V SUNEETHA PRASAD Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The petitioner is seeking a Writ of certiorari quashing the order in HQRS. 1-94/87-88 on the file of CIT, Visakhapatnam, dt. 11/03/1988 and consequential order of (i) waiver or reduction of interest charged under s. 139(8) of IT Act (for short "the Act") and (ii) penalty levied under s. 271(1)(a) of the Act for the asst. yr. 1977-78.

(2.) The facts in brief are that the petitioner is an assessee under GIR No. S. 1830/SKL on the file of ITO, Srikakulam (subsequently transferred to ITO, D. Ward, Vizianagaram) for the asst. yr. 1977-78. Her income from property was Rs. 848 and from other sources Rs. 890. She earned Rs. 53,929 from sale of land and incurred an interest of Rs. 27,271 on the borrowed capital for construction of a cinema hall. It is her case that she was under the impression that there is no taxable income for the asst. yr. 1977-78. However, she was advised that the profit on sale of land would be considered as capital gain within the meaning of s. 45 of the Act and it is chargeable to tax. As regards the interest paid by her she was advised that she may claim deductions of such amount and on that advice she filed a return on 29/12/1983 duly computing her total income. The ITO completed the assessment on a total income of Rs. 63,070 by working out relief under s. 80TT of the Act at 25 per cent. while she claimed 35 per cent. by disallowing the interest. He raised a demand for Rs. 16,796 being the interest charged under s. 139(8) of the Act at 12 per cent. from 1/08/1977 to 29/12/1983. Then a notice under s. 274 r/w s. 271 for levy of penalty under s. 271(1)(a) of the Act for belated filing of the return was issued. She responded to the show-cause notice and submitted the explanation. On a consideration of the explanation, the ITO, levied a penalty of Rs. 33,592 by his order dt. 29/09/1987. She filed an appeal before the AAC, Visakhapatnam, and the same was dismissed by an order dt. 2/12/1986. Thus, she became liable to pay (i) the interest of Rs. 16,796 charged under s. 139(8) and (ii) penalty of Rs. 33,592 under s. 271(1) of the Act. She asserted that she filed the return voluntarily without any notice either under s. 139(2) or under s. 148 of the Act. Then she filed a petition under s. 273A of the Act before respondent No. 1 seeking waiver or reduction of interest as well as penalty on the ground that she filed the return voluntarily without any notice under s. 139(2) or under s. 148 of the Act making a true and full disclosure of her income. It is also her case that claiming allowance under s. 80T of the Act at 35 per cent. while it ought to be 25 per cent. would not amount to non-disclosure of true and full income. Respondent No. 1 by the impugned order dt. 11/03/1988 rejected her petition on three grounds namely (a) that she has not shown the correct income in the return (b) that the payment of tax rightfully due from her was deliberately postponed till the completion of the assessment and (c) that there was no co-operation from her in the matter of recovery of taxes. She submits that the impugned order is based on improper exercise of discretion and it is invalid in law and contrary to the ratio in CIT vs. Padma Timber Depot (1987) 67 CTR (AP) : (1988) 169 ITR 646 (AP) : TC 43R.270). Hence, the writ petition.

(3.) Respondent No. 1 resisted the petition by filing a counter. It is admitted that the petitioner filed return for the asst. yr. 1977-78 declaring her property income as Rs. 848 and income from other sources as Rs. 890 but it is denied that she was under a bona fide belief that the profit from sale of land was not liable for capital gain tax or that interest payment of Rs. 27,271 constituted her business loss. The assessing authority after due consideration of the relevant facts held that the assessee was guilty of non-discharge of statutory obligation and accordingly levied penalty which was confirmed by the AAC. The interest at Rs. 16,796 was levied for delay of 76 months in filing the return. Turning to the petition filed under s. 273A of the Act, it is asserted that the tax due to the Exchequer was withheld even in the belated return by making untenable claims of 35 per cent. deduction under s. 80T of the Act as against 25 per cent. and also claiming interest payment as business loss even though there may be business during the period. Hence, the writ petition is liable to be dismissed. In view of the above pleadings the following points arise for determination. (i) Whether the petitioner is not liable to any interest of Rs. 16,796 under s. 139(8) of the Act ? (ii) Whether she is not liable to pay a penalty of Rs. 33,592 under s. 271(1)(a) of the Act ?