- (1.)THIS Rule is directed against an order passed by the Commissioner of Income-tax rejecting petitioner's application under section 271 (4a) of the Income Tax Act, 1961. The petitioner is a partnership firm registered under section 26a of the Income Tax Act and the petitioner used to carry on business in the purchase and sale of Jute and similar goods from the inception of its business. The petitioner duly tiled returns and was assessed and the amounts assessed were paid by the petitioner in respect of the assessment years 1953-54. 11954-55/1955-56/1956-57/1957-58/1959 60)1960-61. In addition to the said incomes earned and shown in the respective returns on (he basis of which the assessments were made the petitioner's incomes were not entered in the books of account nor shown in the returns filed by the petitioner arid disclosed by an application an unaccounted income of Rs. 2,11,000. It was also stated that the said loans were entered in the books of account of the firm as loans from various fictitious persons and were also mentioned in the statement of investment annexed to the voluntary disclosure. The said application how ever was rejected as not maintainable by the Commissioner and it was communicated to the petitioner by the income-tax Officer Special Investigation branch by order dated 18th April, 1969. I directed the department to produce the order passed by the Com missioner himself. Mr. Pal produced the record along with the order of the commissioner passed on 18th January, 1969 which is as follows "sri N. D. Paul learned Advocate appears. He has been heard. It appears that the firm has made the petition under section 271 (4a) which is not applicable in this case and so it cannot be entertained. " 'being aggrieved by the order dated 18th April, 1969, the petitioner moved this Court and obtained the present rule.
(2.)MR. Dutta on behalf of the petitioner contended that the order passed under section 271 (4a) is a quasi-judicial order and some reasons must be given why the application made by the petitioner should be rejected. Section 271 (4a) runs as follows (4a ). Notwithstanding anything contained in clause (1) or clause (iii) of sub-section (1) the Commissioner may, in his discretion-i) reduce or waive the amount of minimum penalty impossible on a person under clause (i) of sub-section (1) for failure, without reasonable cause, to furnish the return on total income which such person was required to furnish under sub-section (1) of section 139 or ii) reduce or waive the amount of minimum penalty impossible on a person under clause (iii) of sub-section (1) if he is satisfied that such person a) in the case referred to in clause (i) of this sub-section has, prior to the issue of notice to him under sub-section (2) of section 139, voluntarily and in good faith, made full disclosure of his income; and in the case referred to in clause. (ii) of this sub-section has, prior to the detection by the Income-tax Officer, of the concealment of particulars of income in respect of which the penalty is impossible, 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; b) has co-operated in any enquiry relating to the assessment of such income; and c) has either paid or made satisfactory arrangements for payment of any tax or interest payable in consequence of an order passed under this Act in respect of the relevant assessment year: in my opinion, in the body of the section itself it appears to me that before an order is passed the Commissioner may, in his discretion, came to a finding whether the disclosure was voluntarily in good faith. If it is in voluntarily or not in good faith he may reject the application. But be fore imputing bad faith on the assesses it is necessary for the Commissioner, in my opinion, to hear him. It is also necessary to hear the petitioner whether satisfactory arrangement for payment of taxes or interest has been made or in other words the Commissioner concerned must have heard the parties and make a speaking order why the application is either not entertainable or is entertain able by the Commissioner or in other words, it is for the Commissioner to act in a quasi-judicial manner or even if it. is administrative order he should act fairly and justly and to impute a bad faith on an assesses without hearing him the Commissioner cannot be said to acting justly and fairly. The view 1 take is supported by a decision re ported in (1) 87 I. T. R. p. 70. The madras High Court held the test of section 271 (4a) deals only exercise of judicial discretion by the Commissioner while dealing with masters which come up before him for the purpose of reducing or waiving the amount of minimum penalty imposable on an assesses who files a delayed return or who is said to have Concealed his in come etc. The word "reduce" in section 271 (4a) also gives the clue that he could only reduce the penalty which has already been imposed and naturally, therefore, it cannot refer to reduction of penalty which is likely to be imposed or which may not be imposed at all. In this sense also and for the reason that this sub-section deal only with a power and is not indicative of procedure as is normally understood, the Commissioner of In come-tax is bound while exercising his jurisdiction under section 264 to consider an appropriate cases whether he should exercise his judicial discretion ,as contemplated in section 271 (4a ).
(3.)THE text of section 271 (4a)which is the foundation for exercise of. such a judicial discretion is also illustrative of the scope of such a power the Commissioner while dealing with a situation like the one which has arises in this case, has to find whether the person concerned has furnished accurate particulars of his income and that too voluntarily and in good faith has co-operated in any enquiry relating to the assessment of such income and has paid or made satisfactory arrangements for payment of tax, etc. and there after pass necessary orders and might or might not exercise his discretion in favour of the assessee. Though the word used in section 271 (4a) is "discretion" it is obvious that the Commissioner who is deemed to be a quasi-judicial tribunal for the purpose under consideration, should see that no principles of natural justice are violated or no set prescriptions of law are ignored and that in any event he should judicially view the entire material before him and thereafter exercise his so-called discretion judiciously under this sub-clause.