Bombay High Court

Dr. (Mrs) Sudha Kankariya vs Cit on 21 January, 2004

Equivalent citations: 2004 136 TAXMAN 686 Bom

Author: J Devadhar

JUDGMENT

J.P. Devadhar, J.

The challenge in this petition is to the order passed by the Commissioner, Nasik, declining waiver of interest and penalties levied on the assessee under section 273A of the Income Tax Act, 1961.

2. The petitioner (hereinafter referred to as the assessee) and her husband are doctors practising as Opthalmologists at Ahmednagar. It is the case of the assessee that the assessee and her husband had kept certain deposits in Andhra Bank at Ahmednagar. On being adviced by their Consultant that the said deposits should be disclosed in their assessment, the assessee and her husband transferred the said amount on 31-1-1990 to their regular account with intention to disclose the same in the respective assessment years. The assessment year relevant for the purpose herein is assessment year 1988-89.

3. It is the case of the assessee that on 22-2-1990 the assessees husband approached the Income Tax Officer at Ahmednagar of his own free will and had made a voluntary disclosure before the assessing officer (3rd respondent) and offered for taxation the amounts which were deposited by him and the assessee in the Andhra Bank. The assessing officer served a formal summons under section 131 of the Income Tax Act on the assessees husband across the table and recorded his statement. In the statement, the intention to offer the said amounts for taxation by the assessee for assessment years 1988-89 and 1987-88 was recorded. Accordingly, revised return from assessment year 1988-89 was filed by the assessee.

4. Thereafter, or 4-5-1990 a detailed affidavit was filed by the assessee before the Commissioner setting out the events leading to the voluntary surrendering of deposits on 22-2-1990. In the assessment proceedings relating assessment year 1988-89, both the assessee and the assessing officer sought instructions from the Deputy Commissioner under section 144A of the Income Tax Act. The Deputy Commissioner in his directions dated 19-3-1991 took note of the fact that the assessing officer did not know of the existence of the deposits in question until the assessees husband met him in person on 22-2-1990 and considering that the assessee had approached the Commissioner, granted some relief regarding the quantum of the amount and directed finalisation of the penalty proceedings by taking into account the evidence on both sides meticulously.

5. Thereafter, the assessing officer completed the assessment for assessment year 1988-89 on 25-3-1991 on the lines of the assessees disclosure and sought to levy interest under sections 139(8), 215 and 217 of the Income Tax Act and also levied penalty under sections 271(1)(a) and 271(1)(c) and 273 of the Income Tax Act.

6. The petitioner thereupon approached the Commissioner, Nasik, with a formal application under section 273A of the Income Tax Act seeking waiver of the aforesaid penalties and interest. It was stated that the assessee had fulfilled all the conditions set out under section 273A of the Income Tax Act and since the amounts were disclosed voluntarily, the interest and penalty levied be waived. By the impugned order dated 17-1-1994, the Commissioner following his decision in the assessees husbands case declined to consider the application of the petitioner under section 273A of the Income Tax Act, inter alia on the ground that the conditions set out under section 273A of the Income Tax Act were not fulfilled. Challenging the said order, the present petition is filed.

7. Mr. Inamdar, learned counsel appearing on behalf of the petitioner submitted that Commissioner was in error in holding that there was no voluntary disclosure on the ground that the revised return was filed by the assessee after the commencement of enquiries by the assessing officer. Relying upon the decision of this court in the case of Laxman v. CIT (1988) 174 ITR 465 (Bom) and the decision of the Gujarat High Court in the case of Madhukar Manilal Modi v. CWT (1978) 113 ITR 318 (Guj), Mr. Inamdar submitted that merely because the assessing officer had initiated enquiries before the voluntary disclosure does not render the disclosure non-voluntary. Mr. Inamdar relied on the Full Bench decision of Allahabad High Court in the case of Bhairav Lal Verma v. Union of India (1998) 230 ITR 855 (All) and submitted that if there was no incriminating material with the department before the disclosure, then the disclosure must be said to be voluntary. It was submitted that in the present case, there was no incriminating material of any nature whatsoever in possession of the assessing officer and it is only on account of voluntary disclosure made by the assessee through her husband on 22-2-1990, additions were made in the relevant assessment year. It was submitted that even the summons under section 131 of the Income Tax Act was served upon the husband of the assessee across the table when husband of the assessee had visited the office of the Income Tax Department for the purpose of disclosing the aforesaid income. He submitted that since all the conditions set out under section 273A of the Income Tax Act were fulfilled, the Commissioner ought to have exercised its discretion to reduce or waive the penalty and interest levied upon the petitioner.

8. Mr. Jetly, learned counsel appearing on behalf of respondents, on the other hand supported the order of the Commissioner passed under section 273A of the Income Tax Act. He submitted that the assessing officer vide letter dated 26-2-1990 had intimated the assessee regarding his intention to make additions and only thereafter, the revised returns came to be filed by the assessee on 19-3-1990. Accordingly, Mr. Jetly submitted that the assessing officer had already initiated investigation and only after service of the notice, revised returns came to be filed and, therefore, the disclosures made by the assessee cannot be said to be voluntary disclosure within the meaning of section 273A of the Income Tax Act. Accordingly, it was submitted that the Commissioner was justified in rejection the claim of the assessee.

9. We have heard the counsel on both sides. It is well established in law that the conditions precedent required to be fulfilled before exercise of powers to reduce or waive penalty or interest by the Commissioner under section 273A of the Income Tax Act, as it stood then, are :

(a) There must be voluntarily disclosure of income before issue of notice under section 139(2);

(b) assessee must have made full and true disclosure of income in good faith prior to the detection by the assessing officer;

(d) assessee must have paid or made satisfactory arrangement for payment of tax or interest payable in consequence of an order passed under the Act with respect to the relevant assessment year.

In the present case, the Commissioner has declined to exercise powers under section 273A of the Income Tax Act only on the ground that there is no voluntarily disclosure. Thus, there is no dispute that the assessee has complied with all other conditions set out under section 273A of the Income Tax Act, save and except the conditions regarding voluntarily disclosure. According to the revenue, the disclosure made by the assessee cannot be said to be voluntarily, because, the assessing officer had already initiated investigation and by a letter dated 26-2-1990 the assessing officer had intimated the assessee regarding additions to be made in the relevant assessment year. Although the revised return for assessment year 1988-89 was filed by the assessee on 19-3-1990 after the receipt of letter dated 26-2-1990, it is not in dispute that on 22-2-1990 the husband of assessee had visited the Income Tax Department and voluntarily disclosed the amount which was deposited in Andhra Bank Ltd. It is not in dispute that the visit of the husband of the assessee on 22-2-1990 was voluntary. Even the summons under section 131 of the Income Tax Act was served upon the husband of the assessee across the table on 22-2-1990 and thereafter, statement was recorded. In that statement the fact that the husband of the assessee had voluntarily attended the office with intention to disclose and offer the amount for taxation by the assessee is recorded. Moreover, even the letter dated 26-2-1990 was not issued by the assessing officer on the basis of any incriminating documents in possession of the assessing officer, but the same was addressed on the basis of the voluntary disclosure made on behalf of the assessee on 22-2-1990. Under these circumstances, it cannot be said that the disclosure made by the assessee was not voluntary disclosure.

10. merely because the assessing officer had initiated enquiry regarding the assessees source of income, it could not be said that the disclosure was to avoid or pre-empt adverse exposure or penal action. This court in the case of Laxman (supra) has held that even assuming that the inspector of income-tax had visited the premises and made enquiries about the assessees source of funds, it would not lead to the conclusion that such visit and enquiry by itself amounted to compulsion that made assessee to file revised return due to fear of detection. In the present case, there were no incriminating documents in possession of the assessing officer when the disclosure was made on behalf of the assessee. The fact that the assessing officer could have found out the undisclosed income of the assessee and in that event the assessee would have been liable to pay interest and penalty, is no ground to hold that the disclosure was not voluntary. Under section 273A of the Income Tax Act, apart from other conditions what is required to be seen is whether the voluntary disclosure is prior to the detection by the assessing officer and in the present case that condition is fulfilled by the assessee. Therefore, the Commissioner was not justified in declining to exercise powers under section 273A of the Income Tax Act.

11. In this view of the matter, we quash and set aside the order passed by Commissioner under section 273A of the Income Tax Act dated 17-1-1994 and remand the matter back to the Commissioner to decide the application regarding reduction or waiver of penalty and interest on merits on the footing that all the pre-conditions for grant of reduction or waiver of penalty and interest contemplated under section 273A of the Income Tax Act are complied with by the assessee.

12. Petition is allowed in above terms. Rule is made absolute in terms of prayer clause (a). However, in the facts and circumstances of the case, there shall be no order as to costs.