1991 (12) TMI 56 - HC - Income Tax

Court deems revised tax returns filed by petitioner as voluntary under Income-tax Act, setting aside Commissioner's decision.

Sujatha Rubbers Versus Income-Tax Officer And Another

The court held that the Commissioner's view that the returns were not voluntary was legally impermissible. The court set aside the Commissioner's order ... Business Expenditure, Disallowance, Income From Undisclosed Sources Issues Involved:1. Legality of the Commissioner's order dismissing the application for waiver of interest under section 273A of the Income-tax Act, 1961.2. Whether the returns filed by the petitioner under the amnesty scheme were 'voluntary' and in 'good faith.'3. Impact of survey operations on the voluntariness of the returns filed.Issue-wise Detailed Analysis:1. Legality of the Commissioner's Order:The central issue in this writ petition concerns the legality of the order passed by the Commissioner of Income-tax, Visakhapatnam, dated October 5, 1989, under section 273A of the Income-tax Act, 1961. The Commissioner dismissed the petitioner's application for waiver of interest for the assessment years 1982-83, 1983-84, and 1984-85. The Commissioner held that the conditions of section 273A(1) were not satisfied, asserting that the income disclosed in the revised returns was not 'true and full' and that the returns were filed out of fear after survey operations had commenced.2. Voluntariness and Good Faith of the Returns Filed:The petitioner contended that the returns filed under the amnesty scheme were voluntary and in good faith. The amnesty scheme was designed to encourage voluntary filing of returns by assuring no penal action for concealment of income if returns were filed as per the scheme. The petitioner filed revised returns on March 27, 1986, during the currency of the amnesty scheme. The Commissioner, however, found that the returns were not voluntary because they were filed after survey operations had commenced on July 9, 1986. The Commissioner also noted that the disclosure was made out of fear, which he deemed inconsistent with the notion of voluntariness.3. Impact of Survey Operations:The Commissioner argued that the returns were not voluntary because they were filed after the commencement of survey operations. The court examined whether the survey operations and subsequent enquiries had progressed to the extent that the petitioner was aware of any adverse material against him before filing the revised returns. The court found that the petitioner was not informed of any adverse material or the non-existence of the alleged creditors before filing the revised returns on July 23, 1986. The court emphasized that the mere existence of survey operations and the petitioner's fear of detection did not negate the voluntariness of the returns if they contained full and true disclosure of income.Conclusion:The court concluded that the Commissioner's view that the returns were not voluntary was legally impermissible. The court held that the expression 'voluntarily' in section 273A(1) should be construed as filing the return without being prompted by the animus to avoid or preempt adverse exposure or penal action. The court found that the Commissioner had not provided sufficient reasons to link the petitioner's fear to the probability of exposure to penal action. Consequently, the court set aside the Commissioner's order and remitted the matter for reconsideration, directing the Commissioner to consider the case afresh in light of the judgment. The court allowed the writ petition and concluded that the revised returns filed by the petitioner should be construed as 'voluntary returns' within the meaning of section 273A(1) of the Income-tax Act.