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Case Number

Writ Petition No. 1 of 1990

Attorney(S)

For the Appellant: S.R.Ashok, Y.Rathnakar, Advocates.

Judges

M.N Rao
P. Venkata Rama Reddi, JJ.

Acts

subsection (8) of Sec. 139 or Section 215 or Section 217
Sec. 139(8) and 217 of the Income-tax Act
Sec. 273-A of the Income-tax Act, 1961
Sec. 273-A(1) of the Income-tax Act,
Sec. 18(2A) of the Wealth Tax Act.
sub-section (1) of Section 273-A
Sec. 137 of the Income-tax Act
sub-section (2) of Section 139,
INCOME TAX ACT

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Smart Summary

Structured Summary of the Opinion (M.N. Rao, J.)

Factual and Procedural Background

This writ petition challenges the legality of the Commissioner of Income-tax, Visakhapatnam's order dated 5-10-1989 dismissing the petitioner firm's application for waiver of interest under Section 273-A of the Income-tax Act, 1961. The petitioner is a partnership firm carrying on business at Vijayawada, represented by its managing partner.

Background facts drawn from the opinion:

The Government of India ran an Amnesty Scheme from 15-11-1984 to 31-3-1987 promising immunity from penal action for concealment if returns were filed as specified by the scheme.
During the Amnesty Scheme, on 27-3-1986 (the opinion notes revised returns filed during the currency of the scheme) the petitioner filed revised returns; the revised returns were recorded in the file as filed on 23-7-1986 for the three assessment years in question (1982-83, 1983-84 and 1984-85).
The Income-tax Officer completed assessments for the three years on 25-3-1987 and levied interest under Sections 139(8) and 217; the opinion reproduces the interest amounts for each year.
The petitioner appealed to the Deputy Commissioner of Income-tax (Appeals), who on 29-11-1989 allowed appeals and directed cancellation of penalties; the Department appealed those appellate orders to the Tribunal and those appeals were pending at the time of this opinion.
Separately, on 17-6-1987 the petitioner applied to the Commissioner (respondent No. 2) for waiver of interest under Section 273-A; the Commissioner dismissed that application on the basis that the conditions of Section 273-A(1) were not satisfied, reasoning that the returns filed after survey operations were not voluntary and were made out of fear.
The petition in this court challenged the Commissioner's order dated 5-10-1989 and sought judicial review of the Commissioner's exercise of discretion under Section 273-A.
The record shows that survey operations and related inquiries had begun in July 1986 (summons issued on 9-7-1986; inspector's enquiry report dated 10-7-1986 indicating some creditors could not be traced), and that the petitioner filed revised returns on 23-7-1986; communications to produce alleged creditors were issued after that date (a communication dated 4-8-1986 appears after the revised returns).

Legal Issues Presented

Whether the Commissioner lawfully dismissed the petitioner's application for waiver of interest under Section 273-A(1) on the ground that the revised returns filed on 23-7-1986 were not "voluntary" and therefore did not satisfy Section 273-A(1)(iii).
Whether the fact that survey operations and enquiries had commenced before the filing of the revised returns (and that some enquiries showed non-traceability of certain creditors) meant that the returns were not filed "voluntarily and in good faith" as required by Section 273-A(1)(iii).
Whether the Commissioner erred in taking into account irrelevant factors (in particular, a generalized notion of "fear" generated by survey operations) and thereby misdirected his discretion under Section 273-A.

Arguments of the Parties

Petitioner's Arguments (as represented by Shri Y. Ratnakar)

The Commissioner's conclusion that returns filed after the commencement of survey operations are not "voluntary" is erroneous.
The Commissioner's finding that the petitioner filed returns "out of fear" is equally objectionable; mere occurrence of survey operations does not establish that the petitioner acted under fear such that voluntariness is negated.

Revenue's Arguments (as represented by Shri S.R. Ashok)

The petitioner's conduct disentitles it from obtaining waiver of interest under Section 273-A.
A return filed after survey operations have commenced loses its voluntariness; the fear of detection of concealed income motivated the petitioner to file revised returns and so they are neither voluntary nor made in good faith.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court in This Opinion
Hakim Singh v. CIT (Allahabad High Court)	Used by the Commissioner to support the proposition that returns filed after survey may not be "voluntary".	The court found the facts of Hakim Singh were not parallel or similar and held that the finding in Hakim Singh could not constitute valid guidance for refusal to exercise discretion under Section 273-A in the present case.
Madhukar Manilal Modi v. C.I.T (Gujarat High Court)	Held that the word "voluntary" should be read with "made full disclosure" (in Wealth Tax Act context) and not with the act of filing a return — i.e., the Gujarat court treated "voluntary" as referring to disclosure, not filing.	The court in the present opinion rejected that reasoning, expressing inability to accept the Gujarat High Court's approach and observed that voluntariness can be absent even if full disclosure is present when there are supervening factors like imminent adverse exposure.
Mool Chard Mahesh Chard v. C.I.T (Allahabad High Court)	Earlier Allahabad High Court view that a return filed to save oneself from possible penal action cannot be termed "voluntary".	The opinion notes that the earlier Allahabad view was followed in Hakim Singh but distinguishes the present facts from those cases and does not follow the conclusion for this case.
Sarvaria v. C.W.T (Delhi High Court)	Single-judge view that filing a return under the Wealth Tax Act after survey had commenced would not render it "not voluntary" if the return contained full disclosure and no concealment was detected.	The court regarded this as a persuasive authority; it aligns with the view that survey per se does not negate voluntariness where there is no evidence the assessee was apprised of adverse material.
Hira Singh v. C.W.T (Punjab & Haryana High Court)	Held that returns filed before statutory notices were issued were voluntary and relief granted accordingly.	The decision was cited as persuasive support for treating returns filed before notice as voluntary where disclosures were correct; the present court found that the facts of Hira Singh supported the petitioner's position on voluntariness.
S.R. Jadav Desai v. W.T.O (Karnataka High Court) & Shankara Apaya Swami v. W.T.O	Stated that "voluntarily" means without compulsion and "good faith" means with due care and caution; returns filed without notices and without compulsion should be treated as voluntary.	The court quoted and endorsed the legal proposition (from Shankara Apaya Swami as cited) as a correct statement of law about the meaning of "voluntarily" and "good faith".
Alukkas Jewellery v. C.I.T (Kerala High Court)	Preferred the view that a return filed without pressure or duress may be treated as voluntary; in that case, following a search and seizure the Commissioner had rejected relief and the High Court sustained the rejection.	The opinion notes this authority as one of several persuasive cases demonstrating that outcomes turn heavily on facts; it did not bind the court to adopt Alukkas Jewellery's result for the present facts.
Rohtas Industries Ltd. v. S.D. Agarwal (Supreme Court)	Accepted the English principle (per Lord Greene, M.R.) that a decision-maker exercising a statutory discretion must direct himself properly in law, consider relevant matters and exclude irrelevant ones; failure to do so may render the decision unreasonable.	The court relied on this principle to conclude that the Commissioner misdirected his discretion by taking into account irrelevant considerations (generalized fear) and failing to articulate the necessary factual nexus between fear and probable penal exposure.

Court's Reasoning and Analysis

The court's analysis proceeds from statutory text, factual inquiry and established principles governing the exercise of public-law discretion.

Key statutory provision considered:

Section 273-A(1)(iii) — the Commissioner may reduce or waive interest under subsection (8) of Section 139 or Sections 215 or 217 if satisfied that the person "has, prior to the issue of a notice to him under sub-section (2) of Section 139, or where no such notice has been issued and the period for the issue of such notice has expired, prior to the issue of notice to him under Section 148, voluntarily and in good faith made full and true disclosure of his income and has paid the tax on the income so disclosed..."

The court examined the sequence and content of documentary materials in the file:

It accepted that survey operations and some inquiries were in progress before 23-7-1986 (summons issued on 9-7-1986; an inspector's enquiry report dated 10-7-1986 indicating some creditors "appear to be non-existent").
However, the court found no material establishing that the petitioner was apprised of any adverse material before filing the revised returns on 23-7-1986. The communication to require production of alleged creditors was issued after the revised returns (4-8-1986).
The court emphasized that the inspector's report was confidential and there was no showing the petitioner had knowledge of its contents before filing the returns.
There was no allegation, and no finding by the Commissioner, that the revised returns did not contain full and true disclosure or that they were not made in good faith.

From these factual conclusions the court derived legal consequences:

The word "voluntarily" in Section 273-A(1) must be read in context: it does not mean that any filing after the commencement of an enquiry or survey is automatically non-voluntary. Rather, "voluntarily" should be understood as filing without being prompted by a specific animus to avoid or pre-empt imminent or proximate adverse exposure or penal action.
Fear, by itself, is not a sufficient basis to conclude lack of voluntariness. In order to displace voluntariness on the ground of "fear," there must be objective material demonstrating that the return was prompted by imminent or proximate exposure — i.e., that but for the filing the assessee would probably have been subjected to penal action or adverse exposure.
The Commissioner, in dismissing the waiver application, relied on the fact of survey and on a generalized conclusion that the petitioner acted out of fear; the court held that the Commissioner did not identify or rely on adequate objective material to make the necessary inferential leap and thereby treated an irrelevant factor as decisive.
As a matter of public-law principle, a decision-maker exercising a statutory discretion must take into account relevant factors and exclude irrelevant ones; failure to do so renders the exercise of discretion legally impermissible. The court invoked the Rohtas Industries decision (accepting the English principle per Lord Greene) in support of this requirement.

Applying these legal standards to the facts, the court concluded there was no proper basis to find that the revised returns were not voluntary or not in good faith. Consequently, the Commissioner's order dismissing the petitioner's application under Section 273-A was legally flawed.

Holding and Implications

Holding: All three revised returns filed by the petitioner on 23-7-1986 are to be construed as "voluntary returns" within the meaning of Section 273-A(1) of the Income-tax Act.

Direct consequences and orders made by the court:

The impugned order of the Commissioner of Income-tax dated 5-10-1989 is set aside.
The writ petition is allowed.
The matter is remitted to the Commissioner to consider the petitioner's application afresh in the light of the court's judgment and to pass appropriate orders in accordance with law.
There shall be no order as to costs.

Broader implications indicated by the opinion (as stated in the text):

The decision clarifies that survey operations or preliminary enquiries, standing alone, do not automatically render a subsequently filed return non-voluntary for the purposes of Section 273-A; the factual matrix must show an objective link between the return and imminent/proximate exposure to penal action.
The opinion reiterates the public-law principle that a statutory discretion must be exercised after properly considering relevant matters and excluding irrelevant ones; a finding of non-voluntariness should rest on material demonstrating the requisite causal nexus rather than on conjecture about "fear."

Note: This summary is confined strictly to the material and reasoning contained in the provided opinion and does not add or infer facts beyond the text of that opinion.

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M/S. Sujatha Rubbers Rep. By Its Managing Partner, Sri Sasidharan Nair, Vijayawada v. Income-Tax Officer, D. Ward, Circle Ii, Vijayawada And Another

M.N Rao, J.:— At issue in this writ petition is the legality of the order passed by the Commissioner of Income-tax, Visakhapatnam dated 5-10-1989, respondent No. 2 herein, under Sec. 273-A of the Income-tax Act, 1961 dismissing the application of the petitioner herein, a partnership firm carrying on business in Vijayawada, represented by its managing partner, for waiver of interest in respect of assessment years 1982-83, 83-84 and 84-85,

“since the conditions of Sec. 273-A(1) are not satisfied.”

2. The Government of India introduced a scheme called Amnesty Scheme to encourage assessees to file returns voluntarily assuring that no penal action for concealment of incomes would be initiated if returns were filed as laid down in the scheme. The said scheme was in force from 15-11-84 to 31-3-87. On 27-3-86 during the currency of the Amnesty Scheme the petitioner filed revised returns. The income-tax assessments in relation to the petitioner for the assessment years 1982-83, 83-84 and 84-85 were completed by the first respondent, Income-tax Officer, D-ward, Circle-II, Vijayawada and he levied interest in respect of the completed assessments under Sec. 139(8) and 217 of the Income-tax Act as detailed below:

Assessment Year Date of completion of assessment. Interest under S. 139(8) Interest under S. 217 1982-83 25-03-1987 6,310 6,794 1983-84 25-03-1987 5,648 2,688 1984-85 25-03-1987 4,719 6,041

3. Contending that no penalites were imposable in respect of returns filed under the Amnesty Scheme the petitioner preferred appeals to the Deputy Commissioner of Income-tax (Appeals), Vijayawada who by his order dated 29-11-89 allowed the appeals and directed cancellation of penalties. We are informed by Shri S.R Ashok, learned standing counsel for the Income-tax Department that against the appellate orders of the Deputy Commissioner dated 29-11-89, the Department preferred appeals to the Income-tax Tribunal and the same are now pending. Simultaneously, while pursuing to remedy by way of appeals in relation to the levy of penalties, the petitioner made an application on 17-6-87 before the second respondent, Commissioner of Income Tax, for waiver of interest under Sec. 273-A of the Act. That application was dismissed by the Commissioner holding:

“I find that the income disclosed by the assessee in the returns filed on levied penalties under Sec. 271(1)(c) and according to the provisions of Sec. 273 A (1)(c) and according to the provisions of Sec. 273 A (1), in cases where proceedings under Sec. 271(1)(c) are initiated, the income disclosed by such assesee cannot be considered as a true and full disclosure. Moreover, in the instant case, the assessee has filed the revised returns of income on 23-7-86 after conducting survey operations under Sec. 133A on 9-7-86. It may be also stated here that the disclosure made by the assessee is out of fear which is clear from the fact that the assessee has made the disclosure only after the survey operations conducted by the Department under Sec. 133-A on 9-7-86. Had there been no survey operations, the assessee would not have come forward with the disclosure. I will seek support for this proposition from the decision of the Allahabad High Court in the case of Hakim Singh v. CIT. In view of this discussion. I will dismiss the assessee's petition since the conditions of Sec. 273-A(1) are not satisfied.”

4. Shri Y. Ratnakar, learned counsel for the petitioner contends that the Commissioner's view that the returns filed after the commencement of survey operations are not ‘voluntary’, is erroneous. Equally objectionable is the view that out of fear the returns were filed by the petitioner and, therefore, they are not voluntary.

5. Opposing these contentions Shri S.R Ashok, learned standing counsel for the Revenue asserts that the conduct of the petitioner disentitles him from claiming the benefit of waiver of interest under Sec. 273-A. A return filed after the survey operations have commenced will lose its voluntariness; fear of detection of concealed income was the real motive that prompted the petitioner to file the revised returns and, therefore, they are neither voluntary returns nor can good faith be discerned in them.

6. Before considering the rival contentions advanced before us it is necessary to notice Section 273-A which confers power on the Commissioner to reduce or waive penalty and interest in certain cases. In so far as the power to waiver interest is concerned the material portion of the section reads:

“273-A. Power to reduce or waive penalty, etc., in certain cases— (1) Notwithstanding anything contained in this Act, the Commissioner may, in his discretion, whether on his own motion or otherwise,—

(i) xx xx xx

(ii) xx xx xx

(iii) reduce or waive the amount of interest paid or payable under subsection (8) of Sec. 139 or Section 215 or Section 217 or the penalty imposed or imposable under Section 273.

if he is satisfied that such person—

(a) xx xx xx

(b) xx xx xx

(c) in the cases referred to in clause (iii), has, prior to the issue of a notice to him under sub-section (2) of Section 139, or where no such notice has been issued and the period for the issue of such notice has expired, prior to the issue of notice to him under Section 148, voluntarily and in good faith made full and true disclosure of his income and has paid the tax on the income so disclosed,

and also has, in all the cases referred to in clauses (a), (b) and (c), cooperated in any enquiry relating to the assessment of his income and has either paid or made satisfactory arrangements for the payment of any tax or interest payable in consequence of an order passed under this Act in respect of the relevant assessment year.”

(2) xx xx xx

(3) xx xx xx

(4) xx xx xx

7. It is not in dispute that in respect of the three assessment years revised returns were filed by the petitioner on 23-7-86 when the Amnesty Scheme was in operation. It is also not in controversy that survey operations in relation to the petitioner had already begun by the date of the filing of the revised returns under the Amnesty Scheme.

8. The definite stand taken in the counter-affidavit is that survey operations had commenced on 9-7-1986 and in the course of the said operations the petitioner furnished addresses of certain creditors to the Inspector of Income-tax who on conducting enquiry on 10-7-86 could not locate the alleged creditors, and on 11-7-86 the Income tax Officer issued a letter to the Managing Partner to produce the creditors duly posting the case to 16-7-86 and thereafter it was further adjourned to 23-7-86.

“Confronted with the factum of non-traceability of creditors and the mechanic sheds where they were reportedly working, the assessee came forward with the revised returns. Thus, it is very clear that only after survey operations and gathering of the relevant material which proved falsity of the claim of the petitioner, he chose to file revised returns making disclosure.”

9. The file produced before us does not show that on 11-7-86 the Income-tax Officer issued a letter to the petitioner to produce the alleged creditors from whom certain amounts were claimed to have been borrowed by the assessee as disclosed in the original returns. In fact it was only on 4-8-86, long after the revised returns were filed by the assessee, that such a letter was issued by the Income-tax Officer. On 9-7-86 summons were issued under Sec. 137 of the Income-tax Act to the petitioner to produce the Day Book, Ledger and Bank Account copies for the three periods specified therein, on 11-7-86. The proceedings as recorded by the Income-tax Officer on 11-7-86. disclose that in response to the summons issued on 9-7-86 the Managing Partner of the petitioner-firm was present and he was requested to produce the 18 persons said to be the creditors of the firm on 16-7-86. The Managing Partner was also examined on 11-7-86. On 16-7-86, the matter was adjourned to 17-7-86 as the officer was on leave. A representation was made by the petitioner for a short adjournment to 23-7-86 to produce the creditors and accordingly the request was granted. On 23-7-86 a letter was filed before the Income-tax Officer stating that revised returns were filed for the relevant years. It was only after the revised returns were filed, the Income-tax Officer issued a communication dated 4-8-86 calling upon the petitioner to produce the alleged creditors. The record also contains the ‘enquiry report’ dated 10-7-86 of the Income-tax Inspector to the effect that the three persons mentioned in the report and said to be the creditors of the petitioner ‘appear to be non-existent’. What transpired upto 11-7-86, according to the file, is that the Income Tax Inspector was asked to enquire about three of the creditors of the petitioner and he submitted a report on 10-7-86 stating that the three persons were not available at the addresses furnished to him.

10. What emerges from the perusal of the record is that the petitioner has not been told at any time before he filed the revised returns on 23-7-86 that his alleged creditors were fictitious persons and, therefore, the transactions were bogus. No doubt, survey was conducted by the date of filing the revised returns and some sort of enquiry by the Income-tax Officer was in progress at that time, but the petitioner cannot be attributed with any knowledge of the probable result of these enquiries or any adverse material appearing against him.

11. The only question that has to be considered is whether the petitioner in the revised returns filed on 23-7-86,

“volunterily and in good faith made full and true disclosure of his income”

as statutorily obligated under sub-clause (c) of Cause (iii) of subsection (1) of Sec. 273-A?

12. According to the impugned order, the revised returns were filed by the petitioner for two reasons: (1) they were filed “after conducting survey operations under Sec. 133-A on 9-7-86”; and (2) “the disclosure made by the assessee is out of fear which is clear from the fact that the assessee has made the disclosure only after the survey operations conducted by the Department under Section 133-A on 9-7-86.”

13. There is no allegation that the disclosures made in the returns were not full and true. There is also no finding that the disclosure made was not in good faith. The file shows that the information regarding the three of the several creditors of the petitioner was not definite at that stage. The report of the Inspector that they were not available at the addresses furnished to him was a confidential one and it cannot be presumed that the petitioner became aware of the said report. In a case where a return was filed by an assessee after he was apprised of any adverse material leading to a real apprehension of penal action against him; his return could not be construed to be voluntary within the meaning of Section 273-ACD. But that is not the fact situation here. Survey operations followed by enquiries which have not even progressed to the extent of the assessee being apprised of the alleged adverse material collected against him could not be construed as relevant factors for rejecting the returns filed by such an assessee as not voluntary if they contained “full and true disclosure of his income.”

14. The second ground on which the impugned order is based viz., out of fear because of survey operations the petitioner made the disclosure, slides into the first ground to a very large extent, the exclusionary part being fear as the motive prompting the assessee to file the returns. We think, this ground is totally irrelevant. There is no basis for presuming that free will or a sense of commitment to the well being of the State always propels the citizens to pay taxes. An honest and well informed citizen never consciously commits default in the payment of taxes even if the law does not contemplate penal action for non-payment of such taxes. But the same cannot be true of all persons who are liable to pay taxes. In the absence of penal provisions for non-payment of taxes, a vest majority would be too happy to evade payment. Penal action for non-payment is at the bottom of the success of any tax legislation and the Income-tax Act is no exception to this; Chapter XXI of the Act deals with the penalties imposabe.

15. We are, therefore, inclined to think that the expression “voluntarily” occurring in sub-section (1) of Section 273-A could not be construed in isolation with reference to the general animus or state of mind of the assessee. From the legal obligation to file a return, no element of fear could be either attributed or inferred. The word “voluntarily” in the context of Sec. 273-A(1), therefore, has to be construed as filing of the return by the assessee without being prompted by the animus to avoid or pre-empt adverse exposure or penal action. The Commissioner before rejecting the returns as not voluntary must have material based upon which it is reasonable to infer that in all probability, but for the filing of the “Voluntary” return the assessee would have been subjected to penal action or adverse exposure. In other words, “out of fear an assessee has made full disclosure,” by itself, without anything more, cannot be a ground for not exercising the discretion under sec. 273-A. The fear must be traceable to the imminent or proximate exposure of the assessee to penal action but for the filing of the voluntary return under Sec. 273-A and in order to enquire into this subjective element, there must be in existence objective Nearly eleven months thereafter, on 7-10-74, returns were filed and a notice was issued on 25-3-75 by the Income-tax Officer under Sec. 148 alleging escapement of income from assessment. Penalty proceedings also were initiated for the delay in filing the return. These facts clearly show that there was little scope for the assessee to escape from the penal consequences and so very rightly the Commissioner of Income-tax held that the return filed was not voluntary under Sec. 273-A. The Allahabad High Court after distinquishing the decision of the Gujarat High Court in Madhukar Manilal Modi v. C.I.T3 wherein it was held that the word “voluntary” applies to disclosure of wealth but not, filing of return, sustained the action of the Commissioner, in the particular facts of that case, in refusing to grant relief under Sec. 273-A. The earlier view of the Allahabad High Court in Mool Chard Mahesh Chard v. C.I.T4 that a return filed in order to save oneself from a possible penal action cannot be termed as “voluntary” was followed. The facts in Hakam Singh case (2 supra) are neither parellel nor similar to the facts of the case on hand and, therefore, the finding that the return filed in that case was not “voluntary” could not constitute a valid guidance for refusal to exercise discretion by the second respondent-Commissioner under Sec. 273-A.

16. The decision of the Gujarat High Court in Madhukar Manilal Modi case (2 supra) relates to waiver of penalty by the Commissioner under Sec. 18(2A) of the Wealth Tax Act. The crucial words in Sec. 18(2A) that fell for consideration before the Gujarat High Court that the assessee,

“….voluntarily and in good faith made full disclosure of his net wealth,”

are identical to the expressions used in Sec. 273-A of the I.T Act. The Wealth Tax returns for two earlier years were filed in that case only after the assessee was asked to do so in the course of the assessment proceedings for the year 1971-72. His request for waiver of penalty was rejected by the Commissioner on the ground that the returns filed by him were not voluntary. The Gujarat High Court held that the expression “voluntary” should not be read in the context of filing of return, but it should be read with the expression “made full disclosure of his net wealth.” With great respect to the learned judges we are unable to accept the reasoning. A return which contains true and full disclosure need not necessarily be a voluntary return. When the element of voluntariness is absent because of supervening factors like imminence of adverse exposure “voluntariness” disappears, although the return filed may contain a true and full disclosure. As a rule, therefore, it cannot be said that if the return filed contains full disclosure it automatically becomes “voluntary” irrespective of the circumstances under which the same was filed.

17. In Sarvaria v. C.W.T5 a learned single judge of the Delhi High Court has taken the view that the filing of the return under the Wealth Tax Act after the survey operations had commenced would not render the return “not voluntary” when the return contained full disclosure of the wealth and no concealment was detected. Hira Singh v. C.W.T6 arose under the Wealth Tax Act. For two assessment years the assessee in his returns disclosed the extent of his agricultural lands as 24 acres, 6 kanals but for the subsequent two years the extent shown by him was 9 acres 7 kanals, on the ground that his share was reduced in a partition between him and his sons. The Wealth Tax Officer accepted the extents mentioned in the returns but estimated the capital value at a higher figure than those disclosed by the petitioner and initiated penal action for late filing of returns. The returns for all the years were filed by the assessee without the issuance of any statutory notice. The Commissioner waived penalties for the assessment years 70-71 and 71-72 but declined to grant relief for the remaining years. As the petitioner had correctly disclosed the particulars of his land in returns which he filed before the statutory notices were issued, the Punjab and Haryana High Court rules that the return filed was voluntary and on that view set aside the order of the Commissioner of Wealth Tax.

18. In S.R Jadav Desai v. W.T.O, the Karnataka High Court had taken the view that if without notices returns were filed under the Wealth Tax Act without any compulsion they must be treated as voluntary returns. The following statement of law enunciated by Venkataramiah, J., (as he then was) in Shankara Apaya Swami v. WTO.7

“The expression ‘voluntarily’ means without compulsion and ‘good faith’ means ‘with due care and caution’. Hence, if the return filed by the assessee does not show that he has deliberately furnished wrong particulars about his wealth or deliberately omitted to include all the items of taxable wealth then he should be considered as having satisfied the above condition.”

was followed.

19. The Kerala High Court in Alukkas Jewellery v. C.I.T8 preferred the view that if a return was filed without any pressure or duress it may be treated as voluntary. In that case consequent on a search conducted on the premises of the assessee, both residential and business, certain books of accounts and jewellery were seized. In that context viewing the over all conduct of the assessee the Commissioner rejected the application filed under Sec. 273-A and the same was sustained by the Kerala High Court.

20. It will thus be see that the conclusions reached in the persuasive precedents cited by both sides turned upon the facts of each case and no precise legal principle of general application is deducible from them.

21. The question was viewed by the Commissioner from a wrong perspective. He felt that the returns were filed after the survey operations were completed and that is what is discernible from the words—

“after conducting survey operations under Sec. 133-A on 9-1-86, the revised returns were filed.”

22. The extent of the progress made in the survey operations we have already referred to supra after going through the record placed before us. Without considering the effect of the survey operations on the conduct of the assessee, the Commissioner reached the conclusion that the returns filed were not voluntary and this conclusion is clearly impermissible in law. The discretion conferred upon the Commissioner under Section 273-A also compels him to take into account relevant factors and eschew irrelevant factors from consideration. The aspect of fear that is alleged to have prompted the assesses in filing the revised returns which was made out as a ground for not exercising discretion under Sec. 273-A is in our view an irrelevant factor in the context of the failure of the Commissioner in not giving reasons indicating the genuine link between the fear and the probability of exposure to penal action.

23. The extant legal position in the domain of public law as to the parameters of exercise of statutorily ordained discretionary powers is well settled:

“…..a person entrusted with a discretion must direct himself properly in law. He must call his, own attention to the matters which he is bound to consider. He must exclude from his consideration matters which are irrelevant to the matter that he has to consider. If he does not obey those rules, he may truly be said, and often is said, to be acting “unreasonably”. (Per Lord Greene, M.R)

24. The above English principle of public law was accepted by our Supreme Court in Rohtas Industries Ltd. v. S.D Agarwal.10

25. For these reasons, we hold that all the three revised returns filed by the petitioner must be construed to be “voluntary returns” within the meaning of Sec. 273-A(1) of the Income-tax Act, and accordingly we set aside the impugned order passed by the Commissioner, Income-tax dated 5-10-89, allow the writ petition and remit the matter to that authority to consider the case of the petitioner afresh in the light of this judgment and pass appropriate orders in accordance with law. There shall be no order as to costs.

M/S. Sujatha Rubbers... v. Income-Tax Officer, ...