1980 (1) TMI 62 - HC - Income Tax

Summary

Issues involved: Assessment to income tax as an association of persons, dismissal of application under s. 273A of the I.T. Act for waiver or reduction of penalty, interpretation of the term "voluntary" in the context of filing returns after a search operation.

Assessment and Dismissal of Application: The petitioners, assessed as an association of persons, filed returns for multiple assessment years after a search operation on their business premises. Subsequently, penalty proceedings were initiated for delay in filing returns and not filing advance tax estimates. The petitioners applied for waiver or reduction of penalty under s. 273A, but the Commissioner dismissed the application, stating that the returns were not filed voluntarily as they were filed after the search operation.

Interpretation of "Voluntary" Disclosure: The Central Board of Direct Taxes defined "voluntary" as disclosure not prompted by fear or inducement. The Commissioner, following this interpretation, held that the returns filed after a search operation were not voluntary due to the fear of penalties or prosecution. The petitioners argued against this view, citing a Gujarat High Court decision where the term "voluntary" was linked to full disclosure of wealth, not just filing returns.

Judicial Interpretation: The High Court distinguished the present case from the Gujarat decision, emphasizing that the returns were filed under the compulsion of fear of adverse action by the tax department. Citing previous case law, the Court held that a return filed to avoid penalties or prosecution cannot be considered voluntary under s. 273A. The Court rejected the argument that disclosure after seizure of incriminating documents could still be deemed voluntary, as the statute requires disclosure before detection of concealment.

Conclusion: The Court dismissed the writ petition, upholding the Commissioner's decision to deny waiver or reduction of penalty under s. 273A. The petitioners were held to have filed their returns under the compulsion of fear, making them non-voluntary according to the legal interpretation provided.