Jay Bee Industries V. Commissioner of Income Tax, Jalandhar and Income Tax Officer, Ward-B, Bathinda

CWP/1202/1988

AI Insights

M/s Jay Bee Industries, a firm engaged in manufacturing and selling electrical transformers, filed a writ petition challenging several orders related to the assessment year 1983-84. The primary contention was against the rejection of their revision petition concerning the disallowance of a commission payment, which was initially accepted and added to their income. The firm also contested the interest charged under various sections of the Income Tax Act, which they sought to waive under the Amnesty Scheme. The court found that the rejection of the waiver was not in line with the CBDT's circulars and directives, leading to the quashing of the Commissioner of Income Tax's order and a directive for re-evaluation.

• Counselvise Citation: [2009] 140 COUNSELVISE.COM (IT) 797013 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 17-09-2009
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961, Constitution of India
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: KARAN NEHRA
• Keywords: Amnesty Scheme; Assessment; Commission; Income Tax; Interest Waiver; Voluntary disclosure; Voluntary disclosure
• Section: 264; 215; 273; 226; 227; 139(8); 217; 277(1)(a)

Judgement Text

"IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. CWP No.1202/1988 Date of Decision: 17.9.2009. M/s Jay Bee Industries, Malout Road, Bathinda ..........Petitioner. Versus Commissioner of Income Tax, Jalandhar and others ..........Respondent CORAM: HON'BLE MR.JUSTICE M.M.KUMAR HON'BLE MR.JUSTICE JASWANT SINGH. Present: Mr. Karan Nehra,Advocate for the petitioner. 1. To be referred to the Reporter or not ? 2. Whether the judgement should be reported in the Digest ? JASWANT SINGH,J. Petitioner-firm has filed the present writ petition under Articles 226/227 of the Constitution praying for quashing the order dated 12.11.1987 (P/11) passed by Commissioner of Income Tax-respondent no.1 vide which the revision petition dated 26.2.1987 (P/10) under Section 264 of the Income Tax Act,1961 has been rejected; order dated 12.9.1986 (P/5), assessment order dated 14.3.1986 (P/2) and demand notice dated 17.3.1986 (P/3) passed by Income Tax Officer, Ward-B, Bathinda-respondent no.3. The facts giving rise to the present writ petition are that the CWP No.1202/1988 2 petitioner firm is a registered firm and derives its income from the business of manufacturing and sale of electrical transformers. For the assessment year 1983-84 the petitioner firm filed the return on 8.10.1984 and declared its income to the tune of Rs.1,60,450/-. During the course of assessment the authorities found that the assessee had paid an amount of Rs.1,14,727/- as commission to one M/s K.Mohan of Patiala for liaisoning work for procuring tenders from Punjab State Electricity Board, Patiala on behalf of the petitioner firm. The deduction was not permissible under the Income Tax Act and therefore, during the enquiries assessee voluntarily offered that out of the commission of Rs.1,14,727/- an amount of Rs. 55,000/- may be disallowed and counted towards its income for the assessment year 1983-84. The offer made by the petitioner firm was accepted by the respondents vide order dated 14.3.1986 (P/2) and total income was assessed at Rs.2,80,075/-. In addition to this the interest amounting to Rs.22,491/- and Rs.16,571/- was also charged under Section 139(8) and 215 of the Income Tax Act. Aggrieved against the action of respondent no.3, petitioner firm filed an application for waiver of interest charged under Rule 117A and 40 of the Income Tax Rules,1962 read with other circulars issued by the C.B.D.T., under Amnesty Scheme but the same was rejected by respondent no.1 vide order dated 12.11.1987 (P/1). Hence the present writ petition. Neither any reply has been filed by the respondents nor anyone appeared at the time of hearing of the petition. After going through the paper book carefully, we are of the considered opinion that this writ petition deserves to be allowed. Vide order dated 9.2.1988 while issuing notice an interim stay of penalty proceedings initiated under Section 277(1)(a) and 273 of the CWP No.1202/1988 3 Income Tax Act was granted, and subsequently made absolute vide order dated 20.4.1988. The dispute is only regarding the interest component amounting to Rs.39,062/- i.e. Rs.22,491/- under Section 139(8) and Rs.16,571/- under Sections 215 and 217. So far as tax liability was concerned that was to the tune of Rs.31,580/- but the same was deposited before 31.3.1986. The respondent nos. 1 and 3 declined the plea of the petitioner on the ground that the same is not covered under the Amnesty Scheme. The reasoning adopted by the respondents is wholly baseless and untenable as the perusal of the Circular no.450 dated 13.2.1986 (P/12) especially clarification to question no.5 reveals that clarification was issued that even for earlier assessment years if higher income and wealth are declared suo moto before 31.3.1986, the assessee was not to be liable to penalty or prosecution and further the Income Tax Officer would be liberal in waiver of interest in such cases. In the present case undisputedly the petitioner-firm surrendered an additional come of Rs.55,000/- before the respondent no.3 vide its written request/voluntary disclosure dated 5.3.1986 (P/1) and which reads as under:- “That in furtherance to our letter dated 5.3.1986 in respect of genuinity of the payments made to M/s K.Mohan, Patiala and the circumstances under which payments have been made otherwise than crossed cheque or crossed draft and the confirmation of M/s K.Mohan, in order to buy peace and avoid litigation we are ready to surrender for an addition of Rs.55,000/- CWP No.1202/1988 4 subject to no penal action and subject to the right to contest in case of non-approval of the said surrender. The surrender is made to buy peace and subject to no penal action. It is, therefore, requested that the case may be finalised by taking favourable view of the matter.” A perusal of assessment order dated 14.3.1986 (P/2) passed by respondent no.3-Income Tax Officer reveals that respondent no. 2- Inspecting Assistant Commissioner, Bathinda also vide his letter dated 12.3.1986 recommended the finalisation of assessment after considering the surrender of Rs.55,000/- made by the petitioner as reasonable for the assessment year 1983-84. The relevant extract of the aforesaid recommendation reads as under:- “The assessee's voluntary offer to surrender Rs.55,000/- to be added in the assessment of A/Y 1983-84 to cover the above contentions issued in the light of the Chairman, CBDT's circular No.451 (F.No.225/86/85-ITA-II) dated 17.2.86 appears to be a reasonable proposal. The addition, therefore, may be made accordingly to finalise the assessment at the earliest.” In view of the above, the writ petition is allowed, impugned orders dated 12.11.1987 (P/11) passed by Commissioner of Income Tax- respondent no.1 is quashed and respondent no.1 is directed to decide the revision petition dated 26.2.1987 (P/10) under Section 264 of the Act, CWP No.1202/1988 5 afresh by passing a speaking order after taking into consideration the Circular Nos.450 and 451 dated 13.2.1986 (P/12) issued by the C.B.D.T., and the observations made hereinabove. The needful be done within a period of three months from the date of receipt of a copy of this order. (M.M.Kumar) (Jaswant Singh) Judge Judge 17.9.2009. joshi "