9911796707
TMI Blog1997 (7) TMI 675X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant place, yet, we would like to extract a brief before we proceed to discuss and decide various solutions. The facts of the case are that as a result of search warrants and subsequent authorisations dt. 19th Aug., 1986 in the name of 4 individuals'(1) Purshottamdas F. Jhunjhunwala, (2) Kishorilal F. Jhunjhunwala, (3) Niranjan P. Jhunjhunwala, and (4) Nirmal P. Jhunjhunwala. Search was conducted at the premises called Giri Kunj Paliram Road, Bombay'78, on 22nd Aug., 1986. During the course of search, Kishorilal F. Jhunjhunwala disclosed income to the tune of ₹ 1,76,29,155 details of which have been extracted at p..... of this order, as is covered from his statements recorded under s. 132(4). As a result of the search, certain documents and one diary called 'Boston Diary' and following assets/things/valuables were seized : (1) Shares/units/debentures valued at ₹ 82,00,000 (2) Cash of ₹ 7,25,000 (3) Ornaments and jewelleries valued at ₹ 11,34,280 (4) Silver utensils valued at ₹ 2,70,000 As per 4 Panchnamas in the case of persons in whose names search warrants were issued (copies of which have been furnished by the assessee), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to above. 6. Since our clients had submitted in a statement under section .... of the Act, that they shall not claim the liabilities against the investments, that they shall offer for taxation a sum of ₹ 1,44,57,923. 7. From xerox copy of p. 5 of seized papers, it will appear that a sum of ₹ 67,27,966 is shown to have been received under the head "K.F." during the previous years to asst. yrs. 1970-71 to 1987-88 (family members of Jhunjhunwala). 8. A sum of ₹ 13,71,933 is shown to have been received under the head "P.F." during the previous years to asst. yrs. 1970-71 to 1987-88. 9. Similarly, a sum of ₹ 6,66,889 is shown to have been received under the head 'Miscellaneous' during the previous years to asst. yrs. 1970-71 to 1987-88. (This sum of ₹ 6,66,889 includes a sum of ₹ 78,182 being the amounts received by P.F. Jhunjhunwala as perquisites either tax-free or taxed in the case of P.F. Jhunjhunwala in his hands. 10. Our clients shall offer for taxation this sum of ₹ 86,88,606 (Rs. 67,27,966 + ₹ 13,71,933 + ₹ 6,66,889 ₹ 78,182). 11. Our clients were in receipt of a sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arity and donations. 18. We submit to your honour on behalf of our clients that at the time of an action under s. 132 of the Act, our client had submitted in the statements recorded under s. 132(A) of the Act, that they shall submit full and true disclosures and shall pay the taxes. 19. Under the circumstances of the case, we request your honour to be kind enough not to initiate any proceedings for levy of penalty or institute any prosecution. Thanking you, Yours faithfully, Sd/ M.C. Mehta, I.T.P." As the assessments upto asst. yr. 1985-86 in the cases of appellants who were already assessee assessments had been completed by the time disclosure was made, so the revised returns in those cases and fresh returns in other cases and revised returns for asst. yr. 1986-87, based on disclosure petitions were furnished in the case of the persons of the Group on 3rd March, 1987, under the Amnesty Scheme. The disclosure was discussed by the CIT with the assessee and ultimately the matter was finalised as per so-called Discussion Note, details of which are extracted wherever necessary. During the course of consideration of disclosure, the CIT had required the assessee to di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 151 ITR 499(Guj) and CIT vs. Scindia Steam Navigation Co. Ltd. (1961) 42 ITR 589(SC) and the submissions that this ground was not a fresh ground as the same was raised before the Asstt. CIT even before filing of the revised returns and it has been duly acknowledged by the Addl. Director of Income-tax as well as the CIT(A). In support of this submission, the assessee's counsel referred to various letters written by the appellant to the Addl. Director of Income-tax and CIT, copies of which have been filed before us, last but one para at page No. 3 of the penalty order, and top sentence at page No. 5 of the order of the CIT(A). From these documents, he submitted that it is very much clear that the revised returns were furnished as a result of disclosure under the Amnesty Scheme, consequently, the learned Departmental Representative withdrew his objections. After considering the submissions and the fact that it was an admitted fact that the issue relating to assessee's claim of immunity under the Amnesty Scheme was raised during the penalty proceedings before the Asstt. CIT as well as before the CIT(A), both of whom had duly taken cognizance of the same [last but one para at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that as far as cases of 16 (sixteen) appellants other than Purshottam F. Jhunjhunwala, Kishorilal R. Jhunjhunwala, Niranjan P. Jhunjhunwala and Nirmal P. Jhunjhunwala were concerned, there was neither any search in any of these 16 (sixteen) appellants nor was any seizure in their hands. To clarify this aspect a little further, he submitted that search warrants were only in case of the abovementioned 4 individuals, namely; (1) Purshottam F. Jhunjhunwala, (2) Kishorilal R. Jhunjhunwala, (3) Niranjan P. Jhunjhunwala and (4) Nirmal P. Jhunjhunwala. From the copies of Panchnamas filed before us, he further submitted that out of these 4 appellants no valuables such as cash, jewellery, ornaments or any other asset were found in the case of Nirmal P. Jhunjhunwala and there was no seizure in his case. As regards to other three, he submitted that : (i) in case of Purshottam F. Jhunjhunwala, most of the jewellery found was not seized. A part of the jewellery was seized and that too because of difference in valuation; (ii) in case of Kishorilal R. Jhunjhunwala, some cash and a part of jewellery found were seized, whereas most of the jewellery found was not seized; and (iii) in case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be followed by the assessee who wants to declare income or wealth in respect of the past years ? (a) in case where the assessments pertaining to those years are already completed; (b) in case where the assessments in respect of those years are pending ? Ans. : In case where the assessments are already completed, the taxpayer should approach the concerned CIT with the full disclosure of the amounts of income and/or wealth concealed in various years and should also file returns for the relevant years. He should also produce evidence of payment of taxes before 31st March, 1986. The filing of the returns will be regularised by issue of formal notices under s. 148 of the IT Act/s. 17 of the WT Act. In cases where the assessments are pending, the taxpayer should file revised return before the ITO along with evidence of payment of taxes. Q.7 : Where the investigations in the case of persons other than the assessee indicate concealment of income by the assessee and the assessee makes a true and full disclosure of his income, would be entitled to immunity under these circulars ? Ans. : Yes. Q. 19 : Kindly clarify the expression "before detection by the Department "? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foresaid submissions, even if at all, it is assumed that there was some investigation, then also these could be said to be only in case of 4 persons in whose cases action under s. 132 was taken and, therefore, the cases of other 16 (sixteen) appellants were definitely entitled to immunity. 7. From answers to question Nos. 12, 19 and 30, he submitted that the disclosed amount in the hands of all the appellants except the four in whose cases action under s. 132 was taken, was not at all the subject-matter of seizure. As regards to the other 4, he submitted that there was no seizure at all in the cases of Nirmal P. Jhunjhunwala and in the case of the other three, namely, Purshottam Jhunjhunwala, Kishorilal Jhunjhunwala, and Niranjan Jhunjhunwala, though there was some seizure of some cash and jewellery, but these assets, i.e., cash and jewellery which were the subject-matter of seizure were not disclosed, rather, the disclosure was on account of expenses and investments. He, therefore, submitted that the amounts disclosed in the cases of only 17 (seventeen) appellants, was never the subject-matter of seizure and, therefore, prohibition provided under the Amnesty Scheme was not applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), Uttamchand Bhutani & Co. vs. ITO (1992) 42 ITD 404(Del), ITO vs. Ram Nihara Thakur (1993) 46 ITD 90(Pat), Smt. P.M. Celine vs. Asstt. CIT (1991) 39 ITD 454(Coch), Asstt. CIT vs. Manorajyam (1996) 54 TTJ (Coch) 397: (1995) 54 ITD 116(Coch), Asstt. CIT vs. Prakash Oil Industries & Ginning Factory (1995) 52 TTJ (Ahd) 514, Anand Kumar Saraf vs. CIT (1995) 211 ITR 562(Cal) and Ambassador Dry Cleaners vs. Union of India (1994) 210 ITR 292(Raj). The learned Departmental Representative has, on the other hand, submitted that though the search warrants were in the name of 4 persons only, but the search being of a particular premises, so it will amount to search in case of all persons residing at those premises and, therefore, according to him, action under s. 132 was deemed to have been taken in cases of all the 20 appellants. Referring to answers to Q. No. 12 and No. 30 of Circular No. 451, he submitted that the benefits of the Amnesty Scheme were not available to these appellants. Referring to order under s. 273A, he submitted that benefits of Amnesty Scheme were not claimed by the appellants. As regards to the decisions relied upon by the assessee's counsel, he submitted that they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian IT Act, 1922 (11 of 1922), or this Act, (hereinafter in this section referred to as the undisclosed income of property), then : (A) the Director General or Director or the Chief CIT or CIT as the case may be, may authorise any Dy. Director, Dy. CIT, Asstt. Director, Asstt. CIT or ITO, or (B) such Dy. Director or Dy. CIT as the case may be, may authorise any Asstt. Director or Asstt. CIT or ITO (the officer so authorised in all cases being hereinafter referred to as the authorised officer) to (i) enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or things are kept; (ii) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by cl. (i) where the keys thereof are not available; (iia) search any person who has got out of, or is about to get into, or is, in the building, place, vessel, vehicle or aircraft, if the authorised officer has reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jeweller ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested. (5) Where any money, bullion, jewellery or other valuable article or thing (hereafter in this section and in ss. 132A and 132B referred to as the assets) is seized under sub-s. (1) or sub-s. (1A), the AO after affording a reasonable opportunity to the person concerned of being heard and making such enquiry as may be prescribed, shall, within one hundred and twenty days of the seizure, make an order, with the previous approval of the Dy. CIT: (i) estimating the undisclosed income (including the income from the undisclosed property) in a summary manner to the best of his judgment on the basis of such materials as are available with him; (ii) calculating the amount of tax on the income so estimated in accordance with the provisions of the Act, (iia) determining the amount of interest payable and the amount of penalty imposable in accordance with the provisions of the Act, as if the order had been the order of regular assessment; (iii) specifying the amount that will be required to satisfy any existing liability under this Act an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... datory requirement of sub-cl. (iia) of sub-s. (1) of s. 131 is satisfied and unless and until a person is searched in accordance with these sub-clauses, it cannot be assumed that action under s. 132 has been taken in case of every person staying at the relevant premises' may be a living person or otherwise, such as HUF, companies and firms; and therefore, the arguments of the learned Departmental Representative that in spite of search warrants being in the name of 4 individuals only (supra), action under s. 132 will be deemed to have been taken in all the 18 cases, cannot be accepted. Neither there is anything about such presumption in the provisions of s. 132 nor it seems to be the intention of the legislature, and above all, no such fact has been brought to our notice. We, therefore, reject this plea of the learned Departmental Representative and hold that in case of 16 (sixteen) appellants, other than the 4 individuals (named supra), in whose name there were no search warrants, no action under s. 132 can be said to have been taken and consequently those 16 (sixteen) appellants are clearly entitled to immunity available under the Amnesty Scheme. 12. As regards to the plea of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is already completed, the assessee should disclose the particulars before the concerned CIT. Where the assessee files a return also to the CIT along with the showing of particulars and pays the tax due thereon, he would have satisfied the conditions prescribed by s. 18B. Q. 19 : Ans. : (Please refer to p. 11 above). Ans. : (Please refer to p. 12 above). From the aforesaid relevant portion of the circular which are in the form of specific answers to specific questions, relating to the scope of the Amnesty Scheme, it is clear that: (1) that the amnesty scheme was applicable to the assessment years upto asst. yr. 1986-87 irrespective of the fact as to whether assessment for these assessment years had already been completed or not; (2) the scheme was also applicable to old assessees; (3) the immunity from penalty and prosecution was available in all cases whether of income-tax or wealth-tax; (4) investigation in the case of persons other than the assessee claiming benefit of amnesty scheme was not a bar or availability of immunity in such case irrespective of the fact that the investigations in case of such other persons might had indicated concealment by the assessee; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to all the 20 appellants upto the asst. yrs. 1986-87 and therefore, the penalty orders in all these 20 cases for all the asst. yr. 1986-87 are cancelled. 15. Before parting with this aspect of the case, we would like to make a brief mention of the various decisions relied upon by the parties, as under : Cases relied by the assessee : (i) Jaikishan Gopikishan & Son's case (supra). After having gone through the decision and especially the conclusion of the Hon'ble High Court at p. 487, which is reproduced hereinafter, we are of the opinion that the appellants are entitled to seek benefit/immunity under the Amnesty Scheme : "It is well settled that the circulars or the orders have the force of law and are binding on all the authorities of the Department (See the cases of the apex Court in apex Court in Navnit Lal C. Javeri vs. K.K. Sen, AAC (1965) 56 ITR 198(SC) and Ellerman Lines Ltd. vs. CIT 1972 CTR (SC) 71: (1971) 82 ITR 913(SC). The binding nature of the circulars has been considered by the various High Courts in a series of decisions. In a recent decision, the Division Bench of the Kerala High Court in CIT vs. Punalur Paper Mills Ltd. (1987) 64 CTR (Ker) 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fts, who after one week from the date of search of the premises of VC and AL submitted returns for asst. yr. 1985-86 under Amnesty Scheme in which the amount received by such bogus drafts was surrendered as income liable to tax. As the Amnesty Scheme was extended upto 31st March, 1987, so G&C furnished returns of income for asst. yrs. 1985-86 and 1987-88 on 31st March, 1987 and 23rd Feb., 1988, respectively. The ITO held that the appellants did not disclose voluntarily but disclosure was made after search against VC and AL. The question before the Tribunal was whether return of income filed by the assessee for asst. yr. 1985-86 could be accepted as filed under the Amnesty Scheme. The Tribunal after considering the scheme in detail, held that Amnesty Scheme was applicable so far as asst. yr. 1985-86 was concerned and, therefore, held that penalty proceedings under s. 271(1)(c) could not be initiated against the assessee. (iii) WTO vs. Nandkumar Pd. Shah (1992) 41 ITD 406(Pat) : In this case, the assessee had not filed its returns of wealth-tax for asst. yrs. 1976-77 to 1982-83 in spite of notice under s. 17. The assessee had also failed to comply with notices issued under s. 16 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was withdrawn. During the course of penalty proceedings under s. 271(1)(c), the AO was apprised of the revised return but he rejected the assessee's claim under the Amnesty Scheme and levied penalty. On appeal, the CIT(A) also upheld the order of the AO. On appeal before the Tribunal by the assessee, it was held that the assessee was entitled to the benefit under the Amnesty Scheme as per Circular No. 451, dt. 17th Feb., 1986, and consequently the penalty was concealed. The decision in this case also supports the case of the appellants. (v) Ram Nihora Thakur's case (supra) : In this case, original returns were filed late and while completing the assessment, penalty proceedings for late furnishing of returns were initiated. Later on, assessee filed fresh returns under the Amnesty Scheme, 1985, declaring a higher income for all these years, which were accepted by the AO but the immunity under the Amnesty Scheme was not allowed. And consequently penalty under s. 271(1)(a) was imposed. The CIT(A) allowed the assessee's appeal. The Tribunal on further appeal by the Department confirmed the order of the CIT(A) holding that the circulars have to be considered in a liberal man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AKSC, AKT and RT. It was also stated that the declaration made through these returns included/covered all the transactions which were incorporated in the books and documents seized by the Department in course of search carried out in the office and residential premises on 7th March, 1986. The assessee requested that no penalty should be imposed and all interests should be waived. Similarly, WT returns for asst. yrs. 1982-83 to 1985-86 including therein the assets represented by the income so disclosed in the revised returns were also filed. Assessments were completed, but benefits of Amnesty Scheme were not granted on the ground that revised returns were filed after search carried out by the authorities in course of which certain documents relevant to income and wealth now disclosed by the assessee had been duly seized. On appeal, the CIT(A) by his order, dt. 11th Nov., 1988, held that the assessee was entitled to amnesty benefit but the successor CIT as per his order, dt. 23rd Feb., 1989, passed a miscellaneous order holding that the order of his predecessor, dt. 11th Nov., 1988 was erroneous and a mistake had crept therein inasmuch as the said order was passed under a mistaken b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tected by the Department from the papers and documents found and seized in the course of the search. In the instant case, it was found that search was carried out at the residential premises of the petitioner on 7th March, 1986, at Calcutta and on 27th March, 1986, at Surat. It was true that certain documents had been found and seized in the course of the said search, but none of these documents had been scrutinised by the tax authorities prior to 31st March, 1986, when the assessee-appellant herein had filed revised returns in respect of both income-tax and wealth-tax. It was an admitted fact that the assessee disclosed fully and truly his income and wealth in such revised returns and had also paid taxes in due time as provided under the Amnesty Scheme. Since the Department had not looked into the seized papers and had not carried out investigation prior to 31st March, 1986, it could not be said that by the mere fact of seizure, the tax authorities could be said to have even a Prima facie belief that the concealment of income and wealth by the assessee had been detected. Even if there had been such prima facie belief, the existence of such belief could not deprive the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e which is debatable or on which there could conceivably be two opinions cannot be the subject-matter of rectification. A glaring and obvious mistake either of fact or law can alone be corrected under s. 154. On the facts and circumstances of the instant case, it was to be held that the impugned notice issued by the CIT on 23rd March, 1989, was clearly without jurisdiction, and therefore, all proceedings taken in pursuance thereto including the impugned order, dt. 1st Jan., 1990 passed in the instant case under s. 154 were without jurisdiction, illegal, invalid and void ab initio." In view of the aforesaid decisions, we are of the opinion that cases of all the 20 appellants before us are covered by the Amnesty Scheme. (vii) Smt. P.M. Celine's case (supra) : In this case, there was a search in the case of assessee's husband. After the search, the assessee filed her returns of income for asst. yrs. 1983-84 to 1986-87 on 25th Feb., 1987, and return for assessment years was filed on 6th March, 1987. The assessments were completed but penalty under ss. 271(1)(a) and 273(1)(b) were imposed after rejecting the assessee's claim on immunity under the Amnesty Scheme. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ITO initiated penalty proceedings. The Chief CIT accepted the assessee's request for withdrawal of the prosecution, but when he approached the ITO for dropping the penalty proceedings, the ITO did not accept his request and consequently penalty was imposed. The CIT(A) confirmed the penalty. On a writ petition filed by the assessee, the Hon'ble Rajasthan High Court held that the revised returns filed by the petitioner would be treated to have been filed under the Amnesty Scheme entitling the petitioner to all the benefits of the scheme. The petitioner was, therefore, immune from imposition of penatly as per Circular No. 451, dt. 17th Feb., 1986. This decision, though is not directly in assessee's favour, but duly supports the appellant's version that benefits under benevolent circular may be allowed liberally. (ix) Prakash Oil Industries & Ginning Factory's case (supra) : The decision in this case squarely covers the cases of all the assessees and, therefore, we would like to refer to the complete head notes : "Amnesty Scheme 'Applicability' Loose paper found at the premises of the accountant of firm during search operations concerning an amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been rebutted immediately by the partner of the firm cannot be treated as detection, the offer of the sum of ₹ 2,50,000 was made suo motu by the firm only to avail the benefits of the Amnesty Scheme and to avoid further litigation, cannot be taken as a ground that the offer was after detection and estop the firm from the benefits under the Amnesty Scheme. The Revenue had almost two years and after the search was conducted and the statement of the employee and the partners were recorded, to proceed in this matter and to cross-examine various employees, partners, etc., of the firm and quantify the real concealed income, if any, if the firm based on the paper, etc., seized during the course of the search proceedings, which has not been done, and subsequently, because the firm offers a sum which is all the more, more than what has been reflected in the loose paper, cannot abstain the firm from the benefits of the Amnesty Scheme even on 1/6th portion of the amount reflected in the loose paper. As there is no detection the question of granting immunity on a part of a sum and not on the balance also does not arise. The assessee is entitled to the benefits of Amnesty Scheme on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t share and even with his daughter and brother he has only 32 per cent share in the firm, and, therefore, the distribution could not have been 50 per cent. Further, it is noted that G has owned up the entries in the diary and has surrendered peak of credits in the asst. yrs. 1982-83, 1983-84 and 1984-85. He has paid substantial tax thereon. Mere entries in the accounts of third party was not sufficient to prove that the assessee had indulged in such transaction, as there was no guarantee that the entries were genjine. The AO is not justified in making the additions.'Addl. CIT vs. Miss Lata Mangeshkar (1974) 97 ITR 696(Bom) relied on. Conclusion Mere admission of a partner, who happens to be a partner of other firms also, as regards transactions mentioned in a diary seized during search of his premises cannot bind the assessee-firm and binds the partner individually and no addition can be made in the hands of firm on the basis of such admission". The decision in the aforesaid case covers the cases of all the twenty appellants. (x) Tribunal's decision in the case of Pannalal R. Shivhare vs. ITO ITA No. 1031/Bom of 1993, dt. 14th Sept., 1994: In this case, revised re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment with a view to buying peace. The assessment was made exactly on the basis of the income disclosed by the appellant in his revised return of income. A search was conducted and several discrepancies were found. On the basis of the finding of such discrepancies, the appellant came forward and filed the revised return of income voluntarily. All these actions of the appellant would establish that the assessee promptly and immediately volunteered to come forward by showing additional income. Cornering the appellant does not mean that the voluntary filing of the return of income and making the assessment of the said income would attract the penalty. In this view of the matter, the appellant succeeds." Decision in this case amply supports assessee's version that the revised return, in the case of those 4 individuals also where search was conducted were voluntary and consequently covered by the amnesty scheme. (xi) Manorajyam's case (supra) : In this case revised return was furnished after survey and it was held that benefits of amnesty scheme were available to the assessee. This case also supports the appellant's case. (i) Datamal & Sons Investment Co.'s ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of cash creditors. Summons under s. 131 were issued by him to twenty two parties at the addresses furnished by the assessee but the same remained unserved with the remarks that such parties were not available at such addresses. The AO vide his letter, dt. 17th Dec., 1985 informed the assessee about this fact and further asked the assessee to produce the parties along with the books of account and pass-books. Since the assessee was not able to produce these cash creditors except in the case of K.B. Shah, HUF, it filed a revised return on 31st March, 1986 under the Amnesty Scheme offering an additional income of ₹ 7 lakhs which comprised of the following : Rs. (i) 65,000 As peak in respect of 11 cash creditors... (ii) 5,60,000 On account of remaining cash credits including also cash credit in the name of Rameshchand Jain. (iii) 59,938 Interest on loans of ₹ 5,60,000. 6,84,938 rounded off to ₹ 7,00,000. 4. Still being not satisfied the AO continued the investigations in regard to loans. He informed assessee vide letter, dt. 15th Jan., 1987, that GIR Nos./P.A. Nos. given in the loan confirmation letters in respect of 218 persons were not correc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken in earlier years. 11,51,835 rounded of ₹ 1,150,000 Finally the assessment was finalised on the total income of ₹ 26,10,123 after further disallowing interest of ₹ 1,77,212 regarding bogus loans of earlier years and ₹ 25,000 out of the expenses. Penalty proceedings under s. 271(1)(c) and under s. 273 were initiated by the AO in respect of the above additions." It was on these facts that the Tribunal came to the conclusion that the disclosure made by the assessee was not full and true and in good faith, as is clear from the Tribunal's finding in para 10 reproduced as under : "10.1 Now, let us examine whether assessee is entitled to the immunity from levy of penalty under s. 271(1)(c) and under s. 273. In the present case assessee had filed its return originally on 15th June, 1982 declaring an income of ₹ 5,63,910. The revised return under the Amnesty Scheme was filed on 31st March, 1986, declaring an additional income of ₹ 7 lakhs on account of cash credits and interest thereon. Again a revised return was filed under the Amnesty Scheme on 30th March, 1987, offering an additional income of ₹ 11.5 lakhs on account of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the AAC or the CIT(A) who could initiate the penalty proceedings and, therefore, he proceeded to argue that penalty proceedings being penal and quasi judicial, no other authority other than the authorities mentioned in the section itself, had jurisdiction either to initiate the proceedings or to direct any of these authorities to initiate the proceedings. Referring to the last para of the discussion note (placed at p. 13 of the Department's paper-book), para 3 at p. 5 "starting from ninth line from the bottom", para 7 at p. 4 of Tribunal's order (since recalled) and para 6 of the order of the Tribunal passed in assessee's miscellaneous application the assessee's counsel submitted that it is proved from facts on record that the penalty proceedings were initiated on the clear directions of the CIT. He, therefore, submitted that the proceedings were bad in law and the consequential orders are void ab initio. He further relied on the decisions reported as D.M. Manasvi vs. CIT 1972 CTR (SC) 437: (1972) 86 ITR 557(SC), Sheo Narain Jaiswal vs. ITO (1989) 176 ITR 352(Pat), CIT vs. Daj Bhai Kanji Bhai (1991) 189 ITR 41(Bom) and Panchanam Hati vs. CIT (1978) 115 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... la group of cases' Petition under s. 273A. Present before the CIT City, VIII, Bombay (1) Nirmal Kumar P. Jhunjhunwala, the assessee, (2) P.S. Hajela, D.C. Range 26, Bombay, (3) S. Halder, A.C. Cir. 26(1), Bombay, and (4) M. Madhavan, A.C. H.Q. Trs. City VIII, Bombay. The report, dt. 6th March, 1989, was received from A.C. Cir. 26(1). Thereafter he was asked to send another report in the case of Purshottamdas F. Jhunjhunwala as the case records of the said assessee have also been received here on transfer. He submitted a report, dt. 16th March, 1989. The Annexures I to V showing distribution of income amongst various persons were also submitted by the Asstt. CIT. The Asstt. CIT's reports, dt. 6th March, 1989, 16th March, 1989, and the Annexures I to V were duly discussed and considered. 1. Bogus Loans : As per the appraisal report, the amount is worked out at ₹ 88.42 lakhs as stated at p. 4 of the Asstt. CIT's report. The amount of ₹ 88.42 lakhs includes interest of ₹ 14.70 lakhs during the accounting year 1984-85 (p. 49 of the diary). It is submitted by the assessee that this interest is already included in the amount of ₹ 69.46 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll these items have naturally been purchased out of the expenditure for which the amount of ₹ 10.53 lakhs has already been added and, therefore, the reduction of the aforesaid amount should be given. Accordingly, out of ₹ 20.02 lakhs, the deduction of ₹ 10.53 lakhs being expenditure already taxed above is allowed and thereby an addition of ₹ 9.49 lakhs is made on account of unexplained jewellery. This amount of ₹ 9.49 lakhs is made on account of unexplained jewellery. This amount of ₹ 9.49 lakhs should be spread over in the hands of K.F. Jhunjhunwala (Individual), Niranjan P. Jhunjhunwala (Individual), Nirmal P. Jhunjhunwala (Individual) and Purshottamdas Jhunjhunwala (Individual) during the asst. yr. 1987-88 only, in the proportion of undisclosed amount of jewellery of ₹ 20.02 lakhs in the hands of the above said 4 persons. 4. Regarding amount of ₹ 1.80 lakhs in the name of minors : This has reference to p. 10 of the Asstt. CIT's report. The amount of ₹ 1.80 lakhs is to be included and distributed amongst Jhunjhunwala & Co. and Fatechand Paliram & Sons in the ratio stated in Annexure I of the Asstt. CIT's report. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a of the order of the AO for the asst. yr. 1972-73 reads as under : "While granting spread over the CIT has directed that penalty proceedings should be initiated against the assessee..." Extract from Tribunal's order on M.A. Page 7, para 6 : Secondly, the AO stated in his penalty orders and observed as under : "While granting spread over the CIT has directed that penalty proceedings should be initiated against the assessee." 19. After careful consideration of the aforesaid extracts, we are of the opinion that the inference drawn by the Departmental Representative from various orders and documents, relied upon or referred to by him during the course of his submissions, are not sustainable. On the other hand, the submissions of the assessee's counsel that penalty proceedings were initiated on the basis of the directions of the CIT stands proved beyond doubt from the orders of all the authorities portions from which have been extracted as above. Considering the submissions/observations as extracted above, the only inference which anybody will draw will be that it is the version of the Revenue authorities themselves that the penalty proceedings we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mention just his proposal which in this case was as to what action the AO was likely to take and for that purpose, and, therefore, he should have used the words "If approved" and then "should" or "would" or "may". It is, therefore, clear that the word "should" without prefixing the words "If approved" is from the mouth of the higher authority which in this case is the CIT. (ii) Had the note been originated from the mind the Asstt. CIT then there was no question of writing the sentence "the question of waiver would be considered subsequently, with the prior approval of the Board", because the Asstt. CIT had neither any business to deal with waiver of the penalties nor he had the powers or jurisdiction to suggest such a proposal. On the other hand, such direction could be only from the CIT who was seized of the matter of waiver of penalties under s. 273A. The overall interpretation of this note on facts proves beyond doubt that the directions given in this note to initiate penalty proceedings under s. 271(1)(c) were from the CIT. The fact that directions to initiate penalty proceedings were given by the CIT is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h income, he may direct that such persons all pay by way of penalty." From the above provisions of s. 271(1)(c), we find that it is the ITO or the AAC or CIT(A), who, in the course of any assessment proceedings must be satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income, then and only then he may direct that such person shall pay by way of then and only then he may direct that such person shall pay by way of penalty... In our opinion, it is the word 'satisfied' which is the basis of initiation of penalty proceedings and, therefore 'to be satisfied' with a state of things means to be satisfied in "one's own mind", because "satisfied" is certainly a personal statement of mind. Lord Parson in Blyth vs. Blyth (1966) 1 All ER 524 defined phrase "is satisfied" means "makes up its mind". Dickson J. defined it as "actual persuasion" and in the language of Smith Justice, J., Angland vs. Payne 1944 MZLR 610626, the terms "is satisfied" mean "a mind which reached a clear conclusion". Thus, it is the ITO who in the course of ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause a show-cause notice had been issued by the AO, it cannot be concluded that he was satisfied in the course of proceedings under the Act before him that the assessee had committed the default mentioned in s. 271(1)(c) and this is more so in the present case in view of the admission on the part of the AO that the CIT had directed him to initiate penalty proceedings; (ii) the fact that the AO has initiated penalty action even in respect of asst. yr. 1987-88, the return for which year had been filed after the group submitted a petition under s. 273A and the assessee of the group had disclosed in the returns for asst. yr. 1987-88, the additional amount being offered for taxation, is, in our opinion, a proof of the fact that the initiation was because of the directions of the CIT; (iii) further there is hardly any discussion in any of the assessment orders to indicate that the AO was satisfied in the course of assessment proceedings; and to make these observations clear, we would like to produce para 20 of the said order : "20. Firstly, we will take up for consideration the question whether initiation of penalty proceedings was because of the directions given by the CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty action even in respect of asst. yr. 1987-88, the return for which year had been filed after the group submitted a petition under s. 273A and the assessee of the group had disclosed in the returns for asst. yr. 1987-88 the additional amount being offered for taxation is, in our opinion, a proof of fact that the initiation was because of the directions of the CIT. Further, there is hardly any discussion in any of the assessment orders to indicate that the AO was satisfied in the course of proceedings under the Act that the assessee had committed the default under s. 271(1)(c). In our opinion, since the initiation of proceedings was because of the fact that the AO was satisfied in the course of proceedings under the Act that the assessee had committed the default under s. 271(1)(c), the orders under s. 271(1)(c) deserve to be reconsidered." As the learned Departmental Representative has not objected to the findings of the Tribunal arrived in the order of miscellaneous application SO, we have no option but to follow the findings also and on this basis also, we hold that the initiation of penalty proceedings under s. 271(1)(c) was as per the directions of the CIT and consequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nesty Scheme. He further submitted that ultimately as a result of this intention of the whole group the revised returns for assessment year ranging from 1970-71 to 1986-87 were furnished on 3rd March, 1987. He further submitted that by the time these revised returns were furnished, no notice under s. 148 for any of the assessment years and also no notice under s. 143(2) for asst. yr. 1986-87 had been issued. He, therefore, concluded that the disclosure having been made during the search itself, it was voluntary disclosure. Deriving support from the fact of disclosure having been made voluntarily, he submitted that the appellants were entitled to benefits of the amended Expln. 5 to s. 271(1)(c). He submitted that the amendment, though in Expln. 5 to s. 271(1)(c) was brought w.e.f. 10th Sept., 1986, but it being in the nature of an Explanation to the existing uncoded law was applicable to appellant's case also. He further elaborated that the Explanation was amended because it was found that unamended Explanation was too harsh and to remove hardship caused by unamended Explanation, the legislature had thought fit to amend the same. Concluding his submissions on this issue, he subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. Sarda Rice & Oil Mills (1979) 117 ITR 917(Cal); (xv) Bhagwanji Bhawanbhai & Co. vs. CIT (1982) 28 CTR (Cal) 375: (1983) 141 ITR 640(Cal); (xvi) CIT vs. Punjab Tyres (1986) 56 CTR (MP) 7: (1986) 162 ITR 517(MP); (xvii) CIT vs. Bengal Iron Galvanising Works (1987) 61 CTR (Cal) 226: (1987) 165 ITR 249(Cal); (xviii) CIT vs. M. George & Bros. (1987) 59 CTR (Ker) 226: (1986) 160 ITR 511(Ker); (xix) Girdharilal Soni vs. CIT (1990) 82 CTR (Cal) 73: (1989) 179 ITR 111(Cal); (xx) CIT vs. National Alloy & Metal Works (P) Ltd. (1989) 176 ITR 299(Cal); (xxi) V.R. Bendre & Co. (ITA No. 1931 (Bom) of 1986); (xxii) CIT vs. Mansa Ram & Sons 1975 CTR (All) 163: (1977) 106 ITR 307(All); (xxiii) CIT vs. Kartar Singh (1970) 77 ITR 338(P&H) (xxiv) Thoppil Kutti Eroor vs. CIT (1958) 34 ITR 850(Ker); (xxv) S. Santhosa Nadar vs. Addl. ITO (1962) 46 ITR 41(Mad) (xxvi) CST vs. Shahid Husain Rakesh Kumar (1977) 39 STC 520(All); and (xxvii) Narain Das Suraj Bhan vs. CST (1968) 21 STC 104(SC). 26. The Departmental Representative, on the other hand, submitted that though penalty has been imposed under the main provisions of s. 271(1)(c), but there being admission on the part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 1,76,29,155 was made during the course of search itself, details of which have been stated in the submission made by the assessee's counsel. (ii) Difference in valuation of jewellery was also disclosed. (iii) There was no seizure of any value in the case of Nirmal Kumar Jhunjhunwala. (iv) The seizure of jewellery in the case of Purshottam Jhunjhunwala, Kishorilal Jhunjhunwala, Niranjan Jhunjhunwala was only with respect to the jewellery whose valuation was disputed. (v) Some cash was seized in the case of Niranjan Jhunjhunwala. (vi) The Asstt. CIT while completing penalty proceedings had not disputed the fact that assessee had made disclosure under s. 132(4) but denied the benefits of s. 132(4) only because in his opinion, benefits were available to the assessee only in respect of the years for which returns of income had not been furnished by the time search was conducted (See last sentence of 1st para of penalty order at p. 3). (vii) The CIT(A) denied the benefits available under the amended Expln. 5 to s. 271(1)(c) only because of the fact that according to him, the provisions were operative from 10th Sept., 1986, and also because of the search. (viii) No not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty in all these cases was not justified and our opinion is based on the following discussion : (i) As regards to the imposition of penalty under the main provision and discharge of onus by the Department, we are unable to agree with the learned Departmental Representative that after acceptance of concealment by the appellants during the search and by way of filing revised returns, the Department was not under obligation to prove concealment. In our opinioin, the question of disclosure offer during the search or thereafter arise only when there had been concealment on the part of the assessee and, therefore, if the disclosure by the appellant is not accepted as to be voluntary, then it is the Department's onus to prove that whatever it is going to tax was assessee's concealed income for a particular assessment year. If the Department prefers to accept the disclosure, then it cannot allege that the assessee has concealed the income or furnished inaccurate particulars in the revised returns. It has been held by various Courts that where the penalty has been imposed under the main provisions of s. 271(1)(c) and Explanation has not been invoked, then the ratio in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s applicable to the facts and circumstances of the case. (ii) As regards to the benefits available under the amended Expln. 5 to s. 271(1)(c), we are again not able to agree with the learned Departmental Representative because in para 15(5)(c)(b) of Circular No. 469, dt. 23rd Sept., 1986, in which the scope of amended Expln. 5 has been explained to suggest that the amendment was nothing but a recognition of the concept that if there is disclosure during the search that penalty under s. 271(1)(c) and prosecution are not attracted. (iii) As regards to objection of the learned Departmental Representative that disclosure was not voluntary and his reliance on the decision of the Hon'ble Supreme Court in Tribhovandas Bhimji Zhaveri's case (supra) with respect to the Hon'ble apex Court, we are of the opinion that the decision in this case is not applicable to the aforesaid facts of the appellant's case. In this case, the Hon'ble Supreme Court was to consider the scope of word 'voluntary disclosure' in view of provisions of s. 3(2)(ii) and s. 14 of the Voluntary Disclosure of Income and Wealth-tax Act, 1976 (No. 8 of 1976, [102 ITR (St) 49]. Before different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wellery or other valuable articles or things belonging to a person have been seized as a result of the search under s. 132 of the IT Act or s. 37A of WT Act and such person (hereafter in this section referred to as the declarant) makes, on or after the date of commencement of this Act but before the 1st Jan., 1987, a declaration in accordance with the sub-s. (2) in respect of any income relating to the previous year in which such search was made or any earlier previous year' (a) for which he has failed to furnish a return under s. 139 of the IT Act, or (b) which he has failed to disclose in a return of income furnished by him under the IT Act before the commencement of this Act, or (c) which has escaped assessment by reason of the omission or failure on the part of such persons to make a return under the Indian IT Act, 1922 (11 of 1922) or the IT Act, or to disclose fully and truly all material facts necessary for his assessment or otherwise, then notwithstanding anything contained in any of the Acts mentioned in sub-s. (1) of s. 8 or the WT Act, the amount of income so declared or, as the case may be, the value of the assets representing such income, shall not be taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring in this Act was only relevant for ss. 3 and 14 of this Act itself and was not applicable to the disclosures made under s. 273A or under the Amnesty Scheme or under Expln. 5 to s. 271(1)(c), because it was in the context of provision of s. 3 of this Act that the Hon'ble apex Court had found that there being seizure in that case, the apellant's case did not fall within s. 3(2) but fell under s. 14 of the Act, under which there were separate provisions for disclosure in cases of search and seizure. In this case, there was search in the case of the assessee and the assessee was claiming that his case was covered by the provisions of s. 3. So, it was in the context of this claim and in view of different provisions for making disclosure in different types of cases'one where there was search and seizure and the other where there was no search; that the apex Court has held that the appellant's case was not covered by s. 3(2) of the Act. With utmost respect to the Hon'ble Highest Court of the land, we are unable to agree with the submission of the learned Departmental Representative that the findings of the apex Court with respect to the term "voluntary disclo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion is concerned, we are unable to agree with the counsel for the assessee because his so-called Boston diary in our opinion, was not in the nature of any books of account which are to be maintained under the recognised system of accounting and, therefore, this argument is rejected. As regards the arguments that disclosure was subject to no penalty, and, therefore, the same should have been accepted in toto, and if the Department was not to accept the disclosure, then it should have rejected the disclosure and have completed the assessments on the basis of its own enquiries and the seized documents, and as the Department has not done anything except completing the assessment on the basis of disclosure made by the appellants, it was not justified on the part of the Department to accept the disclosure but to reject the condition relating to immunity to penalty and prosecution. The learned Departmental Representative opposed the submission on the ground that disclosure was made only because the appellants were agreeable due to search and seizure and certain documents and the conditions put by them were unreasonable which could not be accepted. 29. After careful consideration of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditional the offer which is in terms made on a condition. If it is not possible to accept that condition, the only result would be that that offer must be rejected. But where an offer is coupled with conditions which cannot be accepted fully, the offer cannot be treated as an unconditional offer merely on that count." II. Amalendu Paul's case (supra) : "For the assessment year the assessee filed a return declaring a certain income. The ITO noticed certain cash credits which were claimed by the assessee to be loans from one creditor. The ITO required the assessee to prove the source of the credit and summons under s. 131 of the IT Act was also issued in this connection. Later, the assessee requested the ITO to issue the summons to another new address of the creditor but the creditor could not be found to substantiate the assessee's contention regarding the source of the credit. The assessee, thereafter, filed a revised return including therein the cash credit amount as his income. The ITO completed the assessment by including the cash credit amount offered by the assessee. The IAC levied penalty on the assessee under s. 271(1)(c) of the Act on the ground that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s counsel further submitted that as far as asst. yr. 1986-87 is concerned, the original returns were filed on 3rd March, 1987, and the revised returns, though were filed after the search, but by that time neither any notice under s. 142 had been issued nor assessments were completed and the disclosure made in the revised returns being a conditional one, there was no question of any concealment. He further submitted that the assessments were completed on the basis of revised returns and, therefore, there was no question of any penalty under s. 271(1)(c). The learned Departmental Representative, on the other hand, submitted that the return was revised after search, so filing of revised returns do not absolve the assessee of the default of concealment and that in view of Expln. 5 to s. 271(1)(c), the income was concealed income. After having considered the submissions, we are of the opinion that though it is true that revised return may not absolve the assessee of its default of concealment, but it is not so in every case, because such outcome depends on the facts of each case. As far as the present case is concerned, no doubt that the revised return was filed after search, but the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y-lending, construction of building, etc. Search operations were carried on on this group on 22nd Aug., 1986, wherein the following assets/things/valuable were seized : (1) Shares/units/debentures valued at ₹ 82,00,000. (2) Cash of ₹ 7,25,000. (3) Ornaments and jewelleries valued at ₹ 11,34,280. (4) Silver utensils valued at ₹ 2,70,000. Certain incriminating documents, including one diary called 'Boston' were found. The said diary contained about 30 pages and numerous transactions were noted therein and that too in code, which could be deciphered by only one or two persons in the group. In connection with the seizure made, orders under s. 132(5) of the Act came to be passed by the Department on 18th Dec., 1986. 3. On 27th Jan., 1987, through their tax consultant, N.C. Mehta, the members of the group made disclosure petition under s. 273A of the Act wherein they offered for taxation over ₹ 2.29 crores in various years beginning from the asst. yrs. 1970-71 to 1987-88 and in the hands of the various assessees of the group. Copy of the petition is extracted in pp. 4 and 5 of the order of the learned Judicial Member. When such disclosures ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A were voluntary and without having been issued any notice under s. 139 or under s. 148. The assessee paid all the taxes on the additional income declared and co-operated with the Department diligently and from time to time for the completion of the assessment. Under the circumstances, the assessee is fully eligible for the benefit available under s. 273A for the non-levy of any penalty and waiver of interest. (iii) In view of the petition under s. 273A and on the basis of the quantum of income offered, Hon'ble CIT issued the direction for taxing the income year-wise. Thus, issuance of direction solely on the basis of amount offered voluntarily for taxation with simultaneous prayer for non-levy of any penalty and interest arising therefrom in view of the petition filed under s. 273A, the penalty on such voluntarily declared income may kindly be dropped/waived." 4.1. The AO rejected the assessee's contentions on the ground that: (i) the assessee was in a habit of concealing income, as earlier also raids were carried out in 1976 and in Oct., 1981; (ii) the assessee had not declared the additional income voluntarily; (iii) the assessee had declared higher amounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h on behalf of the appellant have been carefully considered. It is seen from the impugned penalty orders that in the returned income of the appellant as per the original return and the income at which the appellant had been assessed finally for different assessment years, after considering the appellant's petition before the CIT for spread over, there is wide disproportion in the figures. In the petition under s. 273A of the IT Act, 1961 (and 18B of the WT Act, 1957), dt. 27th Jan., 1987, relating to asst. yrs. 1970-71 to 1987-88, vide para No. 13, additional income of ₹ 2,29,90,529 was offered in respect of the Jhunjhunwala group of cases pertaining to different assessment years as per details enclosed herewith. As per para 14E, each firm and member of Jhunjhunwala group agreed to submit individual petition along with the returns of income and wealth (on or before 15th Feb., 1987). In para 17, it was admitted that the individual petitions were commensurate with the investments made by the group and the expenses incurred on household expenses, marriage expenses, purchase of jewelleries, charity and donation. In the annexure to the petition being the details of disclosure, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt years in question his income was assessed at ₹ 68,000 approximately. On search under s. 132, the Department seized certain books and documents which showed that the assessee was carrying on business in eight other fictitious names. The assessee admitted in his statement that he was carrying on business in fictitious names and also offered to be assessed at ₹ 7 lakhs over a period of five years in question. Penalty proceedings were initiated by the ITO and penalty levied. The question that came up for consideration before the Tribunal was whether understated income by the assessee cannot be treated otherwise than concealed income. The Tribunal held that : 'In the instant case, the total assessed income of the assessee for the five years in question was approximately ₹ 68,000 whereas the income returned by him in his revised returns was approximately of a sum of ₹ 7,68,000. There was such a great disproportion between the assessed income and the revised income that it was impossible for the assessee to have successfully shown that the understatement by him of his was unintentional or bona fide. The assessee in his sworn statement and also in his petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thus come to be posted before us. 7. Before I go into the arguments of the learned counsel for the assessees, I feel that the peculiar objecton taken by the Department needs to be dealt with. The learned Departmental Representative contends that the scope of the present exercise according to the order on the miscellaneous applications is limited and does not extend to give second innings to the assessees and should be confined to prayers made in the assessee's miscellaneous applications. After going through the order on the miscellaneous applications, I find that the Tribunal has recalled the order in its entirety and, therefore, in my view, the appeals are restored and need to be disposed of in accordance with law. 8. The learned counsel besides reiterating what was contended before the two Revenue authorities argues that the present penalty orders are bad in law as they were initiated on the basis of the direction given by the CIT. According to him, the AO has not applied his mind nor recorded his own satisfaction before imposing the penalty. This could be clear from the discussion note itself apart from the discussions in the penalty order for the asst. yr. 1987-88 wherei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decisions in the cases of : (1) CIT vs. Vinay Chand Harilal (1979) 8 CTR (Guj) 247: (1979) 120 ITR 752(Guj); (2) CWT vs. MKS Vanavarayar (1979) 11 CTR (Mad) 168: (1980) 122 ITR 184(Mad); (3) CWT vs. B. Kempanna (1980) 126 ITR 825(Kar); (4) CIT vs. Steel Rolling Mills of Hindustan (P) Ltd. (1983) 34 CTR (Cal) 188: (1983) 143 ITR 933(Cal); (5) CIT vs. Kekatpure Ginning & Pressing Factory (1982) 31 CTR (MP) 287: (1984) 145 ITR 813(MP); and (6) CIT vs. Gwalior Metal Industries (1983) 34 CTR (Pat) 379: (1983) 141 ITR 274(Pat). It was submitted that before imposing penalty under s. 271(1)(c) of the Act, there should be a finding that income of a particular year has been concealed by the assessee. However, according to him, no such finding was given by the AO and the AO simply brought to tax the additional income as agreed between the members of the group and the Revenue authorities without giving a clear finding about the fact of concealment of such income in the assessment orders. 10. Alternatively it was submitted that since all the transactions, which were the subject-matter of disclosure were recorded on the Boston diary, the Revenue cannot take the help of Expln. 5 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department having accepted the offer is precluded from imposing any penalty. Reliance was placed on to the decision in: (1) Punjab Tyres case (supra); and (2) Amalendu Paul's case (supra). According to the learned counsel for the assessee, such disclosure had an implied condition, i.e., non-levy of penalty and interest. The offer, according to him, was not an unconditional one. The learned counsel for the assessee further argued that the penalty is invoked under the main section and not under the Explanation. Relying upon the decision in: (1) 34 ITR 98(sic); (2) CIT vs. Anwar Ali (1970) 70 ITR 696(SC); and (3) Khoday Eswarsa & Sons vs. CIT 1972 CTR (SC) 295: (1972) 83 ITR 369(SC). It was argued that the penalties are not leviable. It was also pointed out that the assessees after having made the disclosure have not capitalised such disclosure in the books of account of the assessees. The learned counsel pointed out that the burden on the Revenue in relation to the imposition of penalty under s. 271(1)(c) is still there even in the case of an admission by the assessees. According to him, concession given in the assessment cannot be extended for penalty proceedings. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly urged that there is nothing like voluntary act on the part of the assessees of Jhunjhunwala group to come forward with disclosures but they had no choice because of the fact that the materials gathered in the search clearly unearthed huge concealment of income/wealth by the members of the group. He also submitted that once the assessees have made applications under s. 273A of the Act to the CIT, they had clearly conceded the fact of concealment. He emphasised that due to post-search investigations and the material gathered, the Jhunjhunwala group came forward with a further disclosure of ₹ 20 lakhs. He also highlighted the fact that the group carried on various activities either individually, through the medium of HUFs or partnership, including building activities, import of chemicals and selling them in black market, financing builders, trading in cotton, sale of properties where on money transactions are a common and a regular feature. He also highlighted the fact that the Boston diary contained transactions of over ₹ 65 lakhs. The assessee had inflated the purchases and has huge undisclosed investments and expenditure. The learned Departmental Representative furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 137 ITR 232(Cal); (4) K.P. Kandaswami Mudaliar & Sons vs. CIT (1984) 39 CTR (Mad) 303: (1985) 156 ITR 638(Mad); (5) Hakam Singh vs. CIT (1980) 17 CTR (All) 255: (1980) 124 ITR 228(All); and (6) Mool Chand Mahesh Chand vs. CIT 1978 CTR (All) 193: (1978) 115 ITR 1(All). It was submitted that once the assessee had made an application under s. 273A of the Act, he has clearly admitted the fact of concealment of income. Reference was also made to p. 5004 of the Income-tax Law by Chaturvedi and Pithisaria, 3rd Edn. 11.1 According to the learned representative for the Revenue, since the assessee's case clearly falls under the main provisions of s. 271(1)(c) of the Act, it is not necessary to find out whether the provisions of Expln. 5 to that section are attracted. Our attention was invited to the decisions in the cases of K. Govindarajulu Naidu (supra), CIT vs. Mussadilal Rambharose (1987) 60 CTR (SC) 120: (1987) 165 ITR 14(SC) and Vishwakarma Industries vs. CIT (1982) 29 CTR (P&H)(FB) 243 : (1982) 135 ITR 652(P&H)(FB). 11.2 As regards the discussion note, it was pointed out that it is a common practice on the part of the Department to hold such discussions whenever substan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, it was argued that the debts and investments are by implication capitalised. The learned Departmental Representative further pointed out that there was search in all the cases of the group as mentioned in the search warrant which is on the premises and in relation to all the assessees of the group and, therefore, the case of the assessees does not fall in the Amnesty Scheme. Finally the contentions of the Revenue can be summarised as under: (1) The facts and circumstances obtaining the case clearly show that but for the search operations carried out under s. 132 of the Act and a seizure of valuable articles and things the assessees would not have come with a disclosure of concealed income. (2) Statements of the members of the Jhunjhunwala group recorded during search leave no doubt that the members of the Jhunjhunwala group carried on various activities earning huge concealed income which was not disclosed to the Revenue. (3) Large part of the investment was unexplained and was recorded in the Boston dairy, which was not disclosed to the Revenue, and such diary recorded the activities of earning huge income, which was not disclosed to the Revenue. (4) The background ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment to drive the assessees to make proper disclosure of concealed income. It is pertinent to mention that the group has generated large unaccounted money and noted those transactions in the Boston diary and such notings in the diary were in secret code and it took great time, patience and persuasion to decipher the same. As already noted, the transactions in the diary were running into lakhs and lakhs of rupees. It is under these circumstances the assessees of Jhunjhunwala group came forward with a disclosure under the guise of "buying peace with the Department" and thereby effectively trying to prevent any further investigation which would perhaps have resulted in much larger concealed income. Under such circumstances, it does not lie in the mouth of the assessee to say that no penalty could be imposed under s. 271(1)(c) of the Act and expect the AO to establish which income, to what extent, from what source, to which year the disclosed income pertains and the assessee to whom it actually belongs and was concealed from the Revenue. It is rather impossible to expect the Revenue how each of the assessees who made such disclosure earned in those years the said income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... returns right from the asst. yr. 1970-71. In other words, the assessees took 15 long years to disclose to the Department what the Department is rightly entitled to assess. It was only after the Department caught the assessees in the act of concealing their income, they have agreed to show the additional income in the years whose assessments were already completed. If an admission is made by the assessees that they have not shown certain income, it cannot be said that the Department should prove again that the assessees have concealed their income in the penalty proceedings. Reference may be made to the decision of the Calcutta High Court in the case of CIT vs. P.B. Shah & Co. (P) Ltd. (1978) 113 ITR 587(Cal). I am also not impressed by the statement made on behalf of the assessees that since they have shown the additional income voluntarily in the returns filed subsequent to the search operations, there was no concealment justifying action under s. 271(1)(c) of the Act. It is pertinent to note that in the returns originally filed the assessees have not shown the additional income found in the search operations and the additional income was shown only after the searches were carried ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose. Therefore, in our opinion, the aforesaid decision will not be of any help to the assessees. In the case of Sir Shadilal Sugar & General Mills Ltd. (supra), it is pertinent to note that the only issue which came up before the Court was that whether the Tribunal was justified in reducing the penalty from ₹ 70,000 to ₹ 5,000. The Hon'ble High Court recasted the aforesaid question as under: "Whether, on the facts and in the circumstances, the finding of the Tribunal that the assessee had not concealed income to the extent of ₹ 67,500 and ₹ 21,700 within the meaning of s. 271(1)(c) of the Act is correct in law." In their judgment, the Hon'ble Supreme Court has not approved the action of the Hon'ble High Court in not only recasting the question but also in interfering with the factual aspect of the matter. It is no doubt true that there are certain observations at p. 713 of the report on which the learned counsel for the assessee had stressed. However, in my opinion, these observations have to be read in the context of the facts and circumstances obtaining in that case. In the instant case, on proper appreciation of the material b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The assessees have also conceded that such Amnesty Scheme is not available for the asst. yr. 1987-88. The decisions reported in: (1) Shama Raising Chandel vs. ITO (1992) 41 ITD 212(Ahd); (2) Uttamchand Bhutani & Co. vs. ITO (1992) 42 ITR 404(Del); and (3) Ram Nihora Thakur (1993) 46 ITD 90(Pat). all support the case of the Revenue. Moreover, in my opinion, the assessees have not made full and proper disclosure. The very fact that the assessees have agreed to disclose further sum of ₹ 20 lakhs shows that the conduct of the assessee was not fair in the direction of full disclosure. In my opinion, the case of the assessee is outside the ambit of the Amnesty Scheme. Taking into consideration that there was a search action in the group, substantial material was found to show that there was huge income which was concealed from the view of the Department and the assessees were successful in concealing such income for 15 long years, the benefit of the Amnesty Scheme, in my opinion is not available to the assessee. 12.4. In my opinion, most of the other cases relied upon by the assessees are decided on those particular facts and circumstances of the cases and cannot be blin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here was a search and seizure action at Giri Kunj, Andheri, being the residence of (1) Kishorilal F Jhunjhunwala; (2) Purshottamdas F. Jhunjhunwala; (3) Nirmal P. Jhunjhunwala; and (4) Niranjan P. Jhunjhunwala; and at Mittal Court, being the business premises of the Jhunjhunwala Group to whom these four persons belonged. Shares/units/debentures valued ₹ 82.00 lakhs, cash ₹ 7.25 lakhs, ornaments and jewelleries worth ₹ 11,34,280, and silver utensils worth ₹ 2.70 lakhs were seized. These are stated to have been recovered from Kishorilal's portion of the residence. The group was also prohibited to sell office premises at Nariman Point and 10 flats at Vasai. Statements under s. 132(4) were recorded, except of Shri Purshottamdas F. Jhunjhunwala, who was away to Surat on that day. Besides, other documents viz. paper Nos. 5, 21 to 26, 27, etc., stated to be incriminating, and a diary called 'Boston Diary' was seized, wherein certain transactions which were not recorded in the regular books were found to have been recorded in code, which could be deciphered only by one or two persons, particularly Shri Kishorilal F. Jhunjhunwala. On 18th Dec., 1986, orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f expenses incurred out of unaccounted income to be assessed as per Asstt. CIT's report (Annexure III). (3) ₹ 9.49 lakhs (Rs. 20.02 lakhs difference in declaration of jewellery minus ₹ 10.53 lakhs already directed to be assessed as above) to be spread over between Kishorilal F. Jhunjhunwala, Nirmal P Jhunjhunwala and Niranjan P. Jhunjhunwala for asst. yr. 1987-88. (4) ₹ 1.18 lakhs in the name of minors to be assessed in Jhunjhunwala & Co. and Purshottamdas F. Jhunjhunwala & Sons as per Annexure I of Asstt. CIT's report. The assessments thereafter were completed in almost identical language on the basis of this final discussion and issue of notice under s. 143 and upon hearing the assessees. One of such an order of assessment as a specimen reads as under: "Return was filed on 3rd March, 1987, disclosing additional income of ₹ 51,000 after the original assessment was completed and action under s. 132 was taken on 22nd Aug., 1986 in this group of assessees. Return being filed after the original assessment was regularised under s. 148. In response to notice under s. 143(2) N.P. Jhunjhunwala personally attended on 23rd March, 1989 and details ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... racts the provisions of s. 271(1)(c). I am, therefore, satisfied that the assessee has concealed the particulars of his income and has furnished inaccurate particulars thereof. Looking to the recalcitrant and unrepenting attitude of the assessee, it is a fit case for levying penalty under s. 271(1)(c). I, therefore, levy minimum penalty under s. 271(1)(c) at 100 per cent of the tax/income sought to be evaded." 7. Challenging the order of the AO, the assessee submitted before the CIT(A) that following the search action on 22nd Aug., 1986, on the group to which the assessee belongs, suo motu offer was made on the initial period while the raid was in operation and while no incriminating papers or assets were found; due to the massive raid the quantification of offer and the units under which to be taxed could not be decided; it was urged to the Intelligence Wing either to allow to have xerox copies of inspection of the papers which were seized indiscriminately to come to the correct amount to be offered; the group was allowed the xerox copies of the relevant papers in the third week of November, 1986. It was also submitted that the details were worked out and the petition was ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ading evidence and to cancel the penalties levied in view of the various decisions relied upon by the assessee. 8. The CIT(A) upheld the penalties vide para 5 of her order, wherein it was held that in the returned income of the assessee as per the original return and the income at which the assessee had been assessed finally for different assessment years, after considering the assessee's petition before the CIT for spread over there was wide disproportion in the figures. In the petition under s. 273A of the IT Act, 1961 (and 18B of the WT Act, 1957), dt. 27th Jan., 1987, relating to asst. yrs. 1970-71 to 1987-88, vide para No. 13, additional income of ₹ 2,29,90,529 was offered in respect of the Jhunjhunwala group of cases pertaining to different assessment years as per details enclosed therewith. As per para 14E, each firm and member of Jhunjhunwala group agreed to submit individual petition along with the returns of income and wealth (on or before 15th Feb., 1987). In Para 17, it was admitted that the individual petitions were commensurate with the investments made by the group and the expenses incurred on household expenses, marriage expenses, purchase of jewelleries, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal are set out in para 12 of its order as under: "(i) The onus is on the ITO to establish that the assessee had concealed income quantum-wise, year-wise, source-wise and assessee-wise. Since in the instant case, the AO has failed to establish the same, no penalty could be imposed under s. 271(1)(c) of the Act. (ii) The offer for taxation of the additional income cannot be considered to be the concealment of income in the contest of the facts and circumstances obtaining in the case. (iii) The provisions of Expln. 5 to s. 271(1)(c) of the Act do not help the Revenue. On the contrary they help the assessee, in view of the transactions noted in Boston diary, which should be considered as "the books of accounts" maintained by the assessee. (iv) In any event, for the asst. yrs. 1986-87 and 1987-88, the provisions of s. 271(1)(c) of the Act cannot be attracted as the assessee had shown the correct income in the returns originally filed." 10. The Tribunal upheld the penalties vide para 18 of its order by observing as under: "18. We have carefully considered the rival submissions of the parties, the material to which our attention was drawn and the repor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and circumstances obtaining in the instant case, the assessee had, in fact concealed income/wealth for the years under consideration. According to us, there is no substance in the stand taken on behalf of the assessee and the other members of the Jhunjhunwala group that while making disclosure of income they had not taken into account liabilities. This may be due to various reasons best known to the members of the Jhunjhunwala group. However, one thing is clear that by making disclosure of income and requesting its spread over the years and in different hands, the members of the Jhunjhunwala Group have stopped further probing/investigation by the Revenue in the matter. At the same time, it appears that the Revenue too, was not interested in investigating further when the Jhunjhunwala group has disclosed substantial income/wealth, as a result of successful search carried out under s. 132 of the Act. Such investigation would not only have entailed time-consuming proceedings but also would not have resulted in unearthing further income/wealth than that already disclosed by the members of the Jhunjhunwala group. It is in this background that one has to decide whether there was anythin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was no default. The learned Departmental Representative, S.U. Pathak, on the other hand supported the order of the Departmental authorities and contended that the initiation was on his own satisfaction of the AO. According to him, in the order itself, the AO records his satisfaction to the following effect: "Total addl. income particulars of which were concealed within the meaning of s. 271(1)(c) Rs''" There is no mention either in the assessment order or in the notices issued by the AO that the initiations were not at his own satisfaction of the AO, but were on the direction of the CIT. It was an independent action of the AO to initiate the proceedings. Relying upon the decision of the Supreme Court in the case of Sirpur Paper Mills Ltd. vs. CWT (1970) 77 ITR 6(SC), the learned Departmental Representative submitted that if the directions issued without jurisdiction, they would be invalid and are to be ignored. On the contrary, in the penalty order he submitted that the AO prior to mentioning of the venerable lines "while granting spread over the CIT has directed that penalty proceedings should be initiated against the assessee" recorded a finding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty proceedings should be initiated against the assessee" cannot be taken as directions for initiation of the proceedings. It is a mere mention of the discussion that has taken place. In any case these notings are of the successor AO and, therefore, cannot be taken to be the true imprint of the mind of the AO initiating the proceedings. The satisfaction of the AO who initiated the proceedings does not indicate any influence or impact of the alleged directions, if any, in the discussion note. In fact, as aforesaid, no such directions are there is the discussion note, if they are read in the right perspective. The observations of the Tribunal in the order in miscellaneous application aforesaid, to the effect that these notings are directions of the CIT, is not a finding, but as per this very order itself a suggestion to consider after a proper opportunity of being heard given to the parties and, therefore, that should not, in my opinion, act as a bar for consideration of the issue afresh. I, therefore, hold that the initiation of the proceedings was valid and were based on the satisfaction of the AO and not on the direction of the CIT. The contention of the assessee, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicated concealed income. The income was not recorded in the regularly maintained books of account, but was found recorded in the Boston's diary; but for which the assessees would not have come forward for disclosure, as they refrained in 1976, when even after a search the assessees did not come forward. Circular of CBDT, according to him, do not apply to any assessee whose premises is searched. He further opined that it was not a full and true disclosure, as the income above ₹ 20 lakhs and odd was assessed and offered by the assessee over and above disclosed in the disclosure petition. 19. The chronology of events show that the disclosure of higher income of all the assessees was on search and seizure action that had taken place. The disclosure is not of the year in which the search has taken place, but of the earlier years as well, right from asst. yr. 1970-71. Inspite of an action in 1976, the assessee had been successful in keeping the income undisclosed until some incriminating material was found and seized in the search conducted in 1986, i.e., in the form of seized papers marked Nos. 5, 21 to 26, 27, Boston diary, etc. referred to in assessee's letter, dt. 27t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prima facie belief view is not detection of concealment. The question and answer are reproduced here below: "Q. 19: Kindly clarify the expression "before detection by the Department?" Ans: If the ITO has already found material to show that there has been concealment, that would mean the Department has detected the concealment. If the ITO only had prima facie belief, that would not mean concealment has been detected." 21. The latter part of the circular has to be read with the first part, which says "if the ITO has already found material to show that there has been concealment, that would mean the Department has detected concealment". Paper Nos. 5, 21 to 26, 27, including the Boston diary is sufficient to conclude that the Department has detected concealment, and had the assessee not owned up the situation, the Department would have held so. That material had already come to the possession of the Department and the concealment detected is the result thereof. Again, the assessee's efforts were to suggest that it was assessee's co-operation in deciphering the coded language used in the 'Boston Diary' that brought the undisclosed inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w to say that this was not a search case. May be that search warrants were there only in four names, but the premises where the search was carried was common, seized documents and other material was owned up as belonging to all, they cannot be said to be non-search cases. Reliance on the decision of the Bombay High Court in the case of Bombay Cloth Syndicate (supra), is not of much help to the assessee, as it was with reference to the provisions of s. 139(5), where the Court held that the second return filed by the assessee was a revised return as contemplated under s. 139(5); that the incorrectness in the original return had not been discovered by the ITO; that the account books were impounded by him merely to remove the suspicion which arose in his mind due to some discrepancies and to find out the truth; that much before the enquiry was completed and any discoveries of evasion were made, the revised return was filed; and that apart the Department having assessed the income of the assessee on the basis of the second return and taken advantage of the extended period of one year for completion of assessments under s. 153(1)(c) from the date of its filing, could not be allowed to ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt thereof were found to be held by such person for or on behalf of any other person, in that case the AO can proceed under sub-s. (5) against such other person and all the provisions of this section apply accordingly. In these circumstances, in my opinion, the mere fact that warrants were issued only in the names of four persons does not take out other cases out of search for claiming the amnesty benefit. 25. The learned counsel of the assessee also attempted to make out a case that it was a conditional offer-a sort of package deal and, therefore, in view of the decision of the Bombay High Court in the case of CIT vs. Kiran & Co. (1996) 217 ITR 326(Bom), no penalty be levied. Here also, I do not find any merit in the contention of the assessee. There does not seem to be any conditional offer. Under petition 273A, the assessees only requested not to initiate the penalty proceedings and there is no acceptance of any such condition, nor can there arise any such question in the light of the material found in the shape of paper Nos. 5, 21 to 26, 27, etc. and the Boston diary, and the examination of the case leading to assessment of income more than the income admitted by the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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