returns filed by the petitioner. Hence, a notice was issued on February 8, 1971, under Section 143(2) of the Act requiring the presence of the petitioner. The petitioner's representative appeared on September 22, 1971, before the Income-tax Officer. On the aforesaid date the Income-tax Officer required the petitioner to file further details in respect of matters which are mentioned below :

(1) Details of capital account from 1963-64 to date with details of all investments year-wise, and particulars of personal expenses, including marriages, deaths and illness in the family in those years;

(2) Detailed family tree with age, educational qualifications, etc., ofeach living or deceased coparcener during these years ;

(3) Detailed copies of profit and loss account, balance-sheet and personal account for all the years ;

(4) Valuation certificates of the bagh including plantation and irrigation facilities installed and house and shops from an approved valuer;

(5) Details of all bank or post office accounts or deposits and shares, etc., held in the name of any of the coparceners.

(6) Details of all furniture, fittings and assets of domestic nature, viz., sofa, wardrobes jewellery, etc., acquired during these years with cost and date of acquisition.

(7) Copies of all bank accounts from date of inception to date and details of lockers held, if any.

3. After the aforesaid date, the petitioner took several adjournments. On 24th March, 1972, he filed revised returns for the assessment years 1969-70 and 1970-71 as well as returns for the years 1963-64 to 1971-72. As the petitioner had concealed the income with reference to the years 1963-64 to 1970-71, he filed an application for the waiver of penalty before the Income-tax Officer. It, however, appears that on being subsequently advised that the application for waiver of penalty had to be moved to the Commissioner of Income-tax, the petitioner filed another application for the waiver. This application was addressed to the Commissioner of Income-tax through the Income-tax Officer, Fatehgarh. Along with the application for waiver the petitioner had also filed an application for disclosure requesting that the income disclosed by him be permitted to be spread over the years 1963-64 to 1971-72. This application was subsequently revised by the petitioner and the disclosure application for spreading over the entire income was restricted to the years 1965-66 to 1971-72. The final position with reference to the various years along with the particulars of the revised returns as well as the initial returns would appear from the chart given below:

Assessment year

Date of filing the returns

Income returned

Revised return filed

First time

Second time

Rs.

1963-64

24-3-72

16,500

-

-

1964-65

25-3-67

1,508

-

-

1965-66

24-3-72

18,600

14,200/ 1-3-75

-

1966-67

24-3-72

19,650

14,850/ 1-3-75

-

1967-68

24-3-72

20,900

16,200/ 1-3-75

-

1968-69

24-3-72

22,440

28,150/ 1-3-75

-

1969-70

25-3-70

8,096

26,490/24-3-72

48,600/5-5-75

1970-71

6-3-71

7,191

26,090/24-3-72

37,600/5-5-75

1971-72

24-3-72

25,540

26,550/ 5-5-75

-

4. The petitioner again filed a fresh application for the waiver of the penalty under Section 271(4A) of the Act. However, before this application forwaiver was moved the Income-tax Officer had already issued notices under Section 148 for the assessment years 1965-66 to 1968-69 and 1970-71. So far as the assessment years 1969-70 and 1971-72 are concerned, the Income-tax Officer issued notices under Section 148 of the Income-tax Act on 24th March, 1975, and 20th March, 1975, respectively.

5. The assessments for all these aforesaid years, viz., 1965-66 to 1971-72, were completed on 17th March, 1975. While making the assessment orders, the Income-tax Officer also issued notices to the petitioner in respect of the years mentioned above under Sections 271(1)(c), 271(1A) and 273. Thereafter, a letter was received by the petitioner from the office of the Commissioner of Income-tax stating that as there had been an amendment to the Income-tax Act with effect from 1st October, 1975, and Section 271(1A) had been replaced by Section 273A, the petitioner's application filed earlier for the waiver of penalty had become infructuous and that the petitioner could file another application under the newly added section, if so advised. Consequently, the petitioner filed a fresh application for waiver on 11th May, 1976. The said application was considered by the Commissioner of Income-tax and was thereafter rejected by an order dated 18th May, 1977. The order passed by the Commissioner rejecting the application reads as under :

'I have gone through the records. Apart from the survey report referred to above, for the assessment year 1969-70 notice under Section 139(2) was issued and served on the assessee on 30th December, 1969. Thereafter, the facts were considered in detail as per entries in the order-sheet. Detailed inquiry on different points were initiated and the assessee was required to furnish information on seven points (Entry dated 22-9-71). The application for spread over was made only in February, 1972. Therefore, the requisite conditions, viz., the returns should have been filed voluntarily, are not satisfied. Hence there cannot be any waiver of penalties under Sections 271(1)(a) or 273(b). Since the case was detected by the department prior to disclosure, Section 271(1)(a) would also apply. A note on the above lines may be endorsed and the Income-tax Officer may be directed to impose the penalties for the various years.

I also find that the then Commissioner of Income-tax had while accepting spread over had not given any assurance about waiver and had given a direction that it should be considered on merits.

Sd. A. R. Natarajan

18-5-77.'

6. Aggrieved by the aforesaid ordor rejecting the application for waiver, the present writ petition was filed in this court.

7. Before dealing with the points raised in this petition we consider it necessary to extract the relevant portions of Section 273A under which the application was filed by the petitioner for the waiver of the penalty.

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

(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..... if he is satisfied that such person--...

(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 ;.....'

8. The first submission made by the learned counsel in support of the writ petition was that the Commissioner of Income-tax having not given an opportunity of oral hearing before rejecting the application filed by the petitioner under Section 273A, the impugned order is invalid and was thus liable to be quashed. Admittedly, there is no provision in Section 273A of the Act providing for an opportunity of hearing to be given to an asscssee who files an application for waiver or reduction of the penalty imposed or imposable. In fact, there is no provision in the Act providing for oral hearing. It would be seen from the scheme of the Act that wherever an oral hearing is required to be given, it is specifically so provided in those provisions. There is nothing in Section 273A of the Act requiring the Commissioner of Income-tax to give an oral hearing before deciding the application. The question, however, that arises for consideration is whether the principles of natural justice could be invoked to the present proceedings contemplated by this Act and the requirement of giving an oral hearing be insisted upon on that basis. It is well settled that the requirement of the rules of natural justice are that a man shall not be a judge in his own cause and, secondly, that a man may not be condemned unheard without his being made aware of the charge which he has to meet. The requirement of giving a hearing flows from the principle of fairness which has to be observed in administrative as well as quasi-judicial proceedings. Normally, a hearing means oral hearing at which the party may be legally represented. But in a suitable case the hearing may be held on paper by permitting the person concerned to make his representation and the arguments in writing. A personal hearing is riot always a concomitant of the principles of natural justice. Dealing with the question of oral hearing the Supreme Court in Union of India v. Jyoti Prakash Mitter, AIR 1971 SC 1093, observed at page 1103 :

'But it is not necessarily an incident of the rules of the natural justice that personal hearing must be given to a party likely to be affected by the order. Except in proceedings in courts, a mere denial of opportunity ofmaking an oral representation will not, without more, vitiate the proceeding.'

9. Similar was the view taken by the Supreme Court in State of Assam v. Gauhati Municipal Board, AIR 1967 SC 1398. In this case the Supreme Court observed that where the Board, which was to be superseded had been given notice calling upon it to file an explanation before the order of supersession was passed, the giving of such an opportunity of filing a representation complies with the requirement of law and that the order could not be quashed simply because a personal hearing was not granted to the Board before superseding.

10. It, therefore, appears to be settled that merely because the petitioner was not given an oral hearing before the impugned order was passed the same cannot be declared to be invalid. In a case, therefore, where representation has been filed in writing setting forth the entire case which a party has to put forward for getting the relief that would meet the requirement of the principles of natural justice and no further opportunity in that regard is required to be given.

11. In the instant case, it would, however, be seen that the application was filed by the petitioner under Section 273A for the waiver of the penalty. Section 273A of the Act gives the various grounds on which an application for the waiver can be filed. The facts, which according to the case of the petitioner entitled him to get the relief contemplated by Section 273A, were known to him. He mentioned all those facts in the application and stated therein that he filed the returns voluntarily and in good faith after having made true and full disclosure of such particulars as were required by the law. It was this application which was considered by the Commissioner of Income-tax and rejected as, in his opinion, no grounds were made out for the relief. The Commissioner of Income-tax could not and in fact did not rely on any fact while rejecting the application which was not known to the petitioner and which had taken him by surprise. He considered the facts and found that as the returns were not filed voluntarily, no relief could be given to the petitioner. In view of the above, we find that the petitioner had full and complete opportunity to make a representation. Hence, the first submission made by the learned counsel for the petitioner has no merit and is thus rejected.

12. The second submission advanced was that the order passed by the Commissioner of Income-tax being not a speaking order, having met or decided all the points raised by the petitioner, the same was illegal. The requirement of giving reasons for an order derives its authority from the maxim that justice should not only be done but also be seem to be done. If an authority discharging quasi-judicial functions gives reasons for the order, that would carry credibility with the people by inspiring confidencein the adjudicatory process. In Siemens Engineering and . v. Union of India, AIR 1976 SC 1785, the Supreme Court, while dealing with this question, observed at page 1789 ;

'It is now settled law that where an authority makes an order in exercise of a quasi-judicial function, it must record its reasons in support of the order it makes. Every quasi-judicial order must be supported by reasons..... The rule requiring reasons to be given in support of an orderis, like the principle of audi alteram partem, a basic principle of natural justice which must inform every quasi-judicial process and this rule must be observed in its proper spirit and mere pretence of compliance with it would not satisfy the requirement of law.'

13. It is, therefore, beyond controversy that the reasons must be recorded by quasi-judicial authority while deciding a matter.

14. Shri Ashok Gupta, counsel for the revenue, however, urged that as Section 273A confers absolute power on a Commissioner of Income-tax to reject an application tiled under the aforesaid section, therefore, the proceedings under this section are not quasi-judicial. In support of his argument he relies on the expression 'in his discretion' used in this Section and urged that the discretion exercised by the Commissioner of Income-tax cannot be interfered with by laying down the requirement of giving reasons in support of it. In our opinion, since the discretion conferred by the provision is coupled with the duty to be performed by the Commissioner of Income-tax, it cannot be construed as conferring absolute discretion upon a Commissioner of Income-tax to pass any order which he pleases to make. The Commissioner is required to consider the application on merits and if the conditions for the exercise of the powers are made out he is obliged to exercise the discretion in favour of such an assessee. It is not permissible that the Commissioner of Income-tax may reject an application under Section 273A although the grounds for granting the relief have been made out. Whether he would reduce or waive the amount of penalty imposed or imposable is of course a matter of discretion but that too will have to be exercised keeping in view the facts of the case, and not arbitrarily. The power has to be exercised only in conformity with the provisions of the section and the Act. In Kundan Lal Behari Lal v. Commissioner of Wealth-tax [1975] 98 ITR 359 (All), while dealing with a similar provision of waiver of penalty contained in Section 18(2A) of the Wealth-tax Act, a Division Bench of this court observed that the Commissioner cannot refuse to exercise the power on the ground that it is discretionary. It is coupled with a duty. Accordingly, we are not prepared to hold that the power conferred by Section 273A was not quasi-judicial in nature.

15. So far as the merits of the point urged is concerned, we have already quoted the order by which the application filed by the petitioner wasrejected, While rejecting the application the Commissioner of income-tax found that the returns were filed by the petitioner only after a detailed inquiry on different points had been initiated against him. It further says that since the case of the petitioner was detected by the department prior to disclosure under Section 271(1)(a) of the Act, the petitioner could not be granted any relief under Section 273A. In our opinion, the reasons given by the Commissioner of Income-tax are cogent and sufficient. These reasons cannot be said to be laconic or nebulous as was urged by the learned counsel for the petitioner. The grounds on which the application of the petitioner was rejected are made out from the section itself. Accordingly, the second submission also is devoid of substance.

16. The third submission advanced was that the Commissioner of Income-tax committed an error in holding that the petitioner did not file the returns for the years 1964-65 to 1970-71 prior to the detection of the concealment of the particulars of income. The submission made has no substance. It is to be noticed that while dealing with the case of the year 1969-70 the petitioner was asked on 22nd September, 1971, to give details with respect to a number of things mentioned above. It was only after the petitioner had come to know that the information called for by the Income-tax Officer, vide the aforesaid order in the course of the proceedings for the assessment year 1969-70, could put him to difficulty and that his game was up, and he would have to face the consequences, that he made the disclosure by filing the returns on 24th March, 1972. It may be true that the information was sought by the Income-tax Officer while dealing with the assessment years 1969-70, but the details of the information sought for were of far-reaching consequences and the same were likely to put the petitioner in trouble if the same would not have been disclosed. The word 'detection' has not been defined in the Act. It does not, therefore, have a rigid meaning. When a word is not defined in an Act itself, it is permissible to refer to the dictionary meanings to find out the general sense in which that word is understood. In this connection, the context of the subject also becomes necessary. In Black's Dictionary, the word 'detection' has several meanings. One of them is investigation while the other is to follow up step by step by patient inquiry or observation. It would, therefore, mean that even a case where the Income-tax Officer starts investigation by laying open what was concealed or hidden or what continued to elude observation, would also be covered in a case of detection within the meaning of that word. In the instant case, it is only when the Income-tax Officer detected the concealment of the particulars that he made inquiry with respect to the matters mentioned above. Accordingly, it is not possible to say that the returns for the years 1963-64 to 1968-69 had been filed by thepetitioner prior to the detection of the concealment of the particulars of the income.

17. In these circumstances, the filing of the revised returns, as a matter of fact, was not the voluntary act of the petitioner. Hence, it cannot be said that the Commissioner of Income-tax committed any mistake in holding that the filing of the returns by the petitioner was not voluntary. Shri R. K. Gulati, counsel for the petitioner, however, emphasised that since the inquiry was made in the assessment year 1969-70, the deduction, if any, was with respect to the concealment of particulars of that year and the prayer for the waiver of the penalty in respect of other years could not be rejected on that ground. It is true that the information was called for in the course of the proceedings for the assessment year 1969-70, but the same was of such a nature that would have enabled the Income-tax Officer to reopen the case of the petitioner of the previous years as well. Hence, on the facts and in the circumstances of the case, it could not be said that the detection of the concealment of the particulars of income was found by the Income-tax Officer in respect of that year alone.

18. The last submission made by the petitioner was that the prayer made by the petitioner was not only confined to Section 273A(1)(ii)(b) but was also one under Sub-section (4) of Section 273A and as the Commissioner did not pass any order on the relief made on the basis of Section 273A, therefore, the order was liable to be set aside. We have perused the application filed by the petitioner and found nothing in the said application which could be said to have been filed under Sub-section (4) of Section 273A. The petitioner did not make any prayer under this Sub-section. Hence, the order of the Commissioner of Income-tax could not be said to be invalid on that ground.

19. In the result, the writ petition fails and is dismissed with costs.


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