1998 (3) TMI 31 - HC - Income Tax

Summary

Issues Involved:

1. Whether the petitioner made a true and complete disclosure voluntarily and in good faith.
2. Whether the disclosure made subsequent to the search under section 132 of the Income-tax Act disentitles the petitioner from claiming benefits under section 273A.
3. Whether the impugned proceedings are supported by reasons and justified in law.

Issue-wise Detailed Analysis:

1. True and Complete Disclosure Voluntarily and in Good Faith:

The petitioner, a partnership firm, faced a search by the Income-tax Department on March 29, 1983, which led to the seizure of certain records. Following the search, the petitioner approached the respondents for a settlement of their assessments, despite maintaining regular accounts. The petitioner made a voluntary disclosure of all relevant facts and requested a waiver of interest and penalty. However, the respondents contended that the disclosure was not voluntary since it was made after the search and subsequent notice under section 148. The court emphasized that the Commissioner must apply his mind to determine if the disclosure was made voluntarily and in good faith, as required under section 273A.

2. Disclosure Subsequent to Search and Section 273A Benefits:

The court referred to various precedents, including *K.C. Vedadri v. CIT* and *A.V. Joy, Alukkas Jewellery v. CIT*, which held that a disclosure made after a search does not automatically disqualify it from being considered voluntary. The court noted that the mere fact of a search does not negate the possibility of a voluntary disclosure. The Commissioner must assess whether the disclosure was made out of fear of imminent penal action or was a genuine attempt to regularize accounts.

3. Justification and Reasoning of Impugned Proceedings:

The impugned order dated January 28, 1988, summarily rejected the petitioner's application under section 273A on the grounds that the disclosure was made after the search. The court found that the Commissioner failed to provide reasons or demonstrate that he had applied his mind to the conditions under section 273A. The court emphasized that the exercise of discretion under section 273A must be based on relevant factors and supported by a speaking order reflecting the judicious application of mind.

Conclusion:

The court quashed the impugned order, finding that the Commissioner had not fairly, justly, or bona fide exercised his discretion under section 273A. The matter was remitted back to the Commissioner for fresh consideration on merits, with a direction to pass appropriate orders within twelve weeks. The writ petition was ordered accordingly, with no order as to costs.