HARJAS RAI Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) THIS judgment will dispose of Civil Writ Petitions Nos. 4170, 4171, 4172 of 1979, as similar questions of law and fact have been raised in these petitions. A reference to the facts in Civil Writ Petition No. 4170 of 1979 will be beneficial to understand the issues raised in all the petitions.

(2.) HARJAS Rai is the partner of M/s. Nauhria Ram Krishan Kumar, Moga. The petitioner-firm is assessed to income-tax since the assessment year 1970-71. The petitioner was required to file the return for the assessment year 1976-77 of the total income under Section 139 (1) of the I. T. Act (hereinafter called "the Act"), on or before 31st July, 1976. The petitioner had an impression that he had filed this return but in fact later on facts revealed that he had not done so. Therefore, he filed a return for the assessment year 1976-77 on 8th July, 1978. He also filed an application under Section 273a of the Act to the Commissioner of Income-tax, Jullundur, praying that the amount of penalty imposable under Section 271 of the Act for failure to file the return within time be waived. The petitioner had deposited the tax due for that year. He also co-operated with the department for assessment purposes. No notice under Section 139 (2) of the Act had been issued to the petitioner. The ITO initiated proceedings for the levy of penalty under Section 271 (1) (a) of the Act and issued directions for charging of interest under Section 139 (8) of the Act, vide order dated 21st November, 1978, because the Commissioner had not disposed of the petitioner's application under Section 273a of the Act till 21st November, 1978. Those proceedings are still pending. The Commissioner rejected the application of the petitioner under Section 273a of the Act, vide his order dated 13th March, 1979, on the ground that the petitioner was being taxed regularly since 1970-71, and for that reason the return filed was not voluntary. The petitioner challenged this order through Civil Writ Petition No. 1675 of 1979- The case came up for hearing before a Bench consisting of R. N. Mittal and J. V. Gupta JJ. After hearing the learned counsel for the parties, the writ petition was allowed and the order dated 13th March, 1979, was set aside and the case was remanded to be decided afresh after giving a hearing to the petitioner. The order of the Division Bench reads as under : "the petitioner has filed this writ petition for quashing the order dated 13th March, 1979, Ex. P-3, passed by the Commissioner of income-tax refusing to waive the penalty in exercise of his powers under Section 273a of the Income-tax Act, 1961. Mr. Awasthi, learned counsel for the respondents has very fairly conceded that the order cannot be supported in the writ petition and that the Commissioner shall decide the matter afresh after giving a hearing to the petitioner. In view of the aforesaid concession, we accept the writ petition and quash the impugned order with no order as to costs. The petitioner is directed to appear before the Commissioner on 20th August, 1979. "

(3.) THEREAFTER, the case was again taken up by the Commissioner. After hearing the parties, he dismissed the application on the ground that the petitioner was a partner in the firm, M/s. Nauhria Ram Krishan Kumar. This firm was registered under the provisions of the I. T. Act. It was assessed to income-tax since the assessment year 1970-71. Its registration had been continuously renewed at the instance of its partners. The petitioner was also an assessee since 1970-71. The departmental authorities know that his income for the year in question was taxable. The petitioner also knew this fact. Therefore, the return was not filed and the disclosure of the income was not made by the petitioner voluntarily. It was done under constraint. He held that " the specific knowledge with ITO would be a constraint on the assessce to file a return or to make a disclosure of the income ". Even if a notice under Sections 139 (2) and 148 of the Act had not been issued by the time the return was filed and a disclosure of the income was made, still such notices would obviously have been issued. So, this knowledge will demolish the claim of the assessee that the disclosure of income by him was made of his own free will and voluntarily. He, however, agreed with the petitioner that the return in disclosure had been made before issuances of notice under Section 139 (2) or Section 148 of the Act and that the petitioner had co-operated with the department and had paid taxes, etc. He dismissed the application. The facts in the other three petitions are also similar. It will be apposite to notice the statutory provisions at this stage: " 139. (1) Every person, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall furnish a return of his income or the income of such other person during the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed (a) in the case of every person whose total income, or the total income of any other person in respect of which he is assessable under this Act, includes any income from business or profession, before the expiry of four months from the end of the previous year or where there is more than one previous year, from the end of the previous year which expired last before the commencement of the assessment year, or before the 30th day of June of the assessment year, whichever is later ; (b) in the case of every other person, before the 30th day of June of the assessment year: Provided that, on an application made in the prescribed manner, the Income-tax Officer may, in his discretion, extend the date for furnishing the return, and notwithstanding that the date is so extended, interest shall be chargeable in accordance with the provisions of Sub-section (8 ). (1a) Notwithstanding anything contained in Sub-section (1), no person need furnish under that Sub-section a return of his income or the income of any other person in respect of whose total income he is asscsssable under this Act, if his income or, as the case may be, the income of such other person during the previous year consisted only of income chargeable under the head 'salaries' or of income chargeable under that head and also income of the nature referred to in any one or more of Clauses (i) to (ix) of Sub-section (1) of Section 80l and the following conditions arc fulfilled, namely:- (a) where he or such other person was employed during the previous year by a company, he or such other person was at no time during the previous year a director of the company or a beneficial owner of shares in the company (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) carrying not less than twenty per cent, of the voting power ; (b) his salary or the salary of such other person, exclusive of the value of all benefits or amenities not provided for by way of monetary payment, does not exceed eighteen thousand rupees; (c) the amount of income of the nature referred to in Clauses (i) to (ix) of Sub-section (I) of Section 80l, if any, does not, in the aggregate, exceed three thousand rupees ; and (d) the tax deductible at source under Section 192 from the income chargeable under the head ' Salaries ' has been deducted from that income. Explanation.--For the purposes of this Sub-section, 'salary' shall have the meaning assigned to it in Clause (1) of Section 17. (2) In the case of any person who, in the Income-tax Officer's opinion, is assessable under this Act, whether on his own total income or on the total income of any other person during the previous year, the Income-tax Officer may, before the end of the relevant assessment year, issue a notice to him and serve the same upon him requiring him to furnish, within thirty days from the date of service of the notice, a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed : Provided that, on an application made in the prescribed manner, the Income-tax Officer may, in his discretion, extend the date for furnishing the return, and, notwithstanding that the date is so extended, interest shall be chargeable in accordance with the provisions of Sub-section (8 ). . . . " "271. (1) If the Income-tax Officer or the Appellate Assistant Commissioner or the Commissioner (Appeals) in the course of any proceedings under this Act, is satisfied that any person (a) has without reasonable cause failed to furnish the return of total income which he was required to furnish under Sub-section (1) of Section 139 or by notice given under Sub-section (2) of Section 139 or Section 148 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by Sub-section (1) of Section 139 or by such notice, as the case may be, or (b) has without reasonable cause failed to comply with a notice under Sub-section (1) of Section 142 or Sub-section (2) of Section 143 or fails to comply with a direction issued under Sub-section (2a) of Section 142, or (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty,-- (i) in the cases referred to in Clause (a),- (a) in the case of a person referred to in Sub-section (4a) of Section 139, where the total income in respect of which he is assessable as a representative assessee does not exceed the maximum amount which is not chargeable to income-tax, a sum not exceeding one per cent. of the total income computed under this Act without giving effect to the provisions of Sections 11 and 12, for each year or part thereof during which the default continued; (b) in any other case, in addition to the amount of the tax, if any, payable by him, a sum equal to two per cent. of the assessed tax for every month during which the default continued ; Explanation.--In this clause, 'assessed tax' means tax as reduced by the sum, if any, deducted at source under Chapter XVII-B or paid in advance under Chapter XVII-C ; (ii) in the cases referred to in Clause (b), in addition to any tax payable by him, a sum which shall not be less than ten per cent. but which shall not exceed fifty per cent. of the amount of the tax, if any, which would have been avoided, if the income returned by such person had been accepted as the correct income ; (iii) in the cases referred to in Clause (c), 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 the concealment" of particulars of his income or the furnishing of inaccurate particulars of such income : Provided that, if in a case falling under Clause (c), the amount of income (as determined by the Income-tax Officer on assessment) in respect of which the particulars have been concealed or inaccurate particulars have been furnished exceeds a sum of twenty-five thousand rupees, the Income-tax Officer shall not issue any direction for payment by way of penalty without the previous approval of the Inspecting Assistant Commissioner. " " 273a. (1) Notwithstanding anything contained in this Act, the Commissioner may, in his discretion, whether on his own motion or otherwise,-- (i) reduce or waive the amount of penalty imposed or imposable on a person under Clause (i) of Sub-section (1) of Section 271 for failure without reasonable cause, to furnish the return of total income which he was required to furnish under Sub-section (1) of Section 139 ; or (ii) reduce or waive the amount of penalty imposed or imposable on a person under Clause (iii) of Sub-section (1) of Section 271 ; or (iii) reduce or waive the amount of interest paid or payable under Sub-section (8) of Section 139 or Section 215 or Section 217 or the penalty imposed or imposable under Section 273, if he is satisfied that such person (a) in the case referred to in Clause (i), has, prior to the issue of a notice to him under Sub-section (2) of Section 139, voluntarily and in good faith made full and true disclosure of his income ; (b) in the case referred to in Clause (ii), has, prior to the detection by the Income-tax Officer, of the concealment of particulars of income 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 ; (c) in the cases referred to in Clause (iii), has, prior to the issue of a notice to him under Sub-section (2) of Section 139, or where no such notice has been issued and the period for the issue of such notice has expired, prior to the issue of notice to him under Section 148, voluntarily and in good faith made full and true disclosure of his income and has paid the tax on the income so disclosed, and also has, in all the cases referred to in Clauses (a), (b) and (c), cooperated in any enquiry relating to the assessment of his income and has either paid or made satisfactory arrangements for the payment of any tax or interest payable in consequence of an order passed under this Act in respect of the relevant assessment year. Explanation.--For the purposes of this Sub-section, a person shall be deemed to have made full and true disclosure of his income or of the particulars relating thereto in any case where the excess of income assessed over the income returned is of such a nature as not to attract the provisions of Clause (c) of Sub-section (1) of Section 271. (2) Notwithstanding anything contained in Sub-section (1),- (a) if in a case the penalty imposed or imposable under Clause (i) of Sub-section (1) of Section 271 or the minimum penalty imposable under Section 273 for the relevant assessment year, or, where such disclosure relates to more than one assessment year, the aggregate of the penalty imposed or imposable under the said clause or of the minimum penalty imposable under the said section for those years, exceeds a sum of fifty thousand rupees, or (b) if in a case falling under Clause (c) of Sub-section (1) of Section 271, the amount of income in respect of which the penalty is imposed or imposable for the relevant assessment year, or, where such disclosure relates to more than one assessment year, the aggregate amount of such income for those years, exceeds a sum of five hundred thousand rupees, no order reducing or waiving the penalty under Sub-section (1) shall be made by the Commissioner except with the previous approval of the Board. (3) Where an order has been made under Sub-section (1) in favour of any person, whether such order relates to one or more assessment years, he shall not be entitled to any relief under this section in relation to any other assessment year at any time after the making of such order. (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 the assessment or any proceeding for the recovery of any amount due from him. (5) Every order made under this section shall be final and shall not be called into question by any court or any other authority. "