SMT. HARBANS KAUR vs. THE COMMISSIONER OF WEALTH TAX, JULLUNDUR

A SMT. HARBANS KAUR v. THE COMMISSIONER OF WEALTH TAX, JULLUNDUR JANUARY 13, 1977 B [B.P. JEEVAN REDDY AND K.T. THOMAS, JJ.] Wea/tit Tax Act,, 1957: Sections 18(!) and 18-B. Wealth Ta.\~Assessment Years 1970-71 to 1975- 76---Commissioner of c Wealth Ta.\~Powcr-under S. 18-B-Scope of-Commissioner ordered reduc-' ti on of penalty in preference to gra11t of full waiver supported by reasons-field: such reduction of penalty was not unjust or i11"e/eva11t~is- cretion has to be exercised fairly and justly and not arbitrarily or fanciful- ly-lncome Tax Act, 1961, S.273-A. D Words and Phrases: "!11 his discretion" and "may"-Mea11i11g of-111 the -context of S.18-B of the Wealth Tax Act, 1957. E The appellant was liable to penalty under Section J !J uf the Wealth Tax Act, 1957 for failure to tile the wealth tax returns in 11!Spect of the .Assessment Years (AYs) 1970·71 to 1975-76. When the Act was amended by incorporating Section 18·8 In the Act, the appellant submitted wealth tax returns and made a request for run waiver or the penalty as envisaged in the new provision. The respondent-Commissioner round that the appel· F lant had complied with the conditions stipulated in Section 18·8 or the Act in respect of the said Assessment Years. However, keeping in view of the facts and circumstances of the case, the Commissioner, instead of granting waiver for the full penalty, had only reduced it to 5%. G The appellant bad filed a writ petition before the High Court con- tending that once the appellant was found to be entitled to the benefit of Section 18·B of the Act, the Commissioner should have waived the entire amount of penalty. The. High Court dismissed the petition i11 limi11e. Hence this appeal. H Dismissing the appeal, this Court 184 >. ,r -<., re ' -- '

H. KAUR v. C.0.W.T. 185 HELD.: 1.1. lfthe conditions stipulated in section 18·8.ofthe Wealth A Tax Act, 1957 are satisfied the Commissioner has discretion in the matter. In exercise of that discretion, the Commissioner can either reduce the amount of the penalty or he may even waive the entire penalty. It is for the Commissioner to decide on the facts ,of a particular case whether a waiver in entirety or a reduction alone is warranted. [187-D]

186 SUPREME COURT REPORTS (1997) 1 S.C.R. A From the Judgment and Order dated 8.8.80 of the Punjab and Haryana High Court in C.W.P. No. 1692 of 1980. Dhruv Mehta and S.K. Mehta for the Appellants. Dr. v. Gaurishankar, Anil Srivastava and B. Krishna Prasad for the B Respondent. The Judgment of the Court was delivered by THOMAS J. Appellants in these appeals were liable to penalty under C section 18 ~f the Wealth Tax Act, 1957, (for short the Act') for failure to, file the returns in respect of the assessment years 1970-71, 1971-72, 1972-73, 1973-74, 1974·75 and 1975-76. When Parliament amended the Act and incorporated Section 18-B by Taxation Laws (Amendment Act 1975) i.e. Act 41 of 1975, appellants in these cases submitted wealth tax returns and made a request for full waiver of the penalty as envisaged in the new D provision. The Commissioner of Wealth Tax (the 'Commissioner' for short) found that as the appellants have complied with the conditions stipulated in section 18-B of the Act they are entitled to the benefit of the new provision. However, keeping in view the facts and circumstances of the case, the Commissioner, instead of granting waiver for the full pen1lty had . E only reduced it to 5% for the relevant assessment years. Appellants sub· mitted that once a person is found to be entitled to the benefits ofthe new provision of section 18-B of the Act, the Commissioner should have waived the entire amount of penalty payable by that person concerned. So saying they approached the High Court by filing writ petitions but those writ p petitions were dismissed ill limi11e. Hence, these appeals. Learned counsel contended that once a person is found entitled LO the benefit under section 18B, the Commissioner cannot withdraw part of the benefit by imposing a penalty of 5 per cent. According to him, once the failure. is condoned, power to waive cannot be exercised in a truncated G manner as was done in this case but only in a full measure. Section 18(1) empowers the officer under the Act to impose penalty · f- on a person in certain contingencies. As per the sub-section if the Wealth Tax Officer, Appellate Assistant Commissioner or Appellate Tribunal in H the course of any proceedings under the Act is satisfied that any person

) H. KAUR v. C.O.W.T. (THOMAS, J.) 187 A has, without reasonable cause, failed to furnish the returns which he is A required to furnish or has without reasonable cause failed to furnish within the time allowed or without reasonable cause failed to comply with a notice •' under section 16(2) or (4), or has concealed the particulars of any assets or furnished inaccurate particulars of any assets or debts such officer may direct that such person shall pay, by way of penalty, the amount specified B respectively in the three clauses set out therein. ' Section 18-B confers power on the Commissioner to reduce or waive such penalty in certain contingencies, if he is satisfied that such person has made full and true disclosure of his net wealth and has also cooperated in any enquiry relating to the assessment ofhis net wealth and has either paid c or made satisfactory arrangement for the payment of any tax or interest payable in consequence of an order passed under the Act. If the conditions stipulated in the section are satisfied Commissioner has a discretion in the matter. In exercise of that discretion, the Comrnis- D r sioner can either reduce the amount of the penalty or he may even waive the entire penalty. It is for the Commissioner to decide oli the facts of a particular case whether a waiver in entirety or a reduction alone is war- ranted. The words "the Commissioner may in his discretion ........... reduce or E waive the ainount of penalty" in Section 18-B of the Act are clear enough to show that the power conferred on the Commissioner is to be exercised by him in such manner as he deems just and proper. When a discretion is -r conferred on an authority the same must be exercised fairly and not arbitrarily, justly and not fancifully vide S.G. Jaisi11gha11i v. U.0.1. & Others, F AIR (1967) SC 1427. Even if the legislature has not used the words "in his discretion" in Section 18(8)(1) Commissioner could have exercised only a discretionary power in view of the employment of the word "may". Now when the G Parliament used both expressions "may" and "in his discretion" together, the position is placed beyond the pale of any doubt that legislature wanted an '"" officer of the rank of the Commissioner to be reposed with the discretion- ary power to choose between entire waiver or reduction in any proportion. Of course when the Commissioner, instead of giving a complete H

188 SUPREME COURT REPORTS (1997] 1 S.C.R. A waiver, chooses to give only a reduction for the penalty amount he must )... indicate in his order that he has applied his mind in that regard. In this view, .there is no warrant for the proposition that the Commissioner, if satisfied of the compliance of conditions, has only one choice i.e. to waive the penalty in entirety. Otherwise, it may mean that Commissioner can in B a case where conditions are not satisfied, reduce the penalty amount. When conditions are not satisfied Commissioner cannot do either. Only when the said conditions are satisfied that the occasion arises for the commissioner to exercise his discretion - not before. _Learned counsel has cited the following decisions of various High C Courts in support of the contention that waiver in full has to be ordered when all the required conditions have been complied with Shakuntla Mehra v. CWT, {1976) 102 ITR 301 of the Delhi High Court; Shankara Apya Swami v. WTO, Belgaum, (1976) 103 ITR 649, of the Karnataka High Court; Anjanappa v. CWT, (1980) 124 ITR 433 of the Karnataka High D Court; Rasiklal Ra11chhodbhai Patel v. CWT, (1980) 121 ITR 219 of the Gujarat High Comt Sardar Karlar Singh v. CWT, (1982) 135 ITR 375 of the Gauhati High Court. fo all those decisions learned Judges have pointed out that without indicating any reason whatsoever the Commissioner can- not dispense with his. discretion in granting waiver of the penalty. Those E decisions have not laid down a proposition that the only course which a Commissioner can adopt on fulfilment of the conditions is to waive the penalty in entirety . F . , Section 18-B is analogous to section 273-A of the Income Tax Act, 1961 whereunder also a similar discretion has been conferred on the Commissioner of Income Tax for either reducing the penalty or granting waiver of the entire penalty. It is understood in clear terms that the said discretion in Income Tax Act is to be exercised in a reasonable and fair manner. The decision of the Bombay High Court (Purslzottam Tl1ackersey_ v. KN. A11antrama Ayyar, {1985) 154 ITR 438] cited before us only shows G that the order of the Commissioner declining to waive the penalty without advancing any reason whatsoever cannot be supported and the matter was remitted to the Commissioner for passing an order afresh. -;- In the cases on hand, the Commissioner has indicated his own H reasons for resorting to the power of reduction of the penalty in preference

) ' H. KAUR v. C.O.W.T. (THOMAS,J.] 189 ~ to granting full waiver of the penalty. We cannot say that the reasons A indicated in the orders are in any manner unjust or irrelevant. We, there- fore, find no ground to interfere with the impugned orders and the judg- ments of the High Court. The appeals are dismissed. V.S.S. Appeals are dismissed.