The assessee was charged interest under s 139 and s 215 and a penalty was also levied under s 271(1)(a) and s 273(1)(b). The assessee made an application under s 273 for a total waiver of the interest and penalties as all the conditions mentioned in s 273A were fulfilled. It was also stated that the assessee had voluntarily and in good faith made a full and true disclosure of her income prior to the issue of a notice under s 139(2) and cooperated in the inquiry relating to the assessment and paid the taxes and interest payable in consequence of the assessment order. After 8 years, the CIT rejected this application. Being aggrieved, the assessee has filed a present writ petition.
The assessee contended that as per s 273A, the CIT is required to record satisfaction in respect of the matters provided under the said section, though the CIT rejected the application on the ground that (i) the reasons given by the assessee for not filing the return were not reasonable and (ii) the assessee had already made payment of interest and penalty and therefore there was nothing to waive. It was further contended that the (ii) ground for rejection of the application was contrary to the provisions of s 273A under which the CIT is required to consider the relevant factors as envisaged thereunder even in a case where the assessee had paid the tax and interest payable in consequence of the order in respect of which the application under s 273A had been filed.
The issue is whether the Commissioner is required to record satisfaction as required under s 273A before the rejection of the assessee’s application for a waiver of Interest and Penalty and whether the CIT was justified in rejecting the application of the assessee for a waiver of interest and penalty on the ground that the assessee could not explain the reason for not filing the return and the assessee paid the penalty and interest on the taxes payable, therefore there was nothing to waive.
The question of a waiver would arise in a case where there is a failure without reasonable cause to furnish a return of total income as required under s 139(1). The question as to whether there was a reasonable cause for failure in furnishing the return of total income under s 139(1) would have been considered at the time of levying a penalty under clause (i) of sub-s (1) of s 271 and it is only when the adjudicating authority finds that there is no reasonable cause for such a failure that a penalty would have been levied. In view of the provisions of s 273B of the Act, in a case where the assessee was in a position to make out a case that there was a reasonable cause for such a failure, no penalty could have been imposed under s 271(1)(i) of the Act. Therefore, the very fact that penalty has been imposed under the said s indicates that no reasonable cause had been made out.
Section 273A makes it amply clear that such power has to be exercised where a penalty has been levied for the failure to show reasonable cause. Hence, when the question of a waiver of the penalty already imposed arises, there would be no reason for the Commissioner to go into the question as to whether the return has been filed belatedly without reasonable cause. While deciding an application under s 273A of the Act in a case where a penalty is imposed or imposable on a person under clause (i) of sub-s (1) of s 271, the Commissioner is required to be satisfied that the assessee had, prior to the issue of a notice to him under sub-s (2) of s 139, voluntarily and in good faith made a full and true disclosure of his income. The Commissioner is required to be satisfied that such a person has cooperated in any enquiry relating to the assessment of his income.
The first reason for rejecting the application was that the reasons advanced by the assessee for the failure to file a return within the time could not be said to be reasonable. Insofar as this factor is concerned, no question arises of going into that issue while considering an application under s 273A.
The second reason was that the petitioner had made a payment of the entire penalty and interest, therefore there was nothing to waive. For granting relief under s 273A, the Commissioner is required to record the satisfaction that such a person has either paid or made satisfactory arrangements for the payment of any tax or interest payable in the consequence of an order passed under the Act in respect of the relevant assessment year. Instead of recording satisfaction or otherwise, the Commissioner had totally misdirected himself and decided the application on grounds that were not germane for the purpose of deciding the application under s 273A.
Though it is true that powers under s 273A are discretionary powers, it is equally true that powers conferred under a statute are required to be exercised in consonance with the provisions of the said statute. The Commissioner has not exercised discretion as required under s 273A. The impugned order suffers from the vice of non-application of mind to the relevant factors and as such cannot be sustained.
Recording of the satisfaction is necessary for Commissioner before rejection of assessee’s application for waiver of Interest and Penalty — as held by GujHC in Shayama Sanjay Shah v CIT — In favour of: Others; Special Civil Application No. 5993 of 2001
Decided on: 25 March 2011
The assessee contended that as per s 273A, the CIT is required to record satisfaction in respect of the matters provided under the said section, though the CIT rejected the application on the ground that (i) the reasons given by the assessee for not filing the return were not reasonable and (ii) the assessee had already made payment of interest and penalty and therefore there was nothing to waive. It was further contended that the (ii) ground for rejection of the application was contrary to the provisions of s 273A under which the CIT is required to consider the relevant factors as envisaged thereunder even in a case where the assessee had paid the tax and interest payable in consequence of the order in respect of which the application under s 273A had been filed.
The issue is whether the Commissioner is required to record satisfaction as required under s 273A before the rejection of the assessee’s application for a waiver of Interest and Penalty and whether the CIT was justified in rejecting the application of the assessee for a waiver of interest and penalty on the ground that the assessee could not explain the reason for not filing the return and the assessee paid the penalty and interest on the taxes payable, therefore there was nothing to waive.
The question of a waiver would arise in a case where there is a failure without reasonable cause to furnish a return of total income as required under s 139(1). The question as to whether there was a reasonable cause for failure in furnishing the return of total income under s 139(1) would have been considered at the time of levying a penalty under clause (i) of sub-s (1) of s 271 and it is only when the adjudicating authority finds that there is no reasonable cause for such a failure that a penalty would have been levied. In view of the provisions of s 273B of the Act, in a case where the assessee was in a position to make out a case that there was a reasonable cause for such a failure, no penalty could have been imposed under s 271(1)(i) of the Act. Therefore, the very fact that penalty has been imposed under the said s indicates that no reasonable cause had been made out.
Section 273A makes it amply clear that such power has to be exercised where a penalty has been levied for the failure to show reasonable cause. Hence, when the question of a waiver of the penalty already imposed arises, there would be no reason for the Commissioner to go into the question as to whether the return has been filed belatedly without reasonable cause. While deciding an application under s 273A of the Act in a case where a penalty is imposed or imposable on a person under clause (i) of sub-s (1) of s 271, the Commissioner is required to be satisfied that the assessee had, prior to the issue of a notice to him under sub-s (2) of s 139, voluntarily and in good faith made a full and true disclosure of his income. The Commissioner is required to be satisfied that such a person has cooperated in any enquiry relating to the assessment of his income.
The first reason for rejecting the application was that the reasons advanced by the assessee for the failure to file a return within the time could not be said to be reasonable. Insofar as this factor is concerned, no question arises of going into that issue while considering an application under s 273A.
The second reason was that the petitioner had made a payment of the entire penalty and interest, therefore there was nothing to waive. For granting relief under s 273A, the Commissioner is required to record the satisfaction that such a person has either paid or made satisfactory arrangements for the payment of any tax or interest payable in the consequence of an order passed under the Act in respect of the relevant assessment year. Instead of recording satisfaction or otherwise, the Commissioner had totally misdirected himself and decided the application on grounds that were not germane for the purpose of deciding the application under s 273A.
Though it is true that powers under s 273A are discretionary powers, it is equally true that powers conferred under a statute are required to be exercised in consonance with the provisions of the said statute. The Commissioner has not exercised discretion as required under s 273A. The impugned order suffers from the vice of non-application of mind to the relevant factors and as such cannot be sustained.
Recording of the satisfaction is necessary for Commissioner before rejection of assessee’s application for waiver of Interest and Penalty — as held by GujHC in Shayama Sanjay Shah v CIT — In favour of: Others; Special Civil Application No. 5993 of 2001
Decided on: 25 March 2011
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