9911796707
TMI Blog1998 (3) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... sessed as a registered firm. The return for the year 1979-80 was filed on August 8, 1979, declaring a total income of Rs. 1,29,439 and the assessment was completed on February 27, 1980, on a total income of Rs. 1,31,610. Thereafter, the return for the year 1980-81 was also submitted on August 29, 1980, and the assessment was completed on a total income of Rs. 1,53,590 as against the returned income of Rs. 1,53,160. The petitioner-firm filed a return of income for the assessment year 1981-82 on February 18, 1982, admitting a total income of Rs. 88,260 and the assessment was completed on March 16, 1983, accepting the return. In respect of the assessment year 1982-83, the return of income filed by the petitioner on July 26, 1982, at Rs. 1,30,670 was accepted by an order of assessment dated March 16, 1983, and, therefore, the assessment of the petitioner were completed up to the assessment year 1982-83. While so, the petitioner states that there was a search by the Income-tax Department in the premises of the petitioner on March 29, 1983, and certain records were seized by the authorities. The petitioner further states that immediately after the search, but before any procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e which was offered for assessment, and further agreeing to pay the additional tax and requested the first respondent to waive the interest and penalty imposable under the provisions of the Income-tax Act. In pursuance of the said letter dated January 4, 1986, the petitioner submitted returns of income on January 20, 1986. However, the second respondent, by his assessment order dated January 30, 1986, levied interest under section 139(8) and section 217 of the Income-tax Act. Therefore, the petitioner made a representation under section 273A of the Act to waive the interest and penalty. But the first respondent, by his order dated January 28, 1998, made in C. No. 2033(77) of 1986-87 T. N.-V., which is impugned in the above writ petition, summarily rejected the petition filed by the petitioner under section 273A. The impugned proceedings dated January 28, 1988, of the first respondent read as follows : "GOVERNMENT OF INDIA OFFICE OF THE COMMISSIONER OF INCOME-TAX, TAMIL NADU-V 121, Nungambakkam High Road, Madras-600 034. PROCEEDINGS OF THE COMMISSIONER OF INCOME-TAX, TAMIL NADU-V, MADRAS 600 034. Shri N. Rangachary Commissioner of Income-tax, Tamil Nadu-V, Madr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the details of the amounts returned. amounts assessed originally and amounts finally assessed after the search. Hence, the respondents contend that the request of the petitioner seeking waiver of interest and penalty under section 273A of the Act is neither bona fide nor justified. That apart, during the course of action under section 132 of the Act, it was also found that a letter obtained from the pawnor to the effect that only half the weight of the jewels pledged were kept in a jewel pouch along with the jewels pledged by the pawnor concerned. Therefore, the respondents contend that the petitioner had deliberately suppressed the unaccounted income while submitting its returns during 1979-80 to 1982-83. According to the respondents, the offer by the petitioner as its unaccounted income assessed under section 69 of the Act on December 31, 1985, is not only long after the assessment made for the years 1979-80 to 1982-83 but also after a considerable time from the date of search, namely, March 29, 1983, and again after the notice issued under section 148 on March 23, 1985, and, therefore, the same cannot be considered as either bona fide or voluntary disclosure enabling hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... educing or waiving the penalty payable by the assessee under the Act. Learned senior counsel, therefore, contends that the refusal to exercise such power conferred on the first respondent under section 273A(4), again, vitiates the impugned proceedings. Per contra, Mr. S. V. Subramaniam, senior standing counsel appearing on behalf of the respondents, arguing in support of the impugned proceedings, highlights the conditions prescribed under section 273A(1) that the alleged full and true disclosure should be made voluntarily and in good faith ; should be made prior to the issue of notice under section 148 ; and the term "voluntarily" used under section 273A(1) indicates an action free of any constraint of search by the Department. In support of his contention, learned senior standing counsel relied upon the decision in Hakam Singh v. CIT [1980] 124 ITR 228 (All). In the instant case, admittedly, the disclosures were made only after the search conducted by the Department in the petitioner's premises on March 29, 1983. Learned senior standing counsel further contends that the word "detected" used in this context would include a case where the Assessing Officer had conducted a search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the relief sought for by the petitioner under section 273A, except a mere ground that the disclosure was made subsequent to the search and initiation of the proceedings under the Act. In this connection, learned senior counsel for the petitioner relies upon the decisions in Anwar Ali v. CIT [1992] 196 ITR 354 (AP) ; Sujatha Rubbers v. ITO [1992] 194 ITR 355 (AP) ; Public Carriers Truck Owners Association v. CIT [1994] 210 ITR 36 (Raj) and N. Subhakaran v. CIT [1992] 198 ITR 720 (Ker). On the other hand, Mr. S. V. Subramaniam, learned senior standing counsel for the respondents, contends that the question of getting satisfied about the compliance with the conditions prescribed under section 273A(1) or the question of exercising the judicial discretion would arise only if the conditions contemplated under section 273A are complied with ; if the conditions prescribed under section 273A(1) are not complied with, there would be no justification in complaining that the Commissioner has failed to exercise the discretion conferred on him ; and in support of his contention, he relies upon the decision in Smt. Harbans Kaur v. CWT [1997] 224 ITR 418 (SC). It may be noted that learned s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory arrangements for the payment of any tax or interest payable in consequence of an order passed under this Act in respect of the relevant assessment year. Explanation 1.---For the purposes of this sub-section, a person shall be deemed to have made full and true disclosure of his income or of the particulars relating thereto in any case where the excess of income assessed over the income returned is of such a nature as not to attract the provisions of clause (c) of sub-section (1) of section 271. (2) Notwithstanding anything contained in sub-section (1),--- (a) if in a case the penalty imposed or imposable under clause (i) of sub-section (1) of section 271 or the minimum penalty imposable under section 273 for the relevant assessment year, or, where such disclosure relates to more than one assessment year, the aggregate of the penalty imposed or imposable under the said clause or of the minimum penalty imposable under the said section for those years, exceeds a sum of one hundred thousand rupees, or (b) if in a case falling under clause (c) of sub-section (1) of section 271, the amount of income in respect of which the penalty is imposed or imposable for the relevant asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... writ petition are as follows : (i) Whether, under the facts and circumstances of the case, the petitioner has made a true and complete disclosure, voluntarily and in good faith ? (ii) The mere fact that such disclosure was admittedly made subsequent to the search under section 132 of the Act disentitles to claim the benefits under section 273A, particularly in the light of non-obstante clause in section 273A(1) ? (iii) Whether the impugned proceedings are supported by reasons and justified in law ? No doubt, the disclosure was made after the search conducted under section 132 of the Act. In this connection, it is relevant to refer to the decision relied upon by both learned counsel for the petitioner and the respondents reported in K. C. Vedadri v. CIT [1973] 87 ITR 76 (Mad), wherein this court has held as follows : "It is not necessary that a person who files a return under section 139(4) of the Income-tax Act, 1961, should contemporaneously or soon thereafter, file an independent application under section 271(4A) and move the Commissioner to exercise his discretion to reduce or waive the minimum penalty imposable. Section 271(4A) deals only with a power and is not ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the disclosure or the filing of return after the search by itself would not be decisive of the fact that the returns and disclosures were not voluntary. On a perusal of the impugned orders, it could be seen that there was no detailed consideration of these aspects by the Commissioner. The Commissioner of Income-tax had to examine for what period suppression was found out after search, what was the nature of the suppression and omission, the gravity of the offending act, subsequent conduct of the assessee, quantum of penalty, etc. The Commissioner had not considered the application under section 271(1)(a) and 273(2)(b) as required by law. Merely because the returns were filed after the search, they would not cease to be voluntary or bona fide disclosure. Therefore, the impugned orders of the Commissioner were liable to be set aside. (The Commissioner was directed to reconsider the matter relating to imposition of penalty under sections 271(1)(a) and 273(2)(b))." On the other hand, in K. M. Rajan, Rajan and Co. v. CIT [1990] 186 ITR 376 (Ker), distinguishing the said decision in A. V. joy, Alukkas Jewellery v. CIT [1990] 185 ITR 638 (Ker), the Division Bench of the Kerala High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alth Act, 1976, is to motivate the voluntary declaration of concealed income and with that object in mind the Schedule to the Act prescribes concessional rates of tax. A declaration of concealed income made after books or other documents or valuable assets have been seized cannot be said to be a voluntary disclosure ; it is made because the books, documents and assets seized would disclose to the assessing authority the concealment of income." Undoubtedly, in both the above decisions, namely, (i) Hakam Singh v. CIT [1980] 124 ITR 228 (All), and (ii) Tribhovandas Bhimji Zaveri v. Union of India [1993] 204 ITR 368 the fact remains that the Commissioner had not summarily rejected the benefit conferred under section 273A(1) ; but only after getting himself satisfied that the conditions prescribed under section 273A(1) were not complied with. In Anwar Ali v. CIT [1992] 196 ITR 354 ; [1990] 51 Taxman 154, the Andhra Pradesh High Court has held that (headnote of 51 Taxman) : "The discretion conferred on the Commissioner under section 273A is a quasi-judicial power and that has to be exercised judiciously, reasonably, but not capriciously and arbitrarily. The conditions mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... element of fear could be either attributed or inferred. The word 'voluntarily' in the context of section 273A(1), therefore, has to be construed as filing of the return by the assessee without being prompted by the animus to avoid or pre-empt adverse exposure or penal action. The Commissioner, before rejecting the returns as not voluntary, must have material based upon which, it is reasonable to infer that, in all probability, but for the filing of the 'voluntary' return, the assessee would have been subjected to penal action or adverse exposure. Fear on the part of the assessee, without anything more, cannot be a ground for not exercising the discretion under section 273A. The fear must be traceable to the imminent or proximate exposure of the assessee to penal action, but for the filing of the voluntary return under section 273A and, in order to enquire into this subjective element, there must be in existence objective facts warranting such an inference. Held, that, in the instant case, without considering the effect of the survey operations on the conduct of the assessee, the Commissioner reached the conclusion that the returns filed were not voluntary and this conclusion was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he conditions mentioned under section 273A nor had he recorded the reasons for not allowing full waiver of the penalty or with regard to the reduction of the amount of penalty and interest to the extent indicated in the orders. His order was not valid and was liable to be quashed " In N. Subhakaran v. CIT [1992] 198 ITR 720, the Kerala High Court has held as follows : "The Commissioner of Income-tax exercises discretionary power when passing an order under section 273A of the Income-tax Act, 1961, on an application for waiver of interest. The order should ex facie disclose the application of mind and should contain reasons in support of the order. When an order is sought to be impugned on the ground that the officer concerned has not exercised his discretion properly in the sense that the reason in support of the order has not been disclosed in the order, the defect cannot be cured by furnishing the reason by an affidavit. If that is allowed, an order which is bad in the beginning may, by the time it comes to the court when challenged, get validated by the grounds supplied in the affidavit. For the assessment year 1983-84, the petitioner filed his return on January 30, 1985, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner is to be exercised by him in such manner as he deems just and proper. When a discretion is conferred on an authority the same must be exercised fairly and not arbitrarily, justly and not fancifully, vide S. G. Jaisinghani v. Union of India [1967] 65 ITR 34; AIR 1967 SC 1427. Even, if the Legislature has not used the words 'in his discretion' in section 18B(1), the Commissioner could have exercised only a discretionary power in view of the employment of the word 'may'. Now, when Parliament used both expressions 'may' and 'in his discretion' together, the position is placed beyond the pale of any doubt that the Legislature wanted an officer of the rank of the Commissioner to be reposed with the discretionary power to choose between entire waiver or reduction in any proportion. Of course, when the Commissioner, instead of giving a complete waiver, chooses to give only a reduction for the penalty amount he must indicate in his order that he has applied his mind in that regard. In this view, there is no warrant for the proposition that the Commissioner, if satisfied of the compliance of conditions, has only one choice, i.e., to waive the penalty in entirety. Otherwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; (h) the state of mind of the assessee free from fear should be inferred from the test of reasonableness relating to the imminent and proximate exposure of the assessee to penal action. (i) all these relevant factors should be spelt out by a speaking order of the Commissioner while exercising his discretionary power conferred under section 273A, indicating the bona fides or otherwise of the assessee in disclosing the materials voluntarily, fully and truly, as well as, the link between fear and probability of exposure to penal action ; (j) the speaking order, therefore, should, apparently, reflect the judicious application of mind by the Commissioner objectively ; but not subjectively ; (k) the exercise of such judicial discretion by the Commissioner, therefore, is coupled with a statutory duty or obligation to apply his mind on the principles referred to above, and to satisfy himself whether the conditions imposed under section 273A are complied with or not ; (I) the judicious exercise of discretion, therefore, should be fair, reasonable just, fine and bona fide, but not arbitrary. Therefore, the first respondent is under a statutory obligation to give reasons to get h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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