1992 (4) TMI 32 - HC - Income Tax

Issues Involved:

1. Reduction or waiver of interest and penalty under Section 273A of the Income-tax Act, 1961.
2. Full and true disclosure of income within 15 days of search and seizure under Section 132 of the Act.
3. Satisfaction of conditions under Section 273A for waiver or reduction of penalty.
4. Interpretation of Explanation 2 to Section 273A(1) of the Act.
5. Validity of the Board's decision to decline approval for waiver or reduction of penalty.

Issue-Wise Detailed Analysis:

1. Reduction or Waiver of Interest and Penalty under Section 273A of the Income-tax Act, 1961:

The petitioner sought reduction or waiver of interest and penalty imposed under Section 271(1)(c)(iii) for the assessment years 1979-80 to 1985-86. The petitioner filed a return for the assessment year 1984-85, but before finalization, a search and seizure operation was conducted, leading to the seizure of documents and books of account. The petitioner filed a disclosure petition within the statutory period, seeking the benefit of Explanation 2 to Section 273A(1).

2. Full and True Disclosure of Income within 15 Days of Search and Seizure under Section 132 of the Act:

Explanation 2 to Section 273A(1) provides that if a person makes a full and true disclosure of income within 15 days of seizure, it shall be deemed to have been made voluntarily and in good faith. The petitioner filed a disclosure petition on February 6, 1985, within the statutory period, claiming full and true disclosure based on memory, as inspection of seized records was not allowed.

3. Satisfaction of Conditions under Section 273A for Waiver or Reduction of Penalty:

Section 273A confers power on the Commissioner to reduce or waive penalty if certain conditions are met, including full and true disclosure of income, cooperation in the enquiry, and payment of tax. The petitioner argued that he met all conditions, including full and true disclosure, as evidenced by his cooperation and immediate payment of tax demands.

4. Interpretation of Explanation 2 to Section 273A(1) of the Act:

The court noted that Explanation 2 requires full and true disclosure within 15 days of seizure. The petitioner's disclosure petition was filed within this period. The court emphasized that the revised returns filed after inspection of seized documents should not be the basis for determining the truthfulness of the initial disclosure made within the statutory period.

5. Validity of the Board's Decision to Decline Approval for Waiver or Reduction of Penalty:

The Board declined approval on the grounds that the disclosure was not full and true, relying on the difference between income returned in revised returns and the finally assessed income. The court found this approach erroneous, as the revised returns filed after the statutory period could not detract from the validity of the initial disclosure. The court held that the petitioner's disclosure was full and true and that the Board's decision was based on extraneous and irrelevant evidence.

Conclusion:

The court concluded that the petitioner made a full and true disclosure of income within the statutory period, satisfying the conditions under Section 273A and Explanation 2. The orders declining approval for waiver or reduction of penalty were quashed, and the case was remitted to the authorities for fresh orders in light of the court's observations. The writ petitions were allowed, and parties were left to bear their own costs.

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