1991 (6) TMI 251 - HC - Income Tax

Summary

Issues Involved:

1. Propriety of the summary rejection of the writ petition.
2. Legitimacy of the assessment and reassessment of the assessee's income.
3. Validity of the settlement proposal between the assessee and the Revenue.
4. Compliance with the conditions under Section 273A for waiver of interest and penalty.
5. Examination of the voluntary nature of the income disclosure by the assessee.
6. Consideration of genuine hardship under Section 273A(4).

Issue-Wise Detailed Analysis:

1. Propriety of the Summary Rejection of the Writ Petition:

The appeal filed by the writ petitioner impugned the order of summary rejection of his writ petition. The Division Bench decided to treat the writ petition as having been admitted and heard the matter on merits.

2. Legitimacy of the Assessment and Reassessment of the Assessee's Income:

The assessee was engaged in a saving unit scheme and was assessed to income-tax for the assessment years 1974-79 under Section 143(1) of the IT Act, 1961. During the assessment proceedings for the assessment year 1980-81, the ITO found suspicious transactions and impounded the books of account. A survey under Section 133A and a subsequent search under Section 132 led to the discovery of cheques and materials suggesting bogus 'havala' transactions. The ITO reopened the assessment for the assessment year 1979-80, increasing the total income from Rs. 17,340 to Rs. 8,52,940. The CIT(A) reduced this by Rs. 2,30,000. For the assessment year 1980-81, the total income was finalized at Rs. 4,74,899, which the CIT(A) reduced by Rs. 2,27,200. A notice under Section 148 was issued for the assessment year 1981-82.

3. Validity of the Settlement Proposal Between the Assessee and the Revenue:

The assessee proposed a settlement to the CIT XII, Bombay, suggesting that the total income of six individuals and proprietary names be taxed in his hands, with a combined peak of approximately Rs. 50.67 lakhs. The proposal included immunity from penalty, interest, and prosecution. The CIT communicated with the CBDT, which agreed on the quantum of income but refused immunity from penalty and interest. The assessee's CA signed an order sheet acknowledging the levy of penal interest and initiation of penalty proceedings.

4. Compliance with the Conditions Under Section 273A for Waiver of Interest and Penalty:

The assessee filed a petition under Section 273A for waiver of interest and penalty, claiming voluntary disclosure and good faith. The CIT rejected the petition, stating that the disclosure was not voluntary but made after investigations and search actions. The CIT noted that the disclosure did not meet the conditions of Section 273A, as it was made after the issuance of a notice under Section 148 and the tax was not paid.

5. Examination of the Voluntary Nature of the Income Disclosure by the Assessee:

The CIT held that the disclosure of Rs. 27,58,080 was not voluntary but prompted by the ITO's investigations, survey, and search actions. The assessee's statements and the issuance of prohibitory orders for loans aggregating to Rs. 42,43,200 indicated that the disclosure aimed to avert adverse consequences. The Court agreed with the CIT's assessment, noting that the disclosure was not voluntary as it followed the discovery of incriminating material.

6. Consideration of Genuine Hardship Under Section 273A(4):

The assessee pleaded hardship in the petition under Section 273A, stating that the levy of penalty and interest would create "tremendous hardships." However, the Court found no substantial case of hardship made out, as required for the CIT to record reasons for waiver or reduction. The CIT's order did not address the plea of hardship, but the Court found no fault in this omission due to the lack of a detailed hardship case.

Conclusion:

The appeal was dismissed, with the Court concluding that the settlement proposal was not accepted in its entirety by the Revenue, particularly regarding the waiver of interest and penalty. The disclosure of income was not deemed voluntary, and the conditions for waiver under Section 273A were not met. The Court also noted that the discretion under Article 226 could not be invoked in this case, given the circumstances. The request for continuation of interim relief was denied.