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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 ..... ion 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 staff, amounts outstanding from a textile company, money lent outstanding outside the accounts as also silver jewels. The assessments of the assessee's income for the assessment years 1984-85 to 1988-89 were thereafter revised on the basis of the revised return filed by the assessee on November 25, 1987. On reassessment, the assessee was found to have additional taxable income for all those years and tax was levied accordingly. Penalty proceedings were initiated thereafter and the penalty was levied on March 25, 1991, under sections 271(1)(c) and 273 of the Act. The assessee filed a petition before the Commissioner of Income-tax on or about April 30, 1991, seeking waiver of the penalty levied. In that he pleaded that he had disclosed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad 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 been derived. But no such statement had been made by the assessee in this case on the date of the search. The payment of tax together with interest referred to in this clause need not be on the same day of the search as the words "in the course of search" apply to the statement and not to the payment of tax and interest. The expression of desire on the part of the assessee to disclose his income conveyed to the officer in charge of the search does not amount to a statement under oath for the purpose of section 132(4) of the Act and the Explanation to section 271(1) of the Act. Such expression of desire would not in any way bind either the maker or the person to whom the statement was made, as it would always be open to the assessee to change h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 petitioner. Counsel also referred to the word "voluntarily" in section 273A(1)(b) and submitted by placing reliance on the decision of a Full Bench of the Allahabad High Court in the case of Bhairav Lal Verma v. Union of India [1998] 230 ITR 855, submitted that the word "voluntarily" in section 273A of the Act means h out of free will without any compulsion and the assessee's disclosure being one made without any compulsion even before the detection of the concealed income by the Income-tax Officer, the disclosure must be treated as voluntary. Counsel also relied on the decision to support his argument that it cannot be said as a principle of law that disclosure of concealed income after the day of search cannot be voluntary, as the disclosure may exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 had been determined. Counsel for the Revenue, on the other hand, supported the order of the Commissioner and submitted that the assessee cannot invoke Explanation 2 to section 273A(1)(b) of the Act as the assessee had submitted to the penalty that had been imposed and there was no appeal against that order. The language of the Explanation also, it was submitted, would show that the statement referred to therein could have to be made at the time of the search and not at any subsequent point of time. Counsel submitted that the disclosure made after a search can never be regarded as voluntary, as but for the search no declaration would have been made at all, and it was not even the case of the assessee that even if the search had not been made the disclosur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standing 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 various other documents. After the search and seizure of bullion, cash and account books the assessee came forward with his disclosure. The assessee did not file any appeal against the order imposing penalty. The assessee sought for waiver only on the premise that the penalty was leviable. Penalty in the circumstance, in fact is leviable as the income had admittedly been concealed and the assessee had failed to make a statement during the course of the search admitting the concealment of income, the manner in which such concealment had been effected and the acquisition of all the proceeds from out of the concealed income. In the petition for waiver the assessee had not pleaded that he had disclosed something which could not have been discovered from a scrutin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 reassessment order about the extent of income concealed and the nature or extent of the inaccuracies in the particulars furnished in respect of such income. The Explanation that was deleted referred to both seizure and detection. Parliament appears to have intended that when the wrong doing on the part of the assessee in failing to disclose his income fully was detected by the search and seizure, that is the time at which detection is made and the disclosure if any made by the assessee before it can be characterised as voluntary, it should have been made prior to such detection. The Income-tax Act deals with assessees. It is the assessee who is primarily liable for the payment of the tax. The concealment of income which is to be penalised is the concealment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 his premises and incriminating materials seized, by claiming that he had disclosed more than what could have been ascertained from the materials that had been seized. The reward provided for under section 273A by way of waiver of penalty is a reward meant for those who voluntarily in good faith make full and true disclosure of the income concealed. It is no doubt true that such a reward is made available to the assessees who had already broken the law by failing to disclose their income truly and fully in the returns filed by them. But that reward is limited to circumstances where the disclosure is made voluntarily and in good faith and not in other circumstances. If the disclosure made after a search and seizure of incriminating material which may or may not lead t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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