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TMI Blog2009 (9) TMI 559X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty. Thus rejection of application by commissioner was justified. - 428 of 1996 - - - Dated:- 14-9-2009 - FERDINO I. REBELLO and D. G. KARNIK JJ. P. S. Jetly with G. S. Jetly and A. S. Tungare for the petitioners. P. S. Sahadevan for the respondents. JUDGMENT The judgment of the court was delivered by 1. <?xml:namespace prefix = st2 /> Ferdino I. Rebello J.- The petitioner by the present petition seeks to impugn the order dated June 21, 1993, under section 273A(4) of the Income-tax Act, 1961, and order dated October 31, 1994, under section 273A(1)(i) of the Income-tax Act. 2. Search operations were carried out in the premises of the petitioners and of their associates on August 22, 1986. In the search carried out, shares/debentures/units valued at Rs. 82,00,000, cash of Rs. 7,25,000, ornaments and jewelleries valued at Rs. 11,34,280 and silver utensils valued at Rs.2,70,000 were seized. Various incriminating documents including one diary called "Boston diary" was also seized. Copies of the documents and seized material were supplied to the petitioners. Between September 13, 1986, and December 18, 1986, various steps were taken. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication and the assessments have been completed accordingly. In the course of search, a diary called "Boston diary" was found which was the main item in question. The notings in the Boston diary could not have been deciphered by anyone except one or two persons from the Jhunjhunwala group. Without their initiative, help and assistance nothing could have been found by the Departmental authorities from the said Boston diary. According to the petitioners, this has been confirmed by the first respondent in his order dated October 31, 1994. Further, it is not in dispute and confirmed by the respondent that the members of the Jhunjhunwala group have voluntarily assisted and co-operated in deciphering the said diary and had voluntarily offered the amount for taxation. 6. So far as the assessment year 1987-88 is concerned, the offer was made even before the due date of the filing of the return was over and in the original return of income itself additional amount was offered. In these circumstances, no penalty could have been levied for the assessment year 1987-88 since the offer was the same in the original return of the income itself. However, certain penalty and interests were lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rated in any inquiry relating to the assessment of his income and has either paid or made satisfactory arrangements for the payment of any tax or interest payable in consequence of an order passed under this Act, in respect of the relevant assessment year. Explanation.-For the purposes of this sub-section, a person shall be deemed to have made full and true disclosure of his income or of the particulars relating thereto in any case where the excess of income assessed over the income returned is of such a nature as not to attract the provisions of clause (C) of sub-section (1) of section 271. (2) Notwithstanding anything contained in sub-section (1), - (a) if in a case the penalty imposed or imposable under clause (i) of sub-section (1) of section 271 or the minimum penalty imposable under section 273 for the relevant assessment year or, where such disclosure relates or more than one assessment year, the aggregate of the penalty imposed or imposable under the said clause or of the minimum penalty imposable under the said section for those years, exceeds a sum of one hundred thousand rupees, or (b) if in a case falling under clause (c) of sub-section (1) of section 271, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This sub-section was inserted by the Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, 1989. The following Explanation below sub- section (1) was omitted by the Finance Act, 1985, with effect from May 24, 1985. "Explanation 2.-Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing belonging to a person are seized under section 132 and within fifteen days of such seizure, the person makes a full and true disclosure of his income to the Commissioner, such person shall, for the purposes of clause (b) of this sub-section, be deemed to have made, prior to the detection by the Income-tax Officer of the concealment of particulars of income or of the inaccuracy of particulars furnished in respect of such income, voluntarily and in good faith, a disclosure of such particulars." 10. An application under section 273A was jointly made on behalf of the petitioners by their application of January 27, 1987. This was further elaborated by communication of March 22, 1991. 11. In so far as the application under section 273A(1)(i) is concerned, the Commissioner was pleased to hold that the petitioners had not satisfied the req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r passed under section 273A(4) it is submitted that the application was only rejected on the ground that the petitioners had failed to make out the case of genuine hardship. In so far as the hardship is concerned, respondent No. 1 did not take into consideration that the petitioners themselves had directed the Unit Trust of India to dispose of the shares at any available price and to pay the sale proceeds directly to the Income-tax Department. It is, therefore, submitted that the order is liable to be set aside and consequently the matter be remanded back to respondent No. 1 for de novo consideration. The learned counsel has placed reliance on several judgments in support of the contentions, to which we shall subsequently advert to in the course of deciding the controversy. 14. In so far as section 273A is concerned, the conditions precedent before exercise of powers to reduce or waive penalty or interest by the Commissioner as per the law as settled are : (a) there must be voluntary disclosure of income before the issue of notice under section 139(2) ; (b) the assessee must have made true and full disclosure of income in good faith prior to detection by the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 273A nor the first respondent had assigned any reason whatsoever for refusing the relief sought for by the petitioner under section 273A while exercising his discretion nor the first respondent had applied his mind or satisfied himself whether the petitioner made the disclosure with a fear relating to the imminent and proximate exposure to penal action. 18. Reliance is also placed on the judgment of the Andhra Pradesh High Court in K. S. N. Murthy v. Chairman, CBDT [2001] 252 ITR 269. In that case, the learned judge on the facts there found that the order does not reflect due application of mind on the part of the Commissioner to the facts of the case. As exercise under section 273A is quasi-judicial, it is incumbent on the Commissioner to apply his mind to all the relevant facts to satisfy himself whether the return has been filed voluntarily and in good faith making full and true disclosure and whether the assessee has co-operated with the Department in concluding the assessment and whether he has paid the tax or made satisfactory arrangements for payment thereof or in other words to satisfy himself as to the existence of the ingredients of the provisions and that the Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... page 376) : "A declaration of concealed income made after books of account or other documents or valuable assets have been seized cannot be said to be a voluntary disclosure ; it is made because the books, documents and assets seized would disclose to the assessing authority the concealment of income." 22. A Division Bench of this court in Natwarlal Joitram Raval v. CIT [1993] 115 CTR 518 (Bom) was pleased to observed as under (page 527) : "We are inclined to agree with the Kerala High Court that in every case the Commissioner of Income-tax must, having regard to the search, seizure or statements, determine whether or not the disclosure subsequently made is or is not voluntary, but, we are also inclined to agree with the Allahabad High Court that where a disclosure is made consequent upon seizure of incriminating material relevant to the particular assessment year, the disclosure is made because adverse consequences under the Act are attracted. Such a disclosure is not voluntary." 23. It will be clear that in so far as the Division Bench of this court is concerned, it was clearly of the opinion that when the disclosure is made subsequently to the seizure of incriminatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owards the end of the section, it prima facie indicates that the Explanation applies to all the clauses in the section. See CED v. Kantilal Trikamlal [1976] 105 ITR 92 (SC); AIR 1976 SC 1935. 28. By the Explanation it was made clear that if any books or documents, money, bullion, amongst others are seized under section 132 and within fifteen days of such seizure, the person makes a full and true disclosure of his income to the Commissioner, such person shall, for the purpose of clause (b) of this sub-section, be deemed to have made, prior to the detection by the Income-tax Officer of the concealment of particulars of income or of the inaccuracy of particulars furnished in respect of such income, voluntarily and in good faith, a disclosure of such particulars. The Explanation has since been omitted with effect from October 1, 1984. What this would mean is, firstly, the contention raised on behalf of the petitioners that the seizure of documents by authority other than Income-tax Officer/ Assessing Officer is not detection by the Assessing Officer has to be rejected. Secondly and consequently once the documents are seized then any disclosure subsequently made would not be voluntar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31. According to the petitioner, the Commissioner did not consider the various tests under section 273A(4) for rejecting the application. The first order was made on June 21, 1993 under section 273A(4). The order in respect of section 273A(1) was made on October 31, 1994. There is no finding by Commissioner apart from hardship. Would this vitiate the order ? If respondent No. 1 considering the application holds that the two predicates have been satisfied one of which was hardship. Considering the test as laid down by the Supreme Court in the case of B. M. Malani [2008] 306 ITR 196, and Benara Valves [2006] 204 ELT 513 (SC) the test is of undue or genuine hardship. The genuine difficulty would also mean that there is hardship that will be occasioned if the petitioner was called upon to pay the penalty. Such hardship normally would be financial hardship that would be occasioned. The only ground made out on behalf of the petitioner is by referring to their contention as raised in the written statement which were filed that the petitioners had entrusted all their shares to the Unit Trust of India to be sold at any available price but the petitioners in the said argument itself have th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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