K C VEDADRI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE petitioner carries on business of the purchase and sale of tanned skins and to a limited extent magnesite. According to him, he sustained loss and he could not close his accounts regularly at the end of each accounting year. For the assessment years 1963-64 and 1964-65 he submitted voluntarily his returns of income on March 31, 1965. It is common ground that for the assessment year 1963-64 the returns ought to have been filed normally on September 30, 1963, and for the year 1964-65 on September 30, 1964. THEse returns were scrutinised by the revenue and the assessment proceedings were completed on February 15, 1966. It is claimed that the department accepted the returns as correct.

(2.) THE petitioner also says that he paid all taxes as per the orders of assessment. Subsequently, the Income-tax Officer purporting to act under section 274 of the Income-tax Act, 1961, issued a notice dated March 21, 1966, calling upon the petitioner to show cause why penalty should not be levied in respect of the assessment year 1963-64, for submission of late returns, without sufficient cause. THE petitioner sought to explain, but apparently his explanation was not accepted and the result was the Income-tax Officer by an order dated May 25, 1966, levied a penalty of Rs. 3, 130, under section 271(1)(a) for not filing the returns within the period provided under section 139(1) of the Act. THEreupon, the petitioner filed a revision petition before the Commissioner of Income-tax under section 264 of the Act questioning the order of penalty imposed by the Income-tax Officer under section 274 of the Act and invited the attention of the Commissioner that there is sufficient cause for the delayed finalisation of the income-tax returns and that, therefore, the Commissioner should exercise his discretion given in section 271(4A) and give him the appropriate relief thereunder. In his revision petition the petitioner would state that the returns were filed voluntarily before a notice under section 139(2) was given he made full disclosure of his income and the returns have been fully accepted that he co-operated in the enquiry relating to the assessment and that he made satisfactory arrangement for the payment of the tax. THE Commissioner of Income-tax refused to exercise his discretion as provided under section 271(4A) and stated, while rejecting the revision petition, that the provisions of section 271(4A) are not attracted once the penalty has already been levied by the competent authority under the Act. It is against this order, the present writ petition for the issue of a writ of mandamus, which was subsequently converted into a writ of certiorari, directing the respondent to consider the application for revision filed by the petitioner under section 264 of the Act in accordance with law and for issue of the necessary directions in consequence thereof In the counter-affidavit, the contention is that the respondent is not bound to grant the relief asked for under section 271(4A) and that the said section has no application to the petitioners' case at all. Even otherwise, it is stated that as the remedy under section 271(4A) is a discretionary one no compulsive direction can issue from this court either in the nature of a direction under article 226 of the Constitution or by way of a rule of mandamus. It is claimed that the discretion is an administrative one exercisable purely on administrative grounds and which is collateral to the questions touching the cause of action for levy of penalty like non-submission of returns, concealment of income, etc.

(3.) THE propriety or regularity of a particular matter may relate to problems connected with time or manner of presentation or any defect inhered there in. If therefore section 271 enables the Income-tax Officer to find whether there was reasonable cause for such a delayed return, then it cannot be said that by a mere acceptance of such a return, by invoking section 139(4) of the Act, the substantive procedure which enables the imposition of a penalty under Chapter 21 cannot be resorted to by the revenueTHE second contention is that, once a revision petition is filed under section 264 to the Commissioner of Income-tax, then he is bound to make such an enquiry as is necessary and pass orders thereon subject to the provisions of the Act. Undoubtedly, section 271(4A) is one such provision. THE argument of the revenue is that, if the Commissioner is called upon to exercise his discretion under section 271(4A) then the person concerned should seek for the exercise of such discretion before the penalty proceedings are completed. I am unable to agree. A person who files a delayed return under section 139(4) of the Act cannot anticipate that the Income-tax Officer would not be satisfied that there was not reasonable cause for such delay. If only he can anticipate such a peculiar situation which is prejudicial to him, he could avail of the provision in section 271(4A) and ask the Commissioner to exercise his discretion one way or the other. It would be in the nature of a quia timet action based on an apprehended injury to the person concerned. In the peculiar circumstances and the lay of the sections, I am unable to hold that a person who files a return under section 139(4) should contemporaneously or sooner thereafter file an independent application under section 271(4A) and move the Commissioner to exercise his discretion to reduce or waive the minimum penalty imposable by the Income-tax Officer or the Appellate Assistant Commissioner, as the case may be. If this is the position, the Commissioner instead of the Income-tax Officer should first decide whether the delay in filing returns could be satisfactorily explained. THE provisions of the Act do not contemplate such a situationAs a matter of fact, section 264 which is too wide in its scope and application would cover revisions against orders of a authorities subordinate to the Commissioner so long as the other limbs of section 264 are satisfied, the Commissioner is bound to make an enquiry into such revision petitions and pass orders subject to the provisions of the Act. As rightly pointed out by the learned counsel for the petitioner, section 264 is the main section which deals with the procedure whereunder an aggrieved person could obtain relief in revision before the Commissioner of Income-tax. In juxta-position to this, section 271(4A) deals only with the exercise of judicial discretion by the Commissioner while dealing with matters which come up before him for the purpose of reducing or waiving the amount of minimum penalty imposable, on an assessee who files a delayed return or who is said to have concealed his income, etc.