TaxTMI 
TaxTMI 
2003 (2) TMI 49
X X X X Extracts X X X X
X X X X Extracts X X X X
....under section 256(1) of the Income-tax Act, 1961, therefrom was pending adjudication before this court. Subsequent to the conclusion of the assessment proceeding, a proceeding for imposition of penalty under sections 271(1)(c), 273(1)(b) and 271(1)(a) of the 1961 Act was initiated. The Assessing Officer and the Commissioner (Appeals) had rejected the claims of the assessee for amnesty. However, the learned Tribunal, in the penalty proceeding, found favour with the assessee's claim and held that the assessee was entitled to immunity under the amnesty scheme; though in the quantum appeal the learned Tribunal found that the assessee was not entitled to the benefit of amnesty scheme. In these circumstances, the following question was referred to this court: "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in setting aside the penalty orders passed by the Commissioner of Income-tax (Appeals) and the Assessing Officer and in directing the Assessing Officer to cancel the penalties levied under sections 271(1)(c), 273(1)(b) and 271(1)(a) of the Income-tax Act, 1961?" Admittedly, the return under the voluntary disclosure scheme was filed on Octob....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ated in the enquiry relating to the assessment of his income. Now, let us examine as to whether these conditions have been fulfilled. It is not in dispute that the disclosure was made within the time stipulated. A clarification was issued by Circular No. 451, dated February 17, 1986. Referring to question No 1, Mr. Saha pointed out that the scheme for voluntary disclosure was applicable only in respect of those assessees whose assessment was complete or was pending in respect of those years and not to an assessee who, for the first time, disclosed his income, the assessment whereof was neither complete nor pending. This proposition seems to be fallacious, inasmuch question No. 1 that was answered in the said circular was specific and clear as made out therein. The question contemplated clarification in respect of the proceedings for those mentioned in clauses (a) and (b) of the said question. The said question did not include cases of persons whose assessment was neither complete nor pending. Therefore, the answer to the said question cannot determine the application of the scheme to persons other than those whose income was complete or pending. If it was so, it was not difficul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....was detected by the seizure and it was this information of detection of the asset that was with the income-tax authority. Detection is a positive action something more than mere receipt of information. There was no material to show detection of concealment of the income by the income-tax authority before October 9, 1986, or earlier. We find that the income-tax authority had not acted upon the information passed on to them until the income was disclosed. Mr. Khaitan had relied on Anand Kumar Saraf v. CIT [1995] 211 ITR 562 (Cal). In this case, this court had held that in case of the seizure, where certain documents were seized, until the seized papers were scrutinized and an investigation is carried out prior to the disclosure of the income, it cannot be said that there was any detection of the concealed income, even though there might be a prima facie belief about the existence of such income. Such a situation would not deprive the assessee of the benefit of the amnesty scheme. We may refer to question No. 19 of the Circular No. 451, dated February 17, 1986. In the said question, the meaning of the expression "detection" has been clarified since quoted in [1995] 211 ITR 562 (Cal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y the customs authority, in the absence of any active consideration towards detection of concealment of income by the income-tax authority despite the information of seizure being passed on to them, cannot rule out the element of voluntariness. In our view, the disclosure was a voluntary one since the assessee had disclosed the income voluntarily. Mr. Saha had also pointed out that the finding in the quantum proceedings is staring on the face of the assessee and is binding on the penalty proceedings as between the parties and operate as res judicata. This question also does not seem to be of any substance, inasmuch as penalty is not automatic, as was held in CIT v. Calcutta Credit Corporation [1987] 166 ITR 29 (Cal) cited by Mr. Khaitan. Under sections 271 and 273, penalty is contemplated in the manner laid down therein. It is an independent proceeding, which is required to be initiated and penalty can be imposed only after giving opportunity to the assessee. Therefore, it is required to be considered as to whether the finding in the quantum proceeding should be binding in the penalty proceeding as between the parties. The question of bindingness is dependent on the principle....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ll and true disclosure in good faith is intertwined with and implicit in each other. We are concerned with the question as to whether the disclosure was full and true and was made in good faith. Mr. Saha contended that disclosure in Part III is not a disclosure. The word "disclosure" means to disclose, reveal, unravel on bring to the notice. Disclosure in Part III satisfies the above test of disclosure. In our view, though disclosed in Part III, yet it was a disclosure. Now we may examine whether the disclosure was full. The income-tax authority in the assessment proceeding has not come to any conclusion that there was any other income, which was not disclosed. Therefore, admittedly, the disclosure was full. Whether it was true disclosure or not and whether it was made in good faith is the question now we are to look into. The word "good faith" means making of a clean breast, to come straight and clean, bona fide, genuinely, free from intent to deceive, etc. The amount, in this case, was disclosed but it was claimed that it did not belong to the assessee, alternatively it was claimed that if his explanation under section 69A appeared to be unsatisfactory, then by way of preca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sclosure. Having regard to the said principle, in our view, we have found in the quantum proceedings that there was an arguable claim for deduction, which was not free from doubt, therefore, non-payment of tax under clause (b) would not disentitle the assessee from the benefit of the amnesty scheme. In ITO v. Burmah Shell Oil Storage and Distributing Co. of India Ltd. [1987] 163 ITR 496, 509 (Cal) cited by Mr. Khaitan, it was held that a disallowed claim for deduction is not a concealment. In CIT v. Off Shore India Ltd. [1994] 209 ITR 473, 480 (Cal), cited by Mr. Khaitan, it was held that when a reference is made on a question of law, then the bona fides of the assessee cannot be ruled out. Therefore, in the present case the claim made by the assessee for deduction will not disentitle him either from claiming voluntary disclosure or from claiming amnesty from payment of tax under clause (b) of the amnesty scheme. Mr. Saha relied on the decision in CIT v. Vidyagauri Natverlal [1999] 238 ITR 91 (Guj.) and contended that in this case it was a concealment disentitling the assessee from the amnesty scheme. We have gone through the said decision. On the facts, the same is distingui....