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Fairdeal Motors and Smt. Shama Mir Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtJammu and Kashmir High Court
Decided On
Case NumberIncome-tax Reference Nos. 6 and 7 of 1973
Judge
Reported in[1975]101ITR687(J& K)
ActsIncome Tax Act, 1961 - Sections 147, 271(1), 271(4A) and 256(2)
AppellantFairdeal Motors and Smt. Shama Mir
RespondentCommissioner of Income-tax
Appellant Advocate G.C. Sharma,; R. Chawla and; R.N. Kaul, Advs.
Respondent Advocate J.N. Bahn, Adv.
Cases ReferredV. Khandvala. v. Commissioner of Income
Excerpt:
- alt, c.j.1. these are references by the income-tax appellate tribunal, delhi bench, under section 256 of the income-tax act (hereinafter referred to as the act), stating the following questions of law for our opinion :in the case of fair deal motors '1. whether, on the facts and in the circumstances of the case, the letter of the commissioner of income-tax dated march 13, 1968, amounts to an order under section 271(4a) ? if the answer to the above question is in the affirmative, whether the commissioner had reduced or waived the penalty below the minimum provided for under the statute and restricted it to 20% of the tax attributable to the income from new bharat transporters ' in the case of shnmati shama mir '1. whether, on the facts and in the circumstances of the case, the letter of.....
Judgment:

Alt, C.J.

1. These are references by the Income-tax Appellate Tribunal, Delhi Bench, under Section 256 of the Income-tax Act (hereinafter referred to as the Act), stating the following questions of law for our opinion :

In the case of fair deal Motors

'1. Whether, on the facts and in the circumstances of the case, the letter of the Commissioner of Income-tax dated March 13, 1968, amounts to an order under Section 271(4A) ?

If the answer to the above question is in the affirmative, whether the Commissioner had reduced or waived the penalty below the minimum provided for under the statute and restricted it to 20% of the tax attributable to the income from New Bharat Transporters '

In the case of Shnmati Shama Mir

'1. Whether, on the facts and in the circumstances of the case, the letter of the Commissioner of Income-tax dated March 13, 1968, amounts to an order under Section 271(4A) ?

2. If the answer to the above question is in the affirmative, whether the Commissioner of Income-tax had waived the penalty imposable on the assessee for the assessment year 1964-65 ?'

2. In order to understand the scope and ambit of the references, it may be necessary to state a few facts which have culminated in the order of the Tribunal making refere ices to this court at the instance of the assessees. In Income-tax Reference No. 6 of 1973, Messrs. Fairdeal Motors v. Commissioner of Income-tax, the assessees were registered as a firm under the Act with the following partners sharing profits in the ratio shown against each:

Shri Bashir Ahmad 25%Shrimati Shama Mir 25%Shri Abdul Rashid 15%Shrimati Hajra Begum 19%Shri Ghulam Qadir 8%Shrimati Fatima Begum 8%

3. There was another concern known as New Bharat Transporters which was supposed to be a branch of the Fairdeal Motors, but whose income was not included or shown by the assessee-firm, Fairdeal Motors. The present reference arises out of the income of the assessee for the assessment years 1964-65 and 1965-66. The main grievance of the assessee was actually against the order of the Inspecting Assistant Commissioner who imposed penalties on the assessee to the tune of Rs. 21,821 for the assessment year 1964-65 and Rs. 14,722 for the assessment year 1965-66. At the time the assessees filed their returns, certain incomes accruing from the New Bharat Transporters and the amount of interest were not shown in their income. Meanwhile, Parliament introduced a new section, Section 271(4A) , which empowered the Commissioner to enter into a settlement with the assessees by waiving or reducing the penalty which they might have incurred for non-disclosure of their income. Being obvious of the fact that the new amendment would prove beneficial to the assessees if they disclosed their income and admitted in tacit terras that they had concealed the income of the New Bharat Transporters which was a part of the firm, Fairdeal Motors, the assesses wrote a letter to the Commissioner ofIncome-tax for arriving at a settlement with him if he agreed to reduce the income by 20% only in respect of the New Bharat Transporters on the assessment or revised assessment of the assessees. In this connection certain proposals were made by the assessees to the Commissioner of Income-tax who having accepted the proposals wrote to the assessees by his letter dated March 13, 1968, that he was prepared to grant certain concession to the assessees in view of the proposals made to him. At the same time, however, the Commissioner of Income-tax imposed certain conditions regarding payment of penalties. It may be pertinent to set out the letter written by the Commissioner of Income-tax to Shri Bashir Ahmad, one of the main partners of the firm:

'With reference to the representation made by you and your counsel before me and your letter dated 23rd December, 1967, to the Income-tax Officer, Central VIII, Delhi, I write to place in record the proposals made by you before me, viz.,

(a) the firm of Fairdeal Motors shall be allowed to be treated as a registered firm.

(b) Shri Ghulam Qadir shall be treated as the benamidar of Shri Bashir Ahmad and the latter's share will be taken to be 33% from 1962-63 onwards.

(c) Shrimati Fatima Begum will be treated as the benamidar of Shrimati Shama Mir and the latter's share will be taken to be 33% from 1962-63 onwards,

(d) the business in the name of New Bharat will be treated as a branch of Fairdeal Motors.

2. I am prepared to agree to the above proposals if you accept the following conditions :--

(i) A minimum penalty of 20% will be imposed under Section 271(1)(c) on Messrs. Fairdeal Motors in respect of the income of New Bharat Transporters which is now agreed to be a branch of the former for the years 1963-64 to 1967-68.

(ii) A minimum of 20% will be imposed under Section 271(1)(c) on Shri Bashir Ahmad in respect of the income of Nav Bharat Transporters which is now agreed to be the proprietary concern of Shri Bashir Ahmad for the years 1964-65 to 1967-68.

(iii) In arriving at the income of Messrs. New Bharat Transporters the story of hiring of truck from the minor children of Shri Bashir Ahmad and Shrimati Shama Mir will not be accepted and the entire income including the alleged payment to the minors will be treated as the income of Messrs. Fairdeal Motors.

You are requested to furnish the written concurrence of Shri Bashir Ahmad, Shrimati Shama Mir and Messrs. Fairdeal Motors to the terms setout in this letter by the 16th instant and also to produce the books of Nav Bharat Transporters and New Bharat Transporters immediately before the Income-tax Officer.'

4. The terms and conditions contained in this letter were categorically accepted by the assessees and accordingly the Income-tax Officer assessed the assessee for the assessment years 1964-65 and 1965-66 on the basis of the settlement arrived at between the assessees and the Commissioner of Income-tax. By virtue of the assessment order the firm was treated as a registered firm and the income from the New Bharat Transporters was included in the assessment. Subsequently, however, the Income-tax Officer initiated proceedings under Section 147(a) of the Act for not having included the receipts of the New Bharat Transporters from the Indian Oil Co. which had been verified by the department. The Incorne-iax Officer also added an interest item of Rs. 6,000 which also was not included in the original assessment. The reassessments were completed taking into account these two matters by orders of the Income-tax Officer dated January 18, 1969 and January 23, 1969. Thereafter, the Income-tax Officer instituted penalty proceedings against the assessees but as the amount of penalty was over Rs. 1,000, he referred the case to the Inspecting Assistant Commissioner. The assessees, however, contended before the Inspecting Assistant Commissioner that the penalties were not attracted in view of the agreement entered into by the assessees with the Commissioner of Income-tax. The Inspecting Assistant Commissioner rejected this contention and held that the letter of the Income-tax Commissioner could not be treated as an order under Section 271(4A) of the Act, and, therefore, the penalties were clearly exigible. Against this order the assessees went up in appeal to the Income-tax Appellate Tribunal which by order dated May 23, 1971, agreed with the view taken by the Inspecting Assistant Commissioner and held that the letter of the Commissioner (supra) did not constitute an order under Section 271(4A) of the Act, and, therefore, the penalties imposed by the Inspecting Assistant Commissioner were legally exigible. Thereafter, the assessees moved the Tribunal for making a reference to this court under Section 256 of the Act, and that is how the matter has come up before this Bench.

5. In support of the reference, Mr. Sharma, appearing for the assessees, raised two main contentions before us. In the first place he submitted that no penalty could be imposed on the assessees unless there was a clear finding that they were guilty of wilful non-disclosure or of any negligent act in deliberately concealing their income. It was contended that during the penalty proceedings no inquiry was made into this aspect of the matter as held by this court in Sadiq Ali's case and other cases of the Supreme Court which this court followed. On the other hand, the standing counselfor the revenue submitted that as this point raised by the assessees has not been referred by the Tribunal to this court and could not by any stretch of imagination be said to be contained or included in the questions of law formulated by the Tribunal, this court cannot go into this point. Mr. Sharma, however, cited a large number of authorities in support of the proposition that even if a point of law is not directly mentioned in the questions framed by the Tribunal, but is indirectly included or contained within its ambit it can be raised before the High Court. It is not necessary for us to refer to the authorities cited by the counsel for the assessees, because there can be no dispute with this proposition. The main point is whether the question of wilful neglect or deliberate concealment can be held to be included either expressly or impliedly in the questions of law framed by the Tribunal. A bare perusal of the points referred to us by the Tribunal would convince anybody that this question cannot at all be held to be included in the questions framed by the Tribunal. This point does not appear to have been taken either before the Inspecting Assistant Commissioner or even before the Tribunal when the assessees filed their appeal. Indeed, this question was raised for the first time when the Tribunal was moved by the assessees for making a reference to this court, and the Tribunal has expressly refused to make a reference to this court on this point and has observed thus:

'Questions 4 and 6 sought to be raised by the assessees contest the leviability of a penalty at all in this case. This question cannot be referred to the High Court. It was not the case of the assessees either before the Inspecting Assistant Commissioner or even before the Tribunal that no penalty at all could be imposed in the circumstances of this case. The arguments were confined only to the question of the amount of penalty to be imposed. We are, therefore, unable to refer these two questions as desired by the assessee and reject the application in so far as they are concerned.' (See para. 9 of the Tribunal's order).

6. In these circumstances since the Tribunal did not refer this question to the High Court, the remedy of the assessee was to have moved an application to the High Court under Section 256(2) of the Act, for calling for a reference from the Tribunal on this point. This application ought to have been made to this court within the period of limitation fixed by this subsection. It may be necessary to quote the provisions of Section 256(2), which runs as follows :

'If, on an application made under Sub-section (1), the Appellate Tribunal refuses to state the case on the ground that no question of law arises, the assessee or the Commissioner, as the case may be, may, within six months from the date on which he is served with notice of such refusal, apply to the High Court, and the High Court may, if it is not satisfiedwith the correctness of the decision of the Appellate Tribunal, require the Appellate Tribunal to state the case and to refer it, and on receipt of any such requisition, the Appellate Tribunal shall state the case and refer it accordingly.'

7. A perusal of this Sub-section clearly shows that the statutory provision confers a substantive right on the assessee to be exercised by him for applying to the High Court in order to call for a reference from the Tribunal within a period of six months from the date of such refusal. It is, therefore, manifestly clear that if no application is made to the High Court, the right conferred by this statute on the assessee became time-barred and cannot be revived indirectly by asking the High Court to consider this question on a reference made by the Tribunal on other points. We are fortified in this view by a decision of the Supreme Court in Kamlapat Motilal v. Commissioner of Income-tax : [1962]45ITR266(SC) wherein their Lordships of the Supreme Court observed as follows :

'The learned advocate for the assessee has, however, made a grievance of the rejection of the assessee's petition under Sub-sections (4) and (5) of Section 66 of the Income-tax Act by the High Court, He has contended that the first question and the third question were interconnected and even though the Tribunal had refused to refer the first question, it was open to the High Court to ask the Tribunal to state a case on the first question also. We are unable to agree. Section 66(4) states clearly that if the High Court is not satisfied that the statements in a case referred under the section are sufficient to enable it to determine the question raised thereby, the court may refer the case back to the Tribunal to make such additions thereto or alterations therein as the court may direct in that behalf. It is manifestly clear that this Sub-sec:ion does not imply that the High Court can ask the Tribunal to state a case on a question which the Tribunal has not referred to the High Court and which, on the contrary, the Tribunal has refused to refer on the ground that it relates to a finding of fact only. It is obvious that Section 66(4) cannot do service for Sub-section (2) thereof. If the assessee was dissatisfied with the order of the Tribunal refusing, to state a case on certain questions, the clear duty of the assessee was to move the High Court under Section 66(2) within the time allowed by law. The assessee in the present case did not take any such action and he wanted to evade the consequences of his failure to take action under Sub-section (2) by resorting to a petition under Sub-section (4). This the assessee was not entitled to do.'

8. It would appear from the above observations that an identical argument was repelled by the Supreme Court. To the same effect is a decision of the Allahabad High Court in Lakshmirntan Cotton Mills Co. v.Commissioner of Income-fax : [1966]61ITR744(All) wherein a Division Bench of that court observed as follows:

'The High Court can correct the form of language of the question framed by the Tribunal but cannot add or substitute and answer a new question, e.g., a question involving a dispute not referred to it in the statement. If it refuses to refer a particular dispute the remedy of the applicant is to apply to the High Court under Sub-section (2); this remedy is open to him whether it has dismissed his application under Sub-section (J) in toto or in part. Merely because it has referred some dispute, it cannot be said that any further action that can be taken by the High Court is under Sub-section (4). Sub-section (4) is meant for quite a different purpose and not for affording a remedy to an applicant whose application has been rejected in toto or in part.'

9. Here the High Court was construing the provisions of Section 66 of the Act which was the corresponding provision before the introduction of Section 256(2) of the Act.

10. A similar view was taken by the Bombay High Court in N. V. Khandvala. v. Commissioner of Income-tax : [1946]14ITR635(Bom) wherein Kania J. (as he then was), speaking for the court, observed as follows :

'When a statement of case, with the question of law framed by the Tribunal, is filed in court for disposal, if a party is aggrieved and wants to contend that certain further facts ought to be stated, or certain questions of law should be raised, he can make an application by way of notice of motion. That should be heard along with the case stated by the Tribunal for the court's opinion. At that time the court will consider whether the statement of case is complete for the question of law raised by the Tribunal.'

11. In this case the learned judge has indicated the procedure by which an aggrieved party can be allowed to raise additional facts before the High Court by a notice of motion to be filed at the proper stage. Heavy reliance was placed by the learned counsel for the assessee on this case. This case, however, does not apply to the facts of the present case because in that case the facts which were sought to be raised were included in the questions of law referred to by the Tribunal but had not been taken into account by the Tribunal. Moreover, no notice of motion has been given in the present case at the time the reference was sent to this court and the point was argued before us for the first time when this reference was heard. In our opinion, therefore, this case does not help the assessees.

12. Reliante was also placed by the assessees on Commissioner oj Income-tax v. Mcleod & Co. Ltd. : [1970]78ITR22(SC) wherein the Supreme Court approving the case of N. V. Khandvala v. Commissioner of Income-tax observed as follows :

'The real complaint of the appellant before us is that the statement of facts in the case stated by the Tribunal was not complete and that certain further facts should have been incorporated therein so that the questions of law which the appellant wanted the High Court to adjudicate upon could be properly gone into. Nevertheless, it appears to us that the appel-lant should hive proceeded in, the way indicated in N V. Khandvala. v. Commissioner of Income-tax 1.........'

13. In this case also it would be seen that the dispute was not that the point raised was not covered or included in the questions framed by the Tribunal but it was only a case of mentioning certain additional facts which were not referred to by the Tribunal. In fact these two decisions proceeded on the footing that new facts can be sought to be added by a notice of motion provided they are included in the questions framed by the Tribunal. This aspect of the matter was made very clear by the Supreme Court in Commissioner of Income-tax v. Indian Molasses Co. P, Ltd. : [1970]78ITR474(SC) wherein their Lordships observed as follows :

'The Commissioner of Income-tax conteaded that the question did not arise out of the order of the Tribunal within the meaning of Section 66 as it was not raised before nor dealt with by the Tribunal, and it was not referred to the court. The High Court overruled the objection. This court held that the High Court had jurisdiction to entertain the company's contention raised for the first time before it, that the fourth proviso to Section 10(2)(vii) did not apply to the assessment as the contention was within the scope of the question as framed by the Appellate Tribunal and was really implicit therein......

All that Section 66(1) requires is that the question of law which is referred to the court for decision and which the court is to decide must be the question which was in issue before the Tribunal. Where the question itself was under issue, there is no further limitation imposed by the section that the reference should be limited to those aspects of the question which had been argued before the Tribunal.'

14. From a perusal of this decision it would be clear that the point was allowed to be raised because it was implicit in the question of law framed by the Tribunal.

15. No authority has been cited before us where a point of law raised before the Tribunal was expressly rejected and the Tribunal refused to make a reference to this court, and yet without complying with the procedure laid down in Section 256(2) of the Act the High Court allowed the point to be raised before it in the reference nude by the Tribunal on other questions.

16. Finally, it seems to us that the question whether the penalty was actually exigible or not would dep3nd upon certain investigation of facts from which an inference of deliberate concealment or wilful negligence could be drawn. These facts had first to be pleaded and proved and could not be raised for the first time before the High Court, because the High Court was not competent to go into questions of fact. If the assessees would have pleaded and raised this question before the Income-tax Officer or the Inspecting Assistant Commissioner or even before the Tribunal at the time of hearing the appeal, something could be done. For these reasons we are unable to allow the assessees to argue this point at this stage when' his right to move this court has become barred by limitation as provided for in Section 256(2) of the Act. The first contention put forward by the assessees is, therefore, overruled.

17. We now come to the questions that have been actually referred to us by the Tribunal. To put the matter briefly the main question to be answered is as to whether the letter of the Commissioner which has been quoted in extenso in an earlier part of this judgment can be said to be an order under Section 271(4A) of the Act. The Tribunal refused to regard this letter as an order under Section 271(4A) on two grounds. In the first place, it held that the conditions mentioned in this, section had not been fulfilled. Secondly, it was of the opinion that there was no intention to grant a reduction or waiver of the amount of penalty imposable on the assessees under Section 271(1)(c) of the Act. In order to assess the validity of the opinion given by the Tribunal it would be necessary to analyse the provisions of Section 271(4A) and the object and ambit thereof. Section 271(4A) of the Act runs as follows :

' 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 total income which such person was required to furnish under Sub-section (1) of Section 139, or

(ii) reduce or waive the amount of minimum penalty imposable on aperson under Clause (iii) of Sub-section (1), if he is satisfied that suchperson,--

(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 139, voluntarily and in good faith, made full disclosure of his income; and in the case referred to in Clause (ii) of this Sub-section has, prior to the detection by the Income-tax Officer, of the concealment of particulars of income in respect of which the penalty is imposable, 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;

(b) has co-operated in any enquiry relating to the assessment of such income; and

(c) has either paid or made satisfactory arrangements for payment of any tax or interest payable in consequence of an order passed under this Act in respect of the relevant assessment year.'

18. It would be seen that this section was introduced by the income-tax Amendment Act of 1965 passed on March 12, 1965. This is undoubtedly a beneficial provision and as it is meant to give relief to the assessees it would apply to proceedings which were pending on the date when the amendment came into force. It seems to me that the main object of enshrining this salutary provision in the Act was to facilitate voluntary disclosures of concealed income by holding out temptation to the assessees by giving them substantial relief against penalties which they otherwise would have incurred. In other words, the cardinal object of the Amendment was to unearth black money and get hold of concealed incomes by persuading big and affluent assessees to surrender their incomes or assets which they had concealed in their returns. The standing counsel appearing for the revenue, however, submitted before us that Section 271(4A) of the Act would not apply to the cases where no penalty proceedings had been taken, because the word 'imposable' used in Section 271(4A)(ii) envisages that there must be penalty proceedings in the course of which penalty becomes imposable before the Commissioner can exercise his discretion under this section. I am, however, unable to agree with this somewhat intertwined line of reasoning adopted by the learned standing counsel which does not appear to be supported by the plain language of the statutory provision. It is not disputed that the present case of the assessees is not covered by Clause (i) but by Clause (ii) of Section 271(4A). The words 'reduce or waive the amount of penalty imposable' clearly connote a penalty which is liable to be imposed on the assessees and not only a penalty which has been imposed on the assessee. The question arises as to when does an assessee incur the liability to pay penalty. Section 139 of the Act enjoins on every assessee whose total income exceeds the taxable limit to furnish a return of his income. This is a statutory duty cast on the citizen or the assessee. If knowing full well that a certain income has accrued to him the assessee does not include the same in the return which he files, then the assessee commits a violation of the duty cast on him under Section 139 and the moment he files his incomplete return before the Income-tax Officer, he incurs the penalty. The penalty may be imposed either in the course of the assessment or after the assessment is over. In other words, the term imposable relates to a point of time when the liability to pay the penalty is incurred by the assessee. Parliament has deliberately used the word (imposable) and not ' imposed ' in order to give wide powers to the Commissioner of making a settlement with the assessees which is consistent with the object of the Amendment. Thus, in my opinion, the moment an assessee knows that there is a particular income which he does not show at the time of filing of his return, he becomes liable to pay, penalty or, in other words, the penalty becomes imposable on him. The point of time, therefore, that is relevant for this purpose is not the time when the penalty is levied but the time when the penalty becomes leviable.

19. Section 271(1)(c) of the Act which applies to this case makes the penalty exigible in cases where the assessee has concealed the particulars of his income at the time of filing the return. This appears to be the combined effect of Sections 139 and 271(1)(c). Thus, when the assessee filed his return by concealing the particulars of a concern which according to him was a part of his firm, he clearly fell within Section 271(1)(c) and the penalty was attracted not when it was levied but at the time when the assessee filed his return.

20. In the instant case it is common ground that the assessees had filed their return in which the income from the New Bharat Transporters and interest were admittedly not shown. The assessees, therefore, incurred the liability to pay penalty the moment they filed their return before the Income-tax Officer. It is also common ground that the agreement with the Commissioner was entered into by the assessees after they had filed their return and when they realized that certain omissions had been made. Moreover, I am fortified in my opinion by the language of Section 271(4A)(ii)(a) particularly the words, 'and in the case referred to in Clause (ii) of this Sub-section, has prior to the detection by the Income-tax Officer, of the concealment of particulars of income in respect of which the penalty is imposable' which show that the jurisdiction of the Commissioner comes into existence long before the penalty is imposed or even when it is detected by the Income-tax Officer. In the instant case it is also not disputed that the assessees had written the letter to the Commissioner and made certain proposals to him which were finally accepted by the Commissioner before the inaccuracy was detected by the Income-tax Officer and the penalty proceedings were taken by the revenue against the assessees. In these circumstances I am satisfied that Section 271(4A) clearly applies to the facts of the present case and gives ample jurisdiction to the Commissioner to waive or reduce penalty.

21. The next question to be considered is whether or not the Commissioner did intend to reduce or waive the penalty which the assessees had undoubtedly incurred and against which they claimed relief. In this connection itmay be necessary to refer to the letter of the assessees by which the proposals of the Commissioner were accepted.

22. This letter runs thus :

'Shri D. Subramantara,

Commissioner of Income-tax,

New Delhi.

Inviting a reference to your letter No. JD-l(9)/CR/67-68, dated 13th May, 1968, I hereby signify my assent to the proposals stated therein. As regards the conditions imposed in para, 2 of your letter aforesaid I accept thorn provided you will kindly appreciate that my acceptance of these proposals and conditions is actuated by considerations other than purely legal nor it ever be construed by our acceptance that lever attempted to conceal my incom'e or to introduce my benamidar in my business. But the main consideration has been that I wanted to buy peace of mind even at some cost and sacrifice on my part in view of the political vendetta which has been carried on in the past with regard to my affairs. I must, however, express my feeling in this context that you being at the helm of affairs in this matter have not been influenced by any political considerations.

Further, it should be clearly understood that the assessments that are made on the basis of the acceptance of these proposals as mutually agreed upon shall never be questioned again in my income-tax proceedings for any assessment year aud the decision shall be irrevocable so far as the points covered in these proposals are concerned...... '

23. It would be seen from the tone and tenor of the lettor that there is no tacit admission of guilt by the assesseas, but they merely wanted to benefit from the provisions of Section 271(4A) with a view to buying peace of mind and shorten litigation with the income-tax department. It was in this spirit that the assessees accepted the proposals of the Commissioner and the conditions imposed by him. The Commissioner was undoubtedly satisfied that the proposal which was made to him was made voluntarily and in good faith and that the assessees had in fact disclosed the income which they had not shown in their returns, namely, the receipts of the New Bharat Transporters as also interest accruing thereon and had further agreed to treat the New Bharat Transporters as a part of the firm of Fairdeai Motors. Thus, all the conditions mentioned in Section 271(4A)(ii)(a) had been fulfilled and it was now left to the discretion of the Commissioner to reduce or waive the amount of penalty. lu these circumstances I do not agree with the Tribunal that the conditions specified in Section 271(4A) were not at all satisfied in this case.

24. The other point taken by the Tribunal is that the letter of the Commissioner cannot be construed as an order under Section 271(4A) of theAct. I am unable to agree with this view taken by the Tribunal. The new Sub-section (4A) to Section 271 of the Act does not prescribe any particular mode or form which an order passed by the Commissioner reducing or waiving the penalty should take. Even the rules do not prescribe that the order of the Commissioner should be in any particular mode or form. In fact, the Tribunal was fully alive to this and conceded in their judgment given on appeal by the assessees that even a correspondence between the Commissioner and the assessees could amount to an order under Section 271(4A). Bat the Tribunal has not spelt out any convincing reasons why they are not prepared to accept the letter of the Commissioner as an order under Section 271(4A). In fact, reading the letter of the Commissioner with reference to the context, namely, the proposals made by the assessees, the conditions imposed by the Commissioner and the final acceptance of these conditions by the assessees, all these facts lead us to the irresistible conclusion that the letter of the Commissioner clearly constitutes an order under Section 271(4A) of the Act.

25. Lastly, it was argued by the learned standing counsel that in any case the order of the Commissioner could not apply to the assessment year 1964-65 because the amendment had come into force in 1965, i.e., after the close of the assessment year 1964-65. I am unable to agree with this argument because, as already pointed out, the amendment being a beneficial provision in a procedural law, it will certainly apply to proceedings pending either at the time the amendment came into force or after it. In the instant case the penalty proceedings were started long after the passing of the amendment and, therefore, the amendment was clearly applicable. If the object of the Act was to give substantial concessions to the assessee, then it must be construed liberally in favour of the subject, being essentially a taxing statute. This argument is, therefore rejected. We are, therefore, clearly of the opinion that the letter of the Commissioner constitutes clearly a specific order under Section 271(4A) of the Act and we accordingly answer this question framed by the Tribunal in the affirmative.

26. The next question that arises for consideration is whether by virtue of the order the Commissioner of Income-tax in fact reduced or waived the penalty below the minimum provided for in the statute or restricted it to 20% attributable to income from the New Bharat Transporters. From a persual of the letter of the Commissioner (supra) it would appear that the Commissioner, in view of the frank and fair admissions made by the assessees, wanted to take a very lenient view of the matter, and while reducing the penalty the Commissioner has clearly mentioned that a minimum penalty of 20% would be imposed on the Fairdeal Motors only in respect of the income of New Bharat Co. for the assessment years 1963-64 and 1967-68. It is manifest that the Commissioner had amplepowers under Section 271(4A) of the Act either to waive the penalty completely or to give substantial relief to the assessees by reducing the penalty, and, to this extent, therefore, the amendment of Section 271(4A) must be deemed to have modified the provisions of Section 271(1), which prescribes the mode and manner of penalties. If the Commissioner had made it clear in his order that the penalty would be liable not on the income of the firm but only on the income which was conceded, namely, the income of the New Bharat Transporters, then the penalty would be leviable only to the extent of 20% of the income of the New Bharat Transporters for the assessment years 1963-64 and 1967-68, A. similar construction must also be given to paragraph 2(ii) of the Commissioner's order regarding the imposition of penalty of 20% on Sri Bashir Ahmed, one of the partners of the assessee-firm, in respect of the income of the New Bharat Transporters only. I might further mention that the proposals made by the Commissioner have been accepted by the assessees and under the provisions of Section 271(4B) the order under Section 271(4A) has been made final and cannot be called into question before any court of law or any other authority. The proposals submitted to the Commissioner, the conditions imposed by him and their acceptance by the assessees all culminated into an order passed by the Commissioner under Section 271(4A) of the Act which is binding on the revenue and its validity cannot be questioned by either the revenue or the Tribunal.

27. For these reasons I would answer the second question framed by the Tribunal in the affirmative and hold that the penalty would be restricted only to 20% of the tax attributable to the income of the New Bharat Transporters. Both the questions framed by the Tribunal are, therefore, answered in the affirmative.

28. 2. Regarding the case of Shrimati Shama Mir (Income-tax Reference No. 7 of 1973), as she is also a partner of the firm, Fairdeal Motors, and is bound by the orders of the Commissioner, the questions referred to by the Tribunal in her case are also answered in the affirmative.

29. The references are disposed of accordingly. In the circumstances, there will be no order as to costs,

Mufti Bahauddin Farooqi , J.

30. I agree.


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