TMI Blog1991 (6) TMI 251X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings for the asst. yr. 1980-81, the ITO noticed transactions in the assessee's books of account which he found suspicious. He impounded the books of account. On 26th Nov., 1981, he carried out a survey operation of the assessee's premises under s. 133A which, on the same day, was converted into a search under s. 132. Cheque books with cheques signed by different parties were found in the course of the search. Examination of the seized material seemed to suggest that the assessee had been carrying on the business of bogus 'havala' transactions by receiving unaccounted moneys in cash and returning the same by way of loans. The assessee made statements to the Revenue authorities that appeared to confirm that he had been doing such bogus `havala' business in his own name and in the names of his friends, in their personal names as also in the names of proprietary concerns. On 7th Dec., 1981, the assessee retracted the statements. Upon examination of the seized material, the ITO found that, out of the loans advanced in the names of the assessee, his friends and relatives, loans aggregating to ₹ 42,43,200 were still outstanding. The ITO issued prohibitory o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cerned CIT wrote to the Secretary, CBDT. The letter noted that the tax due was to be paid within a reasonable time as mutually agreed. No penalty proceedings were to be initiated. No interest was to be charged nor any prosecution launched. The proposal originally given had been modified by the assessee's letters of 14th and 22nd Dec., 1984. There was much in favour of the settlement for, despite prohibitory orders for ₹ 42,43,200, none of the parties had responded and recovery certificates had yielded only ₹ 79,000. The letter recommended that 35% of the total turnover of the assessee's business should be treated as genuine and the balance of approximately ₹ 27,58,000 should be treated as additional income arising upon the `havala' business. The letter recommended that the assessee should be asked to pay the tax before 31st March, 1985. In its last paragraph, the letter stated that the assessee had asked for waiver of penal interest, penalty and immunity from prosecution, which required the CBDT's consideration. On 25th/28th Jan., 1985, the Secretary, CBDT, wrote to the CIT. The letter stated, The Board are of the view that you can decide upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was returned was accepted. Interest was levied under ss. 138(8), 215 and 217 and penalty proceedings under ss. 271(1)(a) and 273 were ordered. On 27th March, 1985, the assessee filed a petition under the provisions of s. 273A before the CIT asking him to waive the interest and penalty as the same would create tremendous hardships . On 3rd Dec., 1985, the assessee wrote to the CIT referring to his petition under s. 273A and submitted that he had voluntarily and in good faith come forward with the proposal of offering an additional income of ₹ 25 lakhs which had not been detected by the Revenue. The Revenue had not collected any evidence during the course of the search proceedings except for the confessionary statements which were obtained from him under threat and coercion. It had been submitted in his petition for settlement that out of the total tax payable by him an aggregate sum of ₹ 4,25,000 would be collected from M/s Suresh K. Mehta Co. and M/s Raja Pictures their Associates and directions in this connection had been issued. He had given all assistance and co-operation during the course of the settlement. He, therefore, prayed for the favourable considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Pictures and their Associates. Accordingly, the CIT held that the assessee had not fulfilled the various conditions laid down in s. 273A for the asst. yr. 1981-82 and he rejected the request for waiver of interest and penalty. 28th June, 1991 5. It was the case of the assessee in the writ petition that the settlement arrived at by him with the Revenue was a single, composite and inseparable transaction and the Revenue had either to accept it or reject it in its entirety. In other words, it was not open to the Revenue to contend that it would accept the proposed settlement in part and not the whole. If the assessee had been informed that the Revenue would accept only a part of the proposed settlement and would insist on imposing penalty, levying interest and initiating recovery proceedings even in respect of the amount of ₹ 4,25,000 recoverable from M/s Suresh K. Mehta Co. and M/s Raja Pictures and their Associates, the assessee would have withdrawn the proposal and not have proceeded to act on it by filing a return. The Revenue clearly and specifically stated and represented to the assessee that the proposal was being accepted and acted upon by the Revenue and it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The order sheet signed by the assessee's CA shows clearly that he was made aware that the term regarding waiver of interest and penalty was not accepted by the Revenue. 9. Paliga filed an affidavit in which he stated that he had signed the order sheet wherein reference was made to the CIT's letter dt. 6th Feb., 1985. He was shown this letter from the file but was refused a copy. It was his case that though the letter stated that penal interest was to be charged and penalty proceedings to be initiated, it was made clear to the ITO that, under the settlement, there was to be a waiver of penalty and interest leviable under the various provisions of the Act, as stated in the letter dt. 15th March, 1985 of the assessee to the ITO, that the basis of the settlement was the waiver of penalty and interest, and the ITO concerned agreed that the assessee should file a formal waiver application under s. 273A after the assessment was made for waiver of interest and penalty. Accordingly, on 27th March, 1985, the assessee filed a formal waiver application. The petition does not state that the assessee's CA, Paliga, had been shown by the ITO the letter written to him by the CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t unless translated into valid orders under the Act. 11. It was submitted, in the alternative, that the assessee met all the conditions specified in s. 273A, and that, therefore, his petition for waiver ought to have been allowed. Our attention was drawn to the Division Bench judgment of this Court in Laxman vs. CIT (1989) 75 CTR (Bom) 76: (1989) 174 ITR 465(Bom), where s. 273A was analysed. The analysis indicated that the following conditions were specified for the exercise of the discretion thereunder : (a) voluntary disclosure of income before issuance of notice under s. 139(2); (b) making of full and true disclosure of the income in good faith; (c) co-operation in the conduct of income-tax assessment proceedings; (d) payment or satisfactory arrangement for payment of tax or interest payable in consequence of an order passed with respect to the relevant assessment year. Counsel for the assessee submitted that there had been a voluntary disclosure of income for the relevant assessment year by the assessee. In his submission, the fact that the disclosure was made after the survey, search and statements did not make the disclosure any the less voluntary. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he penal provisions of the IT Act. The action of the petitioner in filing the returns under such constraint could not be said to be voluntary. This was what had earlier been held in Mool Chand Mahesh Chand's case. We are inclined to agree with the Kerala High Court that in every case the CIT must, having regard to the search, seizure or statements, determine whether or not the disclosure subsequently made is or is not voluntary, but, we are also inclined to agree with the Allahabad High Court that where a disclosure is made consequent upon seizure of incriminating material relevant to the particular assessment year, the disclosure is made because adverse consequences under the Act are attracted. Such a disclosure is not voluntary. 12. In the order under s. 273A, the CIT set out (in paragraph 3), the facts in some detail. Upon the basis thereof he held (in paragraphs 4 and 5), that the disclosure made by the assessee of the additional income of ₹ 27,58,080 for the asst. yr. 1981-82 was not voluntary but, was prompted by the consideration of averting further adverse consequences under the Act. It will be noted that the search of the assessee's premises revealed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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