Holding

The Commissioner, upon satisfaction of the conditions of Section 18‑B, may either reduce the penalty or waive it entirely, and is not compelled to grant a full waiver.

Summary

The appellants were liable to penalty under Section 18(1) of the Wealth Tax Act, 1957 for failing to file wealth‑tax returns for assessment years 1970‑71 to 1975‑76. After the amendment inserting Section 18‑B, they filed the returns and sought a full waiver of the penalty. The Commissioner, satisfied that the conditions of Section 18‑B were met, exercised his discretion to reduce the penalty to 5% instead of granting a complete waiver. The appellants challenged this order before the High Court, which dismissed their writ petition, and then appealed to the Supreme Court. The Court held that Section 18‑B expressly confers a discretionary power on the Commissioner to either reduce or waive the penalty, and that the discretion must be exercised fairly, not arbitrarily. Since the Commissioner gave reasons for the reduction and those reasons were not unjust, the Court found no ground to interfere and dismissed the appeal.

Issues considered

Whether Section 18‑B obliges the Commissioner to waive the entire penalty when its conditions are satisfied.
Whether the Commissioner may, at his discretion, reduce the penalty instead of granting a full waiver.

Legislation cited

Income Tax Act, 1961s. 273-A
Wealth Tax Act, 1957s. 18(1), s. 18-B

Subjects

Wealth TaxPenaltyDiscretionSection 18-BWaiverTax LawAdministrative discretion

Judgment

A SMT. HARBANS KAUR >.
v.
THE COMMISSIONER OF WEALTH TAX, JULLUNDUR

JANUARY 13, 1977

B [B.P. JEEVAN REDDY AND K.T. THOMAS, JJ.]
,r
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: -<.,

re
"!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
'

F
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·
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
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]
B
1.2. The words "the Commissioner may in his discretion ...... reduce or
-( waive the amount 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 deeins just and proper. When a discretion is
conf~rred on an authority the same must be exercised fairly and not ar· C
bitrarily, justly and not fancifully. [187-E]

S.G. Jaisinghani v. U11io11 of India & Ors., AIR (1967) SC 1427, relied
on.

2. Even if the legislature has not used the words "in his discretion" D
>
in Scctio11 18(B)(1) the Commissioner could have exercised only a discre-
tionary power in view of the employment of the word "may". 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; [18?·G, 188-~]
E
Shalamtla Mehra, CWT (1976) 102 ITR (Del.); Sha11karaApaya Swami
v. WTO, Belgauni, (1976) 103 ITR 649 (Kar.);A11ja11appa v. CWT (1980) 124
ITR 433 (Kar.); Rasiklal Ra11chhodbhai Patel v. CWT, (1980) 121 ITR 219
(Guj.); Sardar Kartar Singh v. CWT, (1982) 135 ITR 375 (Gau.) and Purshot·
tam Thackersey v. KN. A11a11trama A;yar, (1985) 154 ITR 438 (Born.), held F
inapplicable.

3. In the Jnstant case, the Commissfoner has indicated his own
reasons for resorting to the power of reduction of the penalty in
preference to granting full waiver of the penalty. The reasons indicated
in the orders are not in any manner unjust or irrelevant Therefore, there G
is no ground to interfere with the impugned orders and the judgments
of the High Court. [188-H, 189-A]

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1334 of
~1~ H
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-
r D
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
conferred on an authority the same must be exercised fairly and not
-r
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
Parliament used both expressions "may" and "in his discretion" together, the G
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.
.,
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
F 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.