Very Important Point
Levy of penalty under Section 271(1)(c) of Income Tax Act, 1961 is not a circumstance by itself to take assessee out of the purview of Section 271(4A) of the Act.

Headnote:Income-tax Act, 1961-Sections 271(1)(c) and 271(4A)-Waiver of penalty-Benefit of-Disclosure of income by assessee voluntarily prior to coming into force of Voluntary Disclosure Scheme and also prior to detection of concealment by Department-Levy of penalty u/s. 271(1)(c)-Not a circumstance by itself to take assessee out of the purview of Section 271(4A) of the Act-Contention of the Department that records disclose that disclosure of concealed income by assessee was not voluntary or in good faith prior to initiation of proceedings by Department-Not acceptable as the order of Board refusing to waive or reduce penalty not a speaking order revealing its mind-Order of Board refusing to waive or reduce penalty-Quashed and Board directed to examine the matter again.
       Held : In the present case, we have already noticed that the assessee had made the disclosure prior to the coming into force of the voluntary disclosure scheme and long before the Department could initiate any action in respect of the concealed income. The levy of penalty under Section 271(1)(c) by itself will not be a circumstance to take him out of the purview of Section 271 (4A) of the Act. (Para 6)
       Further held : The learned counsel for the Department submitted that in the present case the records disclose that the concealed income had not been disclosed voluntarily or in good faith prior to the initiation of the proceedings by the Department. If this contention is examined with reference to the findings recorded by the Tribunal to which we have made detailed reference, it becomes clear that the same cannot be accepted without further scrutiny of the matter. Whether such scrutiny had been made by the Board in this case is not clear from the endorsement issued to the Commissioner of Income Tax. The Commissioner of Income Tax has explained each one of the circumstances arising in the case whether there has been concealment by the assessee and its disclosure, the extent to which they were voluntary or the same had been made prior to the detection of the same by the Department. Therefore, it does not appear that the Board had duly applies its mind or made an order revealing its mind by making a speaking order. (Para 7)
       Consequently held : In the circumstances, we have no hesitation to quash the order made by the Board and direct the Board to restore the proceedings to its file and examine the matter once again in the light of what we have stated above. (Para 8)

Judgment

Rajendra Babu, J.-The appellants before us preferred a writ petition under Article 226 of the Constitution of India before the High Court of Delhi seeking for a direction to extend the benefit of waiver of penalty arising under Section 271 (4A) of the Income Tax Act, 1960 (hereinafter referred to as “the Act”). Pursuant to a scheme, the second appellant. Firm, made an application on February 12, 1965 stating that they would place before the Income Tax Officer a true statement of their financial assets, transactions and they were prepared to file a statement of the affairs as on March 31, 1965. The statement of affairs filed on 20th May, 1965 disclosed an income of about Rs. 28,00,000/- as the total accretion to its wealth over the eight years upto March 31, 1965. Ultimately after some negotiations between the Department officials and the appellants, the appellants agreed to be assessed at Rs. 66,56,000/- subject to the usual allowance for depreciation etc. spread over eight assessment years 1958-59 to 1965-66. Assessments for the year 1958-59 to 1959-60 were to be reopened inasmuch as they were complete by that time. The Inspecting Assistant Commissioner issued notices to the appellants to initiate proceedings under Section 271 (1)(c) of the Act for the non disclosure of he income relating to the aforesaid period. A penalty in a sum of Rs. 4,90,365/- was imposed on the appellants for the years 1958-1959 to 1964-65. Appeal preferred against the said order to the Income Tax Appellate Tribunal met with failure.

2. During the pendency of the penalty proceedings an application was filed under Section 271(4A) of the Act and the Commissioner of Income Tax sent a report on the said application on 23.3.1968 setting forth the circumstances to reduce the penalty against the appellants in terms of provisions of Section 271(4A) of the Act. The Commissioner noticed that the said provision has envisaged disclosure of income made (i) voluntarily; (ii) in good faith; (iii) such disclosure being full and true; and (iv) is made prior to the detection by the I.T.O. of the concealment in question and held that these circumstances to attract waiver or reduction under Section 271(4A) stood satisfied. He referred to various items such as Hundi loans and the amounts surrendered, accretion to wealth between different dates. However a communication was sent by the Secretary of the Central Board of Direct Taxes on 28th March, 1968 refusing to reduce the penalty. Again another letter was sent on April 18, 1969 by the Commissioner pursuant to a letter received by him on 14th April, 1969 making a further report on the matter, he set out the various details thereto as to how the matter had been dealt with by the various authorities and the manner in which the appellants would be entitled to the benefit under the provisions referred to earlier. The Central Board of Direct Taxes has to approve any action of the Commissioner to waive or reduce penalty in cases when the same is above Rs. 50,000/-. Hence in this case reference was made by the Commissioner of Income Tax to the Board for approval of his action to reduce the penalty but the Board refused to reduce the penalty as suggested by the former.

3. Writ petition was preferred before the High Court. In the High Court two contentions were put forth: firstly, that the imposition of the penalty on the appellants was premature inasmuch as the application of the appellants filed under Section 271(4A) of the Act for waiver of the penalty was still pending disposal; secondly, that the condition precedent for the satisfaction of the Income Tax Officer that the assessee had concealed his income had not been satisfied in view of the voluntary disclosure made. The High Court found no substance in either of the contentions and dismissed the writ petition. The High Court took the view that the levy of penalty under Section 271(1)(c) of the Act was not in any way dependent on the provisions of Section 271 (4

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1998 Supreme(SC) 573

Very Important PointLevy of penalty under Section 271(1)(c) of Income Tax Act, 1961 is not a circumstance by itself to take assessee out of the purview of Section 271(4A) of the Act.

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Very Important Point
Levy of penalty under Section 271(1)(c) of Income Tax Act, 1961 is not a circumstance by itself to take assessee out of the purview of Section 271(4A) of the Act.