S.D. Aggarwala, C.J.
1. This and the connected four appeals, i.e., Appeals Nos. 1018, 1015, 1016 and 1022 all of 1992 arise out of the judgment of the learned single judge dated April 24, 1992, in Writ Petitions Nos. 10468, 12796, 12797, 12802 and 13399 of 1990 (see ).
2. The facts involved in all these writ petitions being similar, the learned single judge decided the same by a common judgment. The learned single judge also treated Writ Petition No. 10468 of 1990 as the leading case.
3. Writ Petition No. 10468 was filed by R. P. Handa. He is the proprietor of Messrs. Sona Steel Industries, an export house recognised by the Government of India, Ministry of Commerce, New Delhi. It is situate in Ludhiana in the State of Punjab.
4. On January 23, 1985, in connection with income-tax purposes, a search and seizure operation was conducted at the residence and factory premises of the petitioner. The search and seizure operation continued for three days up to January 25, 1985. A large number of books of account and documents were seized by the income-tax authorities.
5. Section 271 of the Income-tax Act, 1961 (for short, 'the Act'), provides for levy of penalty for concealment of income, etc. Sub-clause (c) of Sub-section (1) of Section 271 of the Act provides that, if the Assessing Officer or the Deputy Commissioner (Appeals) or the Commissioner (Appeals), in the course of any proceedings under this Act is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty in addition to any tax payable by him, a sum which shall not exceed two times the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income. In this section, instead of 'Assessing Officer', the words 'Income-tax Officer' and in place of the words 'Deputy Commissioner (Appeals)', the words 'Appellate Assistant Commissioner' were in existence at the time when the search and seizure operation took place in regard to the petitioner.
6. Section 273A of the Act gives power to the income-tax authorities to reduce or waive penalty, etc., in certain cases. Explanation 2 to Sub-section (1) of Section 273A of the Act was inserted by the Taxation Laws (Amendment) Act with effect from October 1, 1984. This Explanation was omitted by the Finance Act, 1985, with effect from May 24, 1985. At the time when the search and seizure of the petitioner's residence and factory premises took place, this Explanation 2 was in existence. It remained in existence only for a period of about eight months. It is this Explanation 2 which is the subject-matter of interpretation in the present appeal. It is quoted below :
'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 Section 132 and within 15 days of such seizure, the person makes a full and true disclosure of his income to the Commissioner, such person shall, for the purposes of Clause (b) of this sub-section, be deemed to have made, prior to the detection by the Income-tax Officer 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.'
7. Section 273A of the Act, as already stated above, gives power to the income-tax authorities to reduce or waive penalty, etc., in certain cases. At the relevant time, namely, in the year 1984-85, it read as follows :
'273A. (1) Notwithstanding anything contained in this Act, the Commissioner 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 Clause (i) of Sub-section (1) of Section 271 for failure, without reasonable cause, to furnish the return of total income which he was required to furnish under Sub-section (1) of Section 139 ; or
(ii) reduce or waive the amount of penalty imposed or imposable on a person under Clause (iii) of Sub-section (1) of Section 271 ; or
(iii) reduce or waive the amount of interest paid or payable under Sub-section (8) of Section 139 of Section 215 or Section 217 or the penalty imposed or imposable under Section 273,
if he is satisfied that such person -
(a) in the case referred to in Clause (i), has prior to the issue of a notice to him under Sub-section (2) of Section 139, voluntarily and in good faith made full and true disclosure of his income ;
(b) in the case referred to in Clause (ii), has, prior to the detection by the Income-tax Officer, 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 Clause (iii), has, prior to the issue of a notice to him under Sub-section (2) of Section 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 Section 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 Clauses (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.--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 Clause (c) of Sub-section (1) of Section 271.
(2) Notwithstanding anything contained in Sub-section (1),--
(a) if in a case the penalty imposed or imposable under clause (i) of sub-section (1) of Section 271 or the minimum penalty imposable under Section 273 for the relevant assessment year, or, where such disclosure relates to more than one assessment year, the aggregate of the penalty imposed or imposable under the said clause or if the minimum penalty imposable under the said section for those years, exceeds a sum of one hundred thousand rupees, or
(b) if in a case falling under Clause (c) of Sub-section (1) of Section 271, the amount of income in respect of which the penalty is imposed or imposable for the relevant assessment year, or, where such disclosure relates to more than one assessment year, the aggregate amount of such income for those years, exceeds a sum of five hundred thousand rupees,
no order reducing or waiving the penalty under Sub-section (1) shall be made by the Commissioner except with the previous approval of the Board.
(3) Where an order has been made under Sub-section (1) in favour of any person, whether such order relates to one or more assessment years, he shall not be entitled to any relief under this section in relation to any other assessment year at any time after the making of such order.
(4) Without prejudice to the powers conferred on him by any other provision of this Act, the Commissioner may, on an application made in this behalf by an assessee, and after recording his reasons for so doing, reduce or waive the amount of any penalty payable by the assessee under this Act or stay or compound any proceeding for the recovery of any such amount, if he is satisfied that -
(i) to do otherwise would cause genuine hardship to the assessee, having regard to the circumstances of the case ; and
(ii) the assessee has co-operated in any enquiry relating to the assessment or any proceeding for the recovery of any amount due from him :
Provided that where the amount of any penalty payable under this Act or, where such application relates to more than one penalty, the aggregate amount of such penalties exceeds one hundred thousand rupees, no order reducing or waiving the amount or compounding any proceeding for its recovery under this sub-section shall be made by the Commissioner except with the previous approval of the Board. (5) Every order made under this section shall be final and shall not be called into question by any court or any other authority.'
8. The abovesaid section provides that the Commissioner may, in his discretion, whether on his own motion or otherwise reduce or waive the amount of penalty imposed or imposable on a person under Clause (iii) of Sub-section (1) of Section 271 of the Act, if he is satisfied that such person has, prior to the detection by the Income-tax Officer, of the concealment of particulars of income or of the inaccuracy of the particulars furnished in respect of such income, voluntarily and in good faith made full and true disclosure of such particulars. This would be clear on a reading of Section 273A(1) (i), (ii), (iii)(b) of the Act. Clause (b) of Sub-section (2) of the above section provides that, if the amount of income in respect of which the penalty is imposed or imposable for the relevant assessment year, or, where such disclosure relates to more than one assessment year, the aggregate amount of such income for those years exceeds a sum of five hundred thousand rupees, no order reducing or waiving the penalty under Sub-section (1) shall be made by the Commissioner except with the previous approval of the Board. It is, therefore, clear that, if the Commissioner wanted to reduce or waive penalty which aggregated to more than five lakhs of rupees, then, in such a case, no order reducing or waiving the penalty could be made by the Commissioner except with the previous approval of the Board. Out of the five writ petitions against the judgments of which the present appeals have been filed, the penalty amount was above five lakh rupees only in Writ Petition. No. 10468 of 1990. In the other writ petitions, the penalty amount was not more than five lakh rupees and as such no approval of the Board was required by the Commissioner and the Commissioner had the power to reduce or waive the penalty.
9. As already stated above, the search and seizure at the residence and factory premises of R. P. Handa took place from January 23, 1985, to January 25, 1985. In view of Explanation 2 to Section 273A of the Act which has been quoted above, R.P. Handa, on February 2, 1985, within 15 days of the search operation, filed a petition before the Commissioner making a full and true disclosure of the movable and immovable assets held by him. This petition has been attached as annexure P-1 to the letters patent appeal.
10. The dispute in the present appeal relates to the assessment years 1979-80 to 1985-86. After the assessment orders were made, the Inspecting Assistant Commissioner, Patiala, submitted a report to the Commissioner of Income-tax, Patiala, recommending that the penalty imposable on the petitioner should be waived in view of his conduct before the income-tax authorities as he has made complete disclosure of his income. The Chief Commissioner of Income-tax, vide report dated October 26/27, 1987, wrote to the Board of Direct Taxes, New Delhi, recommending that, in view of the co-operation shown by the assessee and due to the fact that the assessee paid the entire tax immediately, he should be given the benefit of waiver of 100 per cent. penalty. This report was submitted to the Board in view of the statutory requirement of Sub-section (2)(b) of Section 273A of the Act. The Board, however, by its letter dated November 13, 1987, declined to accord its approval. The approval was declined as the Board was of the view that the disclosure made by the assessee for the assessment years under consideration was neither true nor full and as such the assessee was not entitled to the benefit of Explanation 2 to Section 273A of the Act. The Board, in its letter dated November 13, 1987, specifically wrote that the income finally assessed in the relevant assessment years exceeds the income disclosed within 15 days of the search by a substantial margin and the assessed income also exceeds the income disclosed in the revised return filed more than one year after the search, and as such it was not a true and full disclosure of the assessee's income. After this order was passed by the Board, a review application was filed by the assessee which was also dismissed by the Board and the petitioner/respondent was communicated the said decision by letter of the Commissioner of Income-tax, Patiala, dated April 25/26, 1990. The petitioner challenged the orders dated November 13, 1987, annexure P-8, and dated April 25/26, 1990, annexure P-11, by means of the writ petition which had been allowed by the learned single judge.
11. Learned counsel for the appellant, the Department of Income-tax, has urged that the petitioner/respondent not having made a full and true disclosure of the income to the Commissioner within 15 days of the search and seizure. Explanation 2 quoted above is not applicable in the instant case and as such he is not entitled to the waiver of penalty.
12. Learned counsel for the petitioner/respondent has, however, vehemently urged that, in view of the facts and circumstances of this case, it is a clear case where the petitioner/respondent has made full and true disclosure of his income and his case squarely falls under Explanation 2 to Section 273A of the Act and, consequently, the petitioner/respondent is entitled to the waiver of penalty imposable upon him.
13. To determine the submissions raised by learned counsel for the parties, it is necessary to examine the scope and effect of Explanation 2 to Section 273A of the Act. It is obvious that Explanation 2 was enacted to give benefit to an assessee in certain circumstances and has, therefore, to be construed liberally.
14. It is apparent from a reading of Explanation 2 that this Explanation was a short-lived provision added by the Legislature which remained effective only between October 1, 1984, and May 24, 1985. It was an Explanation added for a specific purpose to cater to cases where search and seizure had taken place and books of account, other documents, money, bullion, jewellery and other valuable articles or things belonging to a person are seized under Section 132 of the Act. This Explanation on the face of it applies only to cases of search and seizure where the books of account and other documents have been seized by the income-tax authorities and are in their possession. If the books of account and other documents are seized and are in the possession of the income-tax authorities, it is impossible for any assessee to make a full and true disclosure of his income in terms of figures. It is not possible for any assessee to remember accurately the income from his business unless he has an opportunity to examine the books of account and other documents. In the circumstances, Explanation 2 cannot be interpreted to mean that whenever there is discrepancy between the figure supplied by an assessee and the actual assessment made as well as a difference between the revised return filed by the assessee and the actual assessment made, then, a person could not be said to have made a true and full disclosure of his income. If the making of a full and true disclosure of the income depends upon the figures supplied by the assessee and the figure actually assessed by the Income-tax Department, in our opinion, the very purpose of Explanation 2 to Section 273A of the Act would be defeated and there would be no case where an assessee could take the benefit of this Explanation. The words 'voluntarily and in good faith' in this Explanation are also significant. If the entire benefit under the Explanation was to be dependent on the figures given by the assessee, the question of good faith would not have arisen. This has to be given some meaning. This is indicative of the fact that, even if the figures given by the assessee do not tally at the time of the final assessment, he cannot be denied the benefit of the Explanation. In our opinion, consequently, the full and true disclosure of the income in a case where the books of account and other documents have been seized by the income-tax authorities under Section 132 of the Act, would be available to a person who places all the books of account and other documents in his possession before the income-tax authorities in good faith and to the best of his knowledge in order to enable the income-tax authorities to make assessment of his income. If, however, he conceals his books of account and other documents and does not bona fide and in good faith place all the documents in his possession before the income-tax authorities, then, it may be a case where it can be said that he has not made a true and full disclosure of his income. The test in such a case would be the bona fides of the assessee as to whether he has placed all the books of account and documents before the income-tax authorities or not. The test cannot be the difference between the actual figures given by the assessee and the actual assessment order made because, as already observed above, when an assessee docs not have books of account and other documents and those are in the possession of the income-tax authorities, it is not possible for him to give the actual figure of his income. We have consequently to see in the instant case as to whether the assessee bona fide made a true and full disclosure of the income in the sense that he produced all the books of account and other documents before the income-tax authorities in order to enable them to assess the income on which tax would be payable by the assessee.
15. In the instant case, the assessee, in his petition dated February 2, 1985, annexure P-1, attached to the writ petition, made under Explanation 2 to Section 273A of the Act, categorically stated that in spite of repeated requests, he had not been allowed inspection of his books of account and documents and that, in the absence of books of account and documents, it was not possible to make full and true disclosure. He further specifically stated that he was making the disclosure most faithfully and honestly by straining his memory without the help of the documents, account books, etc., lying in the custody of the Income-tax Department. He further stated that, since the petition was being based solely on memory and estimate, the inaccuracy on the higher or lower side to some extent by slip of memory cannot be ruled out though he had tried his best to cover all the possible issues relating to the taxability of income or otherwise. He further stated that in case it was found after discussion that some element of income could be added or reduced, as the case may be, the same may kindly be given effect to in this application keeping in view the bona fides of the petitioner.
16. In this case, it is significant to note that the Inspecting Assistant Commissioner, in his report to the Commissioner of Income-tax, Patiala, recommended the case for waiver of penalty and stated in paragraphs Nos. 6 and 7 of the report as follows :
'6, From time to time, during the course of assessment proceedings, the Income-tax Officer made detailed investigations which involved enquiries from banks, various authorities like Steel Authority of India and Controller of Exports and Imports and the parties with whom the assessee had business transactions. The assessee extended full help in the matter of enquiries. His attitude was never negative. He did not try to fabricate evidence or to hamper the process of investigation. The intention of the assessee after the search was to make a complete disclosure of his income. As such, as and when the Income-tax Officer detected any discrepancy or inaccuracy, the assessee immediately agreed to surrender the same. The assessment proceedings require his personal presence daily for almost two months. The assessee never faltered and his attempt is to make a clean breast of all his income and have amicable relations with the Department. The extent of his co-operation is evident from the fact that he deposited tax (excluding interest) within three days of the completion of assessments.
7. Since the assessee has been co-operative and well intentioned, a favourable view may be taken of this petition. It will not be out of place to mention here that the assessee has agreed to the entire additions and has not filed any appeal. Moreover, the additions have been made not on the basis of seized material, but on the basis of detailed independent enquiries/investigations made by the Income-tax Officer.'
17. The Chief Commissioner of Income-tax also, in his report to the Board in the opening paragraph, stated that the assessee had submitted his application within 15 days of the search and since the assessee was not allowed any access to the seized books of account, the quantification of the income in the application was not complete. However, the assessee had claimed that any further amount which was found by the Income-tax Officer will also be surrendered by him for assessment.
18. The Chief Commissioner of Income-tax agreed with the view of the Inspecting Assistant Commissioner that the assessee, due to his co-operation and due to the fact that he paid the entire taxes immediately, should be given the benefit of waiver of 100 per cent. penalty.
19. From the facts and circumstances of this case, as stated, it is apparent that the assessee had completely co-operated with the income-tax authorities in coming to a correct decision in regard to his income on which he had to pay income-tax. The assessee not only co-operated with the income-tax authorities but also paid the entire tax as and when demanded. He did not even file appeals against the assessment orders. He did not conceal any books of account or other documents from the income-tax authorities and as such it is a clear case which would come within the purview of Explanation 2 to Section 273A of the Income-tax Act and we accordingly hold that, in the facts and circumstances of this case, the assessee did make a full and true disclosure of his income to the Commissioner of Income-tax within Explanation 2 to Section 273A of the Act.
20. In view of the above, in our opinion, the view taken by the learned single judge is correct and does not require interference by this court in appeal. This and the connected four appeals are accordingly dismissed. No costs.