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TMI Blog1998 (9) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... mise situated at Pavoor Chatram, Tirunelveli District, of the assessee under section 132 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). As a result of the search, a quantity of 842 gms. Of jewellery valued at Rs. 2,50,000 was recovered from the residence of the assessee, cash of Rs. 30,000 was recovered from the business premise at Pavoor Chatram and account books, documents and pronotes were recovered from the residence of the assessee. During the course of the search, the assessee expressed his desire to settle the tax matters with the Department by making disclosure, but no disclosure was made on the day of the search, or before the search was completed. No statement was given by the assessee under oath under section 132(4) of the Act. Thereafter, the assessee made a disclosure on October 1, 1987, and offered additional income for assessment in the case of the assessee as also in the case of his wife. He disclosed an income of Rs. 13,35,000 in his own case and a sum of Rs. 5,50,000 in the case of his wife. While making disclosure, he showed investments in the residential house purchased in his name and in the name of his daughter, credits in the name of his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn of income to be furnished before the expiry of time specified in sub-section (1) of section 139, and also specifies in the statement the manner in which such income has been derived and pays the tax, together with interest, if any, in respect of such income." That Explanation requires that the assessee who had been subjected to search, makes a statement under section 132(4) of the Act in the course of the search and states therein that the money, bullion, jewellery or other valuable article or thing found in his possession or under his control had been acquired out of his income which had not been disclosed so far in his return of income to be furnished under section 139(1), specifies in the statement the manner in which such income had been derived and pays the tax together with interest, if any, in respect of such income. The statement referred to in the provision therefore, is a statement made under oath in the course of the search. That statement should not only confirm that the things found in the possession or under the control of the assessee at the time of the search had been acquired out of undisclosed income, but also set out the manner in which the income had b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e word "detection" used in section 273A(1)(b) of the Act. That provision reads as under: "in the case referred to in clause (ii), has, prior to the detection by the Assessing 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, made full and true disclosure of such particulars;" The argument was that the detection is at terms different from seizure or search as something more may have to be done after the search in order to enable the Assessing Officer to come to a conclusion that there had been concealment of particulars of income or inaccuracy in the particulars furnished in respect of the income. His further argument was that if the statement of disclosure was made by the assessee before the Assessing Officer completed his scrutiny of the material that was seized and came to a conclusion that the concealment had been established and had quantified the same, the disclosure made by the assessee should be regarded as voluntary and in good faith and, therefore, the Commissioner should have exercised the discretionary power under section 273A of the Act, in favour of the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particulars." It was submitted by counsel that under that Explanation, if the assessee whose premises had been searched and valuable articles have been seized, within a period of fifteen days of such seizure, makes a full disclosure of his income, such disclosure if made within the time specified, shall be deemed to have been made prior to the detection by the Income-tax Officer of the concealment of particulars of income or of the inaccuracy of the particulars. The deletion of the Explanation according to counsel, would still not have the effect of limiting the rights of the assessee and the assessee by expressing his desire at the time of search to make a disclosure, and thereafter following it up with the disclosure within a reasonable time would be entitled to the benefit of Explanation 5 clause (b)(2) of section 271(1) of the Act. It was also submitted that notwithstanding the reference to seizure and detection in that Explanation, detection is not to be equated with seizure; that detection can be said to have been made only after what had been seized had been scrutinised and analysed by the Assessing Officer, and the extent of concealment or inaccuracy in the particulars h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been in respect of the previous year in which the seizure was made or in respect of any previous year prior thereto. Attention was also invited to the decision of the apex court in the case of Smt. Harbans Kaur v. CWT [1997] 224 ITR 418 wherein the court held with reference to section 18B of the Wealth-tax Act, 1957, that if the conditions stipulated in the section are satisfied, the Commissioner has a discretion in the matter and if the order shows that he applied his mind and reasons are given for his decision not to waive the penalty in full, the discretion is not to be lightly interfered with. The assessee in this case appears to have carried on extensive business of money lending. The disclosure made by the assessee shows that the money lending outstanding was Rs. 9,98,000. The investments made in the houses purchased in his own name and in the name of his daughter as also the cash seized and the jewels were apparently made out of or is a part of the income realised from money lending. During the search which was conducted not only in the residence of the assessee but also in his business premises, the Revenue had seized in addition to cash and gold, account books and v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be examined and on the basis of which further steps are to be taken by the Revenue. It could not have been the intention of Parliament after having provided for search and seizure and such time limits within which further steps pursuant to such search and seizure are to be completed, to open the gates as it were and permit the assessee who had been subjected to search to avoid all penalty by enabling him to make a disclosure on any day prior to the date of completion of the reassessment consequent to the search, as it is only when the reassessment is made, it can be said with definiteness that the extent of income concealed as also the extent of the inaccuracies in the particulars furnished are determined and quantified. Even the Explanation that was on the statute book for a short time from October 1,1984, to May 24,1985, had only provided a limit of fifteen days from the date of search, within which the assessee was required to make the disclosure, which if made would be regarded as a voluntary disclosure of the concealed income. The word "detection" in section 273A(1)(b) therefore cannot be construed as referring to the final stage or the final step of quantification in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osure actually made was independent of the search and was actuated by motive which had nothing to do with the search. The plea of the assessee, on the other hand, was that the disclosure was made in the hope that the penalty would not be levied. The decision of the Allahabad High Court relied on by counsel has interpreted the word "voluntary" as being something made out of free will. I am in respectful agreement with the view that the word "voluntary" can only refer to an act made out of free will without any compulsion, inducement or provocation. I am however unable to subscribe to the view, with great respect, that the disclosure made after the search is still to be regarded as voluntary to the extent such disclosure deals with matters which either had not been ascertained from materials gathered at the search or could not have been so ascertained. Though the proposition that penal provision must be given a consideration which would favour the assessee rather than the Revenue, is not to be lightly departed from. I am unable to read section 273A as a charter for an assessee who has deliberately concealed his income to claim immunity from penalty after a search had been made in h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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