S.R. Nayak, J.
1. Writ Petition No. 15098 of 1993 is filed by Mr. K.S.N. Murthy, whereas W. P. No. 15976 of 1993 is filed by Sri K. Appa Rao. It is stated that Mr. K.S.N, Murthy and Mr. K. Appa Rao are partners of the firm, Durga Lorry Transporters. In these two writ petitions, the petitioners have assailed the validity and legality of the Common Order No. 21/W. Ptn./273A/93-94/CIT(c), dated August 10, 1993, of the Commissioner of Income-tax (for short, 'the Commissioner'), Karnataka (Central). Bangalore, the second respondent herein, rejecting the applications of the petitioners made under Section 273A of the Income-tax Act, 1961 ('the Act', for brevity), for waiver of interest and penalty on the ground that the disclosure of income was made subsequent to a search carried out in the premises of Andhra Cements Limited, Vijayawada, on December 29, 1986. The background facts leading to the filing of these writ petitions be noted briefly as under :
The petitioners in these two writ petitions are partners of the firm, Durga Lorry Transporters. The said firm was engaged in the transportation of cement manufactured by ACC Limited, Vijayawada. On December 21, 1986. a search was conducted under Section 132 of the Act in the business premises of ACC Limited, Vijayawada and several other premises connected with it. The information gathered in the course of the said search revealed that the sale prices of cement had been collected through bank drafts by some of the employees of ACC Limited. The information so gathered from 36 banks revealed that the demand drafts were also obtained inthe name of the firm, Durga Lorry Transport, of which the petitioners are the partners. As matters stood thus, on March 30, 1988, the petitioners came forward to disclose the value of the demand drafts as their undisclosed income. The petitioner made a disclosure of a sum of Rs. 57,00,000 which was subsequently revised to Rs. 60,00,000 as suggested by the Income-tax Department authorities. Accordingly, the petitioners filed returns for the assessment years 1982-83 to 1986-87. The Department accepted the said returns. In the orders of assessment for the assessment years 1982-83 to 1986-87, the Assessing Officer imposed interest under the provisions of Section 139(8) of the Act for the delay in submission of the returns and also under Section 217 of the Act for default in payment of advance tax. The petitioners had also been issued notices under Sections 271(1)(a), 271(1)(c) and 273(2)(b) of the Act for the purpose of imposition of penalty for the delayed filing of the returns, for concealment of income and for default in paying the advance tax respectively. The Assessing Officer levied penalties by separate orders. In addition to the interest and penalty under the Act, the petitioners had also been levied with penalty under Section 18(1)(a) of the Wealth-tax Act for delayed filing of returns of wealth. The petitioners made applications to the second respondent under the provisions of Section 273A of the Act. The plea of the petitioners before the second respondent was that-
(a) the petitioners had sought relief under Section 273A of the Income-tax Act for the first time, and had not sought similar relief in any of the earlier years, nor had been granted any such relief ;
(b) the petitioners had not been issued with any notice under Section 139(2) of the Income-tax Act for any of the years, and the notices issued under Section 148 were for the purpose of regularising the returns filed by the petitioners ;
(c) even before the Assessing Officer had detected any concealment of particulars of income, the petitioners had voluntarily and in good faith made full and true disclosure of such particulars ;
(d) the petitioners, before issue of notice under Section 139(2) or under Section 148 of the Income-tax Act, made true and full disclosure of their income and paid taxes thereon ;
(e) the petitioners had co-operated in the enquiry conducted by the Department relating to the assessment of their income.
2. The applications of the petitioners filed under Section 273A of the Act were rejected by the second respondent by common order dated August 10, 1993. It reads-
'Order under Section 273A of the Income-tax Act, 1961 : The assessee, Shri K.S.N. Murthy, is a partner in Durga Lorry Transport. The firm undertook transportation of cement manufactured by Andhra Cements Co. Ltd., Vijayawada. The premises of the said companywas searched on December 21, 1986. The premises of the persons connected with the company were also searched. During the course of investigation regarding the collection of cement price through demand drafts under the names of several persons including that of Durga Lorry Transport, the assessee, Sri K.S.N. Murthy, and Sri K. Appa Rao, another partner of Durga Lorry Transport, came forward to disclose the value of some demand drafts as their income. The aggregate disclosure was Rs. 60 lakhs. Assessments were completed based on the disclosures in the case of the assessee and Sri K. Appa Rao. These assessments related to the assessment years 1982-83, 1983-84, 1984-85, 1985-86 and 1986-87 in the case of the assessee. In the case of Shri K. Appa Rao assessments were completed in respect of the assessment years 1982-83, 1983-84 and 1984-85. Penalties under Section 271(1)(a) were levied as a consequence of the assessments.
2. The assessee approached the CBDT for waiver of penalties levied in the aforementioned circumstances. On a consideration of the facts and circumstances of the case, the petition under Section 273A was rejected by the Board.
3. I have heard Shri K. S. N. Murthy, the assessee. One of the major conditions that the disclosure should be voluntary and in good faith and must have been made prior to detection by the Department was not satisfied. The disclosure was made subsequent to a search carried out in the case of Andhra Cement Co. Ltd. on December 21, 1986. Subsequently it was revealed that the assessee had concealed substantial amount of income and had made the disclosure when the Department had collected sufficient evidence. Such a disclosure cannot be considered as voluntary, in good faith and prior to detection by the Department. Besides, penalty under Section 271(1)(c) was initiated by the Assessing Officer. Therefore, the benefit of Explanation to Section 273A was not available.
4. The petition relating to the assessment years 1982-83, to 1986-87 is, therefore, rejected.
(Sd.) M.N. Nambiar,
Commissioner of Income-tax,
Karnataka (C), Bangalore. '
3. Hence, these writ petitions assailing the validity and legality of the same.
4. Sri S. Ravi, learned counsel appearing for the petitioners would contend that in the first place, all the conditions to waive or reduce penalty and interest under Section 273A of the Act are satisfied and, therefore, the rejection of the applications of the petitioners is totally unjust and illegal. Learned counsel would contend that the reasoning of the second respondent that on account of search- of ACC Limited, Vijayawada, the disclosure was made by the petitioners and that, therefore, the disclosure was not voluntary is specious. In support of his submission, learned counsel wouldplace reliance on the judgment of the Division Bench of this court in Sujatha Rubbers v. ITO : [1992]194ITR355(AP) and the judgment of the Division Bench of the Calcutta High Court in Anand Kumar Saraf v. CIT : [1995]211ITR562(Cal) and would maintain that the petitioners in these two writ petitions stand on a better footing compared to the petitioners in the above two decided cases.
5. Learned senior standing counsel for the Income-tax Department, Mr. S.R. Ashok, would support the impugned order of the second respondent and would maintain that but for the search conducted in the premises of ACC Limited, Vijayawada, on December 21, 1986, unearthing the incriminating information and documents, the petitioners would not have filed returns at all, and, therefore, filing of the returns by the petitioners on March 30, 1988, cannot be said to be voluntary. Learned standing counsel would maintain that the judgment of this court (see : [1992]194ITR355(AP) ) and that of the Calcutta High Court (see : [1995]211ITR562(Cal) ) can be distinguished on the facts and they are not helpful to the petitioners herein. Learned counsel would further contend and conclude that no grounds are made out to interfere with the discretionary order made by the Commissioner and the court is not entitled to usurp the power of the Commissioner under Section 273A and it cannot substitute its own opinion in place of the opinion formed by the Commissioner in his discretion.
6. After hearing learned counsel for the parties, the only question that arises for consideration is whether the disclosure of income made by the petitioners on March 30, 1988, can be said to be voluntary disclosure made in good faith and whether the disclosure so made is full and true disclosure ?
7. Before dealing with this question, it is necessary to notice the provisions of Section 273A of the Act which confer power on the Commissioner to reduce or waive penalty or interest in certain circumstances. Under Section 273A of the Act, the Commissioner has the discretion to reduce or waive the amount of interest paid or payable under Sub-section (8) of Section 139 or Section 215 or Section 217 of the Act or the penalty imposed or imposable under Section 273 provided the assessee has voluntarily and in good faith made full and true disclosure of his income.
8. The whole concept under Section 273A is that the assessee concerned admits his liability to penalty but relies upon certain mitigating circumstances specified in the section for the purpose of getting the interest or penalty waived or reduced. When the assessee approaches the Commissioner under Section 273A, he does not dispute his liability to pay the penalty. All that he says is that he should be given the relief of reduction or waiver by the fact that the conditions specified in Section 273A are satisfied. In Jakhodia Bros. v. CIT : [1978]115ITR61(All) and P.K.P. Mohammed v. CBDT : [1993]203ITR479(Ker) , it was held that the main object ofSection 273A is to facilitate voluntary disclosure of concealed income by holding out a temptation to the businessmen of giving relief against penalties and interest which may have been incurred by them under the normal law. Section 273A provides that notwithstanding anything contained in the Act, the Commissioner may in his discretion, whether on his own motion or otherwise, reduce or waive the penalty or interest if the conditions mentioned therein are satisfied. The Supreme Court in P. Jayappan v. S.K. Perumal, First ITO : [1984]149ITR696(SC) opined that the power conferred on the Commissioner under Section 273A is an overriding power which he may exercise at his discretion. This court in K. Ramulu and Bros. v. CIT : [1990]185ITR517(AP) has opined that the non obstante clause occurring in Section 273A indicates that the operation of this section is untrammelled by any other provision of the Act. This non obstante clause indicates that the power to reduce or waive penalty imposed or imposable by the Commissioner under Section 273A is an independent power which does not stand equated to that of the other statutory powers conferred on the authorities in respect of levy of penalty. This court in Seetha Mahalakshmi Rice and Groundnut Oil Mills Contractors Co. v. CIT : [1981]127ITR579(AP) held that Section 273A is not only independent but complementary to the power under the statutory provisions of appeals and reference provided under the Act.
9. There is no doubt that the power given to the Commissioner under Section 273A is discretionary. As pointed out by the Supreme Court in P. Jayappan v. S.K. Perumal, First ITO : [1984]149ITR696(SC) , this is quite clear from the use of the expression 'in his discretion'. A perusal of Section 273A shows that the Commissioner is given the discretion when the requisite conditions envisaged by Section 273A are satisfied that he may waive or reduce the penalty or interest imposable under the given sections of the Act. However, the exercise of discretion cannot be either arbitrary or capricious and has to be judicious and objective, once the conditions required for exercise of discretion in any judicial or quasi-judicial proceedings are satisfied. In other words, such discretion must be exercised judiciously by taking into consideration all relevant facts and not arbitrarily or capriciously and the Commissioner's satisfaction can be tested by the courts under Article 226 of the Constitution, because the satisfaction for exercise of discretionary power under this section must be based on objective considerations and not on subjective satisfaction. Since the discretion conferred by the provision is coupled with the duty to be performed by the Commissioner, it cannot be construed as conferring absolute discretion upon him to pass any order which he pleases to make. The concept of 'absolute discretion' is unknown to Indian Constitutional law and administrative law. 'Absolute discretion' is the antithesis of the 'doctrine of equality' enshrined in Article 14 of the Constitution. The Commissioner is requiredto consider the application on the merits and if the conditions for the exercise of the powers are made out, he is obliged to exercise the discretion in favour of such an assessee. In other words, if the conditions laid down for the exercise of discretion are satisfied, the authority has no discretion to refuse to exercise the discretion. The authority is under a statutory duty to exorcise the discretion. This is also what the Supreme Court in Jaswant Rai v. CBDT : [1998]231ITR745(SC) has emphasised to be the position of law. It is one of the well settled principles of administrative law that once the conditions required for exercise of discretion in any judicial or quasi-judicial proceedings are satisfied, exercise of discretion cannot be either arbitrary or capricious and has to be judicious and objective. When the power is given to a public authority for being used for the benefit of a class of persons and the conditions precedent for the exercise are well-defined, there is a duty to exercise such power and on failure to perform that duty, courts are not only empowered but are duty-bound to interfere. It is settled law that where a power is deposited with a public officer for the purpose of being used for the benefit of persons, who are specifically pointed out, and with regard to him a definition is supplied by the Legislature of the conditions upon which they are entitled to call for its exercise, that power ought to be exercised, and the court will require it to be exercised. In other words, if the conditions laid down for the exercise of discretion are satisfied, the authority has no discretion to refuse to exercise the discretion. The authority is under statutory duty to exercise the discretion. If there is omission to exercise discretion, inter alia, on account of the failure on the part of the authority to genuinely address itself to the matter before it or due to misconception of the scope of its power under the statute, mandamus can issue directing such authority to re-hear and determine the matter afresh according to law. In taking this opinion, we are fortified by the judgments in Laxman v. CIT : [1988]174ITR465(Bom) ; Seetha Mahalakshmi Rice and Groundnut Oil Mills Contractors Co. v. CIT : [1981]127ITR579(AP) ; Mool Chand Mahesh Chand v. CIT : [1978]115ITR1(All) ; Patel Engg. Co. Ltd. v. C.B. Rathi : [1985]151ITR542(Guj) , Rohitkumar and Co. v. F.J. Bahadur, CIT : [1991]190ITR93(Bom) ; Julius v. Lord Bishop of Oxford [1880] 5 AC 214 Madhukar Manilal Modi v. CWT : [1978]113ITR318(Guj) , Sannaiah v. CIT : [1974]95ITR435(KAR) ; Paras Bhan Sadh v. CIT : [1978]114ITR834(All) and Jaswant Rai v. CBDT : [1998]231ITR745(SC) . In the case of Jaswant Rai v. CBDT : [1998]231ITR745(SC) , the Supreme Court has opined that the power under Section 273A is coupled with a duty to do justice and the Commissioner is under statutory obligation to exercise the power in favour of an assessee who has fulfilled all the conditions of the section.
10. The Supreme Court in Apex Finance and Leasing Ltd. v. CIT : [1994]207ITR781(SC) has laid down that the question whether the Commissioner, in thefacts and circumstances of the case, was justified in refusing to exercise his discretionary power under Section 273A where the assessee had disclosed income voluntarily in a revised return, is a question which is required to be examined on the merits and the High Court ought not to dismiss the writ petition challenging a refusal of the Commissioner to waive penalty and interest on the ground that the order of refusal was not liable to interference in writ jurisdiction, without entering into the merits.
11. The condition precedent to attract the provisions of Section 273A is that the assessee has disclosed income voluntarily and in good faith, made full and true disclosure of his income. The term 'voluntarily' means 'without compulsion'. The word 'voluntary' has been defined in Shorter Oxford Dictionary, volume 2, page 2371, as performed or done of one's own free will, impulse or choice, not constrained, prompted or suggested by another, proceeding from the free unprompted or unconstrained will of a person. In Black's Law Dictionary, fifth edition, the term 'voluntary', is defined as follows :
'Unconstrained by interference ; unimpelled by another's influence ; spontaneous ; acting of oneself. Coker v. State, 199 Ga. 20, 33 S. E. 2d 171, 174. Done by design or intention. Proceeding from the free and unrestrained will of the person. Produced in or by an act of choice. Resulting from free choice, without compulsion or solicitation. The word, especially in statutes, often implies knowledge of essential facts. Without valuable consideration ; gratuitous, as a voluntary conveyance. Also, having a merely nominal consideration ; as, a voluntary deed.'
12. In Laxman v. CIT : [1988]174ITR465(Bom) , it was held that merely because an Inspector of Income-tax had visited the house of the assessee and made enquiries about the source of certain funds, it would not amount to compulsion or constraint on the assessee to file the returns due to fear of detection and inevitable follow-up action so as to render the returns involuntarily filed. In Madhukar Manilal Modi v. CWT : [1978]113ITR318(Guj) , it was held that even if returns are filed at the behest of the officer during the course of assessment of income, it cannot be said to be involuntary only on that count. The term 'voluntary' has to be understood as anything done intentionally and without coercion, compulsion or constraint. Coercion may in turn be direct or positive as in cases where physical force is used to compel an act against one's will or it may be implied. That would not, however, mean that a mere legal obligation to do something should constitute a constraint of the kind which would render any such action involuntary. In K.L. Swamy v. CIT : [1999]239ITR386(KAR) , the Karnataka High Court has opined that the circumstances, conditions or constraints that make a disclosure under the Act 'involuntary' must be constraints other than obligations that arise under the Act, requiring the assessee to take a particular action. A Full Bench of the Allahabad HighCourt in Bhairav Lal Verma v. Union of India : [1998]230ITR855(All) , was called upon to pronounce its opinion on the question whether a disclosure made subsequent to search and seizure was necessarily a non-voluntary disclosure After surveying the case law available on the subject, the Full Bench opined thus (page 862) :
'The word 'voluntarily' in Section 273A of the Act means out of free will without any compulsion. Disclosure of concealed income after the Department has seized the incriminating material with regard to the income so disclosed, cannot be voluntary disclosure, because it was made under the constraint of exposure to adverse action by the Department. But it cannot be held as a principle of law that the disclosure of income made after the search/raid cannot be voluntary. It is a question which has to be decided by the Department in each case on the basis of the material on record. If on record there is incriminating material with regard to the disclosed income, the disclosure cannot be voluntary. But if the Department has no incriminating material with regard to the income disclosed, the disclosure is liable to be treated as voluntary having been made without any compulsion or constraint of exposure to adverse action by the Department. In a case where the assessee has disclosed not only the income regarding which the Department has incriminating material, but has also disclosed the income with regard to which no incriminating material was seized by the Department, the disclosure of the income with regard to which the Department has no incriminating material, is liable to be treated as voluntary. For example, if an assessee is having five accounts and the Department has incriminating material with regard to one of those accounts only, the disclosure of income relating to four accounts with regard to which the Department has no incriminating material, is voluntary, because it was made without any constraint or compulsion, even though the disclosure of the income relating to the account regarding which the Department has incriminating material, is liable to be treated as non-voluntary.'
13. In Sujatha Rubbers' case : [1992]194ITR355(AP) , the Government of India had introduced a scheme called amnesty scheme to encourage asses-sees to file returns voluntarily assuring them that no penal action for concealment of income would be initiated if returns were filed as laid down in the scheme. The said scheme was in force from November 15, 1984, to March 31, 1987. On March 27, 1986, during the currency of the scheme, the petitioner therein filed revised returns. The income-tax assessments in relation to the petitioner for the assessment years 1982-83, 1983-84 and 1984-85 were completed by the Income-tax Officer and he levied interest in respect of the completed assessments under Section 139(8) and Section 217 of the Act. Contending that no penalties were imposable in respect of the returns filed under the Scheme, the petitioner therein preferredappeals to the Deputy Commissioner of Income-tax (Appeals), Vijayawada. By order dated November, 29 1989, the Appellate Deputy Commissioner allowed the appeals and directed cancellation of penalties. The petitioner while pursuing the remedy by way of appeals in relation to levy of penalties, made an application before the Commissioner for waiver of interest under Section 273A of the Act. The said application was dismissed by the Commissioner holding (page 357) :
'I find that the income disclosed by the assessee in the returns filed on July 23, 1986, is not true and full. In all the years under review, the Income-tax Officer has levied penalties under Section 271(1)(c) and according to the provisions of Section 273A(1), in cases where proceedings under Section 271(1)(c) are initiated, the income disclosed by such assessee cannot be considered as a true and full disclosure. Moreover, in the instant case, the assessee has filed the revised returns of income on July 23, 1986, after survey operations had been conducted under Section 133A on July 9, 1986. It may be also stated here that the disclosure made by the assessee is out of fear which is clear from the fact that the assessee has made the disclosure only after the survey operations conducted by the Department under Section 133A on July 9, 1986. Had there been no survey operations, the assessee would not have come forward with the disclosure. I will seek support for this proposition from the decision of the Allahabad High Court in the case of Hakam Singh v. CIT : [1980]124ITR228(All) . In view of this discussion, I will dismiss the assessee's petition since the conditions of Section 273A(1) are not satisfied.'
14. The said order of the Commissioner was assailed in a writ petition before this court. It was contended on behalf of the petitioner that the view of the Commissioner that the returns filed after the commencement of the survey operations are not 'voluntary', is erroneous and that equally objectionable is the view that the returns were filed by the petitioner out of fear and, therefore, they are not voluntary. It was contended on behalf of the Income-tax Department that the conduct of the petitioner disentitles him from claiming the benefit of waiver of interest and penalty under Section 273A of the Act. It was contended that the returns filed after the survey operations have commenced will lose their voluntariness and that the fear of detection of concealed income was the motive that prompted the petitioner to file the revised returns, and, therefore, they are neither voluntary returns nor can good faith be discerned from them. The Division Bench of this court, considering the rival contentions advanced before it, held (page 360) :
'According to the impugned order, the revised returns were filed by the petitioner for two reasons : (1) they were filed 'after survey operations were conducted under Section 133A on July 9, 1986' ; and (2) 'the disclosure made by the assessee is out of fear which is clear from the fact thatthe assessee has made the disclosure only after the survey operations were conducted by the Department under Section 133A on July 9, 1986.'
There is no allegation that the disclosure made in the returns were not full and true. There is also no finding that the disclosure made was not in good faith. The file shows that information regarding three of the several creditors of the petitioner was not definite at that stage. The report of the Inspector that they were not available at the addresses furnished to him was a confidential one and it cannot be presumed that the petitioner became aware of the said report. In a case where a return was filed by an assessee after he was apprised of any adverse material leading to a real apprehension of penal action against him, his return could not be construed to be voluntary within the meaning of Section 273A(1). But that is not the fact-situation here. Survey operations followed by enquiries which have not even progressed to the extent of the assessee being apprised of the alleged adverse material collected against him could not be construed as relevant factors for rejecting the returns filed by such an assessee as not voluntary if they contained 'full and true disclosure of his income.'
The second ground on which the impugned order is based, viz., that it was out of fear because of survey operations, that the petitioner made the disclosure, slides into the first ground to a very large extent, the exclusionary part being fear as the motive prompting the assessee to file the return. We think, this ground is totally irrelevant. There is no basis for presuming that free will or a sense of commitment to the well being of the State always propels the citizens to pay taxes. An honest and well-informed citizen never consciously commits default in the payment of taxes even if the law does not contemplate penal action for non-payment of such taxes. But the same cannot be true of all persons who are liable to pay taxes, fn the absence of penal provisions for non-payment of taxes, a vast majority would be too happy to evade payment. Penal action for nonpayment is at the bottom of the success of any tax legislation and the Income-tax Act is no exception to this ; Chapter XXI of the Act deals with the penalties imposable. We are, therefore, inclined to think that the expression 'voluntarily' occurring in Sub-section (1) of Section 273A could not be construed in isolation with reference to the general animus or state of mind of the assessee. From the legal obligation to file a return, no element of fear could be either attributed or inferred. The word 'voluntarily', in the context of Section 273A(1), therefore, has to be construed as filing of the return by the assessee without being prompted by the animus to avoid or pre-empt adverse exposure or penal action. The Commissioner, before rejecting the returns as not voluntary, must have material based upon which it is reasonable to infer that, in all probability, but for the filing of the 'voluntary' return, the assessee would have been subjected to penal action or adverseexposure. In other words, 'out of fear, an assessee has made full disclosure,' by itself, without anything more, cannot be a ground for not exercising the discretion under Section 273A. The fear must be traceable to the imminent or proximate exposure of the assessee to penal action but for the filing of the voluntary return under Section 273A and, in order to enquire into this subjective element, there must be in existence objective facts warranting such an inference.'
15. The Division Bench on consideration of the judgments in Hakam Singh v. CIT : [1980]124ITR228(All) ; Madhukar Manilal Modi v. CWT [1976] 113 ITR 318 Mool Chand Mahesh Chand v. CIT : [1978]115ITR1(All) ; Sarvaria (A.N.) v. CWT : [1986]158ITR803(Delhi) ; Hira Singh v. CWT S.R. Jadav Desai v. WTO : [1980]121ITR531(KAR) ; Shankara Apaya Swami v. WTO : [1976]103ITR649(KAR) and Alukkas Jewellery v. CIT : [1989]176ITR198(Ker) has concluded thus (page 364 of 194 ITR) :
'The question was viewed by the Commissioner from a wrong perspective. He felt that the returns were filed after the survey operations were completed and that is what is discernible from the words,
'after conducting survey operations under Section 133A on July, 9, 1986, the revised returns were filed.'
The extent of the progress made in the survey operations we have already referred to supra, after going through the record placed before us. Without considering the effect of the survey operations on the conduct of the assessee, the Commissioner reached the conclusion that the returns filed were not voluntary and this conclusion is clearly impermissible in law. The discretion conferred upon the Commissioner under Section 273A also compels him to take into account relevant factors and eschew irrelevant factors from consideration. The aspect of fear that is alleged to have prompted the assessee in filing the revised returns which was made out as a ground for not exercising discretion under Section 273A is in our view an irrelevant factor in the context of the failure of the Commissioner in not giving reasons indicating the genuine link between the fear and the probability of exposure to penal action.'
16. In that view of the matter, the Division Bench held that all the three revised returns filed by the petitioner therein must be construed to be 'voluntary returns' within the meaning of Section 275A(1) of the Act and accordingly set aside the impugned order passed by the Commissioner and remitted the matter to the Commissioner to consider the case of the petitioner afresh in the light of the judgment.
17. The judgment of the Calcutta High Court in Anand Kumar Saraf's case : [1995]211ITR562(Cal) relied upon by learned counsel for the petitioner did not arise out of an order made by the Commissioner under Section 273A of the Act.. In that case, the appellant was assessed to both income-tax andwealth-lax for several years, During the previous years relating to the assessment years 1980-81 to 1985-86 the appellant derived income from proprietary business carried on by him at Surat in the names of A. K. Textiles and Rachna Textiles and at Calcutta in the name of A. K. Saree Centre. The business of the said concern was that of buying and selling sarees. During September 30, 1980, to January 17, 1983, the appellant-writ petitioner operated a current account with the Oriental Bank of Commerce. Surat, in the name of his proprietary concern, Messrs. A. K. Textiles. During the period from June 9, 1983, onwards, the appellant writ petitioner operated another current account with the Oriental Bank of Commerce. Surat branch, in the name of A. K. Textiles. During the period from October 9, 1983, the writ petitioner operated a current account with the State Bank of India, Tharpa Bazar, Surat, in the name of his proprietary business 'Rachna Textiles'. Further, during the period from May 3, 1979, to April 20, 1983, the appellant writ petitioner operated a current account with Catholic Syrian Bank Ltd., Burra Bazar Branch, Calcutta, in the name of his proprietary concern 'A. K. Saree Centre.' It was admitted in that case that the appellant-writ petitioner did not include the income derived by him from the aforesaid three proprietary concerns in his returns of total income filed in respect of the previous years relevant to the assessment years 1981-82 to 1985-86. On or about March, 7, 1986, a search was conducted by the income-tax authorities in exercise of powers vested in them under Section 132(1) of the Act, at the residential premises of the appellant-writ petitioner at P-2, Kalakar Street, Calcutta, as well as at the business premises of five different firms namely 'Jaree and Saree Stores', 'Saraf Saree Centre', 'Annapurna Textiles', 'Sanwalram Raj Kumar', and 'Gouri Shankar Saraf' at 212, Mahatma Gandhi Road, as well as at Ramkumar Rakshit Lane, Calcutta. In the course of the said search, certain jewellery and ornaments and a sum of Rs. 2,600 in cash were found in the bedroom of the appellant-writ petitioner. None of these items were seized by the income-tax authorities. On the same date, namely, March 7, 1986, the business premises of the partnership firm, Annapurna Textiles, Surat, of which the appellant writ petitioner was a partner in his capacity as karta of a Hindu undivided family was sealed by the income-tax authorities. Subsequently, on March 26, 1986, the seals on the said business premises of the said Annapurna Textiles, Surat, were removed and the searching officials came across certain cheque books and pay-in-slips in respect of the two bank accounts, namely, Current Account No. 253 with the State Bank of India in the name of Rachna Textiles and the Current Account No. 1469 with the Oriental Bank of Commerce in the name of A. K. Textiles. These two were the proprietary concerns of the appellant-writ petitioner. The income of these two proprietary businesses had not been disclosed by the appellant-writ petitioner in the income-tax returns filed by him. Thesecheque books and pay-in-slips were seized from the office of Annapurna Textiles and the fact of such seizure was noted in the panchnama drawn in the name of the said firm. On or about March 31, 1986, the appellant-writ petitioner filed revised returns of income and wealth under the amnesty scheme administered by the Central Board of Direct Taxes through its various circulars, bearing Nos. 423, 432, 439, 440, 441, 450, 451, 453, 456, 472 and 474. The Income-tax Officer completed both the income-tax and wealth-tax assessments of the appellant writ-petitioner, but did not grant the benefit of amnesty scheme to the assessee on the ground that the revised returns were filed after the search carried out by the authorities at the office and residential premises of the assessee and in the course of such search, certain documents relevant to the income and wealth now disclosed by the assessee had been duly seized. In the above fact-situation of the case, the point that arose for consideration before the Calcutta High Court was whether the assessee whose premises had been searched before the filing of the revised returns under the amnesty scheme was entitled to the benefits of the said scheme. Dealing with that question, the Calcutta High Court held (page 573) :
'It is an admitted fact that the assessee disclosed fully and truly his income and wealth in such revised returns and had also paid taxes in due time as provided under the amnesty scheme. Since the Department had not looked into the seized papers and had not carried out investigation prior to March 31, 1986, it cannot be said that by the mere fact of seizure, the tax authorities could be said to have even a prima facie belief that the concealment of income and wealth by the assessee had been detected. Even if there had been such prima facie belief, the existence of such belief could not deprive the assessee from claiming the immunity and benefits given under the amnesty scheme provided the assessee disclosed his true income and wealth in the revised returns and paid taxes based on such revised returns in due time as prescribed in the amnesty scheme.' It was further held (page 574) :
'On the facts and in the circumstances of this case, it cannot be said that the tax authorities had detected concealment merely by having seizedcertain books and papers a few days before the furnishing of revised returns by the assessee. In order to show that a concealment had already been detected, it was obligatory on the tax authorities to look into the seized books and documents, verify the entries therein with the income already disclosed by the assessee in his original returns and thereafter if the tax authorities had found that certain income, although found to be reflected in the seized books and records, had not been disclosed by the assessee in the original returns, it could have been said that the concealment had already been detected by the Department prior to the furnishing of revised returns. This is not the case here.'
18. As could be seen from the provisions of Section 273A of the Act, the Commissioner has the discretion to reduce or waive the amount of interest paid or payable under Sub-section (8) of Section 139 or Section 215 or Section 217 of the Act or penalty imposed or imposable under Section 273 of the Act provided the assessee has made voluntarily and in good faith the true disclosure of his income. As held by this court in Sujatha Rubbers' case : [1992]194ITR355(AP) the word 'voluntary' cannot be construed in isolation with reference to the general animus or state of mind of the assessee. Therefore, it becomes necessary for the Commissioner, before rejecting the application on the ground that the return filed by the assessee is not 'voluntary', to satisfy himself on the basis of the materials placed before him that it is reasonable to infer that, in all probability, but for the filing of the voluntary return, the assessee would have been subjected to penal action or adverse exposure. In Sujatha Rubbers' case : [1992]194ITR355(AP) , this court opined that mere fear on the part of the assessee, without ' anything more, cannot be a ground for not exercising the discretion conferred on the Commissioner under Section 273A of the Act and such fear must be traceable to the imminent or proximate exposure of the assessee to penal action, but for the filing of the voluntary return.
19. The Commissioner in the impugned order has stated that the disclosure made by the petitioners-assessees cannot be considered as voluntary and in good faith. In other words, according to the Commissioner, the disclosure made by the petitioner was not in good faith. The other requirement of Section 273A of the Act is that the full and true disclosure should also be in 'good faith'. The term 'good faith' is not defined under the Act but is defined under Section 3(22) of the General Clauses Act. Either under the General Clauses Act or in ordinary parlance, an act done in good faith means an act done honestly even if it is tainted with negligence or mistake. All that is required is that disclosure of income must be full and true according to the honest belief of the assessee. It is true, in order that a disclosure is termed as having been made in good faith, the same must be demonstrably honest. A disclosure which is made under the compulsion of a possible penalty or other proceedings cannot be termed honest or onemade in good faith, the underlying object of any such disclosure being not to come clean on the subject but to avoid the adverse consequences that may follow a non-disclosure. Accordingly, where an assessee discloses his income which he honestly believes to be true and full, it can be said that he has, in good faith, made a full and true disclosure of his income, within the meaning of the expression. In deciding the question of 'good faith', what comes into consideration is the intention of honesty and the absence of bad faith or mala fides. As such, what is necessary is that the assessee should have acted honestly in making the disclosure. In other words, he should not have been guilty of having acted dishonestly in making the disclosure.
20. This court in K. Ramulu and Bros. v. CIT : [1990]185ITR517(AP) and Jakhodia Bros. v. CIT : [1978]115ITR61(All) has opined that the fact that before making the disclosure, the conduct of the assessees had been dishonest or that he did not act in good faith is irrelevant for the purposes of applying these provisions of Section 273A. It is relevant to notice that the disclosure is made by an assessee under Section 275A for the purpose of getting the benefits provided therein. Therefore, the fact that in the past, the assessee did not make a full and true disclosure of his income and concealed the same is immaterial. In the premise of these well settled principles governing the concept of 'good faith and bad faith', the opinion of the Commissioner that the disclosure made by the assessees is not in good faith cannot be sustained. The Commissioner except stating that the disclosure is not in good faith has not stated in the impugned order the circumstances by force of which he could possibly arrive at such a conclusion on a question of fact. Therefore, the finding of the Commissioner that the disclosure was not in good faith cannot be considered to be a reasoned finding. As noticed supra, the power under Section 273A is quasi-judicial. It is now well settled law that where an authority makes an order in exercise of a quasi-judicial function, it must record its reasons in support of the order it makes. Every quasi-judicial order must be supported by reasons. As observed by the Supreme Court in Siemens Engg. and Mfg. Co. of India Ltd. v. Union of India, : AIR1976SC1785 , the rule requiring reasons to be given in support of an order is, like the principle of audi alteram partem, a basic principle of natural justice which must inform every quasi-judicial process and this rule must be observed in its proper spirit and mere pretence of compliance with it would not satisfy the requirement of law. It hardly requires any emphasis that a judicial or quasi-judicial order must be a speaking order, that is to say, it must give reasons for the conclusions arrived at. The least a quasi-judicial authority can do is to disclose its mind. The compulsion of disclosure guarantees consideration. The condition to give reasons introduces clarity and excludes or at any rate minimises arbitrariness and unreasonableness ; it gives satisfaction to the partyagainst whom the order is made ; and it also enables reviewing courts like the High Courts and the Supreme Court to keep the quasi-judicial authorities within their bounds in exercise of the power of judicial review. A reasoned order is a desirable condition of judicial disposal. If judicial or quasi-judicial authorities can make orders without giving reasons, the said power in the hands of unscrupulous or dishonest officers may turn out to be a potent weapon for abuse of power. But, if reasons for an order are to be given, it will be an effective restraint on such abuse, as the order, if its discloses extraneous or irrelevant considerations, will be subject to judicial scrutiny and correction. As held by the Supreme Court in Madhya Pradesh Industries Ltd. v. Union of India, : [1966]1SCR466 , a speaking order will at its best be a reasonable and at its worst be at least a plausible one and the public should not be deprived of this only safeguard. Looking from that angle also, the non-disclosure of reasons in support of the finding recorded by the Commissioner that the disclosure of the income by the assessees was not in good faith cannot be sustained in law.
21. Coming to the facts of this case, the Commissioner except stating that the disclosure was made subsequent to the search carried out in the premises of ACC Limited, Vijayawada, on December 21, 1996, has not referred to or considered or disclosed any material resting with him on the basis of which he could reasonably infer that, in all probability, but for the filing of the voluntary return, the assessee would have been subjected to penal action or adverse exposure. It is not the case of Income-tax Department that the disclosure made by the petitioners is not full or true. What has been stated by the Commissioner in paragraph 3 of the impugned order to reject the applications of the petitioners is an obvious fact. There is no controversy between the parties that admittedly the disclosures were made by the petitioners only on March 30, 1988, that is to say, after the search was conducted in the premises of ACC Limited on December 21, 1986. Secondly, it is also relevant to notice that the search was conducted on December 21, 1986, not in the premises of the firm of which the petitioners are the partners, but in the premises of ACC Limited, Vijayawada, a third party. That circumstance is also a mitigating circumstance in favour of the petitioners and this circumstance was not taken note of by the Commissioner. In the counter-affidavit, it is stated that the information gathered in the course of the search conducted on December 21, 1986, revealed that the sale price of cement had been collected through bank drafts by some of the employees of ACC Limited. The petitioners' firm was engaged, at the relevant point of time, only in transportation of cement and not in sale and purchase of the same. It is trite to state that the Commissioner while discharging his function under Section 273A of the Act performs a quasi-judicial function. Therefore, the law compels him to take into account all relevant factors and eschew irrelevant factors in the decision-making. We are of the considered opinion that in passing the impugned order rejecting the applications of the petitioners filed under Section 273A of the Act, the Commissioner has not taken into account the above noted factors and the law laid down by this court in Sujatha Rubbers' case : [1992]194ITR355(AP) . The impugned order does not reflect due application of mind on the part of the Commissioner to the facts of the case. Since the proceedings under Section 273A are quasi-judicial, it is incumbent on the Commissioner to apply his mind to all the relevant facts to satisfy himself whether the return has been filed voluntarily and in good faith making a full and true disclosure, whether the assessee has cooperated with the department in concluding the assessment and whether he has paid the tax or made satisfactory arrangement for the payment thereof or, in other words, to satisfy himself as to the existence of the ingredients of the provision. The Commissioner cannot take into consideration factors extraneous to the provision or factors not germane to the decision-making. However, although this court under Article 226 may interfere with the order of the Commissioner made under Section 273A without properly taking into consideration the provisions of Section 273A in rejecting the application or where the order has been passed without applying his mind to the relevant provisions of the statute and the facts or where the application has been rejected on untenable grounds or where the Commissioner refused to exercise discretion on irrelevant considerations, it can only, in the first instance, quash the order made by the Commissioner and it cannot substitute its own opinion in place of the opinion formed by the Commissioner. It is for the Commissioner to decide on the facts and circumstances of a particular case whether waiver in entirety or reduction alone is warranted. In that view of the matter, we think it appropriate that the Commissioner should reconsider the applications of the petitioners afresh after taking into account the relevant factors germane to the decision-making.
22. In the result and for the foregoing reasons, we allow the writ petitions and quash the impugned order No. 21/W. Ptn. 273A/93-94-CIT(C) dated August 10, 1993, passed by the second respondent. The proceedings shall stand remitted to the second respondent-Commissioner with a direction to reconsider the applications of the petitioners de novo in the light of this judgment and the judgment of this court in Sujatha Rubbers' case : [1992]194ITR355(AP) and pass appropriate orders in accordance with law. Adjustment or refund of the monies deposited by the petitioners in pursuance of the interim orders of this court shall await the decision of the second respondent-Commissioner in pursuance of this order. There shall be no order as to costs.