Hakam Singh And Others v. Commissioner Of Income-Tax, Meerut.

Satish Chandra, C.J:— There are five petitioners in this writ petition. They have been assessed to income-tax as an association of persons. They are aggrieved by the dismissal of their application under s. 273A of the I.T Act by the CIT. The petitioners had applied for waiver or reduction of penalty. The Commissioner dismissed the application on the ground that the returns filed by the petitioners were not voluntary.

2. It appears that on 22nd November, 1973, the business premises of Messrs. Popular Transport Agency and Messrs. Gupta Service Station were searched by the I.T department, and certain books were seized. Kartar Singh was a partner in those firms. Kartar Singh is one of the members of the petitioner-association of persons. The petitioner-association on 7th October, 1974, filed returns of income for the assessment years 1966-67, 1967-68, 1968-69, 1969-70, 1972-73 and 1973-74. Subsequently, on 25th March, 1975, a notice under s. 148 of the I.T Act was served on the petitioners. In due course, the ITO initiated penalty proceedings for delay in filing the return and for not filing the estimate of advance tax under ss. 271(1)(a) and 273(b). Thereupon the petitioners applied to the Commissioner under s. 273A for waiver or reduction of the imposable penalty. The Commissioner, by the impugned order, dismissed the application on the finding that the filing of the returns was not voluntary. He held that it is admitted that “a search operation was carried out and the books of account of the A.O.P were seized. In other words, the premises where the books of account of the A.O.P were kept were searched. It is further admitted that the returns were filed after the search. It, therefore, follows that the returns were not filed voluntarily”. Section 273A provides:

“(1) Notwithstanding anything contained in this Act, the Commis sioner may, in his discretion, whether on his own motion or otherwise,—

(i) reduce or waive the amount of penalty imposed or imposable on a person under clause (i) of sub-section (1) of section 271 for failure, with out reasonable cause, to furnish the return of total income which he was required to furnish under sub-section (1) of section 139; or……

if he is satisfied that such person—

(a) in the case referred to in clause (i) has, prior to the issue of a notice to him under sub-section (2) of section 139, voluntarily and in good faith made full and true disclosure of his income;……”

3. According to the notification issued by the Central Board of Direct Taxes, dated September 30, 1969, the word “voluntary” has been explained in paragraph 7 as follows:

“The word ‘voluntary’ in its primary sense means ‘proceeding from one's own free will’ or ‘without compulsion’. In its secondary sense it implies ‘without any legal obligation’ or ‘not prompted by fear or inducement’ depending upon the context in which it is used. In the context in which the word ‘voluntary’ has been used it is not possible to take the view that it means ‘without any legal obligation’. Section 139 places a legal obligation on all persons having taxable income to disclose their income in the prescribed form. If the word ‘voluntary’ is interpreted to mean ‘without legal obligation’ no disclosure under section 271(4A) would be voluntary. This interpretation has, therefore, to be rejected. Therefore, in the context in which the word ‘voluntary’ has been used in section 271(4A) it is only reasonable to infer that the disclosure should be one which is not prompted by fear or inducement of any kind. If there is seizure of incriminating material in the course of a search and penalties and prosecutions are imminent and the disclosure is a sequel to such a search, it would not be possible to treat the disclosure as a voluntary one. The compulsion of such a situation is even more real than any legal compulsion. Similarly, if a disclosure is made by an assessee after obtaining an assurance that the penalty would be waived, the disclosure would be clearly prompted by inducement ……”

4. The Commissioner appears to have accepted and followed the interpretation put by the Board on the word “voluntary”. He has held that, since on a search, books of account of the association of persons were seized and the returns were filed long after the search, they were prompted by a sense of fear and so they were not voluntary.

5. Learned counsel for the petitioners has seriously contested this view of the Commissioner. He has invited our attention to a decision of the Gujarat High Court in Madhukar Manilal Modi v. CWT, [1978] 113 ITR 318. In that case, the ITO, while conducting assessment proceedings for the assessment year 1971-72, asked the assessee to file his return for the years 1969-70 and 1970-71. For these years the returns were filed by the assessee. Since the returns were not filed within time, proceedings for imposing penalty for late filing of the returns were initiated. The Commissioner refused to waive or reduce the penalty on the view that the returns were not filed voluntarily. The Gujarat High Court held that the word “voluntary” has to be read with the expression “made full disclosure of his net wealth”. The word “voluntary” has not to be read in the context of filing a return. This concept has been taken care of by providing that the assessee should have filed the return prior to the issue of notice. They then held that merely because the return has been filed under the advice, suggestion or even at the behest, otherwise than by a notice, it does not cease to be a voluntary return.

6. In our view the case is distinguishable. In that case, there was no allegation much less proof that the WTO had given any inducement or an assurance, inter alia, that the penalty would be waived. Consequently, the mere fact that the ITO advised the assessee to file the return for the earlier years cannot be held to be anything but voluntary. The situation in the present case is different. On a search, books of account of the petitioners' association were seized on 22nd November, 1973. The returns for all these years were filed about 11 months later on 7th October, 1974. In paragraph 16 of the counter-affidavit it has been alleged that the petitioners knew that according to the books seized at the search the income of the petitioners was above the taxable limit and it was only when these books came into the possession of the department that the petitioners filed returns of income. The inference that the returns were filed because the petitioners were prompted to save themselves from the consequence of not filing the return and that they were prompted by a sense of fear does not appear to be unjustified.

7. The question is whether a return, filed out of a sense of fear of penalty, or prosecution, is voluntary. The I.T Act does not define the term “voluntarily”. The word “voluntary” has been defined in Shorter Oxford Dictionary, Vol. 2, p. 2371, as performed or done of one's own free will, impulse or choice not constrained, prompted or suggested by another, proceeding from the free unprompted or unconstrained will of a person. A return filed under the constraint of exposure to adverse action by the I.T departnent, in our opinion, will not be voluntary within the meaning of s. 273A. The action of the petitioners in filing the returns after the books of account had been seized at a raid was impelled by the compelling circumstance that the petitioner was likely to be dealt with under the penal provisions of the I.T Act. The action of the petitioner in filing the returns under such a constraint cannot be said to be voluntary. In Mool Chand Mahesh Chand v. CIT, [1978] 115 ITR 1 (All), the ITO started investigation by asking for details in respect of several matters while conducting the assessment proceedings for the year 1969-70. Thereafter, the assessee filed returns for the years 1964-65 to 1970-71. It was held that since the investigation had started and concealed income had come to light, it was a case covered by the word “detection” occurring in s. 273A. It was further observed that in these circumstances the returns were filed after the assessee felt that the game was up because the investigation initiated by the ITO exposed him to a situation that he had assessable income in respect of other years; it cannot be said that the filing of the return was voluntary. This decision shows that the term “Voluntary” under 8. 273A has been used to indicate an action free of any constraint. A return filed in order to save oneself from a possible penal action cannot be t???rmed “voluntary”.

8. Learned counsel for the assessee invited our attention to cl. (b) of s. 273A(1) which lays down that in a case where there has been concealment or furnishing of inaccurate particulars of the Income by the assessee, the Commissioner is entitled to exercise his discretion to waive or reduce the penalty if he is satisfied that prior to the detection by the ITO of the conc???alment of the particulars of income or of the inaccuracy of particulars furnished in respect of such income, the assessee has voluntarily and in good faith made full and true disclosure of such particulars, and contended that this provision clearly contemplates that an assessee can voluntarily make true disclosure of the particulars of his income even at a stage after certain documents that could incriminate the assessee had been seized, but before the default made by the assessee is actually detected. He urged that, in the circumstances, there is no reason to hold that under cl. (a) of s. 273 A any disclosure of the income made by the assessee, after certain incriminating books or documents have been seized, cannot be voluntary. We are unable to accept this submission. Whereas cl. (a) lays down that in order to qualify for reduction or waiver of penalty in the case of non-filing or late filing of return without sufficient cause, the assessee must voluntarily disclose his income before a notice under s. 139(2) of the Act is issued, cl. (b) provides that in the case of penalty leviable for concealment or wrong furnishing of particulars of income, the penalty can be reduced or waived only if the assessee voluntarily discloses his income before such concealment or furnishing of wrong particulars is actually detected. Both these provisions merely speak of the point of time before which the disclosure of income has to be made by the assessee so as to enable him to make a request for waiving or reducing the penalty imposed or imposable on him. There is nothing in these clauses which is directed to indicate that the expression “voluntary” used therein has been used in a sense different from that as explained by us above.

9. The writ petition fails and is accordingly dismissed with costs.