Charanjit Talwar, J.
1. The petitioner herein, Shri Chhotey Lal Bharany, has challenged the legality of the order passed by the Commissioner of Income-tax, Delhi, on June 20, 1970, whereby the application moved on behalf of the petitioner for waiving the penalty under section 271(4A) of the Income-tax Act, 1961, was rejected.
2. The impugned order deals with two applications filed by the petitioner seeking waiving of the penalty imposable for furnishing late returns for the assessment years 1963-64 and 1964-65.
3. In the present petition, the challenge is to the order regarding the return filed on April 8, 1967, for the assessment year 1964-65. It is admitted by the petitioner that the return was filed late and as such penalty was livable under section 271(1)(a) of the Act for the said assessment year. However, the case of the petitioner is that he had filed the return prior to the issue of notice to him under sub-section (2) of of section 139 of the Act. The return filed was not only voluntary but was made in good faith inasmuch as he had made full disclosure of his income. Thus, the Commissioner of Income-tax failed to exercise discretion vested in him in not reducing or waiving the penalty, it is urged.
4. At this stage, it is appropriate to notice the impugned order as far as it is relevant to decide the question raised in the petition :
'4. For the year 1963-64, penalty amounting to Rs. 3,316 has already been imposed by the Income-tax Officer, Distt. VIII(3), vide his order dated February 5, 1970. The provisions of section 271(4A) apply only to those cases where penalty proceedings are pending and penalty is still imposable. Since in this case penalty under section 271(1)(a) had already been levied on February 5, 1970, before the assessed filed his petition under section 271(4A) on June 2, 1970, his request for waiver of penalty already imposed for 1963-64 is not maintainable and the same is hereby rejected.
5. The return for 1964-65 was filed on April 8, 1967, declaring the total income of Rs. 62,750, while income was assessed at Rs. 65,506. The assessed went in appeal before the Appellate Assistant Commissioner who upheld a part of the addition made by the Income-tax Officer to the trading results. Thus, the disclosure made cannot be regarded as a full disclosure of the income of the assessed as contemplated by section 271(4A). The petition for the assessment year 1964-65, thereforee, is rejected.
Commissioner of Income-tax, Delhi-1,
5. It is obvious that the only ground on which the Commissioner rejected the application, copy of which is annexure 'H' to the writ petition was that the disclosure made by the assessed could not be regarded as full disclosure of his income for the said year as contemplated by section 271(4A) of the Act.
6. I may note here another fact. The petitioner had challenged the order of the Appellate Assistant Commissioner, referred to in the abodequoted order of the Commissioner, before the Income-tax Appellate Tribunal. The Revenue had also filed an appeal against that very order. The two appeals were decided by a common order of December 22, 1970, While dismissing the appeal filed by the Income-tax Officer and allowing the appeal of the assessed (in part) it was observed :
'The application of the proviso to section 145 is undoubtedly called for. However, we feel that the estimate of sales at Rs. 90,000 is somewhat excessive. We have in the last year's appeal estimated the sales at Rs. 80,000 which, we direct, may be repeated in this year as well.'
7. A copy of that order is annexure 'D' to this writ petition.
8. The finding that proviso to section 145 was attracted is a finding of fact. As per that proviso, 'in any case where the accounts are correct and complete to the satisfaction of the Income-tax Officer but the method employed is such that, in the opinion of the Income-tax Officer, the income cannot properly be deduced there from, then the computation shall be made upon such basis and in such manner as the Income-tax Officer may determine'.
9. In view of the order of the Tribunal, it has to be held that the petitioner had furnished correct and complete accounts but because the method employed was such that income could not be properly deduced, the income-tax authorities have computed the income in the manner determined by them. To attract the provision contained in section 145, the return has to be correct and complete which means that the disclosure made therein must be 'full'. An assessed is free to choose a proper method of accounting but, in case the Income-tax Officer is of the opinion that profits and gains cannot be deduced from the method employed, he has the discretion to choose the basis and manner for computation of the income. The pre-condition, however, is that the accounts must be held to be correct and complete. In the present case, that has been held so. The word 'complete', in this context, means free from deficiency, entire or perfect. The finding of the Commissioner in the impugned order that the petitioner had not made full disclosure and, thereforee, the discretion ought not to be exercised in his favor, is wrong, and is liable to be set aside.
10. I may note here that Shri Prem Nath, Commissioner of Income-tax, has filed a counter-affidavit in opposition to the writ petition wherein he has averred to additional reasons than the one given in the order for rejecting the application of the petitioner. In reply to paragraph 10(ii) of the petitioner, it is, inter alia, urged :
'I say that although I had received the application of the petitioner under section 271(4A) before the assessment was made and penalty was levied yet I was of the opinion that the disclosure made by the assessed of his income assessable for the year 1964-65 was not complete. However, the application under section 271(4A) was made on June 2, 1970, whereas returns were submitted on April 8, 1967. The petitioner ought to have submitted his application to me either along with the submitting of the return or immediately thereafter indicating that he had made the necessary arrangements for the payment of taxes. I further say that on reading the application, I was also of the opinion that the delay in the submission of returns for the assessment years 1964-65 and 1963-64 was inordinate. I further say when I passed the order under section 271(4A) dated June 20, 1970, I found that the income returned by the assessed had been enhanced by the Income-tax Officer against which the assessed had gone in appeal to the Appellate Assistant Commissioner who had upheld a part of the enhancement made by the Income-tax Officer. Since, the penalty livable by the Income-tax Officer depended on the quantum of of the total income on which the petitioner was ultimately to be assessed after the appeals were decided, I could not at that stage reduce or waive the penalty. The petitioner need not entertain any grievance in this respect. He has alternate remedies to contest the levy of penalties imposed by the Income-tax Officer under the other provisions of the Act by way of first and second appeals.'
11. The further reasons that the returns had been filed very late (although notice under section 139 had not been issued to the assessed) and that the Commissioner could not at that stage reduce or waive the penalty are contrary to the only reason stated in the impugned order.
12. The view which I am taking is supported by the contention urged in the counter-affidavit that the Commissioner ought not to have at that stage found that the full disclosure had not been made in the return. The return was filed voluntarily. As per the finding of the Tribunal, by virtue of proviso to section 145, those were correct and complete. The finding that those were not 'full' as per the impugned order, on the respondent's own showing in the counter-affidavit, cannot be upheld.
13. The result is that the petition succeeds and the impugned order dated June 20, 1970, is quashed. The matter is sent bank to the Commissioner of Income-tax for decision of the application (copy annexure 'H') made by the assessed, in so far as it relates to the year 1964-65 in accordance with law. In the circumstances, no order as to costs.