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TMI Blog1990 (9) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... uty Director of Inspection (Intelligence) that the amount of Rs. 22,87,000 seized from Shri K. C. Mehta belonged to it, that the amount should not be returned to anybody else including Shri K. C. Mehta and that the petitioner proposed to come forward with a settlement petition offering the entire amount as its income for the assessment year 1981-82. On the same day, Shri K. C. Mehta also wrote to the Deputy Director of Inspection (Intelligence) confirming that the said amount did not belong to him or Jamnadas Madhavji and Co. as was stated by him originally but belonged to the petitioner. He also stated that all the partners in the petitioner firm were his close relatives. On May 9, 1981, the petitioner filed a settlement petition before the Commissioner offering the said amount of Rs. 22,87,000 as its income for the assessment year 1981-82 and requested the Commissioner to waive interest and/or penalty leviable/imposable under the Act as the petitioner was making a full and true disclosure of its income voluntarily and in good faith. In view of the said statements of Shri K. C. Mehta and the petitioner, the Deputy Director of Inspection (Intelligence) passed an order on June 22, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It was only after it became clear to the assessee that the seized amount was likely to be subjected to both tax and penalty and that tax and penalty was likely to be more than the amount seized, that the offer to be assessed in respect thereof was made. Faced with such a situation, the assessee made an offer to make the best out of bad bargain in the hope that the seized amount will bear taxes at the rate applicable to a registered firm and that the penalty and interest under the various sections of the Income-tax Act may be saved. Disclosure made under the constraint of a real and imminent prospect of the loss of the entire seized amount, he opined, cannot be considered to be voluntary or in good faith. Section 273A of the Income-tax Act reads as under: "273A. (1) Notwithstanding anything contained in this Act, the Commissioner may, in his discretion, whether on his own motion o otherwise,-. .. (ii) reduce or waive the amount of penalty imposed or imposable on a person under clause (iii) of sub-section (1) of section 271 ; or (iii) reduce or waive the amount of interest paid or payable under sub-section (8) of section 139 or section 215 or section 217 or the penalty impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the waiver or reduction is sought for interest charged under section 215 and penalties imposed under section 271(1)(c) and under section 273. The conditions necessary are referred to in clauses (b) and (c) of that section. Under both the clauses, the common factor is the making of full and true disclosure of income voluntarily and in good faith. The uncommon factor is that while under clause (b), such a disclosure has to be before the detection of the concealment of income by the Income-tax Officer, under clause (c) it has to be before the issue of notice under section 139(2) or, where no such notice has been issued and the period of the issue of such notice has expired, prior to the issue of notice under section 148. The dispute in the present case is about the satisfaction of the common factor under the two clauses and that is what has been found wanting by the Commissioner. The dispute, thus, boils down to the meaning of the expression "voluntarily and in good faith made full and true disclosure of income." If the Commissioner understood the meaning of that expression correctly and appreciated the facts in the light of such understanding, this court will be reluctant to substit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been different. But on the findings given it is not possible to say that the disclosure made was not voluntary. . . The good faith which is required to be established for invoking the aforesaid provision is that in making the disclosure the petitioner must have acted honestly. In other words, he should not have been guilty of having acted dishonestly in making the disclosure. The fact that before making the disclosure his conduct had been dishonest or that he did not act in good faith is irrelevant for the purposes of applying these provisions. The disclosure is made by an assessee under this section for the purposes of getting the benefits provided therein. The fact that, in the past, the assessee did not make a full disclosure of his income and concealed the same is immaterial. We are, therefore, of the opinion that the ground on which the Commissioner of Income-tax rejected the application filed by the petitioner for the reduction of interest is not tenable in law." The Karnataka High Court, in the cases of S. R. Jadav Desai v. WTO [1980] 121 ITR 531 and B. Anjanappa v. CWT [1980] 124 ITR 433, the Gujarat High Court in the case of Madhukar Manilal Modi v. CWT [1978] 113 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year had not ended. There is, therefore, no question of concealment in the hands of the assessee far less a case of detection and the returns filed cannot but be held to be voluntary and in good faith. Accordingly, the impugned order is quashed. Rule is made absolute in terms of prayer clause (a). The Commissioner is directed to dispose of the application under section 273A afresh in the light of the observations made hereinabove. At the time of the admission, interim relief was not granted. The matter was taken in appeal. The appellate court granted interim relief in terms of prayer clause (d) of the petition on the condition of the petitioners' making a deposit of Rs. 6,50,000 with the Department and furnishing bank guarantee for the balance amount of Rs. 6,50,000 of a nationalised bank to the satisfaction of the prothonotary and Senior Master till the disposal of this petition. In view of the fact that the petition is allowed in terms of prayer clause (a) and the amount of Rs. 22,87,000 seized from the petitioners is still in the possession of the Department, it is only reasonable that the bank guarantee should be discharged and the guarantee returned to the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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