Voluntary disclosure immunity under tax law: penalty could not survive once disclosed income was accepted and tax was paid.

Penalties under section 271(1)(c) of the Income-tax Act were considered unsustainable where the assessee had disclosed income under section 14(1) of the Voluntary Disclosure Act, 1976, the Department had accepted the disclosure, and the tax due had been paid as required. On those facts, the conditions for immunity under section 14(5) were treated as satisfied. A certificate from the Commissioner of Income-tax was held not to be a requirement under section 14(5) and was relevant only to section 8(2) cases. The penalty levy therefore could not stand and any amount already collected was to be refunded.

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Issues: Whether penalties under section 271(1)(c) of the Income-tax Act, 1961 were leviable when the assessee had made disclosures under section 14 of the Voluntary Disclosure Act, 1976 and had paid the tax due, and whether a certificate from the Commissioner of Income-tax was a precondition for immunity.

Analysis: The penalties were based entirely on the income disclosed under section 14(1) of the Voluntary Disclosure Act, 1976. The disclosed income had been accepted by the Department and the tax due had been paid in accordance with the statutory requirements, as evidenced by the bank certificate. On those facts, the conditions for immunity under section 14(5) stood satisfied. The requirement of a certificate from the Commissioner of Income-tax was held not to be part of section 14(5) and was treated as relevant only to cases governed by section 8(2) of the Act. In the absence of any material to deny immunity, the levy of penalty could not stand.

Conclusion: The penalties were not sustainable and were directed to be refunded if already collected.

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