2004 (1) TMI 24 - HC - Income Tax

Court quashes decision on penalty waiver, stresses voluntary disclosure

The court quashed the Commissioner's decision to decline waiver of penalties and interest under section 273A of the Income-tax Act, remanding the matter ... Commissioner of Income-tax, declining waiver of interest and penalties levied on the assessee under section 273A - Tthere were no incriminating documents in the 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 of Income-tax was not justified in declining to exercise powers under section 273A Issues:Challenge to order declining waiver of interest and penalties under section 273A of the Income-tax Act.Analysis:The petitioners, both doctors, disclosed deposits in Andhra Bank for assessment year 1988-89 after being advised by a consultant. The husband voluntarily disclosed the deposits to the Income-tax Office, leading to a revised return filed by the petitioner. The Deputy Commissioner granted some relief in the penalty proceedings. However, the Assessing Officer levied interest and penalties under various sections of the Income-tax Act.The petitioner sought waiver of penalties and interest under section 273A, stating all conditions were fulfilled, and the amounts were disclosed voluntarily. The Commissioner, following a decision in the husband's case, declined the application, citing non-fulfillment of conditions. The petitioner challenged this decision.The petitioner argued that the disclosure was voluntary, relying on legal precedents. The Revenue contended that the disclosure was not voluntary as investigations were initiated before the revised returns were filed. The court outlined conditions under section 273A, emphasizing voluntary disclosure as a key requirement.The court found that all conditions except voluntary disclosure were met. It noted that the husband's visit and disclosure were voluntary, with no incriminating material in possession of the Assessing Officer before the disclosure. The court cited precedents to support that initiation of inquiries did not negate voluntary disclosure.Consequently, the court quashed the Commissioner's order, remanding the matter for a decision based on the fulfilled conditions for reduction or waiver of penalties and interest under section 273A. The petition was allowed with no order as to costs.