Kerala H.C : A common question is involved in these nine writ petitions. It relates to the interpretation of s. 273A of the IT Act, 1961, and, in particular, the scope and ambit of Expln. 2 thereof.

Section 273A, Art. 226

Asst. Year 1979-80, 1980-81, 1981-82, 1982-83, 1983-84

Counsel Appeared

B.S. Krishnan, V. Ramachandran, P.R. Raman & K. Ananthanarayana Iyer, for the Assessee

BY THE COURT :

A common question is involved in these nine writ petitions. It relates to the interpretation of s. 273A of the IT Act, 1961, and, in particular, the scope and ambit of Expln. 2 thereof. Three firms and their partners are involved as parties in these writ petitions. Two of the firms are engaged in jewellery business, Alukkas Jewellery, Trichur, and Alukkas Jewellery, Calicut. The third firm runs a hotel, Alukkas Tourist Home. Original Petitions Nos. 5641, 5642 and 5643 are by the firms, Alukkas Jewellery, Calicut, Alukkas Tourist Home, Trichur, and Alukkas Jewellery, Trichur, respectively. Varghese and Joy are partners in the three firms referred to above. The six writ petitions are by the partners challenging orders passed by the CIT by which a request for waiving of interest under s. 273A was turned down.

The background facts leading to the impugned orders are the following : The firms and their partners had been originally assessed to income-tax. Final orders of assessment had been passed in respect of the periods 1979-80 to 1983-84. It is conceded that the main income of the partners is the share income from the firms.

On January 23, 1985, there was a search in the premises of the firms and the residential premises of the partners at Trichur. Books of account and valuable jewellery had been removed by the officials from the custody of the partners. Soon thereafter, the firms filed a petition, exhibit P-1 dated February 4, 1985, under s. 273A of the Act. Similar petitions have been filed by the partners also. The ITO passed orders on March 3, 1987. The contention of the assessees in relation to the waiver of penalty and interest was not accepted. Representations were filed before the CIT on November 30, 1987. The IAC had stated his views by report dated May 22, 1987. The order, exhibit P-4, and those which correspond to it in respect of other periods and firms were passed by the CIT. According to the CIT, Expln. 2 to s. 273A(1) has got only a limited application. It was confined to a resultant situation coming under s. 271(1)(b) [273A(1)(b) (?)] and not in relation to the other limbs of the section. The CIT had already granted the petitioner benefits which were admissible. He had, as a matter of fact, waived penalty under s. 271(1)(b) [273A(1)(b) (?)]. When s. 271(1)(b) [273A(1)(b) (?)] with the Explanation is not otherwise attracted, there would be a distinct liability which has to be met by the petitioner. It is the correctness of this view that comes for consideration by this Court.

Counsel for the petitioners submitted that no penalty could be levied, when the petitioner, within a week of the search, had filed the revised returns. Those returns were made voluntarily and in good faith. That being so, the penal provisions are not attracted, according to counsel. Sec. 273A may be conveniently quoted in this context: “273A. Power to reduce or waive penalty, etc., in certain cases :(1) Notwithstanding anything contained in this Act, the CIT may, in his discretion, whether on his own motion or otherwise, – (i) reduce or waive the amount of penalty imposed or imposable on a person under cl. (i) of sub-s. (1) of s. 271 for failure, without reasonable cause, to furnish the return of total income which he was required to furnish under sub-s. (1) of s. 139 ; or (ii) reduce or waive the amount of penalty imposed or imposable on a person under cl. (iii) of subs. (1) of s. 271 ; or (iii) reduce or waive the amount of interest paid or payable under sub-s. (8) of s. 139 or s. 215 or s. 217 or the penalty imposed or imposable under s. 273, if he is satisfied that such person – (a) in the case referred to in cl. (i), has, prior to the issue of a notice to him under sub-s. (2) of s. 139, voluntarily and in good faith made full and true disclosure of his income ; (b) in the case referred to in cl. (ii), has, prior to the detection by the ITO, of the concealment of particulars of income or of the inaccuracy of particulars furnished in respect of such income, voluntarily and in good faith, made full and true disclosure of such particulars ; (c) in the cases referred to in cl. (iii), has, prior to the issue of a notice to him under sub-s. (2) of s. 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 s. 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 cls. (a), (b) and (c), co-operated 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. Explanation 1.”For the purposes of this sub-section, a person shall be deemed to have made full and true disclosure of his income or of the particulars relating thereto in any case where the excess of income assessed over the income returned is of such a nature as not to attract the provisions of cl. (c) of sub-s. (1) of s. 271. Explanation 2.”Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing belonging to a person are seized under s. 132 and within fifteen days of such seizure, the person makes a full and true disclosure of his income to the CIT, such person shall, for the purposes of cl. (b) of this sub-section, be deemed to have made, prior to the detection by the ITO of the concealment of particulars of income or of the inaccuracy of particulars furnished in respect of such income, voluntarily and in good faith, a disclosure of such particulars.”

9. It may be noted that as regards s. 271(1)(b) [273A(1)(b) (?)], the statute created a fiction. That fiction is, however, circumscribed in relation to space and time. The Commissioner has found that the two conditions which the petitioner failed to satisfy were : (1) That the returns were not made voluntarily, and (2) that they were not filed in good faith. If, on any one of these, the finding is adverse to the petitioner, the conclusion of the CIT could get confirmed ; otherwise, not. The matter may now be considered in greater elaboration.

10. The term “voluntarily”, is a familiar one to lawyers. It has got a specific definition under the Indian Penal Code, s. 39. The place where a person voluntarily resides is very important while considering the Court in which suits of the nature mentioned in s. 20, CPC, are to be instituted. While the definition in the Penal Code may not be opposite, in considering the scope and amplitude of that term in s. 273A, the history of judicial decisions forming the background of s. 20, CPC, may offer abundance of guidance. An influence of external element may change the content and complexion of what would have been otherwise a voluntary act. Such external affectation can arise only by way of an element of compulsion ; or by an impact of inducement. Mere eagerness to avoid an inconvenience may not, by itself, be sufficient to affect the voluntary character of an act or transaction. The border line can, at times, be thin, so thin, even to strain trained eyes. The London & North Western Railway Co. vs. Lindsay (3 Macq. 99) was an illustrative case. Blackburn, Lord Justice, commented on that term in Schibsby vs. Westenholz (40 Law J. Rep. QB. 73). A sentence by way of general observation occurring in that judgment later led to considerable contentions on the scope of its construction. Absent pressure or duress, an act can be voluntary. The other facet is illuminated by the observation of Bowen L. J. in Vionet vs. Barrett (1885) 55 L. J. QB 38, 42. The distilled principle construing the concept of compulsion in understanding the term “voluntarily” is given in the summing up by Bowen L. J. reading : ” . . . the result is that a man cannot be said to be compelled to appear because if he does not do so he may be inconvenienced in the long run on account of his being a trader in the country, in which the process has been issued, so that he will from time to time have property in that country, for in such a case the appearance is made as a matter of conveni ence and not under what the law considers compulsion.”

11. Two decisions of the Allahabad High Court are directly on the point : Jakhodia Brothers vs. CIT 1978 CTR (All) 400 : (1978) 115 ITR 61 (All) and Hakam Singh vs. CIT (1980) 17 CTR (All) 255 : (1980) 124 ITR 228 (All). In the former, the ITO had started investigation and had called for details concerning many matters in the course of the assessment proceedings for a year. Then came the revised returns of the assessee in respect of some previous years. It was observed that the “returns were filed after the assessee felt that the game was up because the investigation initiated by the ITO exposed him to a situation that he had assessable income in respect of other years and that it could not be said that the filing of the return was voluntary.” The filing of the return, accordingly, was held to be not voluntary. The decision in Jakhodia Bros. vs. CIT (supra), was approvingly referred to (sic.) in the later decision in Hakam Singh vs. CIT (supra). In the latter case, an association of persons invoked s. 273A for waiver or reduction of the imposable penalty. The association of persons had filed a revised return, about 11 months after a search conducted by the IT Department and the seizure of certain books during the course of such search in the business premises of the two firms in which one of the members of the association of persons was a partner. The Commissioner took the view that the returns were not voluntary. That was confirmed by the High Court. An inference was drawn from the circumstances that the revised returns were the result of a self-prompting for escaping the consequences of an earlier default.

Counsel for the petitioners placed before me decisions in which, in the peculiar factual situations obtaining therein, the filing of the return was held to be voluntary: S. Sannaiah vs. CIT (1974) 95 ITR 435 (Mys), Shankara Apaya Swami vs. WTO (1975) CTR (Kar) 90 : (1976) 103 ITR 649 (Kar), B. Anjanappa vs. CWT (1980) 15 CTR (Kar) 5 : (1980) 124 ITR 433 (Kar), Madhukar Manilal Modi vs. CWT 1978 CTR (Guj) 393 : (1978) 113 ITR 318 (Guj), Hira Singh vs. CWT (1981) 25 CTR (P & H) (1982) 134 ITR 438 (P & H) and R. P. Ramaswamy Chettiar vs. CWT (1983) 35 CTR (Mad) 128 : (1983) 144 ITR 87 (Mad). It is unnecessary to plunge into an exhaustive enumeration of the factual details of these decisions. Some are cases where there was only some delay in filing the return, which delay could not be satisfactorily explained ; some were cases where the return was filed at the instance of, but not due to any inducement or compulsion, from the ITO.

Counsel for the petitioners submitted that when a full disclosure is made in the revised return, the CIT is well within a compulsive situation to effect waiver or reduction of imposable penalty. That extreme contention would not bear scrutiny of the section. The contention would render the word “voluntarily” redundant. That is not permissible.

It was complained that there was no adequate reference or detailed discussion of all relevant facts and circumstances before the CIT came to an adverse conclusion. May be, a more detailed discussion would have given greater satisfaction to all concerned. It cannot, however, be said that any of the salient and significant circumstances had been missed or eschewed in the impugned order.

It was contended that the overall conduct of the assessee, and the speed with which he filed the revised return after the search, would insulate him in relation to the penal consequences of s. 273A(1)(a) and (b). Reference was made in that connection to Expln. 2. The Explanation would really give a contrary indication. That Explanation creates a statutory fiction, limited in its scope and effect. Its operation is in a restricted field. It is inoperative and powerless in other areas, even when they are as adjacent as in s. 273A(1)(a) and (b). Had it not been for such a beneficent fiction, the petitioners would have been out of bounds, even as regards the facility they were favoured with in relation to waiver of penalty under s. 273A(1)(b).

Counsel attempted to project yet another contention based on section 273A(4). Such a contention was not raised either in writing nor urged in the course of the arguments presented by the tax practitioner. It is impermissible for the petitioner to urge, and for the Court to consider, such a contention in such circumstances.

The conclusion, reached above, makes it unnecessary to consider a further and additional ground mentioned in the orders challenged in some of the original petitions, namely, that the present assessee himself did not file the required petition under Expln. 2 to s. 273A(1).

18. The discomfiture of the petitioners is understandable. That, however, is the fate of adventurers in business, who rashly brush aside the adage : “Honesty is the best policy”. All the writ petitions fail. They are accordingly dismissed with costs.

[Citation : 176 ITR 198]