Jyoti Steels Vs. Commissioner of Income-tax and anr. - Court Judgment

Excerpt:
- - (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 theassessment or any proceeding for the recovery of any amount due fromhim: 9. section 273a(4) empowers the commissioner that he may, on an application made by an assessee and after recording his reasons, reduce or waive the amount of any penalty payable by the assessee under the income-tax act, or stay or compound any proceeding for the recovery of any such amount on his being satisfied that non-waiver or non-reduction of penalty would cause genuine hardship to the taxpayer. another condition for the application of this sub-section is that the commissioner should also be satisfied that the taxpayer has co-operated in an enquiry relating to the assessment or any proceeding for the recovery of any amount due from him. 10. the provisions contained in sub-section (4) like the provisions contained in sub-section (1) of section 273a are for the benefit of the taxpayer.r.k. gulati, j. 1. this writ petition is filed for issuance of a writ of certiorari against the order under section 273a of the income-tax act, 1961, passed by the commissioner of income-tax, meerut.2. in the assessment relating to the assessment year 1980-81, besides other additions, a sum of rs. 50,000 was brought to tax as income of the petitioner from unexplained deposits.' the income-tax officer while completing the assessment also initiated penalty proceedings under sections 271(1)(c) and 273(2)(a) of the act.3. although an appeal was filed by the petitioner against the addition made in its hands, it withdrew the appeal subsequently. after having done so, it approached the commissioner of income-tax with a petition under section 273a for reduction and waiver of penalties imposable under section 271(1)(c) and under section 273(2)(a) of the act. the petition under section 273a of the act was allowed in part inasmuch as the income-tax officer was directed to impose on the petitioner, minimum penalties leviable under the aforesaid two sections. aggrieved by this order, the present writ petition has been filed on the ground that the commissioner ought to have waived the penalties leviable in their entirety.4. it is not disputed before us that the provisions contained in sub-section (1) of section 273a of the act are not applicable to the petitioner's case. the conditions required for the application of that sub-section are wanting and the petitioner cannot, with justification, ask for relief under those provisions. according to the petitioner, its case is covered by sub-section (4) of section 273a. these provisions are to the following effect:' (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 theassessment or any proceeding for the recovery of any amount due fromhim: provided that where the amount of any penalty payable under this act or, where such application relates to more than one penalty, the aggregate amount of such penalties exceeds one hundred thousand rupees, no order reducing or waiving the amount or compounding any proceeding for its recovery under this sub-section shall be made by the commissioner except with the previous approval of the board. ' 5. before proceeding further, it is necessary to state some more facts.6. according to the petitioner, in withdrawing the appeal, it was prompted and motivated on account of a circular bearing no. 451 (f. no. 225/86/85-it(a-ii), dated february 17, 1986-- [1986] 158 itr 135), issued by the ministry of finance regarding declaration of higher income or wealth. the petitioner has annexed (vide annexure 1 to the writ petition) a copy of certain circulars and clarifications issued by the central board of direct taxes between september 20, 1985, to april 8, 1986. according to the petititioner's case, by means of these circulars and clarifications, it was given out that if a taxpayer discloses its current income and wealth correctly at a higher figure and from a source not earlier disclosed, no probe or enquiry shall be made as to why such income or wealth was not declared by the taxpayer in earlier years. similarly, in respect of income and wealth undisclosed relating to the earlier years which ought to have been disclosed in the returns for earlier years, may be disclosed now by furnishing correct and complete disclosure of income or wealth by march 31, 1986. in such cases, the petitioner asserts, the taxpayers have been assured that there shall be immunity for them from imposition of any penalty or prosecution, if such declaration of income is made by march 31, 1986.7. the petitioner has relied upon the aforesaid circular no. 451 dated february 17, 1986-- [1986] 158 itr 135, for seeking redress in his case. this circular is in the nature of clarification, in question and answer form, issued by the ministry of finance. question no. 28 and the answer thereto is the only question relevant for the petitioner's case to which our attention was invited. the relevant portion of question no. 28 together with its answer is extracted below (at p. 139 of 158 itr (st.)):'question no. 28.--where an addition is contested in appeal, whether an assessee could make a declaration and agree to pay tax thereon ? answer.--yes, the assessee should withdraw that appeal and make a declaration before the administrative commissioner. in such a case, alenient view will be taken, though such a declaration cannot be taken as entirely voluntary.' 8. the grievance of the petitioner is that in view of the answer to question no. 28 extracted above, the petitioner was entitled to complete exoneration from the imposition of penalties leviable on account of the additions made in the petitioner's hands which were being contested in appeal but given up as a result of its withdrawal.9. section 273a(4) empowers the commissioner that he may, on an application made by an assessee and after recording his reasons, reduce or waive the amount of any penalty payable by the assessee under the income-tax act, or stay or compound any proceeding for the recovery of any such amount on his being satisfied that non-waiver or non-reduction of penalty would cause genuine hardship to the taxpayer. another condition for the application of this sub-section is that the commissioner should also be satisfied that the taxpayer has co-operated in an enquiry relating to the assessment or any proceeding for the recovery of any amount due from him. in considering these conditions, we have left out the proviso attached to sub-section (4) of section 273a, as we are not concerned with it in the present case.10. the provisions contained in sub-section (4) like the provisions contained in sub-section (1) of section 273a are for the benefit of the taxpayer. these provisions have been enacted with the object of encouraging voluntary disclosures of undisclosed income by the taxpayer and pacify their fears about imposition of penalties for earlier concealment or holding back such income from the revenue. both sub-sections (1) and (4) of section 273a prescribe certain pre-requistte conditions and it is upon the compliance of these conditions that the commissioner is given the discretion waive or reduce the penalty or interest imposable under the given sections of the act.11. sub-section (3) of section 273a is independent of the other powers conferred on the commissioner of income-tax by any other provisions of the income-tax act. in order to avail of the benefit of sub-section (4) of section 273a, it is for the assessee to make out a case that imposition of any penalty would cause genuine hardship to him. the circumstances obtaining in this case do not warrant such an order. this must be done to the satisfaction of the commissioner of income-tax. he must also satisfy the commissioner that he co-operated in an enquiry relating to his assessment or in proceedings for the recovery of any amount due from him.12. from a perusal of the impugned order, it does not appear that the petitioner made any such attempt. there is no whisper of any hardship, much less a genuine hardship caused to the petitioner. there is also nothing on the record to suggest that the petitioner had co-operated in any inquiry relating to its assessment. for the compliance of requirements contemplated by sub-section (4) of section 273a, the petitioner merely relied upon the circular under which it withdrew its appeal. the commissioner in his order stated the petitioner's case in the following manner:' in his written reply, it has been contended that since the circumstances laid down under section 273a when read with press release no. 451 dated february 17, 1986, are all present in the instant case, minimum penalty leviable as a result of addition having been surrendered, may thus be dropped in view of powers vested in the commissioner of income-tax.'13. the ground is that the appeal having been withdrawn, any imposition of penalty would cause genuine hardship. this plea may not be correct.14. however, assuming but without deciding, that the nature of hardship pleaded by the petitioner entitled it to approach the commissioner under section 273a(4) of the act, what is required to be decided is, whether the impugned order suffers from any infirmity which may call for any interference at our hands.15. in passing the impugned order, the commissioner took note of the circular and the clarification to question no. 28. in directing imposition of minimum penalties, he held :'i think that the lenient view will be that levy of penalty is directed at minimum.'16. we may note that the penalty which could be imposed on an assessee under section 271(1)(c), is, 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 concealment of particulars of his income or the furnishing of inaccurate particulars of such income. likewise, under section 273(2)(a), an assessee can be subjected to a penalty which shall not be less than ten per cent. but shall not exceed one and a half times the amount by which the tax actually paid during the financial year immediately preceding the assessment year under the provisions of chapter xvii-c falls short of 75% of the assessed tax as defined in subsection (5) of section 215, or the amount which would have been payable by way of advance tax if the assessee had furnished a correct and complete statement in accordance with the provisions of clause (a) of sub-section (1) of section 209a, whichever is less.17. it is significant to note that the expression used in the clarification to question no. 28 (extracted above) is 'in such a case a lenient view will be taken' followed by the words 'though such a declaration cannot be taken as entirely voluntary'. the important words used in this clarification are 'a lenient view' and 'not entirely voluntary'. according to the webster's iiird new international dictionary, the word 'lenient' means 'of mild and tolerant disposition or effect'. in webster's dictionary of english language in deluxe encyclopaedia edition, the word 'lenient' is defined as 'mild acting without rigour or severity'. reading the expressions 'lenient' and 'not entirely voluntary' together, the intention seems to be that only a liberal view in such cases should be taken, that is to say, that strict legality may be mitigated by soft approach. what should be a lenient view will vary from case to case. no tailor-made formula, in our opinion, can be evolved which can be applied to every such case. in such cases, the commissioner may have to bear in mind several factors such as, severity of the default, the loss occasioned to the revenue and a host of other attending circumstances.18. when a taxpayer approaches the commissioner under section 273a, including under sub-section (4) of that section, he impliedly admits his liability to penalty but asks for remission or reduction thereof, relying upon mitigating circumstances arising in a given case. it may be that having regard to the circumstances of a case, the commissioner may direct that penalty proceedings may be dropped, while in another case, a partial reduction of penalty alone may meet the ends of justice.19. in our opinion, under the aforesaid circular, when an appeal is withdrawn by the taxpayer and he makes a declaration before the administrative commissioner, this gesture on his part will be treated as an exonerating circumstance calling for a liberal view in the matter of penalties. it is possible that in the petitioner's case, another commissioner may have taken a more liberal view and may have directed the imposition of penalties even less than the minimum prescribed, or may have completely waived those penalties. this, however, does not justify any interference with the order of the commissioner of income-tax at our hands. we do not see any error of law much less a manifest error of law in the impugned order where we should exercise our power in favour of the petitioner under article 226 of the constitution.20. we accordingly dismiss this writ petition summarily.