Sandeep M.Shah. Vs v.N.Wakarker and Anr.

 IN THE HIGH COURT OF JUDICATURE AT BOMBAY

¶3

 ORDINARY ORIGINAL CIVIL JURISDICTION

¶4

WRIT PETITION NO. 887 OF 1994
WRIT PETITION NO. 888 OF 1994
WRIT PETITION NO. 889 OF 1994

¶5

WRIT PETITION NO. 887 OF 1994

¶6

 Shri Sandeep M.Shah ... Petitioner
 Vs.
 V.D.Wakharkar & Anr. ... Respondents
WRIT PETITION NO. 888 OF 1994

¶7

 M/s. Sun and Deep Jewellers ... Petitioner
 Vs.
 V.D.Wakharkar & Anr. ... Respondents
WRIT PETITION NO. 889 OF 1994

¶8

 S.M.Shah ... Petitioner
 Vs.
 V.D.Wakharkar ... Respondent

¶9

 Ms. Vasanti B. Patel for the petitioner.

¶10

¶11

 None for respondents.

¶12

CORAM: F.I.REBELLO AND

¶13

 J.H.BHATIA, JJ.

¶14

DATE: 20th April, 2009.

¶15

JUDGMENT

¶16

 1. The brief point involved in these matters

¶17

 is whether the Commissioner of Income-tax was justified
 in refusing waiver of interest under Section 139(8) and
 Section 217 of the Income-tax Act, while for the same
 reasons the penalty was waived.

¶18

 2. To state in brief, Writ Petition No.888 of 1994 is
 filed by M/s. Sun & Deep Jewellers, which is a
 partnership firm and other two petitions are filed by the
 partners thereof. Admittedly, the partnership firm and
 the partners filed their respective Income-tax returns
 for the assessment years 1987-88 and 1988-89 on 7.2.1990.
 Therefore, it is clear that the income tax returns were
 submitted long after the due date. The assessees filed
 the returns making their own assessment of income and
 deposited the income tax accordingly. The Assessing
 Officer reported that the assessments were completed

¶19

 under Section 143(1) accepting the income returned by the
 assessees for both the years. Interest under Section
 139(8) and under Section 217 was charged for both the

¶20

¶21

 assessment years. Similarly, the penalty as also levied
 under Section 271(1)(a) and under Section 273 for both
 the years. According to the firm, firstly, it was
 preoccupied with matters relating to past assessments,
 appeals, prosecution, notices and various other issues
 were raised by the Income tax Department. Secondly, the
 petitioners did not have all the material relevant to
 file returns of income to properly estimate liability of
 advance tax as the books of accounts were seized by the
 Income tax Department on 31.1.1983 and were not yet
 returned and thirdly, one Mr.Jitubhai who was looking
 after the accounts had left this firm and therefore
 finalisation of books was delayed. According to the
 petitioners, who are partners of the firm, they had no
 income except the income from the firm and as the
 accounts of the firm ere not finalised they could not
 estimate their income and file returns in time. These
 reasons for not filing the returns were accepted by the
 Central Board of Direct Taxes and it was communicated to
 the Income-tax Commissioner by their letter dated
 12.2.1993 and, therefore, the penalty levied for both the
 years was waived. However, the Commissioner of
 Income-tax refused to waive the interest charged for both
 the assessment years. It appears that the application
 for review by the firm was also rejected on the same
 grounds. According to the Commissioner of Income-tax,

¶22

¶23

 the petitioners were expected to deposit the income tax
 within time and because of the delay on their part, the
 Government has been deprived of those taxes within time
 and, therefore interest has ben charged under Sections
 139(8) and 217 of the I.T. Act.

¶24

 3. The learned Counsel for the petitioners contended
 that the conditions for waiver of penalty and the
 conditions for waiver of interest are the same in view of
 the provisions of Section 273A and if the explanation
 given by the petitioners for waiver of penalty was
 sufficient and if the conditions are satisfied for waiver
 of penalty, there could be no reason not to accept the
 explanation for waiver of interest. Section 273A(1), as
 it stood during the relevant period, reads as follows :-

¶25

 "273A(1) Notwithstanding anything contained in
 this Act, the Commissioner may, in his discretion,
 whether on his own motion or otherwise, -

¶26

 (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 as required to furnish under
 sub-section(1) of section 139; or

¶27

¶28

 (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

¶29

 (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,

¶30

 if he is satisfied that such person -

¶31

 (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;

¶32

 (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;

¶33

 (c) in the cases referred to in clause (iii), has,

¶34

¶35

 prior to the issue of a notice to him under

¶36

 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,

¶37

 and also has, in all the cases referred to in
 clauses (a), (b) and (c), co-operated 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."

¶38

 Admittedly, the petitioners had submitted the income-tax
 returns voluntarily without any notice or any action
 being taken by the Income-tax Department and had also
 deposited the income tax as per their own assessment. As
 noted above, the Assessing Officer found the assessment
 correct and the returns were accepted without any
 objection. It shows that the petitioners had, in fact,
 co-operated in the assessment and the enquiry which could

¶39

¶40

 be held before or after filing of such income tax
 returns. This indicates that they acted in good faith
 and they had made full and true disclosure of their
 income voluntarily. They had also given reasons and the
 circumstances in which the income tax returns could not
 be submitted within time, those the reasons were accepted
 for the purpose of waiver of penalty. If the conditions
 were satisfied and if the reasons given by the
 petitioners were good for waiver of penalty, it is
 difficult to understand why they could not be good for
 waiver of interest, particularly when it appears that the
 delay was not intentional and because of the
 circumstances, in which they found themselves, the
 returns could not be submitted within time.

¶41

 4. In a similar matter, in Vinodcandra C. Patel and
others v. Commissioner of Income-tax (1995) 211 ITR 232
(Guj), the Division Bench of the Gujarat High Gujarat
 observed as follows :-

¶42

 "There is no dispute that these are cases in which
 applications under section 273A could be made.
 There is also no dispute as regards the conditions
 that the petitioners had voluntarily and in good
 faith made full and true disclosure of their

¶43

¶44

 income. The question which arises for

¶45

 consideration is whether the two common conditions
 which are applicable to all the three clauses,
 viz. (a), (b) and (c), can be said to have been
 satisfied in respect of both the claims, viz. the
 claim of waiver of penalty and the claim of waiver
 of interest. The two conditions are that:(i) the
 assessee should have co-operated in any enquiry
 relating to the assessment of his income, and (ii)
 the assessee should have paid or made satisfactory
 arrangements for payment of tax or interest
 payable in consequence of an order passed in
 respect of the relevant assessment year. Thus,
 the condition regarding payment was common both
 for the purpose of waiver of penalty and for the
 purpose of waiver of interest. Whereas for the
 purpose of payment of penalty, the Commissioner
 came to the conclusion that the condition for
 payment of tax was satisfied, with respect tothe
 waiver of interest, he came to the conclusion that
 the very same condition was not satisfied.
 Obviously, that discloses non-application of mind
 because the two things are so inconsistent that
 they cannot stand together. Even in those cases
 where the Commissioner has come to the conclusion
 that even though the other conditions were

¶46

¶47

 satisfied as the defaults were for three years or
 more, only 50 per cent reduction should be granted
 to the petitioners. With respect to these cases,
 it as submitted by learned counsel for the Revenue

¶48

 that it was within the discretion of the
 Commissioner to pass such an order. But the
 Commissioner has not stated why when all other
 conditions were fully satisfied, full amount of
 interest did not deserve to be waived. If the
 assessee had not committed default, no interest
 would have become payable. Interest became
 payable only because the assessee had committed
 the default. Therefore, while considering the
 question as to whether the interest deserved to be
 waived or not, the Commissioner should not have
 given much importance to the fact that for three
 years the returns were not filed by the concerned
 assessee. Thus, in all these cases, the impugned
 orders appear to have been passed without proper
 application of mind."

¶49

 5. In Sushila Indubhai Patel vs. Union of India and

¶50

another (2008) 303 ITR 308 (Bom),the assessee was out of
 the country for a period of 9-1/2 years and, therefore,
 there was delay in submission of the income tax returns

¶51

¶52

 for the assessment years 1979-80 to 1988-89. In that

¶53

 case also the Assessing Officer had levied interest and
 also penalty. The Commissioner (Appeals) deleted the
 penalty, but the application for waiver of interest was
 rejected. This Court allowed the writ petition and held
 that when the penalty was waived, the Commissioner of
 Income-tax was not justified in rejecting the application
 for waiver of interest on the same grounds. In view of
 the legal provisions as interpreted by the Gujarat High
 Court as well as this Court, we find that if the reasons
 given by the petitioners for delay in filing the income
 tax returns were sufficient for waiver of penalty, the
 said reasons should also be sufficient for waiver of
 interest under Sections 217 and 139(8) of the I.T.Act.
 Therefore, we hold that the Income-tax Commissioner was
 not justified in refusing the waiver of interest.

¶54

 6. In the result, the Writ Petitions are allowed and
 the impugned orders dated 30.3.1993 and 21.6.1993 in
 respect of Writ Petition No.888 of 1994 and the impugned
 orders dated 25.8.1993 in respect of Writ Petition No.887
 of 1994 and Writ Petition No.889 of 1994 are quashed and
 set aside. If the amount of interest is already
 deposited, the petitioners shall be entitled to refund of
 the same without any interest thereon.

¶55

¶56

(F.I.REBELLO,J.)

¶57

(J.H.BHATIA,J.)

Sandeep M.Shah. v. v.N.Wakarker and Anr.

Case brief

What is this about?

What did the court decide?

Sandeep M.Shah. v. v.N.Wakarker and Anr.

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

The Commissioner of Sales -Tax,Mum Vs M/S Inaid Gypsum Ltd.

Asset Reconstruction Company (India) Limited and Anr. Vs Union of India and Ors.

M/S.P. K. International Vs Union of India and Anr.

Veenadevi Singhania and Ors. (L.R.'S of Ajaypat Singhania ) Vs R.S. Rao, Wealth -Tax Officer, C.C. VII and Ors.

Vijaypat Singhania Vs R.S. Rao, Wealth -Tax Officer, C.C. VII and Ors.

Madhupati v. Singhania Vs S. Venugopalan, Wealth-Tax Officer, C.C. Xi and Ors.