Skip to content


Harjas Rai Vs. Commissioner of Income-tax and anr. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case NumberCivil Writ Petition Nos. 4170 to 4172 of 1979
Judge
Reported in(1982)26CTR(P& H)51; [1982]138ITR77(P& H)
ActsIncome Tax Act, 1961 - Sections 139, 139(2), 139(8), 148, 271, 271(1) and 273A
AppellantHarjas Rai
RespondentCommissioner of Income-tax and anr.
Appellant Advocate Ashok Bhan, Adv.
Respondent Advocate D.N. Awasthy, Adv.
Cases ReferredMadhukar Manilal Modi v. Commissioner of Wealth
Excerpt:
.....payable in consequence of an order passed under the act in respect of the relevant assessment year. assessment year 1971-72. though section 18(2a)(a) uses the word 'voluntarily',the said word has to be read with the expression :made full disclosure of his net wealth'.the condition which the legislature has imposed is that in cases where an assessee has, prior to the issue of notice to him under section 14(2), filed a return but has not done so within the time limited by law, he must satisfy the commissioner that he has made full disclosure of his net wealth voluntarily and in good faith. on a true construction of section 18(2a), we have there held that the word 'voluntarily' occurring in the relevant statutory provision has to be read with 'made full disclosure of his net wealth'..........not exceed fifty per cent. of the amount of the tax, if any, which would have been avoided, if the income returned by such person had been accepted as the correct income ; (iii) in the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount of tax sought to be evaded by reason of the concealment' of particulars of his income or the furnishing of inaccurate particulars of such income : provided that, if in a case falling under clause (c), the amount of income (as determined by the income-tax officer on assessment) in respect of which the particulars have been concealed or inaccurate particulars have been furnished exceeds a sum of twenty-five thousand rupees, the income-tax officer shall not.....
Judgment:

Sukhdev Singh Rang, J.

1. This judgment will dispose of Civil Writ Petitions Nos. 4170, 4171, 4172 of 1979, as similar questions of law and fact have been raised in these petitions. A reference to the facts in Civil Writ Petition No. 4170 of 1979 will be beneficial to understand the issues raised in all the petitions.

2. Harjas Rai is the partner of M/s. Nauhria Ram Krishan Kumar, Moga. The petitioner-firm is assessed to income-tax since the assessment year 1970-71. The petitioner was required to file the return for the assessment year 1976-77 of the total income under Section 139(1) of the I.T. Act (hereinafter called 'the Act'), on or before 31st July, 1976. The petitioner had an impression that he had filed this return but in fact later on facts revealed that he had not done so. Therefore, he filed a return for the assessment year 1976-77 on 8th July, 1978. He also filed an application under Section 273A of the Act to the Commissioner of Income-tax, Jullundur, praying that the amount of penalty imposable under Section 271 of the Act for failure to file the return within time be waived. The petitioner had deposited the tax due for that year. He also co-operated with the department for assessment purposes. No notice under Section 139(2) of the Act had been issued to the petitioner. The ITO initiated proceedings for the levy of penalty under Section 271(1)(a) of the Act and issued directions for charging of interest under Section 139(8) of the Act, vide order dated 21st November, 1978, because the Commissioner had not disposed of the petitioner's application under Section 273A of the Act till 21st November, 1978. Those proceedings are still pending. The Commissioner rejected the application of the petitioner under Section 273A of the Act, vide his order dated 13th March, 1979, on the ground that the petitioner was being taxed regularly since 1970-71, and for that reason the return filed was not voluntary. The petitioner challenged this order through Civil Writ Petition No. 1675 of 1979- The case came up for hearing before a Bench consisting of R.N. Mittal and J.V. Gupta JJ. After hearing the learned counsel for the parties, the writ petition was allowed and the order dated 13th March, 1979, was set aside and the case was remanded to be decided afresh after giving a hearing to the petitioner. The order of the Division Bench reads as under :

'The petitioner has filed this writ petition for quashing the order dated 13th March, 1979, Ex. P-3, passed by the Commissioner of income-tax refusing to waive the penalty in exercise of his powers under Section 273A of the Income-tax Act, 1961. Mr. Awasthi, learned counsel for the respondents has very fairly conceded that the order cannot be supported in the writ petition and that the Commissioner shall decide the matter afresh after giving a hearing to the petitioner. In view of the aforesaid concession, we accept the writ petition and quash the impugned order with no order as to costs. The petitioner is directed to appear before the Commissioner on 20th August, 1979. '

3. Thereafter, the case was again taken up by the Commissioner. After hearing the parties, he dismissed the application on the ground that the petitioner was a partner in the firm, M/s. Nauhria Ram Krishan Kumar. This firm was registered under the provisions of the I.T. Act. It was assessed to income-tax since the assessment year 1970-71. Its registration had been continuously renewed at the instance of its partners. The petitioner was also an assessee since 1970-71. The departmental authorities know that his income for the year in question was taxable. The petitioner also knew this fact. Therefore, the return was not filed and the disclosure of the income was not made by the petitioner voluntarily. It was done under constraint. He held that ' the specific knowledge with ITO would be a constraint on the assessce to file a return or to make a disclosure of the income '. Even if a notice under Sections 139(2) and 148 of the Act had not been issued by the time the return was filed and a disclosure of the income was made, still such notices would obviously have been issued. So, this knowledge will demolish the claim of the assessee that the disclosure of income by him was made of his own free will and voluntarily. He, however, agreed with the petitioner that the return in disclosure had been made before issuances of notice under Section 139(2) or Section 148 of the Act and that the petitioner had co-operated with the department and had paid taxes, etc. He dismissed the application. The facts in the other three petitions are also similar. It will be apposite to notice the statutory provisions at this stage:

' 139. (1) Every person, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall furnish a return of his income or the income of such other person during the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed-

(a) in the case of every person whose total income, or the total income of any other person in respect of which he is assessable under this Act, includes any income from business or profession, before the expiry of four months from the end of the previous year or where there is more than one previous year, from the end of the previous year which expired last before the commencement of the assessment year, or before the 30th day of June of the assessment year, whichever is later ;

(b) in the case of every other person, before the 30th day of June of the assessment year:

Provided that, on an application made in the prescribed manner, the Income-tax Officer may, in his discretion, extend the date for furnishing the return, and notwithstanding that the date is so extended, interest shall be chargeable in accordance with the provisions of Sub-section (8).

(1A) Notwithstanding anything contained in Sub-section (1), no person need furnish under that Sub-section a return of his income or the income of any other person in respect of whose total income he is asscsssable under this Act, if his income or, as the case may be, the income of such other person during the previous year consisted only of income chargeable under the head 'Salaries' or of income chargeable under that head and also income of the nature referred to in any one or more of Clauses (i) to (ix) of Sub-section (1) of Section 80L and the following conditions arc fulfilled, namely:--

(a) where he or such other person was employed during the previous year by a company, he or such other person was at no time during the previous year a director of the company or a beneficial owner of shares in the company (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) carrying not less than twenty per cent, of the voting power ;

(b) his salary or the salary of such other person, exclusive of the value of all benefits or amenities not provided for by way of monetary payment, does not exceed eighteen thousand rupees;

(c) the amount of income of the nature referred to in Clauses (i) to (ix) of Sub-section (I) of Section 80L, if any, does not, in the aggregate, exceed three thousand rupees ; and

(d) the tax deductible at source under Section 192 from the income chargeable under the head ' Salaries ' has been deducted from that income.

Explanation.--For the purposes of this Sub-section, 'salary' shall have the meaning assigned to it in Clause (1) of Section 17.

(2) In the case of any person who, in the Income-tax Officer's opinion, is assessable under this Act, whether on his own total income or on the total income of any other person during the previous year, the Income-tax Officer may, before the end of the relevant assessment year, issue a notice to him and serve the same upon him requiring him to furnish, within thirty days from the date of service of the notice, a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed :

Provided that, on an application made in the prescribed manner, the Income-tax Officer may, in his discretion, extend the date for furnishing the return, and, notwithstanding that the date is so extended, interest shall be chargeable in accordance with the provisions of Sub-section (8)....'

'271. (1) If the Income-tax Officer or the Appellate Assistant Commissioner or the Commissioner (Appeals) in the course of any proceedings under this Act, is satisfied that any person-

(a) has without reasonable cause failed to furnish the return of total income which he was required to furnish under Sub-section (1) of Section 139 or by notice given under Sub-section (2) of Section 139 or Section 148 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by Sub-section (1) of Section 139 or by such notice, as the case may be, or

(b) has without reasonable cause failed to comply with a notice under Sub-section (1) of Section 142 or Sub-section (2) of Section 143 or fails to comply with a direction issued under Sub-section (2A) of Section 142, or

(c) has concealed the particulars of his income or furnished inaccurate particulars of such income,

he may direct that such person shall pay by way of penalty,--(i) in the cases referred to in Clause (a),--

(a) in the case of a person referred to in Sub-section (4A) of Section 139, where the total income in respect of which he is assessable as a representative assessee does not exceed the maximum amount which is not chargeable to income-tax, a sum not exceeding one per cent. of the total income computed under this Act without giving effect to the provisions of Sections 11 and 12, for each year or part thereof during which the default continued;

(b) in any other case, in addition to the amount of the tax, if any, payable by him, a sum equal to two per cent. of the assessed tax for every month during which the default continued ;

Explanation.--In this clause, 'assessed tax' means tax as reduced bythe sum, if any, deducted at source under Chapter XVII-B or paid inadvance under Chapter XVII-C ;

(ii) in the cases referred to in Clause (b), in addition to any tax payable by him, a sum which shall not be less than ten per cent. but which shall not exceed fifty per cent. of the amount of the tax, if any, which would have been avoided, if the income returned by such person had been accepted as the correct income ;

(iii) in the cases referred to in Clause (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount of tax sought to be evaded by reason of the concealment' of particulars of his income or the furnishing of inaccurate particulars of such income :

Provided that, if in a case falling under Clause (c), the amount of income (as determined by the Income-tax Officer on assessment) in respect of which the particulars have been concealed or inaccurate particulars have been furnished exceeds a sum of twenty-five thousand rupees, the Income-tax Officer shall not issue any direction for payment by way of penalty without the previous approval of the Inspecting Assistant Commissioner. '

' 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 disclosed,

and 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.

(2) Notwithstanding anything contained in Sub-section (1),--

(a) if in a case the penalty imposed or imposable under Clause (i) of Sub-section (1) of Section 271 or the minimum penalty imposable under Section 273 for the relevant assessment year, or, where such disclosurerelates to more than one assessment year, the aggregate of the penaltyimposed or imposable under the said clause or of the minimum penaltyimposable under the said section for those years, exceeds a sum of fiftythousand rupees, or

(b) if in a case falling under Clause (c) of Sub-section (1) of Section 271, the amount of income in respect of which the penalty is imposed or imposable for the relevant assessment year, or, where such disclosure relates to more than one assessment year, the aggregate amount of such income for those years, exceeds a sum of five hundred thousand rupees,

no order reducing or waiving the penalty under Sub-section (1) shall be made by the Commissioner except with the previous approval of the Board.

(3) Where an order has been made under Sub-section (1) in favour of any person, whether such order relates to one or more assessment years, he shall not be entitled to any relief under this section in relation to any other assessment year at any time after the making of such order.

(4) Without prejudice to the powers conferred on him by any other provision of this Act, the Commissioner may, on an application made in this behalf by an assessee, and after recording his reasons for so doing, reduce or waive the amount of any penalty payable by the assessee under this Act or stay or compound any proceeding for the recovery of any such amount, if he is satisfied that-

(i) to do otherwise would cause genuine hardship to the assessee, having regard to the circumstances of the case ; and

(ii) the assessee has co-operated in any enquiry relating to the assessment or any proceeding for the recovery of any amount due from him.

(5) Every order made under this section shall be final and shall not be called into question by any court or any other authority. '

4. Mr. Ashok Bhan, the learned counsel for the petitioners, has argued that the petitioners had complied with all the requirements of Section 273A. Returns had been filed and the petitioners had voluntarily and in good faith made full and true disclosure of their income before the issuance of any notice under Section 139(2) or under Section 148 of the Act. The Commissioner had misdirected himself in law when he held that the specific knowledge with the ITO that the assessee was enjoying a taxable income would be a constraint on the assessee to file a return or to make a declaration of the income. He contended that the petitioners had voluntarily made returns and had voluntarily and in good faith disclosed their income and had complied with the other provisions of Section 273A of the Act.

5. Mr. D.N. Awasthy, the learned counsel for the Revenue, has, on the other hand, argued that the order passed by the Commissioner was perfectly legal, valid and just. Since the petitioners were assessees and the ITO knew that they had earned taxable income and, in fact, the advance tax demand had been made on the assessees, the ITO was bound to issue notice under Section 139(2). The returns filed by the petitioners and the disclosures made by them of their respective incomes were not voluntary.

6. I have carefully considered the contentions raised by the learned counsel for the parties and perused the record. In my view the orders of the Commissioner are not sustainable in law. Admittedly, no notices under Section 139(2) or Section 139(1) of the Act had been issued to the petitioners when they filed the returns and made disclosures of their income. They had on their own accord submitted these returns and made the disclosures. Nobody had asked, much less coerced, them to do so because it was purely a volitional act on the part of the petitioners. The mere fact that the petitioners were assessees of income-tax or advance tax demand had been made or that the ITO knew that the petitioners had earned taxable income will not be sufficient to hold that the returns filed and the disclosures made by the petitioners were not voluntary. The knowledge with the ITO cannot act as a constraint on the petitioner. If this interpretation is accepted then no person, who is already an assessee, can avail of the concession provided by Section 273A. The setting and the context of Section 273A of the Act do not support the interpretation put on the word 'voluntary' by the Commissioner. The Legislature wanted to encourage voluntary disclosures of income. For this purpose, they provided an inducement in the form of reduction or waiver of penalty. This provision has to be liberally construed. The Commissioner has put a very narrow construction, which is not supported even by the dictionary meaning of the word 'voluntary'. The matter is not res integra. The I.T. Act has been recently amended and Section 273A has been incorporated. Previously, a provision in similar language was incorporated in Section 271(4A) of the Act. While interpreting Section 271(4A), as it stood before the amendment, which is in pari materia with Section 273A, Rajindra Nath Mittal J. in Dr. Paramjit Singh Grewal v. CIT held (headnote):

'Tender Section 271(4A) of the I.T. Act, 1961, penalty imposable on an assessee can be waived in the cases referred to in Clause (i) if the Commissioner is satisfied, firstly, that the assessee has voluntarily and in good faith made full disclosure of his income prior to the issue of notice to him under Section 139(2), secondly, that the assessee co-operates in an enquiry relating to the assessment of such income and, thirdly, has either paid or made satisfactory arrangement for the payment of tax or interest payable in consequence of an order passed under the Act in respect of the relevant assessment year. The Act nowhere provides that if the person concerned is an assessee in the previous years and had been submitting returns, he is not entitled to the benefit of the section. If that had been the intention of the Legislature it would have specifically said so in the Act. Further, the provisions of a taxing statute have to be construed strictly. If the person makingan application under the section fulfils the requirements of the section, the Commissioner has to decide the question of waiving the imposition of penalty on merits in each case.'

7. It was concluded (headnote):

' That the Commissioner took into consideration irrelevant matters, viz., that the assessee was assessed to tax for a number of years prior to the relevant assessment year and by submitting the returns under Section 139(1) after the due date he could not be considered to have made any disclosure in terms of Section 271(4A) and, therefore, the order of the Commissioner was liable to be quashed. However, the Commissioner could reconsider the matter afresh after taking notice of the relevant considerations as provided in Section 271(4A).'

8. The provisions of Section 18(2A) of the W.T. Act are also in pari materia with the provisions of Section 273A of the Act. In Madhukar Manilal Modi v. CWT : [1978]113ITR318(Guj) , a Division Bench of the Gujarat High Court held (headnote):

' Firstly, that the Commissioner completely misdirected himself in law in reading into Section 18(2A) the condition, that the assessee had not voluntarily filed returns for the two assessment years in question since he did so only after he was asked to do so during the course of the assessment proceedings for the; assessment year 1971-72. Though Section 18(2A)(a) uses the word 'voluntarily', the said word has to be read with the expression :'made full disclosure of his net wealth'. The condition which the Legislature has imposed is that in cases where an assessee has, prior to the issue of notice to him under Section 14(2), filed a return but has not done so within the time limited by law, he must satisfy the Commissioner that he has made full disclosure of his net wealth voluntarily and in good faith. The word 'voluntarily', therefore, has not to be read in the context of the filing of the return.

Secondly, by the mere fact that a return has been filed under the advice, suggestion or even at the behest (otherwise than by a notice under Section 14(2) of the Wealth-tax Officer, it does not cease to be a voluntary return.

Thirdly, there is nothing in Section 18(2A) which restricts the relief to assessees who file their returns for the first time. Imposition of such a condition would amount to addition of a new condition in the relevant statutory provision.

Therefore, the Commissioner, upon an apparent misconstruction of the scope of his statutory power, had refused to exercise the discretion vested in him by law and the assessee was entitled to succeed.'

9. The same Bench interpreted the provisions of Section 271(4A) in Mahavir Transport Co. Ltd. v. CIT, : [1978]113ITR360(Guj) as under (p. 362):

' Now, we had today an occasion to deal with a case arising under Section 18(2A) of the Wealth-tax Act, which provision is identical to the provision of Section 271(4A) of the Act under consideration (see Special Civil Application No. 1265 of 1975 decided on February 16/17, 1978--since reported as Madhukar Manilal Modi v. Commissioner of Wealth-tax : [1978]113ITR318(Guj) . In that case also on a similar ground the relief under Section 18(2A) was rejected by the Commissioner. On a true construction of Section 18(2A), we have there held that the word 'voluntarily' occurring in the relevant statutory provision has to be read with 'made full disclosure of his net wealth' and that the concept of voluntary filing of return is irrelevant for the purpose of grant of relief except to the extent that it must be shown that the return was not filed pursuant to a notice issued under Section 14(2). Since the language of Section 18(2A) and Section 271(4A) is in pari materia, so far as the point under consideration is concerned, we must, following the said decision, hold in the present case that the relief which the petitioner sought was refused to him on a total misconstruction of the relevant statutory provision which resulted in failure on the part of the Commissioner to exercise the discretion which was vested in him.'

10. The same view has been taken by other High Courts in Shankara Apaya Swami v. WTO : [1976]103ITR649(KAR) , S. Sannaiah v. CIT : [1974]95ITR435(KAR) and Kundan Lal Behari Lal v. CWT : [1975]98ITR359(All) .

11. In fairness to Mr. Awasthy, two decisions cited by him may be noticed at this stage. The first is a Division Bench judgment of the Allahabad High Court in Mool Chand Mahesh Chand v. CIT : [1978]115ITR1(All) . The facts of that case are totally different. In that case while dealing with the assessment year 1969-70, the ITO asked the assessee to give details with respect to a number of matters. The petitioner filed returns for those years. It was held on the facts of that case that the returns for the earlier period were not filed prior to the detection of concealment of the particulars of income. The present is not a case of concealment. The second case is again a decision of the Division Bench of the Allahabad High Court in Hakam Singh v. CIT : [1980]124ITR228(All) . In that case, the business premises of the assessee had been searched by the officers of the I.T. Dept. and certain books were seized. After that, the assessee had filed certain returns and then claimed concessions under Section 273A of the Act. It was held that since the returns were not voluntary because they were filed long after a search operation was carried out and the books of account of the assessee were seized, the returns were prompted by a sense of fear. They were not voluntary. However, in the present cases, there was no raid or seizure of books. The two authorities cited by Mr. Awasthy have been given in the peculiar facts of those particular cases. The facts of those cases which have no parallel with the facts of the present cases do not lay down any general proposition of law.

12. For the foregoing reasons, I allow Writ Petitions Nos. 4170, 4171 and 4172 of 1979, set aside the orders of the Commissioner declining relief on application under Section 273A of the Act and remand the cases to the Commissioner for a fresh decision in accordance with law and the observations made in this judgment. The penalty proceedings in the case of Harjas Rai also fall with the orders of the Commissioner. The Department will be entitled to take these proceedings only if the Commissioner decides against the petitioners.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //