Nirmal Udyog Co. Vs. Assistant Commissioner of Income - Court Judgment

Excerpt:
1. all these appeals by the 20 appellants are against the penalty orders under s. 271(1)(c) and the facts, circumstances and grounds being the same; therefore, all these appeals of 20 appellants which is known as 'jhunjhunwala group of cases' are heard and decided by this common order.2. before the start of the arguments, it was agreed to by the parties that the arguments, counter-arguments and the decisions may be with respect to the decision in the case of nirmal kumar p. jhunjhunwala, in whose case, the loading order has been passed and that decision will govern all these appeals.3. the detailed facts, as are relevant to various submissions made by the parties, through, are mentioned at the relevant place, yet, we would like to extract a brief before we proceed to discuss and decide.....

Judgment:
1. All these appeals by the 20 appellants are against the penalty orders under s. 271(1)(c) and the facts, circumstances and grounds being the same; therefore, all these appeals of 20 appellants which is known as 'Jhunjhunwala Group of cases' are heard and decided by this common order.

2. Before the start of the arguments, it was agreed to by the parties that the arguments, counter-arguments and the decisions may be with respect to the decision in the case of Nirmal Kumar P. Jhunjhunwala, in whose case, the loading order has been passed and that decision will govern all these appeals.

3. The detailed facts, as are relevant to various submissions made by the parties, through, are mentioned at the relevant place, yet, we would like to extract a brief before we proceed to discuss and decide various solutions. The facts of the case are that as a result of search warrants and subsequent authorisations dt. 19th August, 1986 in the name of 4 individuals-(1) Purshottamdas F. Jhunjhunwala, (2) Kishorilal F. Jhunjhunwala, (3) Niranjan P. Jhunjhunwala, and (4) Nirmal P.Jhunjhunwala. Search was conducted at the premises called Giri Kunj Paliram Road, Bombay-78, on 22nd August, 1986. During the course of search, Kishorilal F. Jhunjhunwala disclosed income to the tune of Rs. 1,76,29,155 details of which have been extracted at p. .... of this order, as is covered from his statements recorded under s. 132(4). As a result of the search, certain documents and one diary called 'Boston Diary' and following assets/things/valuables were seized : As per 4 Panchnamas in the case of persons in whose names search warrants were issued (copies of which have been furnished by the assessee), the person-wise seizure was as under : In the case of Nirmal P. Jhunjhunwala, certain papers/documents, files were seized and there was no seizure of any In the case of Purshottamdas Jhunjhunwala, there was seizure of some jewellery. As per col. 5(b) of the Panchnama jewellery whose value tallied with the valuation got made by the authorised officer was not seized.

In the case of Kishorilal Jhunjhunwala, cash and some jewellery, etc., were seized, but jewellery which tallied with the valuation got done by the AO was not seized. In addition to these, 2 diaries, one note-book and some loose papers files were also seized. In the case of Niranjan P. Jhunjhunwala, some cash and one loose paper file was seized, jewellery found was not seized.

After the search, the group wrote letters to the ADI (Inv.) and CIT, Bombay City VIII, Bombay, on 28th August, 1986, and 7th November, 1986, respectively showing the intention of the aforesaid assessees to make disclosure under the Disclosure Scheme, 1986, generally known as Amnesty Scheme. Thereafter, all the aforesaid assessees made a petition extracted below, in which a total amount of Rs. 2,29,90,529 was disclosed in the hands of various persons, HUFs, firms of this group in various assessment years ranging from 1970-71 to 1987-88.

Extract of Disclosure petition dt. 27th January, 1987, to CIT City VIII, Bombay : Sub : Petition under s. 273A of the IT Act and 18B of WT Act, 1957.

Under the instruction of our clients, the Jhunjhunwala group of assessees we have to submit as under : 1. Out clients-except Rukmani Chemicals (P) Ltd. and Purshottamdas F. Jhunjhunwala-are assessed to IT with 1st ITO C-III Ward, Bombay.

2. An action under s. 132 of the IT Act was taken out against our clients on 22nd August, 1986.

3. Thereafter, for the first time in the 2nd and 3rd week of November, 1986, our clients were supplied with xerox copies of the papers seized so as to enable them to prepare necessary petitions.

4. On receipt of xerox copies of papers seized, our clients have worked out a balance sheet as on 22nd August, 1986 (A date of an action under s. 132 of the Act).

5. The total of investments made as on 22nd August, 1986, is a sum of Rs. 1,44,57,923. There were huge liabilities incurred by our clients for the investment referred to above.

6. Since our clients had submitted in a statement under section ....

of the Act, that they shall not claim the liabilities against the investments, that they shall offer for taxation a sum of Rs. 1,44,57,923.

7. From xerox copy of p. 5 of seized papers, it will appear that a sum of Rs. 67,27,966 is shown to have been received under the head "K.F." during the previous years to asst. yrs. 1970-71 to 1987-88 (family members of Jhunjhunwala).

8. A sum of Rs. 13,71,933 is shown to have been received under the head "P.F." during the previous years to asst. yrs. 1970-71 to 1987-88.

9. Similarly, a sum of Rs. 6,66,889 is shown to have been received under the head 'Miscellaneous' during the previous years to asst.

yrs. 1970-71 to 1987-88. (This sum of Rs. 6,66,889 includes a sum of Rs. 78,182 being the amounts received by P. F. Jhunjhunwala as perquisites either tax-free or taxed in the case of P. F. Jhunjhunwala in his hands.

10. Our clients shall offer for taxation this sum of Rs. 86,88,606 (Rs. 67,27,966 + Rs. 13,71,933 + Rs. 6,66,889 - Rs. 78,182).

11. Our clients were in receipt of a sum of Rs. 1,56,000 (forming part of B/S as on 22nd August, 1986) from Shakti Housing & Development Corpn. Ltd. 12. Shakti Housing & Development Corpn. Ltd., have submitted a petition under s. 173A of the IT Act adding this sum of Rs. 1,55,000 in their hands. The said petition is submitted to the CIT, B.C. III Bombay.

13. As such, our clients shall declare an additional income of Rs. 2,29,90,529.

14. As regards the place of assessments of this sum of Rs. 2,29,90,529, we have to say and submit as under : A. The group of firms and the individuals had made borrowings from their parties totalling to a sum of Rs. 54,15,000. This included the loans borrowed by the two trusts as under :Rani Sati Sevashram 3,15,000Shree Shankar Sevashram 3,50,000 ------------- B. This sum of Rs. 6,65,000 will be declared by the individuals and a sum of Rs. 47,50,000 (Rs. 54,15,000-Rs. 6,65,000) will be declared by the respective firms and the borrowers of Jhunjhunwala group.

C. The members of Jhunjhunwala group and the firms have purchased and sold immovable properties. They have earned by way of capital gain a sum of Rs. 33,01,521, which amount will be declared by the respective firms as individuals as capital gains on purchase and sale of properties. (please see pp. 5 & 6).

D. This leaves a balance of Rs. 1,49,40,733 (Rs. 2,29,90,529 - Rs. 47,50,000 - Rs. 33,01,521 which members of J. group shall declare in their personal assessments. (Please see pp. 7 & 8).

E. Each firm and the member of J group shall submit individual petitions along with the returns of income and wealth. These petitions will be submitted to the Department on or before 15th March, 1987.

15. As regards payment of taxes, they shall endeavour to pay all the taxes due and payable on account of this petition on or before 15th March, 1987.

16. To liquidate the tax liability, our clients shall in turn request the Department : (iii) shall permit the sale of the assets retained vide orders under s. 132(5) of the Act.

(2) commensurate with the expenses incurred on household expenses, marriages, or purchase of jewelleries, charity and donations.

18. We submit to your honour on behalf of our clients that at the time of an action under s. 132 of the Act, our client had submitted in the statements recorded under s. 132(A) of the Act, that they shall submit full and true disclosures and shall pay the taxes.

19. Under the circumstances of the case, we request your honour to be kind enough not to initiate any proceedings for levy of penalty or institute any prosecution.

As the assessments upto asst. yr. 1985-86 in the cases of appellants who were already assessee assessments had been completed by the time disclosure was made, so the revised returns in those cases and fresh returns in other cases and revised returns for asst. yr. 1986-87, based on disclosure petitions were furnished in the case of the persons of the Group on 3rd March, 1987, under the Amnesty Scheme.

The disclosure was discussed by the CIT with the assessee and ultimately the matter was finalised as per so-called Discussion Note, details of which are extracted wherever necessary.

During the course of consideration of disclosure, the CIT had required the assessee to disclose the further amount of more than Rs. 20 lakhs to which the assessee had agreed and the reason for agreeing to this disclosure of this additional amount have been given in Para III(ii) of assessee's letter dt. 5th March, 1990, placed at p. 26 of the assessee paper-book No. 1. Assessments in all these cases were completed on the basis returns filed by the appellants which were in accordance with the disclosure and the share of amount out of additional disclosed amount.

While completing the assessments, the Asstt. CIT initiated the penalty proceedings under s. 271(1)(c) and in consequence of such initiation, imposed penalties in all these cases. While passing the penalty order, the Asstt. CIT in last para of the said order has stated that while granting spreadover the CIT has directed that penalty proceedings should be initiated against the assessee.

All the appellants went in appeal before the CIT(A) but failed as the orders of the Asstt. CIT were confirmed. Aggrieved with the order of the CIT(A), the appellant came in appeal before the Tribunal. The Tribunal vide its order dt. 26th November, 1991, dismissed all the appeals, but later on, as per order dt. 20th April, 1995, the Tribunal's order dismissing the appeals was recalled for fresh hearing.

We have heard the counsel for the assessee as well as the learned Departmental Representative in detail and proceed to decide the various submissions/grounds of appeal/pleadings as hereinafter.

First of all, we would like to deal with the appellant's ground relating to the claim that the returns of income for the asst. yrs.

1970-71 to 1986-87 in the case of all the 20 appellants furnished on 3rd March, 1987, were as a result of voluntary disclosure which they were entitled to make under Circular Nos. 423, 432, 439, 440, 441, 451, 472, 475 (hereinafter called the Amnesty Scheme) and, therefore, they were entitled to immunity from penalty under s. 271(1)(c) of the IT Act, 1961.

4. When the assessee's counsel sought to raise this ground, the learned Departmental Representative first tried to raise some objections against raising these grounds, but later on, in view of the reliance by the assessee's counsel on the decisions reported in Jaikishan Gopikishan & Sons vs. CIT (1989) 178 ITR 481 (MP), CIT vs. Cellulose Products of India Ltd. (1985) 151 ITR 499 (Guj) and CIT vs. Scindia Steam Navigation Co. Ltd. (1961) 42 ITR 589 (SC) and the submissions that this ground was not a fresh ground as the same was raised before the Asstt. CIT even before filing of the revised returns and it has been duly acknowledged by the Addl. Director of Income-tax as well as the CIT(A). In support of this submission, the assessee's counsel referred to various letters written by the appellant to the Addl.

Director of Income-tax and CIT, copies of which have been filed before us, last but one para at page No. 3 of the penalty order, and top sentence at page No. 5 of the order of the CIT(A). From these documents, he submitted that it is very much clear that the revised returns were furnished as a result of disclosure under the Amnesty Scheme, consequently, the learned Departmental Representative withdrew his objections.

After considering the submissions and the fact that it was an admitted fact that the issue relating to assessee's claim of immunity under the Amnesty Scheme was raised during the penalty proceedings before the Asstt. CIT as well as before the CIT(A), both of whom had duly taken cognizance of the same [last but one para at p. 3 of the penalty order and top sentence at p. 5 of the order of the CIT(A)], in view of decisions relied upon by the counsel for the assessee, and no objection by the Departmental Representative, we are of the opinion that the assessee can raise the issue even at this stage. Even otherwise, the circulars under which the assessee is claiming the benefit are of benevolent nature and, therefore, claim under such circulars can be made even before the Tribunal. In this respect, we would like to refer to the decision in the case of Jaikishan Gopikishan & Sons (supra), relied upon by the assessee's counsel. In this decision, the Hon'ble Madhya Pradesh High Court has held that circulars issued by the CBDT are binding on all officers of the IT Department. Benevolent circulars are in the nature of administrative relief and they assist the assessee. They supplant the law and do not supplement it. Even if circulars are relied on for the first time before the High Court during the course of hearing, the assessee will be entitled to the benefit of the circular. The Court is bound to take note of the circular. The relevant para from the head note is reproduced hereunder : "Circular issued by the CBDT are binding on all officers of the IT Department. Benevolent circulars are in the nature of administrative relief and they assist the assessee. They supplant the law and do not supplement it. Even if circulars are relied on for the first time before the High Court during the course of hearing, the assessee will be entitled to the benefit of the circulars. The Court is bound to take note of the circular." In view of the aforesaid facts and circumstances of the case, we are of the view that firstly, the assessee's claim for immunity under the Amnesty Scheme is not a fresh claim and even if it is considered to have been made for the first time, then also, the Tribunal is dutybound to take cognisance of the same and decide the issue in the light of those circulars.

5. Coming to the merits of the assessee's claim under the Amnesty Scheme, the counsel for the assessee submitted that Amnesty Scheme was available upto 31st March, 1987, and the revised return making the disclosure of amounts representing expenses and investments were filed on 3rd March, 1987, so, the benefits of Amnesty Scheme were very much available to the appellants. He further submitted that as far as cases of 16 (sixteen) appellants other than Purshottam F. Jhunjhunwala, Kishorilal R. Jhunjhunwala, Niranjan P. Jhunjhunwala and Nirmal P.Jhunjhunwala were concerned, there was neither any search in any of these 16 (sixteen) appellants nor was any seizure in their hands. To clarify this aspect a little further, he submitted that search warrants were only in case of the abovementioned 4 individuals, namely; (1) Purshottam F. Jhunjhunwala, (2) Kishorilal R. Jhunjhunwala, (3) Niranjan P. Jhunjhunwala and (4) Nirmal P. Jhunjhunwala. From the copies of Panchnamas filed before us, he further submitted that out of these 4 appellants no valuables such as cash, jewellery, ornaments or any other asset were found in the case of Nirmal P. Jhunjhunwala and there was no seizure in his case. As regards to other three, he submitted that : (i) in case of Purshottam F. Jhunjhunwala, most of the jewellery found was not seized. A part of the jewellery was seized and that too because of difference in valuation; (ii) in case of Kishorilal R. Jhunjhunwala, some cash and a part of jewellery found were seized, whereas most of the jewellery found was not seized; and (iii) in case of Niranjan P. Jhunjhunwala, only cash was seized whereas whole of the jewellery found was not seized.

He further submitted that during the course of search, the jewellery found in all these 3 cases was claimed by them to have been already disclosed before the IT Department in their respective wealth-tax assessments. The authorised officer got the jewellery valued during the search itself and the jewellery whose value was found in accordance with the statement of the appellants was not seized, whereas part of the jewellery was seized only because of difference in valuation. To support this plea, he referred to the noting in col. 5(b) of the Panchnama in all the aforesaid 3 cases which reads as "jewellery found but not seized as per valuation report". The assessee's counsel further submitted that the cases of all these 4 appellants (in whose case action under s. 132 was taken) were also covered by the Amnesty Scheme, because; (i) in case of Nirmal P. Jhunjhunwala, as is clear from col. 5(a) and (b) of the Panchnama in his case, neither any concealed income or asset was found nor there was any seizure; and (ii) as regards to cases of other three named hereinbefore, he submitted that as per answers to various questions given in the Circular No. 451 of the CBDT, dt. 17th February, 1986, it is very much clear that the immunity was available even in search cases though subject to one exception that the disclosed asset or income should not have been a matter of 'seizure'. In other words, he submitted that if some asset or income had been found in search and had been seized, then, disclosure of those seized assets or income was not covered by the Amnesty Scheme. He, therefore, submitted that as far as the cases of these 3 appellants are concerned, the disclosure was on account of expenses and investments during the relevant years and none of them being the subject-matter of seizure, the prohibition mentioned in Circular No. 451 was not applicable. Explaining further, he submitted that the disclosed income in all these cases was never the subject-matter of seizure and, therefore, the immunity under the Amnesty Scheme was available.

The counsel for the assessee further went on to interpret the effect of answer to question Nos. 1, 7, 19, 12 and 30 of the Circular Nos.

451 which are reproduced as under : Q.1 : What will be the procedure required to be followed by the assessee who wants to declare income or wealth in respect of the past years (a) in case where the assessments pertaining to those years are already completed; (b) in case where the assessments in respect of those years are pending Ans. : In case where the assessments are already completed, the taxpayer should approach the concerned CIT with the full disclosure of the amounts of income and/or wealth concealed in various years and should also file returns for the relevant years. He should also produce evidence of payment of taxes before 31st March, 1986. The filing of the returns will be regularised by issue of formal notices under s. 148 of the IT Act/s. 17 of the WT Act. In cases where the assessments are pending, the taxpayer should file revised return before the ITO along with evidence of payment of taxes.

Q.7 : Where the investigations in the case of persons other than the assessee indicate concealment of income by the assessee and the assessee makes a true and full disclosure of his income, would be entitled to immunity under these circulars Q. 19 : Kindly clarify the expression "before detection by the Department "? Ans. : If the ITO has already found material to show that there has been concealment, that would mean the Department has detected the concealment. If the ITO only had prima facie belief, that would not mean concealment has been detected.

Q. 12 : Can immunity given by the circulars be availed of by assessees whose premises have been searched by the tax authorities Q. 30 : Whether, an assessee could make a declaration in respect of assets or income which is not the subject-matter of seizure Ans. : Yes, if it has not been already found out in the course of the search.

From answer to question No. 1, he submitted that the scheme was available up to asst. yr. 1986-87 irrespective of the fact that as to whether the assessment for those years had already been completed or not. Elaborating further, he submitted that upto asst. yr.

1985-86, though assessments had already been completed, yet the benefit of schemes were available. For asst. yr. 1986-87, no assessment was completed and, therefore, the revised return was automatic under the Amnesty Scheme. He further submitted that by the time, the disclosure was made, the Department had not detected any concealment. To support this, first, he interpreted the intention of answer to question No. 19, where it has been specifically stated that "only had prima facie belief will not amount to detection". He further submitted that the very fact that in spite of admission by Kishorilal Jhunjhunwala in his statement during the search and offering certain amount for taxation in the hands of himself, Niranjan Jhunjhunwala, Jhunjhunwala & Co. and Sree Shakti Housing Development (P) Ltd. for asst. yrs. 1986-87 and 1987-88, the Department instead of taking action or any effort to tax those amounts in the hands of these assessees and in asst. yrs. 1986-87 and 1987-88, accepted the spreadover of the amounts to be disclosed in asst. yrs. 1970-71 to 1986-87 and in the hands of 21 (twenty one) assessees, clearly leads to prove that the Department had not detected any concealed income because had the Department detected any concealment then there was no reason for either not taking any action under s. 147 or accepting the disclosure in the hands of 21 assessees and in assessment years ranging from asst. yrs. 1970-71 to 1986-87.

6. From answer to question No. 7, he submitted that without prejudice to his aforesaid submissions, even if at all, it is assumed that there was some investigation, then also these could be said to be only in case of 4 persons in whose cases action under s. 132 was taken and, therefore, the cases of other 16 (sixteen) appellants were definitely entitled to immunity.

7. From answers to question Nos. 12, 19 and 30, he submitted that the disclosed amount in the hands of all the appellants except the four in whose cases action under s. 132 was taken, was not at all the subject-matter of seizure. As regards to the other 4, he submitted that there was no seizure at all in the cases of Nirmal P. Jhunjhunwala and in the case of the other three, namely, Purshottam Jhunjhunwala, Kishorilal Jhunjhunwala, and Niranjan Jhunjhunwala, though there was some seizure of some cash and jewellery, but these assets, i.e., cash and jewellery which were the subject-matter of seizure were not disclosed, rather, the disclosure was on account of expenses and investments. He, therefore, submitted that the amounts disclosed in the cases of only 17 (seventeen) appellants, was never the subject-matter of seizure and, therefore, prohibition provided under the Amnesty Scheme was not applicable; rather all these appellants were entitled to immunity under the Amnesty Scheme. He further submitted that by the time the revised returns making the disclosure were filed, no notice under s. 148 in any of the cases and for any of the assessment years had been issued. So, the disclosure was completely in accordance with the provisions of Amnesty Scheme. As regards to additional disclosure (the appellants themselves had disclosed a total amount of Rs. 2,29,90,529 which as per letter dt. 27th January, 1987, has been shown at Rs. 2,29,92,455 p. 3 of the assessee's paper-book) of Rs. 21,41,400 on account of difference in valuation of jewellery, difference in interest figures and borrowings of firms, he submitted that these being calculation mistakes, cannot render the disclosure made by the appellants as not full and true. On the other hands, he submitted that the disclosure was full and true and the appellants agreeing for additional disclosure to the tune of Rs. 21,41,400 was only to co-operate with the Department, to purchase peace of mind and avoid litigation of any nature. Concluding his submissions, the assessee's counsel submitted that cases of all the 20 (twenty) appellants were covered by the Amnesty Scheme and immunity available thereunder was available to all of them. Consequently, he submitted that the penalty under appeal has been imposed in complete disregard to the Amnesty Scheme and because the IT authorities are bound by the circulars specially beneficial to the assessees; so the penalty imposed in violation of those benevolent circulars is bad in law and should be quashed. The assessee's counsel further submitted that during the search, the statement were recorded of only 4 persons in whose cases search warrants were issued (supra) and, therefore, the other 16 (sixteen) persons were not bound by any statement which may be considered as against their interest. In view of these facts and the fact that the Department had not initiated action under s. 147, by issue of notice under s. 148, in any of these cases, these appellants were entitled to immunity under the Amnesty Scheme. In support of his submissions, he relied in the following cases : Scindia Steam Navigation Co. Ltd.'s case (supra), Jaikishan Gopikishan & Sons' case (supra), Shama Raising Chandel vs. ITO (1992) 43 TTJ (Ahd) 268 : (1992) 41 ITD 212 (Ahd), Uttamchand Bhutani & Co. vs. ITO (1992) 42 ITD 404 (Del), ITO vs. Ram Nihara Thakur (1993) 46 ITD 90 (Pat), Smt. P. M. Celine vs. Asstt. CIT (1991) 39 ITD 454 (Coch), Asstt. CIT vs. Manorajyam (1996) 54 TTJ (Coch) 397 : (1995) 54 ITD 116 (Coch), Asstt. CIT vs. Prakash Oil Industries & Ginning Factory (1995) 52 TTJ (Ahd) 514, Anand Kumar Saraf vs. CIT (1995) 211 ITR 562 (Cal) and Ambassador Dry Cleaners vs. Union of India (1994) 210 ITR 292 (Raj).

The learned Departmental Representative has, on the other hand, submitted that though the search warrants were in the name of 4 persons only, but the search being of a particular premises, so it will amount to search in case of all persons residing at those premises and, therefore, according to him, action under s. 132 was deemed to have been taken in cases of all the 20 appellants. Referring to answers to Q. No. 12 and No. 30 of Circular No. 451, he submitted that the benefits of the Amnesty Scheme were not available to these appellants.

Referring to order under s. 273A, he submitted that benefits of Amnesty Scheme were not claimed by the appellants. As regards to the decisions relied upon by the assessee's counsel, he submitted that they were not applicable to the appellant's cases. Concluding his submissions, the learned Departmental Representative submitted that the benefits of Amnesty Scheme were not available to the appellants and to support his submissions, he relied on the following decisions : (1) Asstt. CIT vs. Tribhovandas Bhimji Zhaveri & Sons (ITA Nos. 7350 & 7351 (Bom) of 1989, dt. 8th August, 1996); (2) Asstt. CIT vs. Dalamal & Sons Investment Co. (1994) 49 ITD 80 (Bom); and (3) Asstt. CIT vs. Ilaxi Textiles Industries (1994) 49 TTJ (Ahd) 491 : (1994) 49 ITD 330 (Ahd).

8. We have considered the submissions from both the sides and have gone through the various circulars as well as case law relied on by the parties with utmost care, and on the basis of discussions and observations in the subsequent paras. We are of the opinion that the submissions made by the assessee's counsel have got force.

9. First of all, we would like to discuss the scope of action taken under s. 132 of the IT Act and for this purpose, would like to reproduce the relevant provisions of s. 132 : "132 Search and Seizure. - Where the Director General or General or the Chief CIT or CIT or any such Dy. Director or Dy. CIT as may be empowered in this behalf by the Board, in consequence of information in his possession, has reason to believe that : (a) any person to whom a summons under sub-s. (1) of s. 37 of the Indian IT Act, 1922, or under sub-s. (1) of s. 131 of this Act, or a notice under sub-s. (4) of s. 22 of the Indian IT Act, 1922, or under sub-s. (1) of s. 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents as required by such summons or notice, or (b) any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to any proceedings under the Indian IT Act, 1922 (11 of 1922) or under this Act, or (c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been or would not be disclosed for the purposes of Indian IT Act, 1922 (11 of 1922), or this Act, (hereinafter in this section referred to as the undisclosed income of property), then : (A) the Director General or Director or the Chief CIT or CIT as the case may be, may authorise any Dy. Director, Dy. CIT, Asstt.

Director, Asstt. CIT or ITO, or (B) such Dy. Director or Dy. CIT as the case may be, may authorise any Asstt. Director or Asstt. CIT or ITO (the officer so authorised in all cases being hereinafter referred to as the authorised officer) to (i) enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or things are kept; (ii) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by cl. (i) where the keys thereof are not available; (iia) search any person who has got out of, or is about to get into, or is, in the building, place, vessel, vehicle or aircraft, if the authorised officer has reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery or other valuable article or thing; (iii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search; (iv) place marks of identification on any books of account, or other documents or make or cause to be made extracts or copies therefrom; (v) make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing.

(1A) Where any CIT in consequence of information in his possession, has reason to suspect that any books of account, other documents, money, bullion, jewellery, or other valuable article or thing in respect of which an officer has been authorised by the DG or Director or any other CIT or any such Dy. Director or Dy. CIT as may be empowered in this behalf by the Board to take action under cls.

(i) to (v) of sub-s. (1) are or is kept in any building, place, vessel, vehicle or aircraft not mentioned in the authorisation under sub-s. (1), such CIT may notwithstanding anything contained in s.

120 authorise the said officer to take action under any of the clauses aforesaid in respect of such building, place, vessel, vehicle or aircraft.

(4) The authorised officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian IT Act, 1922 (11 of 1922), or under this Act.

(4A) Where any books of account, other documents, money, bullion, jewellery or other valuable article or things are or is found in the possession or control of any person in the course of a search, it may be presumed : (i) that such books of account, other documents, money, bullion, jewellery or other valuable articles or things belong or belongs to such person; (ii) that the contents of such books of account and other documents are true; and (iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.

(5) Where any money, bullion, jewellery or other valuable article or thing (hereafter in this section and in ss. 132A and 132B referred to as the assets) is seized under sub-s. (1) or sub-s. (1A), the AO after affording a reasonable opportunity to the person concerned of being heard and making such enquiry as may be prescribed, shall, within one hundred and twenty days of the seizure, make an order, with the previous approval of the Dy. CIT : (i) estimating the undisclosed income (including the income from the undisclosed property) in a summary manner to the best of his judgment on the basis of such materials as are available with him; (ii) calculating the amount of tax on the income so estimated in accordance with the provisions of the Act, (iia) determining the amount of interest payable and the amount of penalty imposable in accordance with the provisions of the Act, as if the order had been the order of regular assessment; (iii) specifying the amount that will be required to satisfy any existing liability under this Act and any one or more of the Acts specified in cl. (a) of sub-s. (1) of s. 230A in respect of which such person in default or is deemed to be in default; and retain in his custody such assets or part thereof as are in his opinion, sufficient to satisfy the aggregate of the amounts referred to in cls. (ii), (iia) and (iii) and forthwith release the remaining portion, if any, of the assets to the person from whose custody they were seized; (6) The assets retained under sub-s. (5) may be dealt with in accordance with the provisions of s. 132B. (7) If the AO is satisfied that the seized assets or any part thereof were held by such person, for or on behalf of any other person, the AO may proceed under sub-s. (5) against such other person and all the provisions of this section shall apply accordingly.

(13) The provisions of the Code of Criminal Procedure, 1973 (2 of 1974), relating to searches and seizures shall apply, so far as may be, to searches and seizures under sub-s. (1) or sub-s. (1A).

10. From the provisions of s. 132, reproduced as above, it is evident that s. 132 is a self-contained code in itself. It concerns with search and seizure and also provides a machinery as well as the procedure in its provisions for estimating the undisclosed income, tax liability and other matter when seizure is effected. It exists in complete isolation of the other provisions of the Act and the general provisions of the Act can neither creep from underneath these fortifications nor can overpower these to influence the procedure or judgment in the proceedings under s. 132 of the Act [Joginder Singh vs. CIT (1981) 128 ITR 14 (P&H)].

11. Provisions of s. 132, therefore, suggest that these are to be construed strictly and deeming provisions of the Act cannot be read with these provisions. From the provisions of s. 132(1)(iia), it is very much evident that though the authorised officer can search any person who has got out of, or is about to get into or is in, the building, etc., but this power can be exercised only if the authorised officer has reason to suspect that such person has secreted about his person any books of account, other documents, money, bullion, jewellery or other valuable articles or things. These provisions, which state in clear terms, confirms that a person other than a person in whose name search warrants have been issued can be searched only if the mandatory requirement of sub-cl. (iia) of sub-s. (1) of s. 131 is satisfied and unless and until a person is searched in accordance with these sub-clauses, it cannot be assumed that action under s. 132 has been taken in case of every person staying at the relevant premises - may be a living person or otherwise, such as HUF, companies and firms; and therefore, the arguments of the learned Departmental Representative that in spite of search warrants being in the name of 4 individuals only (supra), action under s. 132 will be deemed to have been taken in all the 18 cases, cannot be accepted. Neither there is anything about such presumption in the provisions of s. 132 nor it seems to be the intention of the legislature, and above all, no such fact has been brought to our notice. We, therefore, reject this plea of the learned Departmental Representative and hold that in case of 16 (sixteen) appellants, other than the 4 individuals (named supra), in whose name there were no search warrants, no action under s. 132 can be said to have been taken and consequently those 16 (sixteen) appellants are clearly entitled to immunity available under the Amnesty Scheme.

12. As regards to the plea of the assessee's counsel that cases of all the 20 appellants including the appellants in whose cases search was made are covered by the Amnesty Scheme we would like to find the scope of the scheme and therefore, would like to reproduce some of the questions and answers contained in Circular No. 451, dt. 17th February, 1986.

Q. 2 : In respect of completed assessments, the question will arise whether the assessee should merely declare the income relevant to those years and pay the tax according to the rates prevalent in those years on such declared income or whether he is required to file the return of income showing the additional income.

Ans. : As mentioned above, he must file a fresh return of income including the additional income.

Q. 3 : Reading Circular No. 423 together with Circular No. 441, it is not clear whether the old assessees who have been regularly filing their returns of income would be eligible for the benefit of circulars in respect of their income which has escaped assessment for an earlier assessment year and whether the assessment is completed or pending Q. 4 : The Income-tax Circulars are not very clear as to whether immunity from penalty and prosecution is guaranteed to the assessee unlike the circular in respect of wealth-tax which appears to be clear on this point Ans. : The immunity from penalty and prosecution applies in all cases whether of income-tax or wealth-tax where the assessee admits the truth and pays taxes properly.

Q. 11 : Whether ladies and minors can avail of the immunity given by the circulars Ans. : Yes. In respect of their own income or wealth certainly. But taxpayers who try to introduce black money and benami investments in the name of ladies or minors will be doing so at their own risk.

Q. 13 : Whether in disclosing assets which have been suppressed earlier or undervalued for the purpose of wealth-tax under this circular the Board has devised any proforma for making such an application or whether the assessee is required to file a return before the WTO Ans. : If the assessment for the relevant year is pending, the assessee should disclose the information before the WTO. If the assessment or the year is already completed, the assessee should disclose the particulars before the concerned CIT. Where the assessee files a return also to the CIT along with the showing of particulars and pays the tax due thereon, he would have satisfied the conditions prescribed by s.

18B.From the aforesaid relevant portion of the circular which are in the form of specific answers to specific questions, relating to the scope of the Amnesty Scheme, it is clear that : (1) that the amnesty scheme was applicable to the assessment years upto asst. yr. 1986-87 irrespective of the fact as to whether assessment for these assessment years had already been completed or not; (3) the immunity from penalty and prosecution was available in all cases whether of income-tax or wealth-tax; (4) investigation in the case of persons other than the assessee claiming benefit of amnesty scheme was not a bar or availability of immunity in such case irrespective of the fact that the investigations in case of such other persons might had indicated concealment by the assessee; cannot be questioned; (5) that ladies as well as minors and also HUFs, firms and companies were entitled to claim benefit/immunity under the amnesty scheme; (6) it was also clarified that unless and until the ITO had found the material to show that there has been concealment, it will not be taken that the Department had detected concealment. Even prima facie belief of the ITO was not to mean that concealment has been detected.

(7) Answers to Q. No. 30 and Q. No. 11 suggest that answer to Q. No. 30 is an explanation/elaboration of an answer to question No. 12 and the cumulative effect of these answers is that only, the asset or income which were "the subject-matter of seizure", even if disclosed by the assessee as his income under the Amnesty Scheme; were not covered by the scheme. In other words, the assets and income which were not the subject-matter of seizure were entitled to immunity under the scheme.

13. In view of the aforesaid scope of the Amnesty Scheme, if we consider cases of those 4 appellants also in whose cases, action under s. 132 had been taken, we are of the opinion that on the facts and in the circumstances of the case : (a) the case of Nirmal P. Jhunjhunwala is clearly covered by the Amnesty Scheme, because in spite of search, there was no seizure of any asset or income in his case as is evidenced by Panchnama; and (b) the cases of the other 3 persons are also covered by the Amnesty Scheme because none of the seized assets has been disclosed; rather the disclosure is stated to be on account of expenses and investments recorded in the "Boston Diary" found during the search.

14. From the facts on record and cumulative effect of all the circulars issued under the Amnesty Scheme, we are of the opinion that the immunity under the Amnesty Scheme was available to these 4 appellants also. As regards to the Departmental Representative's submission that the disclosure was not made under the Amnesty Scheme, we are of the opinion that this argument also does not hold good because the 4 appellants, during search and all the 20 appellants in their various letters addressed to the Addl. Director of Income-tax (Inv.) and CIT had duly stated that they were making disclosure was made under the Amnesty Scheme. In view of our aforesaid discussion, we are of the opinion that the immunity/benefits of Amnesty Scheme were available to all the 20 appellants upto the asst. yrs. 1986-87 and therefore, the penalty orders in all these 20 cases for all the asst. yr. 1986-87 are cancelled.

15. Before parting with this aspect of the case, we would like to make a brief mention of the various decisions relied upon by the parties, as under : (i) Jaikishan Gopikishan & Son's case (supra). After having gone through the decision and especially the conclusion of the Hon'ble High Court at p. 487, which is reproduced hereinafter, we are of the opinion that the appellants are entitled to seek benefit/immunity under the Amnesty Scheme : "It is well settled that the circulars or the orders have the force of law and are binding on all the authorities of the Department (See the cases of the apex Court in apex Court in Navnit Lal C. Javeri vs. K. K. Sen, AAC (1965) 56 ITR 198 (SC) and Ellerman Lines Ltd. vs. CIT (1971) 82 ITR 913 (SC). The binding nature of the circulars has been considered by the various High Courts in a series of decisions. In a recent decision, the Division Bench of the Kerala High Court in CIT vs. Punalur Paper Mills Ltd. (1988) 170 ITR 37 (Ker), after placing reliance on the decisions of the apex Court and various High Courts, has held that the circulars so issued have the force of law and are binding on all the officers of the Department.

The benevolent circulars are in the nature of administrative relief and will go to the assistance of the assessee. They "supplant" the law and not "supplement" the law. The circulars can deviate from the provisions of the Act. It is not open to the Department to contend, even in cases where the circular goes beyond the terms of the section, that the circular has no legal effect or should not be given effect to. Circulars cannot impose any burden on the taxpayer.

But by the issue of the circular, the rigour of the law can be relaxed by giving administrative relief. Even if the circulars are relied on for the first time. Before the High Court during the course of hearing, the assessee will be entitled to the benefits of the circulars. The Court is bound to take note of the circular. It is too late in the day for the Revenue to contend that the circular issued by the CBDT is only an administrative direction or that it will not bind the Department or that it shall not be given effect to since it goes beyond the terms of the section. As stated above, the circulars "supplant" the law and not "supplement" the law, and we respectfully agree with the view taken by the Kerala High Court.

Therefore, we are of the opinion that the various circulars issued by the CBDT in exercise of its powers under s. 119 of the Act have the force of law and are binding on the subordinate authorities. We are also of the opinion that guidelines are issued from time to time to deal with the cases of such assessees, who claim immunity and consideration of their cases leniently and sympathetically, and the authorities are bound to deal with the cases, according to the instructions issued from time to time." (ii) Shama Raising Chandel vs. ITO (supra) : The facts in this case were that a search was conducted at the premises of one VC and AL on 23rd September, 1986, and 24th September, 1986; and it was revealed that there was a racket which involved conversion of substantial amount of black money into white money by issuing bogus bank drafts shown as having been issued from NRE account. Assessee-appellants had received bogus bank drafts, who after one week from the date of search of the premises of VC and AL submitted returns for asst. yr.

1985-86 under Amnesty Scheme in which the amount received by such bogus drafts was surrendered as income liable to tax. As the Amnesty Scheme was extended upto 31st March, 1987, so G&C furnished returns of income for asst. yrs. 1985-86 and 1987-88 on 31st March, 1987 and 23rd February, 1988, respectively. The ITO held that the appellants did not disclose voluntarily but disclosure was made after search against VC and AL. The question before the Tribunal was whether return of income filed by the assessee for asst. yr. 1985-86 could be accepted as filed under the Amnesty Scheme. The Tribunal after considering the scheme in detail, held that Amnesty Scheme was applicable so far as asst. yr. 1985-86 was concerned and, therefore, held that penalty proceedings under s. 271(1)(c) could not be initiated against the assessee.

(iii) WTO vs. Nandkumar Pd. Shah (1992) 41 ITD 406 (Pat) : In this case, the assessee had not filed its returns of wealth-tax for asst.

yrs. 1976-77 to 1982-83 in spite of notice under s. 17. The assessee had also failed to comply with notices issued under s. 16 of the WT Act, and, therefore, the WTO made ex parte assessments. The CIT(A) had however, set aside these orders. In the meanwhile assessee filed returns for all the assessment years and claimed the benefit under the Amnesty Scheme, 1986. The assessee, therefore, claimed that no penalty was leviable in view of the Amnesty Scheme. This claim was not accepted by the WTO but the CIT(A) accepting the assessee's plea had disallowed the penalty. On appeal by the Department, the Tribunal confirmed the order of the CIT(A) that the appellant was entitled to benefit under the Amnesty Scheme. His decision clearly supports the cases of the 14 appellants in whose cases there was no search and to support this, we would like to reproduce the relevant portion of the head notes : "Thus, the amnesty scheme was fully applicable even to assessments which were set aside on appeal and to cases of pending reassessments. It was further applicable even in relation to additions made and contended by the assessee in appeals. Only search and seizure cases were not covered under the circular and in those cases the disclosures were not to be treated as suo motu. Therefore, the assessee's case was fully covered by Amnesty Scheme and, therefore, no penalty should be recovered from the assessee under s.

18(1)(a)." (iv) Uttamchand Bhutani & Co.'s case (supra). In this case, the assessment for asst. yr. 1977-78 was filed by the assessee on 21st July, 1977, and the assessment was completed on the basis of that return. Thereafter, the ST Department conducted the raid in the premises of the assessee and seized certain documents and accounts.

Based on the information gathered from the ST Department, notice under s. 148 was issued in response to which the assessee filed return showing assessed income. In reassessment, additions that were made to the returned income were profits at 10 per cent on suppressed sales and unexplained cash credit. On appeal, the CIT(A) allowed relief on trading additions only. And when the assessee's appeal against addition of cash credit was pending before the Tribunal, the Amnesty Scheme, 1986, was announced. The assessee, availing benefits of Amnesty Scheme paid taxes on reassessment figures including relief allowed by the CIT(A) and based on these filed revised return under the Amnesty Scheme; and consequently the appeal before the Tribunal was withdrawn. During the course of penalty proceedings under s. 271(1)(c), the AO was apprised of the revised return but he rejected the assessee's claim under the Amnesty Scheme and levied penalty. On appeal, the CIT(A) also upheld the order of the AO. On appeal before the Tribunal by the assessee, it was held that the assessee was entitled to the benefit under the Amnesty Scheme as per Circular No. 451, dt. 17th February, 1986, and consequently the penalty was concealed. The decision in this case also supports the case of the appellants.

(v) Ram Nihora Thakur's case (supra) : In this case, original returns were filed late and while completing the assessment, penalty proceedings for late furnishing of returns were initiated. Later on, assessee filed fresh returns under the Amnesty Scheme, 1985, declaring a higher income for all these years, which were accepted by the AO but the immunity under the Amnesty Scheme was not allowed.

And consequently penalty under s. 271(1)(a) was imposed. The CIT(A) allowed the assessee's appeal. The Tribunal on further appeal by the Department confirmed the order of the CIT(A) holding that the circulars have to be considered in a liberal manner as they are meant for common taxpayers. The scheme is not to be read as a statute since its object was to encourage the defaulting assessees to come forward and disclosed concealed income. On consideration of concessions given under the scheme, and the assurance given by the Government, it was to be held that no penalty would be imposed.

On the basis of this decision, we are absolutely in agreement with the appellants that after disclosure by all the 18 appellants which in our view, though was after search, was voluntary and was full and true. So it was not justified on the part of the Department to refuse the benefits available under the Amnesty Scheme. The findings in the aforesaid case therefore, are in appellants' favour.

(vi) Anandkumar Saraf's case (supra) : In this case, the assessee was regular income-tax payer and was carrying on business at Surat in the name of AKT and RT and at Calcutta in the name of AKSC. A search was conducted on 7th March, 1986, at the residential premises of the appellant-assessee as well as the business premises of the assessee as well as at the business premises of five different firms. In the course of said search, certain jewellery and ornaments and a sum of Rs. 2,600 in cash were found in the bedroom of the appellant. None of these items were seized. On the same date the business premises of partnership firm AT of which the assessee was a partner in his capacity as Karta of the HUF was sealed and when on 26th March, 1986, the said premises were opened, the searching officials came across certain cheque books and pay-in-slip in respect of two banks accounts, namely, current account in the name of RT with State Bank and current account with the Oriental Bank of Commerce in the name of AKT, which were the proprietary concerns of the assessee. It was an admitted fact that the income of these two proprietary business had not been disclosed by the assessee in the IT return filed earlier. These cheque books and pay-in-slips were seized. On 31st March, 1986, the assessee filed revised returns of income and wealth under the Amnesty Scheme administered by the Board through its various circulars-the scheme which is under consideration in appeal before us. In the revised returns for asst.

yrs. 1981-82 to 1985-86, the assessee included the income derived from the proprietary business done by him in the names of AKSC, AKT and RT. It was also stated that the declaration made through these returns included/covered all the transactions which were incorporated in the books and documents seized by the Department in course of search carried out in the office and residential premises on 7th March, 1986. The assessee requested that no penalty should be imposed and all interests should be waived. Similarly, WT returns for asst. yrs. 1982-83 to 1985-86 including therein the assets represented by the income so disclosed in the revised returns were also filed. Assessments were completed, but benefits of Amnesty Scheme were not granted on the ground that revised returns were filed after search carried out by the authorities in course of which certain documents relevant to income and wealth now disclosed by the assessee had been duly seized. On appeal, the CIT(A) by his order, dt. 11th November, 1988, held that the assessee was entitled to amnesty benefit but the successor CIT as per his order, dt. 23rd February, 1989, passed a miscellaneous order holding that the order of his predecessor, dt. 11th November, 1988 was erroneous and a mistake had crept therein inasmuch as the said order was passed under a mistaken belief that the IT and WT returns filed by the appellant were covered by the amnesty scheme. He, therefore, wanted to rectify the orders, dt. 11th November, 1988, under the provisions of s. 154 of WT Act as well as s. 35 of the WT Act and consequently initiated proceedings by issuing notice under relevant sections on 23rd February, 1989. The assessee's writ petition before the High Court was dismissed on 31st March, 1989, but later on filed appeal with a stay petition. Pursuant to the leave granted by the appeal Court, the appellant appeared before the CIT(A) and contested the validity of the rectification proceedings. The CIT(A) rejected the assessee's arguments and passed a rectificatory order, dt. 1st January, 1990, holding that the assessee was not entitled to the benefits of Amnesty Scheme since it was a case of search and seizure. The assessee thereafter affirmed a supplementary affidavit also challenging the legality or validity of the said order, dt. 1st January, 1990, passed under s. 154 along with an application seeking stay of operation of the said order. On a reference of the writ, the Hon'ble High Court quashed the notice, dt. 23rd February, 1989, as well as the order, dt. 1st January, 1990, passed by the CIT(A) under s. 154.

As the decision in this case is very much relevant to the facts and circumstances of the case, so we have preferred to reproduce the headnotes as under : "Existence of the alternative remedy is not an absolute bar to the issue of a writ. If the conditions precedent for assumption of jurisdiction under s. 154 are not satisfied, in that event, the concerned officer cannot have any jurisdiction to initiate proceeding for rectification. If the absence of jurisdiction is apparent, the Court should interfere in a writ proceeding.

A combined reading of Circular No. 451 as a whole leads one to believe that an assessee whose premises had been searched could not claim immunity and other benefits given in the Amnesty Scheme only in respect of assets or income which had been found and/or seized by the tax authorities before the filing of revised returns by the assessee concerned and also in those cases where the tax authorities had looked into the seized papers and had carried out some investigations (before the furnishing of revised returns by the assessee) to show that the income now declared in the revised return had already been detected by the Department from the papers and documents found and seized in the course of the search.

In the instant case, it was found that search was carried out at the residential premises of the petitioner on 7th March, 1986, at Calcutta and on 27th March, 1986, at Surat. It was true that certain documents had been found and seized in the course of the said search, but none of these documents had been scrutinised by the tax authorities prior to 31st March, 1986, when the assessee-appellant herein had filed revised returns in respect of both income-tax and wealth-tax.

It was 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 31st March, 1986, it could not 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. This had been clearly explained by CBDT in reply to Q. No. 19 in Circular No. 451, dt. 17th February, 1986.

On the facts and circumstances of the instant case, it could not be said that the tax authorities had detected concealment merely by having seized certain 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 would have been said that concealment had already been detected by the Department prior to the furnishing of revised returns. This was not the case here.

The mere stigma of search and seizure shut out the assessee from the amnesty. The scheme is an inducement to the tax evaders to make a clean breast of past evasions and square up account with the Revenue. The clarifications of the Board in its answer to Q. No. 19 as to the meaning of the expression 'before detection by the Department' shows that if the assessing authority has a prima facie belief, that would not have meant detection. In the instant case, certain documents and papers were seized. They might or might not have revealed concealment. Even the seizure could not have led to a prima facie belief as to concealment as the contents purported and the implications of the documents were yet to be gone into.

Therefore, at the point of time the return under the Amnesty Scheme was filed the AO admittedly had no idea as to whether the seized papers would reveal any concealment. The mere fact that the petitioner appellant's case was awaiting a probe with reference to his past records as well as extrinsic sources could not lead to his ouster from the scope of the scheme.

Furthermore, the scope of proceedings under s. 154, is very limited.

It is well settled that an issue which is debatable or on which there could conceivably be two opinions cannot be the subject-matter of rectification. A glaring and obvious mistake either of fact or law can alone be corrected under s. 154.

On the facts and circumstances of the instant case, it was to be held that the impugned notice issued by the CIT on 23rd March, 1989, was clearly without jurisdiction, and therefore, all proceedings taken in pursuance thereto including the impugned order, dt. 1st January, 1990 passed in the instant case under s. 154 were without jurisdiction, illegal, invalid and void ab initio." In view of the aforesaid decisions, we are of the opinion that cases of all the 20 appellants before us are covered by the Amnesty Scheme.

(vii) Smt. P. M. Celine's case (supra) : In this case, there was a search in the case of assessee's husband. After the search, the assessee filed her returns of income for asst. yrs. 1983-84 to 1986-87 on 25th February, 1987, and return for assessment years was filed on 6th March, 1987. The assessments were completed but penalty under ss. 271(1)(a) and 273(1)(b) were imposed after rejecting the assessee's claim on immunity under the Amnesty Scheme. The CIT(A) confirmed the order of the AO. The Tribunal, on appeal by the assessee, deleted the penalties holding as under : "In the instant case, assessee had filed returns and felt that she had filed returns voluntarily and in good faith and had made a full and true disclosure of her income. In fact the incomes returned were accepted as such in the assessment years in question. As held by the Andhra Pradesh High Court in the case of Seetha Mahalakshmi Rice & Groundnut Oil Mill Contractors Co. vs. CIT (1981) 127 ITR 579 (AP), the mere fact that the incomes disclosed have not been accepted by the ITO, would not disentitle the assessee from the immunity under the Amnesty Scheme. Further enquiries and search were conducted in the case of assessee's husband and the Revenue's contention was that voluntariness was absent in the filing of returns by the assessee.

But the Kerala High Court in the case of A. V. Joy, Alukkas Jewellery vs. CIT (1990) 185 ITR 638 (Ker) held that merely because returns were filed after search, they will not be ceased to be voluntary or a bona fide disclosure. Therefore, in the instant case, the immunity under the Amnesty Scheme was clearly available to the assessee and the penalties were not at all leviable." The decision in this case supports the case of 16 (sixteen) appellants, other than the 4 individuals in whose cases search was conducted.

(viii) Ambassador Dry Cleaners case (supra) : In this case the business premises of the assessee were surveyed under s. 133 on 7th September, 1979, and on account of some incriminating documents and other materials, assessments for asst yrs. 1975-76 to 1979-80 were reopened under s. 148. While making reassessments, a net profit rate of 25 per cent was applied on receipts disclosed by the assessee.

These assessments were set aside by the Tribunal by its order, dt.

30th March, 1986, upto the stage of filing of the revised returns.

Before the petitioner filed the revised returns, the Amnesty Scheme was introduced by the Revenue. In the revised return, the petitioners disclosed its income by applying the net rate of 25 per cent which the ITO had adopted. These returns were filed under Amnesty Scheme and were accepted. The assessee moved an application under s. 273A before the Chief CIT, praying for waiver of penalties and claiming other benefits of Amnesty Scheme. The ITO initiated penalty proceedings. The Chief CIT accepted the assessee's request for withdrawal of the prosecution, but when he approached the ITO for dropping the penalty proceedings, the ITO did not accept his request and consequently penalty was imposed. The CIT(A) confirmed the penalty. On a writ petition filed by the assessee, the Hon'ble Rajasthan High Court held that the revised returns filed by the petitioner would be treated to have been filed under the Amnesty Scheme entitling the petitioner to all the benefits of the scheme.

The petitioner was, therefore, immune from imposition of penatly as per Circular No. 451, dt. 17th February, 1986. This decision, though is not directly in assessee's favour, but duly supports the appellant's version that benefits under benevolent circular may be allowed liberally.

(ix) Prakash Oil Industries & Ginning Factory's case (supra) : The decision in this case squarely covers the cases of all the assessees and, therefore, we would like to refer to the complete head notes : "Amnesty Scheme - Applicability - Loose paper found at the premises of the accountant of firm during search operations concerning an amount of Rs. 2,25,000 - Accountant made a statement that the amount reflected distribution of income earned by firm over a period of six years not reflected in the books - Partners gave different statements - No action taken by the Revenue qua this amount for about a period of two years - Meanwhile, assessee offered the amount of Rs. 2,25,000 + Rs. 25,000 under the Amnesty Scheme - AO not granting benefits of Amnesty Scheme but the CIT(A), on appeal, granting benefits to the extent of 5/6th of Rs. 2,25,000 on the ground that 1/6th of the amount represented concealed income of the relevant assessment years - Not justified - Benefits of Amnesty Scheme available qua the whole amount as the same was offered for taxation prior to any detection by the Revenue in the circumstances of the case.

It is evident from the facts that the search was conducted and the Revenue took no action whatsoever with reference to the various statements recorded of the partners and the employee. Nor with reference to the loose paper in question, which was formed the basis for this sum of Rs. 2,25,000. The search had been carried out almost two years prior to the filing of the return by the assessee-firm, and no action whatsoever had been taken by the Revenue to go into the facts of the case and unearth concealed income which they thought to have been concealed by the assessee-firm. Merely for the reason that one of the employees had made the statement with reference to a particular paper that it reflected the unaccounted income of the firm, and which had, there and then, simultaneously at a different premises been denied/rejected by the partner, it could in noway be said that the offer made by the firm under the Amnesty Scheme for a sum of Rs. 2,25,000 was after the detection. The suo motu offer by the assessee-firm was for a sum of Rs. 2,50,000 whereas Rs. 2,50,000 is presumed to be concealed income of the firm by the Department, could in noway abstain the firm from the benefits as envisaged under the Amnesty Scheme. Moreover, the reasoning of the CIT(A) that 1/6th of Rs. 2,25,000 could be the concealed income of the firm, referable to the assessment year cannot also hold the ground for the fact that the Department has failed to detect any concealed income, and merely a seizure of a paper and a statement of an employee which had been rebutted immediately by the partner of the firm cannot be treated as detection, the offer of the sum of Rs. 2,50,000 was made suo motu by the firm only to avail the benefits of the Amnesty Scheme and to avoid further litigation, cannot be taken as a ground that the offer was after detection and estop the firm from the benefits under the Amnesty Scheme. The Revenue had almost two years and after the search was conducted and the statement of the employee and the partners were recorded, to proceed in this matter and to cross-examine various employees, partners, etc., of the firm and quantify the real concealed income, if any, if the firm based on the paper, etc., seized during the course of the search proceedings, which has not been done, and subsequently, because the firm offers a sum which is all the more, more than what has been reflected in the loose paper, cannot abstain the firm from the benefits of the Amnesty Scheme even on 1/6th portion of the amount reflected in the loose paper. As there is no detection the question of granting immunity on a part of a sum and not on the balance also does not arise. The assessee is entitled to the benefits of Amnesty Scheme on the entire amount of Rs. 2,50,000. - Anand Kumar Saraf vs.

CIT (1995) 211 ITR 562 (Cal) followed; Ilexi Textile Industries (1994) 49 TTJ (Ahd) 491 : (1994) 49 ITD 330 (Ahd) distinguished.

Revenue not having taken any steps to prove concealment in regard to amount depicted in a loose paper seized during search for about two years after the said search, and assessee having offered the amount for taxation under the Amnesty Scheme, the disclosure was before any detection and the assessee was entitled to benefits of the Amnesty Scheme in respect of the whole amount offered.

Income from undisclosed sources - Unexplained money - Diary found in search operations at the residence if assessee's partner 'G' who was also partner in other firms - Name of assessee not mentioned in the relevant page of the diary but other names mentioned - 'G' offering the peak credits for taxation and paying tax thereon - Merely because 'G' happens to be a partner of the assessee-firm, he being partner in other firms also, any admission on the part of 'G' regarding the transaction mentioned in the diary cannot bind the assessee-firm but binds him alone - No additions can be made in the hands of assessee.

The name of the assessee has not been mentioned in the diary at all.

Those of the other names like V, N, K, J, etc., have been mentioned in respect of certain payments or receipts. There was also mention of some other entries. When read as a whole p. 306 of the diary purportedly gives a summary of the transactions carried on by G at his end and there is no corroborative evidence that the assessee-firm made sales to G. It is an admitted fact that the diary was seized from the residence of G who has got interest in 12 different firms in his individual sub-group and if he has admitted about his financial transactions as recorded in the diary such admission binds him alone and not the assessee-firm merely because he happens to be one of the partners of the assessee-firm. It is further noted that five different families are interested in the assessee-firm and therefore, it is difficult to believe that G would have been allowed to divert any profit to the extent of 50 per cent in respect of any transaction. Further, the ITO has talked of 50 per cent share in the accounted profit whereas G individually holds only 25 per cent share and even with his daughter and brother he has only 32 per cent share in the firm, and, therefore, the distribution could not have been 50 per cent. Further, it is noted that G has owned up the entries in the diary and has surrendered peak of credits in the asst. yrs. 1982-83, 1983-84 and 1984-85. He has paid substantial tax thereon. Mere entries in the accounts of third party was not sufficient to prove that the assessee had indulged in such transaction, as there was no guarantee that the entries were genjine. The AO is not justified in making the additions. - Addl.

CIT vs. Miss Lata Mangeshkar (1974) 97 ITR 696 (Bom) relied on.

Mere admission of a partner, who happens to be a partner of other firms also, as regards transactions mentioned in a diary seized during search of his premises cannot bind the assessee-firm and binds the partner individually and no addition can be made in the hands of firm on the basis of such admission". The decision in the aforesaid case covers the cases of all the twenty appellants.

(x) Tribunal's decision in the case of Pannalal R. Shivhare vs. ITO ITA No. 1031/Bom of 1993, dt. 14th September, 1994 : In this case, revised returns were filed by the assessee after the search in which some unexplained assets seized of cash and jewellery, etc., were found. As a result of the revised return furnished by the assessee, the total income assessed was Rs. 13,86,340 which included cash of Rs. 6,28,438, jewellery of Rs. 3,33,277, interest and loans unaccounted of Rs. 1,00,000, restaurant receipts of Rs. 10,000, income from five special clubs of Rs. 1,00,000, interest and loans to Mohd. Shafi Tailor of Rs. 35,000, fixed deposit of Rs. 96,000 and bank investment of Rs. 30,000 in the name of minor children and another income of Rs. 60,539, totalling Rs. 13,93,254. After deduction under s. 80C, the assessed income was rounded of to Rs. 13,86,340. The appellant's contention was that before making the final assessment, he had furnished revised salary voluntarily and disclosed the total income as assessed to the AO. After disclosing the said income, assessment was made by the AO. It was the fact that assessment was made on the basis of revised return only. The appellant had agreed to the proposed addition and responded by declaring the total income by filing revised return of income. In this case, though the cash and jewellery were found during the search, but the appellant filed revised return of income voluntarily with a view to purchase peace. The assessee, therefore, submitted that the return being voluntarily filed to buy peace, so, penalty under s. 271(1)(c) was not leviable. The Hon'ble Tribunal after considering the facts and circumstances of the case and following the Tribunal's decision in assessee's own case for asst. yr. 1982-83 held that the revised return filed by the assessee was voluntary and consequently penalty under s. 271(1)(c) was not leviable. The relevant findings are found in para 10 of the order which is reproduced below : "10. We have examined the facts as brought on record. We have gone through the assessment order, penalty order and the order of the CIT(A) sustaining the said penalty order. There is no difference between the facts for the asst. yrs. 1982-83 and 1983-84. The penalty levied for the alleged concealment of income under s.

271(1)(c) for asst. yr. 1982-83 has been cancelled by the Tribunal.

It is a fact that the appellant filed the revised return of income voluntarily before making the assessment with a view to buying peace. The assessment was made exactly on the basis of the income disclosed by the appellant in his revised return of income. A search was conducted and several discrepancies were found. On the basis of the finding of such discrepancies, the appellant came forward and filed the revised return of income voluntarily. All these actions of the appellant would establish that the assessee promptly and immediately volunteered to come forward by showing additional income. Cornering the appellant does not mean that the voluntary filing of the return of income and making the assessment of the said income would attract the penalty. In this view of the matter, the appellant succeeds." Decision in this case amply supports assessee's version that the revised return, in the case of those 4 individuals also where search was conducted were voluntary and consequently covered by the amnesty scheme.

(xi) Manorajyam's case (supra) : In this case revised return was furnished after survey and it was held that benefits of amnesty scheme were available to the assessee. This case also supports the appellant's case.

(i) Datamal & Sons Investment Co.'s case (supra) : In this case, the benefits of Amnesty Scheme were held to be not admissible because on facts it was found that the Department had come into possession of unquestionable evidence regarding concealment of income before assessee filed returns purportedly under Amnesty Scheme. Disclosure claim was held to be not voluntary and in good faith and consequently initiation of penalty was held justified. The facts of the case are quite different than the facts of cases of appellants before us, because in those cases we have already held that there was no evidence with the Department to prove any concealment of income. Consequently the decision in this case does not help the Revenue.

(ii) Ilexi Textile Industries' case (supra) : In this case also, it was found on facts that concealment had been detected prior to filing of the revised return and it was under these circumstances, that the disclosure made by the assessee was not accepted under the Amnesty Scheme. This decision is also not helpful to the Revenue.

(iii) Tribunal's decision in Tribhovandas Bhimji Jhaveri & Sons' case (supra) : The facts in this case have been discussed by the Tribunal in paras 2 to 6 of its order which are reproduced below : "2. The brief facts of the case are these. Assessee is one of the leading jewellers of Bombay. It filed its return of income on 15th June, 1982 declaring its income at Rs. 5,63,910. On 21st September, 1982, a search was conducted at the premises of the assessee. A petition under s. 273A was filed by the assessee before the CIT on 27th January, 1983, offering Rs. 20 lakhs for taxation purposes with a view to avoid further inquiries and investigations and to buy peace. This petition related to asst. yrs. 1979-80 to 1982-83. This offer was increased gradually to Rs. 30 lakhs and later on further increased to Rs. 52 lakhs plus vide letter, dt. 22nd September, 1984. This offer was not accepted by the Department. In the meanwhile assessee filed a settlement petition before the Settlement Commission on 31st October, 1983, pertaining to asst. yrs. 1979-80 to 1983-84. The said petition was accepted for all the years except for asst. yr. 1982-83. The petition for 1982-83 was rejected on the ground that concealment was likely to be established by the Department.

3. In the course of assessment proceedings, the AO asked assessee to file the details of cash creditors. Summons under s. 131 were issued by him to twenty two parties at the addresses furnished by the assessee but the same remained unserved with the remarks that such parties were not available at such addresses. The AO vide his letter, dt. 17th December, 1985 informed the assessee about this fact and further asked the assessee to produce the parties along with the books of account and pass-books. Since the assessee was not able to produce these cash creditors except in the case of K.B. Shah, HUF, it filed a revised return on 31st March, 1986 under the Amnesty Scheme offering an additional income of Rs. 7 lakhs which comprised of the following :(i) 65,000 As peak in respect of 11 cash creditors ...(ii) 5,60,000 On account of remaining cash credits including also cash credit in the name of Rameshchand Jain.(iii) 59,938 Interest on loans of Rs. 5,60,000.

---------- 4. Still being not satisfied the AO continued the investigations in regard to loans. He informed assessee vide letter, dt. 15th January, 1987, that GIR Nos./P.A. Nos. given in the loan confirmation letters in respect of 218 persons were not correct as they were not found in the respective wards. This fact is also stated to have been informed to the representatives of the assessee. The list of 218 parties was enclosed in the penalty order as 253. In response to this letter, assessee vide its letter, dt. 3rd February, 1982, submitted before the AO that during the year it had only borrowed money from only 24 persons and to the remaining parties only interest had been paid on the loans taken from them in earlier years. It was further submitted that out of these 24 parties, 10 parties were covered under the return filed on 31st March, 1986, under the Amnesty Scheme. Out of 14 parties 5 had already been before the AO and given their statement. Regarding remaining parties, it was submitted that these are covered by the petition under s. 273A. 5. It may also be noted that on 16th January, 1987, the AO also issued a letter to the assessee informing that summons had been issued to Miss Rekha Ganeshan, a film actress for examination to be held on 22nd January, 1987. He asked the assessee to remain present during her examination/cross-examination. This summon had been issued because she had stated in her statement, dt. 9th November, 1982, recorded under s. 131 by the Addl. Director of Income-tax..

Unit (III)(5) that she had purchased certain jewellery from the assessee-firm on 15th May, 1981, against the cash payment. The statement of Miss Rekha Ganeshan was, however, recorded by the AO on 25th March, 1987, wherein it was stated that she had visited the shop of the assessee, but the jewellery was purchased through some other person who was introduced to her by the partner of the assessee-firm Vajubhai. It appears that the assessee was not asked to cross-examine her in spite of the fact that assessee's CA along with DMH Advocate remained present till 9 p.m. This is seen from the letter filed by the assessee ..... office of the AO on the next day, i.e., 26th March, 1987 which is placed at p. 60 of the compilation.

6. Faced with this situation, assessee again filed a revised return on 30th March, 1987, under the Amnesty Scheme offering an additional income of Rs. 11.5 lakhs comprising of the following : Rs.(i) 2,85,000 In respect of loans from six cash creditors.(ii) 38,047 Interest on above loans.(iii) 5,50,000 Re. Jewellery purchased by Miss Rekha Ganeshan.(iv) 2,78,788 Interest on loans taken in earlier years.

------------- Finally the assessment was finalised on the total income of Rs. 26,10,123 after further disallowing interest of Rs. 1,77,212 regarding bogus loans of earlier years and Rs. 25,000 out of the expenses. Penalty proceedings under s. 271(1)(c) and under s. 273 were initiated by the AO in respect of the above additions." It was on these facts that the Tribunal came to the conclusion that the disclosure made by the assessee was not full and true and in good faith, as is clear from the Tribunal's finding in para 10 reproduced as under : "10.1 Now, let us examine whether assessee is entitled to the immunity from levy of penalty under s. 271(1)(c) and under s. 273.

In the present case assessee had filed its return originally on 15th June, 1982 declaring an income of Rs. 5,63,910. The revised return under the Amnesty Scheme was filed on 31st March, 1986, declaring an additional income of Rs. 7 lakhs on account of cash credits and interest thereon. Again a revised return was filed under the Amnesty Scheme on 30th March, 1987, offering an additional income of Rs. 11.5 lakhs on account of cash credits and interest thereon as well as on account of alleged sale of jewellery by the assessee to Miss Rekha Ganeshan. Considering the disclosures by the assessee in piece-meal it cannot be said that the assessee had come forward with clean hands. The assessee must have disclosed the entire income while filing the first return under the Amnesty Scheme. In the present case the AO was not satisfied with regard to the disclosure made by the assessee in the year 1986, and continued his investigation in respect of the cash credits which were not surrendered by the assessee. Since the assessee was unable to prove the genuineness of the cash credits, it filed another revised return on 30th March, 1987. Had the AO not made further investigations, assessee would have escaped from being taxed in respect of its income which had been surrendered in the second revised return filed on 30th March, 1987. In these circumstances, it could not be said that assessee made full and true disclosure honestly. The view which we have taken is further supported by the decision of the Tribunal Bombay Bench in the case of B. Tax Corpn. vs. ITO (1993) 46 TTJ (Bom) 668 (TM) : (1993) 46 ITD 61 (Bom)(TM) wherein the Third Member has taken a similar decision on similar set of facts." After considering the aforesaid decision, we are of the opinion that the decision in this case is not helpful to the Revenue.

16. In view of our aforesaid observation and discussions, we are of the opinion that the cases of all the appellants upto asst. yr. 1986-87 are covered by the various circulars issued under the Amnesty Scheme (supra) and therefore, we hold that penalty under s. 271(1)(c) in all these cases have been imposed in complete disregard to the Amnesty Scheme which was binding on the lower authorities. Consequently, the orders of the CIT(A) as well as the penalty orders of the Asstt. CIT are quashed.

17. The next ground of attack by the counsel for the assessee is that penalty proceedings in all these cases have been initiated on the basis of directions of the CIT and, therefore, the initiation of penalty proceedings itself is bad in law. He further submitted that the penalty orders passed as a result of initiation which itself is bad in law, are also bad in law and void ab initio. He further submitted that as per the provisions of s. 271(1)(c) as they stood at that time, it was the ITO or the AAC or the CIT(A) who could initiate the penalty proceedings and, therefore, he proceeded to argue that penalty proceedings being penal and quasi judicial, no other authority other than the authorities mentioned in the section itself, had jurisdiction either to initiate the proceedings or to direct any of these authorities to initiate the proceedings. Referring to the last para of the discussion note (placed at p. 13 of the Department's paper-book), para 3 at p. 5 "starting from ninth line from the bottom", para 7 at p. 4 of Tribunal's order (since recalled) and para 6 of the order of the Tribunal passed in assessee's miscellaneous application the assessee's counsel submitted that it is proved from facts on record that the penalty proceedings were initiated on the clear directions of the CIT. He, therefore, submitted that the proceedings were bad in law and the consequential orders are void ab initio. He further relied on the decisions reported as D. M. Manasvi vs. CIT (1972) 86 ITR 557 (SC), Sheo Narain Jaiswal vs. ITO (1989) 176 ITR 352 (Pat), CIT vs. Daj Bhai Kanji Bhai (1991) 189 ITR 41 (Bom) and Panchanam Hati vs. CIT (1978) 115 ITR 336 (Cal).

The learned Departmental Representative, on the other hand, after referring to the discussion note and letters from the Dy. CIT, dt. 20th March, 1989, addressed to CIT Bombay, City VIII, Bombay, and all CITs, dt. 21st March, 1989 addressed to Dy. CIT, Range 26, Bombay (placed from pp. 11 to 15 of the Department's paper-book), submitted that there were no directions from the CIT to initiate the penalty proceedings. He further submitted that the penalty proceedings were initiated by the Asstt. CIT who completed the assessments. He, therefore, submitted that assessee's ground has no force. The learned Departmental Representative further submitted that the last para of the discussion note which states that the question of waiver of penalty would be considered subsequently with the prior approval of the Board, on the other hand, shows that no directions were issued by the CIT. He further submitted that the observations of the Tribunal in para 6 of its order (since recalled) to the effect that "Consequently, the AO stated in his penalty orders and observed as under ... While granting the spread over the CIT has directed that penalty proceedings should be initiated against the assessees", had been inserted erroneously and the same should be taken as not in existence. He further submitted that the conclusions arrived at in the order passed in miscellaneous application should be ignored and the issue may be decided afresh and in the light of the aforesaid submissions after considering as if the fresh appeals are pending. He further submitted that even if it is construed that the CIT had observed that penalty proceedings will be initiated then also it cannot be said that the CIT had issued any directions because order under s. 273A is a judicial order and not an administrative order.

18. We have considered the submissions made by both the sides and have carefully gone through the penalty orders, order of the CIT(A), the Tribunal's order (since recalled), order in miscellaneous application, CIT's letter dt. 21st March, 1988, Dy. CIT's letter dt. 20th March, 1989, and various case law relied upon by the assessee's counsel.

Before expressing our opinion, we would like first of all, to reproduce the relevant portions of various documents referred to by the parties as under : "Extract on discussion note in Jhunjhunwala group of cases - Petition under s. 273A. The report, dt. 6th March, 1989, was received from A.C. Cir. 26(1).

Thereafter he was asked to send another report in the case of Purshottamdas F. Jhunjhunwala as the case records of the said assessee have also been received here on transfer. He submitted a report, dt. 16th March, 1989.

The Annexures I to V showing distribution of income amongst various persons were also submitted by the Asstt. CIT. The Asstt. CIT's reports, dt. 6th March, 1989, 16th March, 1989, and the Annexures I to V were duly discussed and considered.

As per the appraisal report, the amount is worked out at Rs. 88.42 lakhs as stated at p. 4 of the Asstt. CIT's report. The amount of Rs. 88.42 lakhs includes interest of Rs. 14.70 lakhs during the accounting year 1984-85 (p. 49 of the diary). It is submitted by the assessee that this interest is already included in the amount of Rs. 69.46 lakhs. Page 49 of Boston diary was perused. The assessee has worked out the figure of Rs. 69.46 lakhs in various names and those details are mentioned in the said diary. Thereafter certain pages have been pinned up with the diary showing the figures of interest.

The assessee tried to explain with the help of certain entries that the figure of Rs. 69.42 lakhs also includes the interest of Rs. 14.70 lakhs. After discussion it was decided that 50 per cent of this interest should be included in the total income of the assessee for the purpose of disclosure. Thus, the amount to be considered for disclosure under this head would be Rs. 81.07 lakhs as against Rs. 80.53 lakhs shown by the assessee. There will, therefore, be an addition of Rs. 54,000. It was decided that this additional amount of Rs. 54,000 should be taxed in the hands of Kishorilal Fatechand Jhunjhunwala (Individual) during the asst. yr. 1987-88.

As per p. 5 of the report of the Asstt. CIT, Cir. 26 (1), Bombay, the difference is worked out at Rs. 10.53 lakhs. It was decided that this amount should be further added to the disclosed income. The distribution of the additional amount of Rs. 10.53 lakhs should be made as per the figures in Annexure III of the Asstt CIT's report.

At p. 7 of the report of the Asstt. CIT he has worked out the figures of jewellery not declared at Rs. 7.28 lakhs and figures of jewellery with wide variatoins at 6.11 lakhs in the names of 3 (three) parties, viz., Kishorilal F. Jhunjhunwala, Niranjan P. Jhunjhunwala and Nirmal Kumar P. Jhunjhunwala. As regards Purshottamdas Jhunjhunwala, the Asstt. CIT has submitted a report, dt. 16th March, 1989 showing jewellery at Rs. 1,99 lakhs not disclosed and jewellery with vide variations at Rs. 1.90 lakhs.

Thus, the total unexplained jewellery comes to Rs. 17.28 lakhs.

Regarding jewellery of Rs. 4.77 lakhs in the hands of Purshottamdas since they are pertaining to other parties and they have been shown in their respective hands, they are to be ignored for the purpose of this disclosure. Thus, unexplained jewellery of Rs. 17.28 lakhs will be added along with silver utensils not disclosed by the assessee at Rs. 2.74 lakhs making the total at Rs. 20.02 lakhs. It is explained by the assessee that all these items have naturally been purchased out of the expenditure for which the amount of Rs. 10.53 lakhs has already been added and, therefore, the reduction of the aforesaid amount should be given. Accordingly, out of Rs. 20.02 lakhs, the deduction of Rs. 10.53 lakhs being expenditure already taxed above is allowed and thereby an addition of Rs. 9.49 lakhs is made on account of unexplained jewellery. This amount of Rs. 9.49 lakhs is made on account of unexplained jewellery. This amount of Rs. 9.49 lakhs should be spread over in the hands of K. F. Jhunjhunwala (Individual), Niranjan P. Jhunjhunwala (Individual), Nirmal P. Jhunjhunwala (Individual) and Purshottamdas Jhunjhunwala (Individual) during the asst. yr. 1987-88 only, in the proportion of undisclosed amount of jewellery of Rs. 20.02 lakhs in the hands of the above said 4 persons.

This has reference to p. 10 of the Asstt. CIT's report. The amount of Rs. 1.80 lakhs is to be included and distributed amongst Jhunjhunwala & Co. and Fatechand Paliram & Sons in the ratio stated in Annexure I of the Asstt. CIT's report.

The distribution as done in Annexure V is approved. This has reference to p. 11 of the Asstt. CIT's report. However, the tax paid by the assessee in respect of those years in which the disclosure is not accepted should be given credit in the remaining years.

The last para of p. 3 of the Asstt. CIT's report, dt. 6th March, 1989, is also approved.

The penal interest should be charged and penalty proceedings should also be initiated. The question of waiver would be considered subsequently, with the prior approval of the Board." Extract of letter, dt. 20th March, 1989 from Dy. CIT Bombay to CIT, Range 26, Bombay to CIT, City, VIII, Bombay Sub :- Report in the case of Jhunjhunwala Group of cases on petition under s. 273.

Kindly refer to this office letter No. Range-26/9/1988-89, dt. 7th March, 1989.

A discussion note, dt. 20th March, 1989, is sent herewith along with copies of Asstt. CIT's report, dt. 16th March, 1989, and Annexure I to V. The discussion note may kindly be approved so as to enable the Asstt. CIT Cir. 26(1), Bombay to complete the assessments.

Extract of letter, dt. 21st March, 1989, from CIT B.C. VIII, to D.C. Range 26, Bombay I have been directed to refer to your No. Range 26/273A JJ Group/1988-89, dt. 23rd March, 1989, forwarding the discussion note, dt. 20th March, 1989. CIT's remarks are as under : "Approved, assessments in the respective cases to be made as per the note and as discussed." Extract from CIT(A)'s order dt. 7th February, 1991 in the case of Nirmal P. Jhunjhunwala : "... Lastly the Asstt. CIT pointed out that while granting spread over, the CIT had directed that the penalty proceedings should be initiated against the assessee.

"While granting spread over the CIT has directed that penalty proceedings should be initiated against the assessee ..." Extract from Tribunal's order, dt. 26th November, 1991 in the case of Nirmal P. Jhunjhunwala : "The penultimate para of the order of the AO for the asst. yr.

1972-73 reads as under : "While granting spread over the CIT has directed that penalty proceedings should be initiated against the assessee ..." "While granting spread over the CIT has directed that penalty proceedings should be initiated against the assessee." 19. After careful consideration of the aforesaid extracts, we are of the opinion that the inference drawn by the Departmental Representative from various orders and documents, relied upon or referred to by him during the course of his submissions, are not sustainable. On the other hand, the submissions of the assessee's counsel that penalty proceedings were initiated on the basis of the directions of the CIT stands proved beyond doubt from the orders of all the authorities portions from which have been extracted as above. Considering the submissions/observations as extracted above, the only inference which anybody will draw will be that it is the version of the Revenue authorities themselves that the penalty proceedings were initiated as per directions of the CIT. Here, we would like to discuss the various statements in these documents as under : Firstly, the discussion note clearly confirms that the issue regarding disclosure by the appellants was discussed by the CIT City VIII, Bombay with the representative of the assessee, Nirmal Kumar P. Jhunjhunwala, P. S. Hajela, Dy. CIT, Range 26, Bombay, S. Halder, Asstt. CIT, Cir.

26(1), Bombay and M. Madhavan, Asstt. CIT (HQ), City-VIII, Bombay. So, this itself shows that the decision was that of the CIT and not of anybody else.

Secondly, the last sentence of 1st para of this note which goes as "The Asstt. CIT's reports, dt. 6th March, 1989, 16th March, 1989 and the Annexures I to V were duly discussed and considered .... clearly confirms that it was the CIT (or at the most the Dy. CIT) who had discussed and considered the Asstt. CIT's report because nobody else could have done so.

Thirdly, on the basis of such discussion and consideration, it has been mentioned as "The following decisions were taken". This finding also confirms that the decisions were taken by the CIT and nobody else.

Fourthly, from para 5, which runs as hereunder, it is very clear that such direction could be given only by the CIT and nobody else : Annexure V of the report : The distribution as done in Annexure V is approved. This has reference to p. 11 of the Asstt. CIT's report. However, the tax paid by the assessee in respect of those years in which the disclosure is not accepted should be given credit in the remaining years.

"... The penal interest should be charged and penalty proceedings should also be initiated. The question of waiver would be considered subsequently, with the prior approval of the Board" confirms beyond any doubt that this para was nothing but the directions of the CIT because of the following two reasons : (i) Had it been from the Asstt. CIT, then there was no question of using the word "should" rather the words would have been as "if approved" and then the words "should" or "would" or "may" because when some one seeks instructions or approval from a higher authority, then such lower authorities can never use the directive language; rather will mention just his proposal which in this case was as to what action the AO was likely to take and for that purpose, and, therefore, he should have used the words "If approved" and then "should" or "would" or "may". It is, therefore, clear that the word "should" without prefixing the words "If approved" is from the mouth of the higher authority which in this case is the CIT. (ii) Had the note been originated from the mind the Asstt. CIT then there was no question of writing the sentence "the question of waiver would be considered subsequently, with the prior approval of the Board", because the Asstt. CIT had neither any business to deal with waiver of the penalties nor he had the powers or jurisdiction to suggest such a proposal. On the other hand, such direction could be only from the CIT who was seized of the matter of waiver of penalties under s. 273A.The overall interpretation of this note on facts proves beyond doubt that the directions given in this note to initiate penalty proceedings under s. 271(1)(c) were from the CIT.The fact that directions to initiate penalty proceedings were given by the CIT is further evidenced beyond any doubt from the statement of the Asstt. CIT recorded in the penalty order itself. In last para, at p. 4 of the penalty order which starts with the sentence "while granting spread over, the CIT directed that penalty proceedings should be initiated against the assessee"; requires no further evidence to prove that the penalty proceedings were initiated not by the Asstt. CIT himself but were initiated as per the directions of the CIT. We would further like to observe that this fact has been duly taken note of by the CIT(A), the Tribunal in the order (since recalled) and Tribunal's order passed in assessee's miscellaneous application.

20. We would further like to observe that had there been no such directions by the CIT, then, either the CIT(A) would have rebutted the admission made by the Asstt. CIT in penalty order or the Revenue would have come in appeal before the Tribunal against the order of the CIT(A) or the CIT would have rectified the penalty order by exercising the powers under s. 263. Failure on the part of the Revenue to do so further proves that the fact of issuance of directions by the CIT for initiation of penalty proceedings was very much documented and had been accepted by the Revenue. We would further like to observe that the Asstt. CIT was honest in his decision by mentioning that penalty proceedings were initiated as per the directions of the CIT.21. In our opinion, the cumulative effect of the aforesaid discussion and facts on record confirms beyond doubt that the Revenue had all along been accepting that the penalty proceedings were initiated by the CIT and, therefore, we are of the opinion, that the CIT had given such directions.

22. Having found from the facts on record and admission by various Revenue authorities that the penalty proceedings under appeal were initiated on the basis of directions issued by the CIT, the next question for our consideration is as to whether the penalty proceedings initiated as per the terms of the CIT were bad in law or not. To decide this issue, we would like to reproduce s. 271(1)(c) : "Sec. 271(1) : If the ITO or the AAC or the CIT(A) in the course of any proceedings under this Act, is satisfied that any person :(a) xx xx xx(b) xx xx xx (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such persons all pay by way of penalty." From the above provisions of s. 271(1)(c), we find that it is the ITO or the AAC or CIT(A), who, in the course of any assessment proceedings must be satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income, then and only then he may direct that such person shall pay by way of then and only then he may direct that such person shall pay by way of penalty ... In our opinion, it is the word 'satisfied' which is the basis of initiation of penalty proceedings and, therefore 'to be satisfied' with a state of things means to be satisfied in "one's own mind", because "satisfied" is certainly a personal statement of mind. Lord Parson in Blyth vs. Blyth (1966) 1 All ER 524 defined phrase "is satisfied" means "makes up its mind". Dickson J. defined it as "actual persuasion" and in the language of Smith Justice, J., Angland vs. Payne 1944 MZLR 610626, the terms "is satisfied" mean "a mind which reached a clear conclusion".

Thus, it is the ITO who in the course of assessment proceedings or first appellate authority in the course of appellate proceedings, who has to be satisfied in his own mind that it is a case where he should initiate penalty proceedings, so that the majesty of law is upheld. He must reach a clear conclusion and, therefore, it is this satisfaction which is the foundation of action for imposition of penalty. - Jiten & Co. vs. STO (1977) 39 STC 308 (Del).

23. The mentioning of the specific authorities in the opening sentence of s. 271(1) confirms that it is the ITO or the AAC or the CIT(A) who is the prime authority in power to initiate proceedings and, therefore, there being specific authority, and satisfaction being of that specific authority, we are clearly of the view that penalty proceedings under s.

271(1)(c) can be initiated only on the personal satisfaction of any of these 3 authorities, i.e., ITO, AAC or CIT(A) and not on the basis of satisfaction of any other authority, meaning thereby, that penalty proceedings under s. 271(1)(c) cannot be initiated on the directions, suggestions or advice of any other authority, even higher in rank.

Consequently, we hold that penalty proceedings initiated on the directions of the CIT will definitely be bad in law. This view is fortified by the order of the Hon'ble Supreme Court in D. M. Manasvi's case (supra).

24. As far as the cases before us are concerned, we have already found from facts that penalty proceedings were initiated on the direction of the higher authority, that is, CIT and, therefore, in view of that finding coupled with aforesaid conclusion, we are of the opinion that penalty proceedings in case of all these appellants were bad in law, and consequently, the penalty orders passed by the Asstt. CIT on the basis of such initiation are automatically bad in law and void ab initio. The same are held to be null and void.

25. Though, after having reached the aforesaid conclusion it is not necessary to make any further comments, but we would like to mention that in the order passed in assessee's miscellaneous application, it has been clearly held in para 20 of its order that if the penalty proceedings are initiated as per the direction of the superior authority, the entire penalty proceedings would get vitiated and the penalty orders would have to be struck down. The Tribunal has further held in para 20 itself at p. 21, that : (i) only because a show-cause notice had been issued by the AO, it cannot be concluded that he was satisfied in the course of proceedings under the Act before him that the assessee had committed the default mentioned in s. 271(1)(c) and this is more so in the present case in view of the admission on the part of the AO that the CIT had directed him to initiate penalty proceedings; (ii) the fact that the AO has initiated penalty action even in respect of asst. yr. 1987-88, the return for which year had been filed after the group submitted a petition under s. 273A and the assessee of the group had disclosed in the returns for asst. yr.

1987-88, the additional amount being offered for taxation, is, in our opinion, a proof of the fact that the initiation was because of the directions of the CIT; (iii) further there is hardly any discussion in any of the assessment orders to indicate that the AO was satisfied in the course of assessment proceedings; and to make these observations clear, we would like to produce para 20 of the said order : "20. Firstly, we will take up for consideration the question whether initiation of penalty proceedings was because of the directions given by the CIT to the AO or the AO was satisfied that the penalty under s. 271(1)(c) was leviable on the assessee. In this connection, it may be noted that the Tribunal in its order has reproduced extracts from the AO's penalty order which clearly bring out the fact that the CIT had directed the AO to initiate penalty proceedings. Secondly, it has been asserted by the assessees that an argument had been made by the assessee's counsel that since the initiation of penalty proceedings was because of the directions of the CIT, the whole proceedings were vitiated and that the penalty orders deserve to be cancelled on this ground. Thirdly, it may be noted that this claim of the assessee that this point had been urged before the Tribunal has not been controverted by the Department.

Fourthly, it may be noted that the following observations of AO in the penalty orders are so clear and unequivable that it is inconceivable that this argument would not have been made : 'While granting spread over the CIT has directed that the penalty proceedings should be initiated against the assessee.' Therefore, firstly, we hold that this submission has not been dealt with by the Tribunal in its order. Secondly, it is a well settled position in law that penalty proceedings can be initiated only if the ITO is satisfied in the course of proceedings under the Act before him that the assessee had committed one of the specified defaults. If the initiation of penalty proceedings is not because of such satisfaction on the part of the ITO but is because of the directions of the superior authority, the entire penalty proceedings would get vitiated and the penalty orders would have to be struck down. The question, therefore, for our consideration, is whether the AO had initiated penalty proceedings because he was satisfied that the defaults mentioned in s. 271(1)(c) had been committed by the assessee or he had initiated the penalty proceedings because of the directions of the CIT. Only because a show-cause notice had been issued by the AO it cannot be concluded that he was satisfied in the course of proceedings under the Act before him that the assessee had committed the default mentioned in s. 271(1)(c) and this is more so in the present case in view of the admission on the part of the AO that the CIT had directed him to initiate penalty proceedings. The fact that the AO has initiated penalty action even in respect of asst. yr. 1987-88, the return for which year had been filed after the group submitted a petition under s. 273A and the assessee of the group had disclosed in the returns for asst. yr. 1987-88 the additional amount being offered for taxation is, in our opinion, a proof of fact that the initiation was because of the directions of the CIT. Further, there is hardly any discussion in any of the assessment orders to indicate that the AO was satisfied in the course of proceedings under the Act that the assessee had committed the default under s. 271(1)(c). In our opinion, since the initiation of proceedings was because of the fact that the AO was satisfied in the course of proceedings under the Act that the assessee had committed the default under s. 271(1)(c), the orders under s.

271(1)(c) deserve to be reconsidered." As the learned Departmental Representative has not objected to the findings of the Tribunal arrived in the order of miscellaneous application SO, we have no option but to follow the findings also and on this basis also, we hold that the initiation of penalty proceedings under s. 271(1)(c) was as per the directions of the CIT and consequently the penalty orders are bad in law.

As regards to the decisions relied upon by counsel for the assessee, we are of the opinion that these decisions support the assessee's submission and for the sake of brevity, the details of the orders are not reproduced. On merits the counsel for the assessee submitted that (i) the penalty having been imposed under the main provisions of s.

271(1)(c) without invoking any of the Explanation, so, it was Department's onus first to prove that what amount was appellant's concealed income and for which year. Referring to assessment order as well as penalty order, he submitted that there is nothing except the reliance on disclosure made by the assessee himself. He, therefore, concluded that the Department's failure to discharge its onus the penalty is unjustified. (ii) His next point of attack was that the disclosure was voluntary. For this proposition, he referred to the submissions of Kishorilal F. Jhunjhunwala placed at pp. 16 to 26 of the assessees paper-book containing copy of statements recorded during search. Referring to answer to Q. Nos. 4 and Q. No. 5, of statement recorded at 9.15 p.m. on 22nd August, 1986, Q. Nos. 17, 19, 20, 21 and 23 of the statement recorded at 1 a.m. on 23rd August, 1986, and Q.Nos. 1, 2 and 3 of statement recorded on 23rd August, 1986, he submitted that a disclosure to the tune of Rs. 1,76,29,155 as detailed below was made during the search itself :----------------------------------------------------------------------S. Amount Nature of In whose hand disclosure wasNo. disclosed amount made----------------------------------------------------------------------(1) (2) (3) (4)---------------------------------------------------------------------- (Rs.)2.

2,00,000 Cash Shakti Housing Development (P) Ltd.3.

1,00,000 Difference in Whole of Jhunjhunwala Group.

valuation of4.

3,25,000 Payment in cash Niranjan P. Jhunjhunwala for flat5.

2,00,000 Income from bldg. Niranjan P. Jhunjhunwala construction work7.

93,67,129 Expenses and Whole of Jhunjhunwala investments, Group8.

69,46,900 Advances given Kishorilal Jhunjhunwala---------------------------------------------------------------------- After referring to the letters, dt. 28th August, 1986, and 7th November, 1986, addressed to the Additional Director of Income-tax (Inv.) and CIT respectively, he submitted that in para 2A of these letters, the other members of the group had submitted a proposal for making disclosure under the Disclosure Scheme, 1986, so-called Amnesty Scheme. He further submitted that ultimately as a result of this intention of the whole group the revised returns for assessment year ranging from 1970-71 to 1986-87 were furnished on 3rd March, 1987. He further submitted that by the time these revised returns were furnished, no notice under s. 148 for any of the assessment years and also no notice under s. 143(2) for asst. yr. 1986-87 had been issued.

He, therefore, concluded that the disclosure having been made during the search itself, it was voluntary disclosure. Deriving support from the fact of disclosure having been made voluntarily, he submitted that the appellants were entitled to benefits of the amended Expln. 5 to s.

271(1)(c). He submitted that the amendment, though in Expln. 5 to s.

271(1)(c) was brought w.e.f. 10th September, 1986, but it being in the nature of an Explanation to the existing uncoded law was applicable to appellant's case also. He further elaborated that the Explanation was amended because it was found that unamended Explanation was too harsh and to remove hardship caused by unamended Explanation, the legislature had thought fit to amend the same. Concluding his submissions on this issue, he submitted that the amendment in Explanation was nothing but to give recognition to the existing legal proposition. To support this, he relied on the Board Cir No. ... and also derived force from the amendments effected by way of introducing deeming provisions of ss. 69, 69A, etc., which have been held by various Courts as recognition of the existing legal proposition. He, therefore, submitted that the benefits of no penalty were admissible to the assessees who had volunteered to disclose the concealed income even prior to the amendment of this Explanation and it was only to recognise that legal position that the amendment was made in the Explanation.

Without prejudice to the above submissions, the assessee's counsel submitted that acceptance of appellants' disclosure itself is a sufficient evidence to prove that the disclosure was voluntary and assessee was not liable to penalty. He further invited our attention to the observation made in the discussion note which we have already discussed. According to these observations, it is very much clear that the assessee's disclosure was accepted. He further submitted that the disclosure was subject to no penalty for concealment and prosecution.

So his point of objection that either the Department should have accepted the disclosure in toto or should have rejected. In support of the aforesaid submissions, the counsel for the assessee relied on the following decisions : (vi) Kunal Agency vs. Asstt. CIT (ITA Nos. 6905 to 6908 (Bom) of 1989); (vii) Mahabir Prasad Agarwala vs. ITO (1990) 36 TTJ (Ctk) 181 (SMC Bench); (viii) Sir Shadilal Sugar & General Mills Ltd. vs. CIT (1987) 168 ITR 705 (SC); (ix) Anantharam Veerasinghaiah & Co. vs. CIT (1980) 123 ITR 457 (SC); (xvii) CIT vs. Bengal Iron Galvanising Works (1987) 165 ITR 249 (Cal); (xx) CIT vs. National Alloy & Metal Works (P) Ltd. (1989) 176 ITR 299 (Cal); (xxvi) CST vs. Shahid Husain Rakesh Kumar (1977) 39 STC 520 (All); and 26. The Departmental Representative, on the other hand, submitted that though penalty has been imposed under the main provisions of s.

271(1)(c), but there being admission on the part of the appellants during the search itself, it was not the Department's onus to prove that the amount disclosed was assessee's concealed income.

He further submitted that the disclosure was not voluntary and to support this view, he relied on the statement of Kishorilal F.Jhunjhunwala recorded during search, order under s. 132(5) and order of the Hon'ble Supreme Court in Tribhovandas Bhimji Zaveri vs. Union of India (1993) 204 ITR 369 (SC). Relying on the statements, he submitted that Kishorilal Jhunjhunwala has admitted the concealment whereas from the order under s. 132(5), he derived the proposition that the Department had detected a huge amount of concealment while relying on the decision of the apex Court (supra), he submitted that the assessee had disclosed the huge amount of Rs. 2,29,92,254 only because of the search and, therefore, the disclosure cannot be said to be voluntary.

As regards to benefits available under Expln. 5 to s. 271(1)(c), he stated that the amended Explanation was not applicable to the appellant's case. He further submitted that the furnishing of revised returns do not absolve the appellants of its default of concealment. As regards to acceptance of disclosure he submitted that the Department had nowhere accepted the condition that no penalty will be imposed and to support his submission, the Departmental Representative relied on the following decisions : Tube Fabrico (I) Ltd. vs. CIT (1994) 210 ITR 1035 (Del), Krishna Kumari Chamanlal vs. CIT (1996) 217 ITR 645 (Bom), CIT vs. K. Govindarajulu Naidu (1991) 190 ITR 318 (Mad), S. Vasudeva Rao vs. P. S. J. Sigamang (1995) 211 ITR 284 (Mad), F. C. Agarwal vs. CIT (1976) 102 ITR 408 (Gau), CIT vs. Industrial Finance Corpn. of India Ltd. (1989) 180 ITR 440 (Del), Dayabhai Girdharbhai vs. CIT (1957) 32 ITR 677 (Bom), Vadilal Ichhachand vs. CIT (1957) 32 ITR 569 (Bom), Tribhovandas Bhimji Zhaveri's case (supra) and CIT vs. Express Newspapers Ltd. (1994) 206 ITR 443 (SC).

27. After considering the submissions and having gone through the material before us, the facts which are evidenced from the record emerges as under : (i) That a disclosure to the tune of Rs. 1,76,29,155 was made during the course of search itself, details of which have been stated in the submission made by the assessee's counsel.

(iii) There was no seizure of any value in the case of Nirmal Kumar Jhunjhunwala.

(iv) The seizure of jewellery in the case of Purshottam Jhunjhunwala, Kishorilal Jhunjhunwala, Niranjan Jhunjhunwala was only with respect to the jewellery whose valuation was disputed.

(vi) The Asstt. CIT while completing penalty proceedings had not disputed the fact that assessee had made disclosure under s. 132(4) but denied the benefits of s. 132(4) only because in his opinion, benefits were available to the assessee only in respect of the years for which returns of income had not been furnished by the time search was conducted (See last sentence of 1st para of penalty order at p. 3).

(vii) The CIT(A) denied the benefits available under the amended Expln. 5 to s. 271(1)(c) only because of the fact that according to him, the provisions were operative from 10th September, 1986, and also because of the search.

(viii) No notice under s. 148 in any of the case was issued prior to furnishing of revised return and no notice under s. 143(2) was issued prior to furnishing of revised return for the asst. yr.

1986-87.

(ix) Assessments were completed on the basis of disclosed income with minor variations due to appellants' further agreeing to disclosure of an additional amount of Rs. 20 lakhs reasons for which have been given in the appellants letter, dt. 5th March, 1990, placed at pp. 26 to 30 of the assessee's paper-book Part III(ii) which goes to state that as "During the discussion with Hon'ble CIT and Hon'ble Dy. CIT(A) between December, 1988, to March, 1989, Hon'ble CIT concluded that jewellery to the tune of around Rs. 20 lakhs were not tallying meticulous either as per weight or as per description. To avoid litigation and to conclude the objection and relevant assessments in their prospective perspective, Hon'ble CIT suggested over us to set further an amount of Rs. 20 lakhs for taxation which were gracefully accepted even though not fully convinced. In the said meeting, the Hon'ble CIT decided the years and the persons in whose hands the said amount of Rs. 20 lakhs were to be taxed. On the basis of said directions, various assessments were completed between May to July, 1989.

(x) As per the discussion note, disclosure with respect to the some assessment years had been accepted as is clear from the last sentence at p. 2 of the note which goes as "... However, the tax paid by the assessee in respect of those years in which the disclosure is not accepted should be given credit in the remaining years." (xi) When the settlement was arrived at and spread over was accepted, the appellants were certainly given assurance for not initiating the penalty proceedings and the reasons for this conclusion in the sentence in the said discussion note to the effect that "penal interest should be charged and penalty proceedings should be initiated. The question of waiver would be considered subsequently, with the prior approval of the Board". Had there been no intention to waive the penalty, this sentence should not have been stated/included.

28. Having considered the submissions and the various facts on record and having gone through the various decisions relied upon by both the parties, we are of the opinion that the penalty in all these cases was not justified and our opinion is based on the following discussion : (i) As regards to the imposition of penalty under the main provision and discharge of onus by the Department, we are unable to agree with the learned Departmental Representative that after acceptance of concealment by the appellants during the search and by way of filing revised returns, the Department was not under obligation to prove concealment. In our opinioin, the question of disclosure offer during the search or thereafter arise only when there had been concealment on the part of the assessee and, therefore, if the disclosure by the appellant is not accepted as to be voluntary, then it is the Department's onus to prove that whatever it is going to tax was assessee's concealed income for a particular assessment year. If the Department prefers to accept the disclosure, then it cannot allege that the assessee has concealed the income or furnished inaccurate particulars in the revised returns.

It has been held by various Courts that where the penalty has been imposed under the main provisions of s. 271(1)(c) and Explanation has not been invoked, then the ratio in the case of Anwar Ali (supra) still holds good.

We are, therefore, of the opinion that in view of ratio the decision in Anwar Ali's case (supra), it was the Department's onus to prove that the income which it was going to tax in the assessment years ranging from 1970-71 to 1987-88 was income of that particular year and belonged to the particular assessee. The Department's failure to do so cannot be a support to the Department for its claim that after disclosure by the assessee, the Department was not under obligation to do anything in proving that the income disclosed was assessee's income. Our aforesaid views are fortified by decisions of the Bombay Tribunal in the case of Sidhivinayak Chemicals (P) Ltd. vs. Asstt. CIT (1995) 52 ITD 226 and we would like to reproduce the relevant portion from this order hereinafter : (i) That in the absence of the application of Expln. 1, the onus lies upon the Revenue to establish the mens rea on the part of the assessee as the penalty proceedings were quasi-criminal in nature and the CIT(A) was not justified in holding that mens rea was not required in view of Supreme Court's judgments.

(ii) That the ratio laid down by the Hon'ble Supreme Court in the case of CIT vs. Anwar Ali (1970) 76 ITR 696 (SC) would apply to the facts of the present case. Therefore, the penalty cannot be imposed on the mere findings arrived at in the course of assessment proceedings as these findings, though relevant, are not conclusive.

(iii) That all the facts on the record should be taken into consideration in deciding the justification of penalty imposed by the AO. 11. Both the parties have been heard at length and the material placed before us had been perused. There cannot be any dispute about the legal position taken by the assessee that in the absence of application of Explanation the law declared by the Supreme Court in Anwar Ali's case (supra) would apply. Penalty proceedings being quasi-criminal in nature the onus lies on the Revenue to prove that there is concealment of the particulars of the income by the assessee ..." In the aforesaid case, after having found that the Explanation was not invoked by the ITO and could not be invoked by the CIT(A), the Tribunal found that the ratio of the Supreme Court decision in Anwar Ali's case (supra) was applicable to the facts and circumstances of the case.

(ii) As regards to the benefits available under the amended Expln. 5 to s. 271(1)(c), we are again not able to agree with the learned Departmental Representative because in para 15(5)(c)(b) of Circular No.469, dt. 23rd September, 1986, in which the scope of amended Expln. 5 has been explained to suggest that the amendment was nothing but a recognition of the concept that if there is disclosure during the search that penalty under s. 271(1)(c) and prosecution are not attracted.

(iii) As regards to objection of the learned Departmental Representative that disclosure was not voluntary and his reliance on the decision of the Hon'ble Supreme Court in Tribhovandas Bhimji Zhaveri's case (supra) with respect to the Hon'ble apex Court, we are of the opinion that the decision in this case is not applicable to the aforesaid facts of the appellant's case. In this case, the Hon'ble Supreme Court was to consider the scope of word 'voluntary disclosure' in view of provisions of s. 3(2)(ii) and s. 14 of the Voluntary Disclosure of Income and Wealth-tax Act, 1976 (No. 8 of 1976, [102 ITR (St) 49]. Before differentiating the decision, we would like to note the relevant provisions of this Act.

Sec. 3(1). Subject to the provisions of this Act, where any person makes, on or after the date of commencement of this Act but before the 1st January, 1976, a declaration in accordance with the provisions of s. 4 in respect of any income chargeable to tax under the Indian IT Act, 1922 (11 of 1922), or the IT Act for assessment year : (a) for which he has failed to furnish a return under s. 139 of the IT Act, or (b) which he has failed to disclose in a return of income furnished by him under the IT Act before the date of commencement of this Act, or (c) which has escaped assessment by reason of the omission or failure on the part of such person to make a return under the Indian IT Act, 1922 (11 of 1922) or the IT Act or to disclose fully and truly all material facts necessary for his assessment or otherwise, then, notwithstanding anything contained in the Indian IT Act, 1922 (11 of 1922), or the IT Act or in any Finance Act, income-tax shall be charged in respect of the income so declared such income being hereinafter referred to as the voluntary disclosed income at the rate or rates specified in the Schedule.

(i) the income assessable for any assessment year for which a notice under s. 139 or s. 148 of the Act has been served upon such person and the return has not been furnished before the commencement of this Act; (ii) where any books of account, other documents, money, bullion, jewellery, or other valuable articles or things belonging to the person making the declaration under sub-s. (1) (hereinafter in this section, in ss. 4 to 13 and in the Schedule referred to as the declarant) have been seized as a result of any search under s. 132 of the IT Act or under s. 37A of the WT Act, income in respect of the previous year in which such search was made on any earlier previous year.

(3) In addition to the amount of income-tax to be paid under sub-s.

(1), the declarant shall invest a sum equal to 5 per cent of the amount of the voluntarily disclosed income in such securities as the Central Government notify in this behalf of the Official Gazette.

Sec. 14(1) - Subject to the provisions of this section, where any books of account, other documents, money, bullion, jewellery or other valuable articles or things belonging to a person have been seized as a result of the search under s. 132 of the IT Act or s.

37A of WT Act and such person (hereafter in this section referred to as the declarant) makes, on or after the date of commencement of this Act but before the 1st January, 1987, a declaration in accordance with the sub-s. (2) in respect of any income relating to the previous year in which such search was made or any earlier previous year - (a) for which he has failed to furnish a return under s. 139 of the IT Act, or (b) which he has failed to disclose in a return of income furnished by him under the IT Act before the commencement of this Act, or (c) which has escaped assessment by reason of the omission or failure on the part of such persons to make a return under the Indian IT Act, 1922 (11 of 1922) or the IT Act, or to disclose fully and truly all material facts necessary for his assessment or otherwise, then notwithstanding anything contained in any of the Acts mentioned in sub-s. (1) of s. 8 or the WT Act, the amount of income so declared or, as the case may be, the value of the assets representing such income, shall not be taken into account for the purposes of - (i) payment of interest by the declarant under sub-s. (8) of s. 139 of the IT Act; (ii) payment of interest by the declarant under s. 215 or s. 217 of the IT Act or the corresponding provisions of the Indian IT Act, 1922 (11 of 1922); (iii) imposition of penalty on the declarant under the provisions of any of the said Act, except under s. 221 of the IT Act or the corresponding provisions of any of the other said Acts; and (iv) prosecution of the declarant under the provisions of any of the said Acts.

(2) The declaration under sub-s. (1) shall be made to the CIT and shall be in such form and shall be verified in such manner as may be prescribed by rules made by the Board.

(3) A declaration under this section shall be signed by the person specified in sub-s. (2) of s. 4 as if the declaration had been made under that section.

(4) A copy of the declaration made by the declarant under sub-s. (1) shall be forwarded by the CIT to the ITO and the information contained therein may be taken into account for the purposes of the proceedings relating to assessment or reassessment of the income of the declarant under the provisions of any of the Acts mentioned in sub-s. (1) of s. 8 or the WT Act.

(5) The immunity provided under sub-s. (1) shall not be available to the declarant unless the tax chargeable in respect of the income of the previous year or years for which the declaration has been made is paid by the declarant in accordance with the provisions of s. 5." Under s. 3(2)(ii) of this Act, it was specifically provided that provisions of sub-s. (1) were not applicable to a case where books of account, etc., had been seized as a result of action under s. 132. It was, therefore, in this context and the fact that as per s. 3(1), the income so disclosed (in cases where there was no search) was considered to be "voluntarily disclosed income"; meaning thereby, that in these provisions, the specific limitation was placed on the meaning of "voluntarily disclosed income" by the prohibitory provisions and, therefore, it cannot be said that the term "voluntarily disclosed income" or "voluntary disclosure scheme" as appearing in this Act had universal application to such term appearing at any other place in the IT Act. In our opinion, the term 'voluntary disclosure scheme' appearing in this Act was only relevant for ss. 3 and 14 of this Act itself and was not applicable to the disclosures made under s. 273A or under the Amnesty Scheme or under Expln. 5 to s. 271(1)(c), because it was in the context of provision of s. 3 of this Act that the Hon'ble apex Court had found that there being seizure in that case, the appellant's case did not fall within s. 3(2) but fell under s. 14 of the Act, under which there were separate provisions for disclosure in cases of search and seizure. In this case, there was search in the case of the assessee and the assessee was claiming that his case was covered by the provisions of s. 3. So, it was in the context of this claim and in view of different provisions for making disclosure in different types of cases-one where there was search and seizure and the other where there was no search; that the apex Court has held that the appellant's case was not covered by s. 3(2) of the Act. With utmost respect to the Hon'ble Highest Court of the land, we are unable to agree with the submission of the learned Departmental Representative that the findings of the apex Court with respect to the term "voluntary disclosure income" have an universal application.

On the other hand, we are of the opinion that these findings were applicable only to the cases concerning the provisions of that Act only, and, therefore, the Departmental Representative's submission is rejected. On the other hand, as we have already held that disclosure was voluntary, so the assessee succeeds on this issue. More so, because in the cases relied upon by the learned Departmental Representative, the disclosure was found to be not voluntary, not because of the fact of search and seizure alone, but because of prohibitory provisions in the Act itself, according to which search and seizure cases were excluded from the ambit of the term "voluntary disclosure of income".

In view of the above facts and circumstances, we are of the opinion that the appellant's case may not be directly covered by the amended Explanation but in view of the legislature's intention behind the amendment and the disclosure being voluntary, we are of the opinion that no penalty was leviable in this case.

As regards to the Departmental Representative's reference to the statement of Kishorilal Jhunjhunwala recorded during the search and reference to the order under s. 132(5), we are of the opinion that these also do not help the Department because the admission in the statements recorded during the search was a disclosure and the amounts which were considered as income in the orders under s. 132(5) were nothing but the amount disclosed by the assessee during the search and that too have not been assessed anywhere in the final assessment orders because the assessment orders have been completed on the basis of appellants' disclosure.

The assessee's counsel had further submitted that even if it is taken that the amended Expln. 5 was not applicable, then also, the appellants were entitled to immunity under the old Explanation because of the disclosed amounts were recorded in the 'Boston diary' which was a part of the books of account as contemplated in Expln. 5(1). Elaborating his arguments, he submitted that the books of account as contemplated in this Explanation means any books of account and not necessarily the books of account, which in the normal parlance, are known as regular books of account or whether the same was to be produced or not before the authorities.

As far as the contention is concerned, we are unable to agree with the counsel for the assessee because his so-called Boston diary in our opinion, was not in the nature of any books of account which are to be maintained under the recognised system of accounting and, therefore, this argument is rejected.

As regards the arguments that disclosure was subject to no penalty, and, therefore, the same should have been accepted in toto, and if the Department was not to accept the disclosure, then it should have rejected the disclosure and have completed the assessments on the basis of its own enquiries and the seized documents, and as the Department has not done anything except completing the assessment on the basis of disclosure made by the appellants, it was not justified on the part of the Department to accept the disclosure but to reject the condition relating to immunity to penalty and prosecution.

The learned Departmental Representative opposed the submission on the ground that disclosure was made only because the appellants were agreeable due to search and seizure and certain documents and the conditions put by them were unreasonable which could not be accepted.

29. After careful consideration of the submissions, we are of the opinion that the appellants' submissions have force and the Departmental Representative's objection cannot be sustained. As far as the fact of conditional offer, i.e., the disclosure was subject to no penalty and prosecution is concerned, it has never been disputed by any of the parties and the Departmental Representative has also not disputed. So, once this fact is accepted, then it has to be held automatically that the authorities were not justified in accepting a part of it, i.e., relating to quantum of income and reject or ignore the other part which was relating to no penalty and prosecution. If the Department had any material or want to reject the condition relating to no penalty and prosecution, then the legal procedure for it was to reject the whole disclosure and complete the assessment on the basis of its own enquiries or material available with it.

From the assessment orders and the discussion note, it is, however, evident beyond doubt that the assessments have been completed solely on the basis of disclosure made by the assessee after having accepted the spread over of the income in the hands of the various persons and in various years. So, having done so, now, it does not lie in the mouth of the Department to claim that the disclosure was unconditional or that the condition would not be accepted as the disclosure was made after the search. Our opinion is fortified by the decisions in the following two cases :I. Ramnath Jagannath vs. State of Maharashtra (1984) 57 STC 46 (Bom).

To justify our view, we would like to reproduce the relevant portion of this decision as under : "Held, that on a plain reading of the letter of the assessee's counsel to the Dy. CIT and in the light of the facts, it was clear that the offer made in the letter to give up the claim of deduction under first proviso to s. 9 of the Act was clearly a conditional offer on the post-assessment penalty levied and leviable being given up. If it was not possible to accept that condition the only result would be that the said offer just be rejected. If it was rejected by the Dy. CIT he was bound to deal with the claim of the assessees for deduction under the first proviso to s. 9 of the Act on merits. That an offer is coupled with conditions which are not reasonable or one which can be accepted in law completely would not render unconditional the offer which is in terms made on a condition. If it is not possible to accept that condition, the only result would be that that offer must be rejected. But where an offer is coupled with conditions which cannot be accepted fully, the offer cannot be treated as an unconditional offer merely on that count." "For the assessment year the assessee filed a return declaring a certain income. The ITO noticed certain cash credits which were claimed by the assessee to be loans from one creditor. The ITO required the assessee to prove the source of the credit and summons under s. 131 of the IT Act was also issued in this connection.

Later, the assessee requested the ITO to issue the summons to another new address of the creditor but the creditor could not be found to substantiate the assessee's contention regarding the source of the credit. The assessee, thereafter, filed a revised return including therein the cash credit amount as his income. The ITO completed the assessment by including the cash credit amount offered by the assessee. The IAC levied penalty on the assessee under s.

271(1)(c) of the Act on the ground that the assessee had concealed his income as the revised return was filed only after the ITO started investigation and when the assessee had no other course open to him as he was caught. On appeal, the Tribunal found that the assessee offered voluntarily the cash credit for assessment in the revised return only because he was unable to prove, by satisfactory evidence, his claim that the amount was a loan taken from the creditor and not because he admitted the amount to be his undisclosed income and that too with a prayer that no penalty was to be levied, and, therefore, cancelled the levy of penalty. On a reference : Held, affirming the decision of the Tribunal, that the admission made by the assessee was a conditional admission and could not be relied upon for imposing penalty as an unconditional admission.

Therefore, the levy of penalty was not valid." In the case at No. I above, the appellants' condition was not accepted because according to the authorities, it was not possible to accept the same. The Hon'ble High Court held that an offer is coupled with conditions which are not reasonable or one which cannot be accepted in law completely would not render it unconditional offer, which is in terms, made on a condition. The High Court further held that if it is not possible to accept that condition, the only result would be that offer must be rejected, but when an offer is coupled with conditions, then whether those conditions can be accepted or not, the offer cannot be treated as unconditional.

In the case at No. II above, the Hon'ble High Court while dealing with the levy of penalty under s. 271(1)(c) by the Department in spite of the fact that surrender of cash credits by the assessee was subject to the conditions of no penalty would hold affirming the Tribunal's order cancelling the penalty, that conditional admission made by the assessee cannot be relied upon for imposing the penalty under s. 271(1)(c) as an unconditional admission. Respectfully following the law laid down in the aforesaid decisions and the fact that the assessments have been completed on the basis of appellant's disclosure, which was no doubt a conditional one, the levy of penatly in all the 20 cases and for all these years upto asst. yr. 1987-88 was not justified.

30. In the result, all the penalty orders upto asst. yr. 1987-88 are cancelled.

31. Assessee's counsel further submitted that as far as asst. yr.

1986-87 is concerned, the original returns were filed on 3rd March, 1987, and the revised returns, though were filed after the search, but by that time neither any notice under s. 142 had been issued nor assessments were completed and the disclosure made in the revised returns being a conditional one, there was no question of any concealment. He further submitted that the assessments were completed on the basis of revised returns and, therefore, there was no question of any penalty under s. 271(1)(c).

The learned Departmental Representative, on the other hand, submitted that the return was revised after search, so filing of revised returns do not absolve the assessee of the default of concealment and that in view of Expln. 5 to s. 271(1)(c), the income was concealed income.

After having considered the submissions, we are of the opinion that though it is true that revised return may not absolve the assessee of its default of concealment, but it is not so in every case, because such outcome depends on the facts of each case. As far as the present case is concerned, no doubt that the revised return was filed after search, but the other factors such as wholesome disclosure, conditional and of no penalty and completion of assessments only on the basis of disclosure without proving the factum of concealment, supports the assessee's version. We are, therefore, of the opinion that penalty under s. 271(1)(c) and that too, solely on the basis of disclosure by assessee, which of course was subject to no penalty and prosecution and had been accepted, was not justified.

As regards to asst. yr. 1987-88, assessee's counsel submitted that return for asst. yr. 1987-88 was filed for the first time which has been accepted as such. So, there was no question of any concealment.

Alternatively, he submitted that the disclosure having been made during the search itself, the assessee was entitled to the benefits of amended Expln. 5 to s. 271(1)(c). The learned Departmental Representative, on the other hand, submitted that the unamended Explanation was applicable and the penalty was justified. After considering the submissions we are of the opinion that when search was conducted, returns for asst. yr.

1987-88 were not due and as we have already held that the amendment in the Explanation was nothing but a recognition to the prevailing concept of law, so the assessee was entitled to benefit of the amended Explanation. Consequently, the asst. yr. 1987-88 is covered by the amended Explanation and as the income declared in the return has been accepted as it is, so the appellants are entitled to the amendment to Expln. 5. Consequently, the penalties for asst. yr. 1987-88 also are held to be unjustified which are cancelled.

Before departing, we woud, like to record that the cases relied upon by the assessee's counsel supports the relevant submissions-in some cases directly and in some cases indirectly, whereas the decisions in the cases relied upon by the learned Departmental Representative are completely distinguishable on facts.

In the result, the appeals of all the 20 appellants in all the assessment years are allowed.

1. I have gone through the order proposed by my learned brother but I am unable to agree to his conclusions. I proceed to dissent in the following manner .

2. All these assessees are the members of a group called Jhunjhunwala group consisting of nine individuals, five HUFs and four firms and are engaged in the activities like dealing in yarn, money-lending, construction of building, etc. Search operations were carried on on this group on 22nd August, 1986, wherein the following assets/things/valuable were seized : Certain incriminating documents, including one diary called 'Boston' were found. The said diary contained about 30 pages and numerous transactions were noted therein and that too in code, which could be deciphered by only one or two persons in the group.

In connection with the seizure made, orders under s. 132(5) of the Act came to be passed by the Department on 18th December, 1986.

3. On 27th January, 1987, through their tax consultant, N. C. Mehta, the members of the group made disclosure petition under s. 273A of the Act wherein they offered for taxation over Rs. 2.29 crores in various years beginning from the asst. yrs. 1970-71 to 1987-88 and in the hands of the various assessees of the group. Copy of the petition is extracted in pp. 4 and 5 of the order of the learned Judicial Member.

When such disclosures are made, normally the CIT calls for a report from the AO. Such report was given by the AO on 6th March, 1989. A supplementary report, dt. 16th March, 1989, was also prepared and given to the CIT. On 20th March, 1989, a discussion took place between the members of the group and the CIT/AO. Whenever such important discussion takes place, it is normally the practice of the Department to draw the memorandum of discussion by means of discussion note. Such note, dt.

20th March, 1989, is also extracted in para 19 of the order of the learned J.M. In the meantime, post-search investigations were going on and the members of the group were called upon to furnish certain particulars/information. It may be mentioned that the members of the group filed revised returns for all the years on 3rd March, 1987, although by then regular assessments upto the asst. yr. 1985-86 were already completed. The returns for the asst. yr. 1987-88 were filed for the first time by the members of the group on the said date. In respect of completed assessments for all the years, the AO issued notice under s. 148 of the Act. Thereafter, the AO passed orders under s.

143(3)/147(b) of the Act including therein the additional income disclosed in each of the years under consideration in terms of disclosure petition.

4. With the framing of assessments under s. 143(3)/148 of the Act, the AO initiated proceedings under s. 271(1)(c) of the Act in respect of the concealed income brought to tax in the reassessments. The assessees, by the letter of their representatives, dt. 19th February, 1990, stated as under : "(i) During the actions under s. 132, the assessee voluntarily made the declaration under s. 132(4) by offering the additional income for taxation.

(ii) As a corollary and in furtherance to the said statement the assessee filed the petition under s. 273A to the Hon'ble CIT and offered the additional income for taxation. Just to make the declaration full and complete as per the spirit of the provision of the said section, the assessee declared and offered the income for taxation far more than the amount declared under s. 132(4). Along with the said petition and declaration, the assessee prayed for not levying any penalty nor any interest. The assessee has complied all the requirements necessary for the compliance of s. 273A. The declaration under s. 132(4) and the petition under s. 273A were voluntary and without having been issued any notice under s. 139 or under s. 148. The assessee paid all the taxes on the additional income declared and co-operated with the Department diligently and from time to time for the completion of the assessment. Under the circumstances, the assessee is fully eligible for the benefit available under s. 273A for the non-levy of any penalty and waiver of interest.

(iii) In view of the petition under s. 273A and on the basis of the quantum of income offered, Hon'ble CIT issued the direction for taxing the income year-wise. Thus, issuance of direction solely on the basis of amount offered voluntarily for taxation with simultaneous prayer for non-levy of any penalty and interest arising therefrom in view of the petition filed under s. 273A, the penalty on such voluntarily declared income may kindly be dropped/waived." (i) the assessee was in a habit of concealing income, as earlier also raids were carried out in 1976 and in October, 1981; (ii) the assessee had not declared the additional income voluntarily; (iii) the assessee had declared higher amounts than what was earlier declared only on further post-search investigation/probing; (iv) filing of petition under s. 273A of the Act would indicate confession of concealed income/wealth; and (v) the assessee's contention that he had co-operated with the Revenue is not borne out from the records. On the contrary, after great persuasion that the assessee paid the tax long after the assessments were completed.

4.2. The penultimate paragraph of the order of the AO imposing penalty for the asst. yr. 1972-73 in the case of Nirmal P. Jhunjhunwala reads as under : "While granting spread over the CIT has directed that penalty proceedings should be initiated against the assessee. This is a case where the assessee has deliberately concealed the particulars of his income. There was conscious attempt on his part to conceal his income and the same could be detected only when search action was taken by the Department. The very fact that this income was thereafter offered by the assessee for taxation shows that the income not disclosed originally was the 'income' of the assessee.

The fact that this was the third search in the case of the assessee shows that he is a habitual defaulter and as such, the case clearly attract the provisioins of s. 271(1)(c). I am, therefore, satisfied that the assessee has concealed the particulars of his income and has furnished inaccurate particulars thereof. Looking to the recalcitrant and unrepenting attitude of the assessee, it is a fit case for levying penalty under s. 271(1)(c). I, therefore, levy minimum penalty under s. 271(1)(c) at 100 per cent of the tax/income sought to be evaded amounting to Rs. 56,206, as per working given below :Income as finally assessed 81,580Income as per original return 24,444 ------------Tax on assessed income as per order of final assessment - ------------Income-tax sought to be evaded, minimum penalty @ 100per cent of Income-tax sought to be evaded Rs. 56,206." 56,206 ------------ Similarly, the AO imposed penalty for other years and in all other cases.

5. The assessee went in appeal and contended before the CIT(A) that the disclosure of additional income was voluntary and not detected by the AO and such disclosure was made with a view to buy peace with the Revenue. The CIT(A), in his consolidated order, upheld the action of the AO as under : "The various contentions put forth on behalf of the appellant have been carefully considered. It is seen from the impugned penalty orders that in the returned income of the appellant as per the original return and the income at which the appellant had been assessed finally for different assessment years, after considering the appellant's petition before the CIT for spread over, there is wide disproportion in the figures. In the petition under s. 273A of the IT Act, 1961 (and 18B of the WT Act, 1957), dt. 27th January, 1987, relating to asst. yrs. 1970-71 to 1987-88, vide para No. 13, additional income of Rs. 2,29,90,529 was offered in respect of the Jhunjhunwala group of cases pertaining to different assessment years as per details enclosed herewith. As per para 14E, each firm and member of Jhunjhunwala group agreed to submit individual petition along with the returns of income and wealth (on or before 15th February, 1987). In para 17, it was admitted that the individual petitions were commensurate with the investments made by the group and the expenses incurred on household expenses, marriage expenses, purchase of jewelleries, charity and donation. In the annexure to the petition being the details of disclosure, the amount offered is, however, Rs. 2,29,92,254. The above petition was followed by another letter dt. 3rd March, 1987, addressed to the CIT, Bombay, with respect to payment of taxes. It is seen from the said petition that vide para 2 thereof it has been categorically admitted that the offer made in the petition, dt. 27th January, 1987 was commensurate with the papers found at the time of action under s. 132 of the IT Act. Therefore, the plea taken at this stage that the group made suo motu offer while no incriminating papers or things were found during the initial period of raid appears to be prima facie not borne out from the records. In fact, perusal of the appraisal report and other records lead to the conclusion that when confronted with a number of incriminating papers found during the search for instance papers No. 5, 21 to 26, 27, diary (Boston note), etc., the representatives of the group had little option left but to confess wide scale concealment and come forward with disclosure in the hands of the assessee and various members of the group as per details on record.

Thus, it is difficult to accept that the appellant would have suo motu come forward with disclosure if the search operations had not taken place resulting in detection of concealed income. This is also evidenced from the fact that in the original returns in this case and other cases of this group, assessments have been framed at meagre income(s) an without declaring income(s) shown as per the assessment framed afresh following search and seizure action in this group. It may also be added here that the benefit extended under s.

132(4) for the purpose of levy of penalties, if any, was not available to the assessee as search took place on 22nd August, 1986, and the said provisions were operative from 10th September, 1986, by Taxation Laws (Amendment miscellaneous Provisions) Act, 1986.

Regarding the citations relied upon by the appellant at the time of hearing before me, the facts are distinguishable. On the contrary, there is a very recent decision of Tribunal, Nagpur Bench in the case of ITO vs. Dhanpatrai Badridas Malhotra in appeal Nos. 525 to 529 (Nag) of 1986 and CO. No. 17 (Nag) of 1986 dt. 13th August, 1990 reported in 35 ITD, 247. These relate to levy of penalties under s.

271(1)(c) for asst. yrs. 1973-74 to 1982-83. The assessee was carrying on business in handloom and for all assessment years in question his income was assessed at Rs. 68,000 approximately. On search under s. 132, the Department seized certain books and documents which showed that the assessee was carrying on business in eight other fictitious names. The assessee admitted in his statement that he was carrying on business in fictitious names and also offered to be assessed at Rs. 7 lakhs over a period of five years in question. Penalty proceedings were initiated by the ITO and penalty levied. The question that came up for consideration before the Tribunal was whether understated income by the assessee cannot be treated otherwise than concealed income. The Tribunal held that : 'In the instant case, the total assessed income of the assessee for the five years in question was approximately Rs. 68,000 whereas the income returned by him in his revised returns was approximately of a sum of Rs. 7,68,000. There was such a great disproportion between the assessed income and the revised income that it was impossible for the assessee to have successfully shown that the understatement by him of his was unintentional or bona fide. The assessee in his sworn statement and also in his petition under s. 273A(4) had unequivocally admitted that he had been surreptitiously carrying on, under fictitious names, as many as eight businesses. The income generated therefrom could not be treated otherwise than concealed income.

In the facts and circumstances of the instant case, there was full justification for the ITO to have levied penalties under s.

271(1)(c) for all the five years in question and, therefore, the CIT(A) was not justified in cancelling the penalties so levied.' The facts of the case are similar. In most of these years, 1972-73 to 1975-76 and 1977-78 to 1986-87, there is wide disproportion between the income assessed originally and the income assessed on the basis of material found after search operations and covered in the revised returns and such disproportion is occurred on account of material detected at the time of search operations on 22nd August, 1986. Further, in asst. yr. 1987-88, the return was filed after the search operations had taken place and accordingly on the basis of material detected in search operations. Thus, keeping in mind the ratio of citation (supra), the facts of the case on record and reasons detailed at paras 3 and 5 of the order, I hold that the appellant has concealed particulars of his income and levy of penalties under s. 271(1)(c) was justified. The Asstt. CIT's orders are accordingly confirmed and the appeals dismissed." 6. Aggrieved by the order of the CIT(A), the assessees came up in appeal before the Tribunal and strongly argued against the imposition of penalty on the basis of income that was stated to be voluntarily declared by the group of assessees. The Tribunal, by a Bench consisting of U. T. Shah, Vice-President and H. C. Srivastava, A.M. vide their order, dt. 26th November, 1991, dismissed all the appeals of the assessees resulting in confirmation of the penalties. Thereafter, the assessees filed reference applications under s. 256(1) against the aforesaid order, which were rejected by the Tribunal. After the rejection of the reference application, miscellaneous applications came to be filed. The miscellaneous applications were posted for hearing before a Bench consisting of T. A. Bukte, J.M., and J. K. Verma, A.M., and the Tribunal, by its order, dt. 26th April, 1995, allowed the miscellaneous applications filed by the assessees by recalling the order of the Tribunal. The appeals have thus come to be posted before us.

7. Before I go into the arguments of the learned counsel for the assessees, I feel that the peculiar objection taken by the Department needs to be dealt with. The learned Departmental Representative contends that the scope of the present exercise according to the order on the miscellaneous applications is limited and does not extend to give second innings to the assessees and should be confined to prayers made in the assessee's miscellaneous applications. After going through the order on the miscellaneous applications, I find that the Tribunal has recalled the order in its entirety and, therefore, in my view, the appeals are restored and need to be disposed of in accordance with law.

8. The learned counsel besides reiterating what was contended before the two Revenue authorities argues that the present penalty orders are bad in law as they were initiated on the basis of the direction given by the CIT. According to him, the AO has not applied his mind nor recorded his own satisfaction before imposing the penalty. This could be clear from the discussion note itself apart from the discussions in the penalty order for the asst. yr. 1987-88 wherein the AO has mechanically proceeded to impose penalty under s. 271(1)(c) without considering the fact that the return was filed for the first time in that year. To this, reliance was placed on to the authorities in : 9. The next plank of the argument of the learned counsel for the assessee was that the IT authorities were not justified in imposing the penalty under s. 271(1)(c) of the Act. It was pointed out that it was for the AO to establish what was the income concealed, to what extent and the year to which it pertained. The AO has not given any finding on these material issues and the entire assessments are based on the disclosures made as to the extent and to the year. The amounts, according to the learned counsel for the assessee, were based on a disclosure that were made voluntarily before any sort of detection by the AO. It was highlighted that the additional income was offered for taxation on the basis of investments made on certain assets and the expenditure incurred on various occasions like marriages in the family and other auspicious occasions. The income so declared was not the actual income earned from a particular source. It was argued that the assessment proceedings and the penalty proceedings are two separate and distinct proceedings and, therefore, in deciding the issue relating to the penalty, one should not be influenced by the fact that certain additions were made in the assessment. It was vehemently argued that by making application under s. 273A of the Act, there can be no presumption that the assessees had tacitly or otherwise conceded the fact of concealment on their part. Reliance was placed on to : (1) Sir Shadilal Sugar & General Mills Ltd.'s vs. CIT (1987) 168 ITR 705 (SC) (6) CIT vs. National Alloy & Metal Work (P) Ltd. (1989) 176 ITR 299 (Cal)' (4) CIT vs. Steel Rolling Mills of Hindustan (P) Ltd. (1983) 143 ITR 933 (Cal); (5) CIT vs. Kekatpure Ginning & Pressing Factory (1984) 145 ITR 813 (MP); and It was submitted that before imposing penalty under s. 271(1)(c) of the Act, there should be a finding that income of a particular year has been concealed by the assessee. However, according to him, no such finding was given by the AO and the AO simply brought to tax the additional income as agreed between the members of the group and the Revenue authorities without giving a clear finding about the fact of concealment of such income in the assessment orders.

10. Alternatively it was submitted that since all the transactions, which were the subject-matter of disclosure were recorded on the Boston diary, the Revenue cannot take the help of Expln. 5 to s. 271(1)(c) of the Act. According to him, the Boston diary found in the course of search should be treated as "the books of account". In this connection our attention was invited to the decision in the case of CIT vs. Kartar Singh (1970) 77 ITR 338 (P&H). Reliance was also placed on to the decision in the case of Narain Das Suraj Bhan vs. CST (1968) 21 STC 104 (SC) to urge that the concealment should be in the return filed by the assessees and not outside the returns. The learned counsel for the assessees also submitted that it was the assessees who offered the services to the Department for computing the income of the various persons involved in different years. But, for the help rendered by the assessees, the Department would not have ever been able to identify the fact of additional income, the particular person in whose hands the additional income is liable to be taxed and the previous year for which such income has to be added. It was submitted that the assessees, in order to buy peace, agreed to be assessed to additional income in different hands and for different years and there is no evidence on record to prove that the income assessed was actually concealed by the assessees in the previous accounting period and as such the principle of mens rea has not been satisfied. It was submitted that the assessment of a person for an amount of income which has not been proved to be belonging to him cannot be based on the ground that he himself wanted to be assessed on it. It was, therefore, submitted that the Department has, prima facie, failed to make out a case of concealment of income or furnishing of inaccurate particulars and as such the penalty imposed should be cancelled. The learned counsel further continued that the disclosure is voluntary and, therefore, the penalty is not leviable. According to him, the order passed under s.

132(5) and the assessment order is at variance. The learned counsel pointed out that the decision in Tribhovandas Bhimji Zaveri's case (supra), which is referred to in the order passed under s. 132(5), is not applicable to the facts of the case. According to him, it was concerned with the expression of "voluntary disclosure" in s. 3(2) of the Voluntary Disclosure Act, 1975. The learned counsel for the assessee further contended that the disclosure besides being voluntrary, was a conditional offer and the Department having accepted the offer is precluded from imposing any penalty. Reliance was placed on to the decision in : According to the learned counsel for the assessee, such disclosure had an implied condition, i.e., non-levy of penalty and interest. The offer, according to him, was not an unconditional one. The learned counsel for the assessee further argued that the penalty is invoked under the main section and not under the Explanation. Relying upon the decision in : It was argued that the penalties are not leviable. It was also pointed out that the assessees after having made the disclosure have not capitalised such disclosure in the books of account of the assessees.

The learned counsel pointed out that the burden on the Revenue in relation to the imposition of penalty under s. 271(1)(c) is still there even in the case of an admission by the assessees. According to him, concession given in the assessment cannot be extended for penalty proceedings. The learned counsel further argued that searches were there in eight cases and not in all the cases of the group. Further it was pointed out except in the case of Kishorilal, Purshottam and Nirmal, the Department has no material whatsoever in other cases. The learned counsel further argued that the returns were revised under the Amnesty Scheme and, therefore, the penalty should not be imposed. In this connection, it was pointed that the search action was on eight persons of the group and not on all persons and, therefore, the benefit of Amnesty Scheme should be made available to all the assessees.

Finally, the learned counsel for the assessee summarised his contentions as under : (1) That the initiation of the penalty is on the basis of the direction of the CIT as contained in the discussion note.

(2) The onus is on the AO to establish that the assessees had concealed income - quantum-wise, year-wise, source-wise and assessee-wise. Since, in the instant case, the AO has failed to establish the same, no penalty could be imposed under s. 271(1)(c) of the Act.

(3) The offer for taxation of the additional income cannot be considered to be concealment of income in the context of the facts and circumstances obtaining in the case.

(4) The provisions of Expln. 5 to s. 271(1)(c) of the Act do not help the Revenue. On the contrary, they help the assessee in view of the transactions noted in Boston diary, which should be considered as "the books of account" maintained by the assessees.

(5) In any event, the assessment is based on the disclosure, which was voluntary and an additional offer and the Department should not impose any penalty as a condition for accepting the addition.

(6) In any event, for the asst. yrs. 1986-87 and 1987-88, the provisions of s. 271(1)(c) of the Act cannot be attracted as the assessees have shown the correct income in the returns either revised before the assessment was completed or originally filed.

(7) The returns were filed under the Amnesty Scheme and the benefit of Amnesty Scheme should be extended to the assessees.

11. The learned Departmental Representative, on the other hand, strongly supported the action of the IT authorities tracing the events which took place after the search operations were carried on right from August, 1986, till the disclosure petitions were made under s. 273A of the Act. He forcefully urged that there is nothing like voluntary act on the part of the assessees of Jhunjhunwala group to come forward with disclosures but they had no choice because of the fact that the materials gathered in the search clearly unearthed huge concealment of income/wealth by the members of the group. He also submitted that once the assessees have made applications under s. 273A of the Act to the CIT, they had clearly conceded the fact of concealment. He emphasised that due to post-search investigations and the material gathered, the Jhunjhunwala group came forward with a further disclosure of Rs. 20 lakhs. He also highlighted the fact that the group carried on various activities either individually, through the medium of HUFs or partnership, including building activities, import of chemicals and selling them in black market, financing builders, trading in cotton, sale of properties where on money transactions are a common and a regular feature. He also highlighted the fact that the Boston diary contained transactions of over Rs. 65 lakhs. The assessee had inflated the purchases and has huge undisclosed investments and expenditure. The learned Departmental Representative further pointed out that there were searches in the group in 1976 and also in 1981 and the assessees had not used those opportunities to make such disclosures, which they now call as voluntary. Although the searches in 1976 and 1981 did not yield any benefits to the Revenue, it is not now open for the assessees to contend that the assessees are now making a clean breast of their affairs. Income of more than a decade was recorded in the Boston diary.

The entries in the Boston diary were in secret code, which could be deciphered only by one or two members of the group. The Boston diary did record the unaccounted transactions of the group. The existence of Boston diary is only to record the concealed income earned by the assessees in multifarious transactions. The learned Departmental Representative wondered how within the provisions of s. 271(1)(c) and its Explanation such Boston diary could be considered as part of regular books of account. The learned Departmental Representative disputed the fact that there was any conditional offer. According to him, when there is an admission of concealment, nothing is left for the Department to do to establish the concealment assessee-wise, year-wise, quantum-wise and source-wise. According to the learned Departmental Representative neither agreed assessments nor filing of revised returns would absolve the assessees from the penal provisions of s. 271(1)(c) of the Act. In this connection, he relied upon the decisions in the cases of Durga Timber Works vs. CIT (1971) 79 ITR 63 (Del), Mahavir Metal Works vs. CIT (1973) 92 ITR 513 (P&H), Western Automobiles (India) vs. CIT (1978) 112 ITR 1048 (Bom), Calicut Trading Co. vs. CIT (1989) 178 ITR 430 (Ker), Madras Bangalore Transport Co. vs. CIT (1991) 190 ITR 679 (Bom). Smt. V. Kanakammal vs. ITO (1990) 33 ITD 157 (Mad), ITO vs. B. N. Keshatwar (1990) 33 ITD 568 (Pune) and ITO vs. Dhanpatrai Badridas Malhotra (1990) 35 ITD 247 (Nag). He further submitted that even in an agreed assessment, the onus is on the assessee to prove that his case could not be brought under s. 271(1)(c) of the Act, in the penalty proceedings. Relying upon the decisions in : (4) K. P. Kandaswami Mudaliar & Sons vs. CIT (1985) 156 ITR 638 (Mad); It was submitted that once the assessee had made an application under s. 273A of the Act, he has clearly admitted the fact of concealment of income. Reference was also made to p. 5004 of the Income-tax Law by Chaturvedi and Pithisaria, 3rd Edn.

11.1 According to the learned representative for the Revenue, since the assessee's case clearly falls under the main provisions of s. 271(1)(c) of the Act, it is not necessary to find out whether the provisions of Expln. 5 to that section are attracted. Our attention was invited to the decisions in the cases of K. Govindarajulu Naidu (supra), CIT vs.

Mussadilal Rambharose (1987) 165 ITR 14 (SC) and Vishwakarma Industries vs. CIT (1982) 135 ITR 652 (P&H)(FB).

11.2 As regards the discussion note, it was pointed out that it is a common practice on the part of the Department to hold such discussions whenever substantial disclosures are made before the CIT. In the instant case, the petition was made before the CIT, meetings were held between the parties and the minutes of the meetings are reduced in the form of discussion notes. The learned Departmental Representative pointed out that such discussion note should be read out of context.

What was discussed in the meeting is only recorded therein. Such discussions cannot bind the AO and should not be regarded as in the nature of directions to the AO in relation to the penalty. The learned Departmental Representative pointed out that the Department has collected substantial material before the assessees made any disclosure and, therefore, the assessees' disclosure cannot be taken to be voluntary or prior to the detection by the Department. Our attention was invited to the decision of the Delhi High Court in Tube Fabrico (I) Ltd.'s case (supra). When there is a clear admission on the part of the assessee, the Department need not venture into the task of establishing further concealment with reference to the years or the assessees in relation to which such disclosure is made by the assessees. In other words, such exercise is only factual and sheer waste of time. The learned Departmental Representative further pointed out the authorities relied upon by the assessees are in relation to cash credits, which were offered on voluntary basis, and has no relation to the type of the case which is before us. Our attention was invited to the following authorities :Tribhovandas Bhimji Zaveri vs. Union of India (1993) 204 ITR 368 (SC); and The learned Departmental Representative did not agree with the contention of the assessee that there was no capitalisation of the disclosure. In fact, the assets and the investments, which were not the part of regular books of account, are now treated as explained and the unexplained expenditure cannot be capitalised. Therefore, it was argued that the debts and investments are by implication capitalised. The learned Departmental Representative further pointed out that there was search in all the cases of the group as mentioned in the search warrant which is on the premises and in relation to all the assessees of the group and, therefore, the case of the assessees does not fall in the Amnesty Scheme. Finally the contentions of the Revenue can be summarised as under : (1) The facts and circumstances obtaining the case clearly show that but for the search operations carried out under s. 132 of the Act and a seizure of valuable articles and things the assessees would not have come with a disclosure of concealed income.

(2) Statements of the members of the Jhunjhunwala group recorded during search leave no doubt that the members of the Jhunjhunwala group carried on various activities earning huge concealed income which was not disclosed to the Revenue.

(3) Large part of the investment was unexplained and was recorded in the Boston dairy, which was not disclosed to the Revenue, and such diary recorded the activities of earning huge income, which was not disclosed to the Revenue.

(4) The background of the sequence of proceedings under s. 132 of the Act as also the assessees' admission of concealment should be kept in mind in deciding the issues involved. There are no directions by the CIT to the AO either in relation to the initiation or imposition of penalty under s. 271(1)(c) of the Act in the case of the group. The discussion note should be read in the context in which it was made.

(5) The disclosure was neither voluntary nor was made under the Amnesty Scheme. The Amnesty Scheme does not apply in the cases in which there was search or there was a detection of concealed income by the Revenue. The Department has collected material sufficient to prove that there was a large concealed income before the assessees made any sort of disclosure.

In the light of this it was strongly argued that we should uphold the penalty imposed under s. 271(1)(c) of the Act.

12.1. I have carefully considered the rival submissions of the parties, the material to which our attention was drawn and the reported decisions cited at the Bar in order to support the respective stand taken by the parties and I am of the opinion that there is no escape for the assessees to salvage their case from the clutches of the provisions of s. 271(1)(c) of the Act. The material available on the record clearly show that the assessees were systematically earning huge income since last several years which was not disclosed in the returns filed originally. It was only when the search operations under s. 132 of the Act were taken and the material which indicated concealed income, the group actively offered the concealed income spread over different years and in the hands of the different assessees of the group. It is needless to mention that the assessee has not offered any bounty to the Department. The assessee has, in fact, earned the income from different sources and not recorded the same in their regular books of account. All these transactions are recorded in the Boston diary, which was also a part of seizure in the course of search. Had this diary not been seized, it would be impossible to expect that the assessees would have come forward with similar disclosures. It may be mentioned that in 1976 and 1981 also there were searches on the same group and the Department has not seized any such diary as Boston. Only in the current search operations such diary was found and utilised by the Department to drive the assessees to make proper disclosure of concealed income. It is pertinent to mention that the group has generated large unaccounted money and noted those transactions in the Boston diary and such notings in the diary were in secret code and it took great time, patience and persuasion to decipher the same. As already noted, the transactions in the diary were running into lakhs and lakhs of rupees. It is under these circumstances the assessees of Jhunjhunwala group came forward with a disclosure under the guise of "buying peace with the Department" and thereby effectively trying to prevent any further investigation which would perhaps have resulted in much larger concealed income. Under such circumstances, it does not lie in the mouth of the assessee to say that no penalty could be imposed under s. 271(1)(c) of the Act and expect the AO to establish which income, to what extent, from what source, to which year the disclosed income pertains and the assessee to whom it actually belongs and was concealed from the Revenue. It is rather impossible to expect the Revenue how each of the assessees who made such disclosure earned in those years the said income and from what sources. If one were to consider the entire sequence of events right from August, 1986, when the search operations were carried out in proper perspective, one gets a clear impression as to how the Jhunjhunwala group, as a whole, had successfully concealed a large chunk of income/wealth from the Revenue over the years till the bubble was burst, which was to burst one day.

Therefore, taking into consideration the circumstances and the modus operandi employed by the assessees over the years in not disclosing the proper income to the Department, I am of the opinion that the assessee deserves to be penalised in accordance with the law. According to me, there is no substance in the stand taken on behalf of the assessees that in making the disclosure of income, they have not taken into account the liabilities, which were also recorded in the said Boston diary. This may be due to various reasons best known to the members of the Jhunjhunwala group. One thing is clear that by making disclosure of income and requesting its spread over a number of years and in different hands, the members of the Jhunjhunwala group have forestalled further investigations/ probing by the Revenue, which, perhaps, would have disclosed larger concealed income. At the same time, it appears that the Revenue too was not interested in investigating further when the Jhunjhunwala group had disclosed substantial income/wealth as a result of successful search carried out under s. 132 of the Act. Such investigation would not only have entailed time consuming proceedings but also would have resulted in hardship to the assessees. It is in this background that one has to decide whether there was anything left for the AO to establish the concealment of income, its extent, its source, the year to which it pertained and the individual to which it belonged before imposing any penalty under s. 271(1)(c) of the Act.

12.2. It may be mentioned that the assessee maintained a diary known as Boston diary, in which transactions outside the regular books of account were noted. The assessees very well knew that such a diary was being maintained and it recorded the details of income not shown to the Department. Therefore, the assessees very well knew that part of such income contained in Boston diary belonged to them. In spite of knowing that fact, the assessees did not show this income in the original returns right from the asst. yr. 1970-71. In other words, the assessees took 15 long years to disclose to the Department what the Department is rightly entitled to assess. It was only after the Department caught the assessees in the act of concealing their income, they have agreed to show the additional income in the years whose assessments were already completed. If an admission is made by the assessees that they have not shown certain income, it cannot be said that the Department should prove again that the assessees have concealed their income in the penalty proceedings. Reference may be made to the decision of the Calcutta High Court in the case of CIT vs. P. B. Shah & Co. (P) Ltd. (1978) 113 ITR 587 (Cal). I am also not impressed by the statement made on behalf of the assessees that since they have shown the additional income voluntarily in the returns filed subsequent to the search operations, there was no concealment justifying action under s.

271(1)(c) of the Act. It is pertinent to note that in the returns originally filed the assessees have not shown the additional income found in the search operations and the additional income was shown only after the searches were carried on under s. 132 of the Act, which implied that but for the search operations such income would have never seen the light of the day. In this view of the matter, it is impossible to accept the stand taken by the assessee that even in such a situation the additional income so disclosed after the search does not result in the imposition of penalty within the provisions of s. 271(1)(c) of the Act.

12.3 As regards the assessees' contention about the discussion note, which they contend to be in the nature of direction, I am afraid such a stand cannot be accepted. After all, the discussion note, as it reads, is the recording of the minutes of the discussion that took place in pursuance of the petition filed by the assessees before the CIT under s. 273 of the Act. Whenever such petition comes before the Revenue, it is posted for such discussion and such discussion is normally reduced into writing. What has been discussed is contained therein. It is not in the nature of a direction nor is it meant to be used as direction when it comes to the imposition of penalty. The AO has independently initiated the proceedings and was satisfied with the facts and circumstances of the case requiring the imposition of penalty and is certainly not guided by the so-called directions of the CIT. In fact, there is no such direction by the CIT. The contention of the assessees is out of context. The discussion note does not decide the fate of the assessees in the penalty proceedings. The AO has issued the notice, called for the explanations from the assessees and gave them opportunities to file explanations. In my opinion, the penalties are validly initiated and properly concluded against the assessees. Now I shall deal with some of the cases relied on on behalf of the assessee.

One such case is Balakram Jankidas Agarwal (IT Appeal Nos. 2028 to 2033 of 1989, dt. 3rd July, 1990). The Tribunal has found that the assessee had never admitted as his income certain cash credits found in the search operations. Further, the Tribunal found entries for the cash credits in the books of account and confirmation letters along with GIR number were also filed in respect of such cash credits. In the case before us, the assessees of the group have offered for taxation huge amounts, which were earned outside the regular course of business and not recorded in the books of account maintained for that purpose.

Therefore, in our opinion, the aforesaid decision will not be of any help to the assessees. In the case of Sir Shadilal Sugar & General Mills Ltd. (supra), it is pertinent to note that the only issue which came up before the Court was that whether the Tribunal was justified in reducing the penalty from Rs. 70,000 to Rs. 5,000. The Hon'ble High Court recasted the aforesaid question as under : "Whether, on the facts and in the circumstances, the finding of the Tribunal that the assessee had not concealed income to the extent of Rs. 67,500 and Rs. 21,700 within the meaning of s. 271(1)(c) of the Act is correct in law." In their judgment, the Hon'ble Supreme Court has not approved the action of the Hon'ble High Court in not only recasting the question but also in interfering with the factual aspect of the matter. It is no doubt true that there are certain observations at p. 713 of the report on which the learned counsel for the assessee had stressed. However, in my opinion, these observations have to be read in the context of the facts and circumstances obtaining in that case. In the instant case, on proper appreciation of the material brought on record, I am of the opinion that the assessees of the group have concealed income and assets which were systematically recorded outside the books of account.

In the case of Haji Gaffar Haji Dada Chini (supra), the assessee had offered for taxation certain amount when after completing of assessment it came to light that in the account books some money was introduced.

In the case before us there were rigorous proceedings under s. 132 of the Act and there were material gathered in the course of search, which show that the group had possessed undisclosed income or assets. I am, therefore, of the opinion that the aforesaid decision also would not be of any help to the assessee. In the case of Punjab Tyres (supra), no evidence was adduced by the Revenue to show that the assessee had consciously concealed particulars of its income. However, in the present case, on proper appreciation of facts and circumstances obtaining, it would be difficult to hold that the assessees have not consciously concealed particulars of their income/assets.

12.4. As regards the assessees' contention about the applicability of the Amnesty Scheme to the cases of the group, I may observe that all the members of the group reside in the premises known as Giri Kunj, Paliram Road, Bombay-78. All the search warrants are on that premises.

To a question that whether an immunity given by the amnesty circular be availed of by the assessees whose premises have been searched by the tax authorities, the answer given by the CBDT is an emphatic No. The above answer is available in question No. 2 in the CBDT Circular No.451, dt. 17th February, 1986. Question No. 30 and its reply, which are also relevant, read as under : "Question No. 30. - Whether an assessee could make a declaration in respect of assets or income which is not the subject-matter of seizure Answer. - Yes, if it has not been already found out in the course of the search".

The above answer makes it possible for the assessee still make a declaration in respect of the income which is not the subject-matter of seizure.

The disclosure in the computation is in respect of the unexplained expenditure and investment found recorded in the Boston diary. Which was a subject-matter of seizure in the search proceedings. I am, therefore, of the opinion that the benefit of Amnesty Scheme cannot be availed of by the assessees. The assessees have also conceded that such Amnesty Scheme is not available for the asst. yr. 1987-88. The decisions reported in : all support the case of the Revenue. Moreover, in my opinion, the assessees have not made full and proper disclosure. The very fact that the assessees have agreed to disclose further sum of Rs. 20 lakhs shows that the conduct of the assessee was not fair in the direction of full disclosure. In my opinion, the case of the assessee is outside the ambit of the Amnesty Scheme. Taking into consideration that there was a search action in the group, substantial material was found to show that there was huge income which was concealed from the view of the Department and the assessees were successful in concealing such income for 15 long years, the benefit of the Amnesty Scheme, in my opinion is not available to the assessee.

12.5. In my opinion, most of the other cases relied upon by the assessees are decided on those particular facts and circumstances of the cases and cannot be blindly applied to decide the cases of the assessees whose facts are not entirely identical.

12.6. I, therefore, for the discussions made herein, hold that the penalties are correctly levied on these assessees for all the assessment years.

Following point of difference emerging from the proposed orders of the Members constituting the Bench in ITA Nos. 1528 to 1534/Bom/1991 and others in the case of Nirmal Udyog Co. & Ors., involving asst. yrs.

1970-71 to 1987-88, is being referred to the Hon'ble President of the Tribunal for making reference to Third Member as provided for in s.

255(4) of the IT Act, 1961 : "Whether, on the facts and in the circumstances of the case, levy of penalty under s. 271(1)(c) on these assessees is justified ?" 1. On a difference of opinion between the two Members of the Tribunal constituting 'E' Bench, on the point of levy of penalty under s.

271(1)(c), the following point of difference was referred for my opinion under s. 255(4) of the Act : "Whether, on the facts and in the circumstances of the case, levy of penalty under s. 271(1)(c) on these assessees is justified ?" Though the question is of wide amplitude, the opinion expressed by the two Members differ on the following main aspects : (1) Whether the notices for initiating the penalty proceedings were invalid and consequently no penalty can be levied the Judicial Member opined that the notices were issued on the directions of the CIT and therefore invalid; whereas the Accountant Member stated that they were issued on AO's own satisfaction as required under s.

271(1) and therefore there was infirmity.

(2) Whether amnesty benefit could be given to the assessee - the Judicial Member held that the assessee came forward voluntarily and offered the income before it was detected by the Department and therefore the assessee was entitled to immunity; whereas the Accountant Member held that the disclosure and the assessment of income was not voluntary but consequent upon the search and seizure action and the detection by the Department and therefore no immunity can be granted.

2. Before dealing with these issues, it would be appropriate to give a little background of the case. On 22nd August, 1986, there was a search and seizure action at Giri Kunj, Andheri, being the residence of (1) Kishorilal F Jhunjhunwala; (2) Purshottamdas F. Jhunjhunwala; (3) Nirmal P. Jhunjhunwala; and (4) Niranjan P. Jhunjhunwala; and at Mittal Court, being the business premises of the Jhunjhunwala Group to whom these four persons belonged. Shares/units/debentures valued Rs. 82.00 lakhs, cash Rs. 7.25 lakhs, ornaments and jewelleries worth Rs. 11,34,280, and silver utensils worth Rs. 2.70 lakhs were seized. These are stated to have been recovered from Kishorilal's portion of the residence. The group was also prohibited to sell office premises at Nariman Point and 10 flats at Vasai. Statements under s. 132(4) were recorded, except of Shri Purshottamdas F. Jhunjhunwala, who was away to Surat on that day. Besides, other documents viz. paper Nos. 5, 21 to 26, 27, etc., stated to be incriminating, and a diary called 'Boston Diary' was seized, wherein certain transactions which were not recorded in the regular books were found to have been recorded in code, which could be deciphered only by one or two persons, particularly Shri Kishorilal F. Jhunjhunwala. On 18th December, 1986, order under s.

132(5) was passed.

3. On 27th January, 1987, the assessee owned up this situation and made a disclosure to the CIT under s. 273A by offering Rs. 2.29 crores to tax and claiming spread over in various hands and for various years from asst. yrs. 1970-71 to 1987-88. This included Rs. 1,44,57,923 and Rs. 86,88,606 being receipts as per the seized papers minus Rs. 1,56,000 offered by Shakti Housing Development Corporation.

4. As the assessments for and upto asst. yr. 1985-86 were completed on the basis of the returns filed in regular course, fresh returns were filed for asst. yrs. 1970-71 to 1985-86 as per the disclosure petition and for asst. yr. 1986-87, a revised return was filed before issue of any notice under s. 143(2) by the AO. These returns are stated to have been filed on 3rd March, 1987. The return for asst. yr. 1987-88 was the first return and filed on 10th September, 1987.

5. A letter to the CIT-VIII was also written on 3rd March, 1987, requesting inter alia for the payment of tax modalities. In paras 2 to 6 of this letter, it is stated as under : "2. Vide the said petition, we had offered a sum of Rs. 2,29,99,254 to be added to our income over a period of years. The offer made in the said petition is commensurate with the papers found at the time of an action under s. 132 of the Act not only that the offer made by us is commensurate with the papers found, but we have not taken into consideration the liabilities which are ascertainable from the papers seized.

3. Based upon the said petition under s. 273A of the IT Act and 18-B of the WT Act, we have got compiled the returns of income for each of the assessee of our group, and have also worked out our tax liability.

4. We feel that we have to pay taxes approximating a sum of Rs. 1,00,00,000.

6. We also intend to co-operate with the Department in completion of all pending proceedings in our matter." The matter was thereafter discussed by tax authorities with the assessee and after discussion the disclosure was increased by another sum of Rs. 20.02 lakhs, consisting of the following : (1) Rs. 54,000 on account of difference of interest on bogus loans in the hands of Kishorilal F. Jhunjhunwala (Individual) for asst.

yr. 1987-88.

(2) Rs. 10.53 lakhs on account of difference of expenses incurred out of unaccounted income to be assessed as per Asstt. CIT's report (Annexure III).

(3) Rs. 9.49 lakhs (Rs. 20.02 lakhs difference in declaration of jewellery minus Rs. 10.53 lakhs already directed to be assessed as above) to be spread over between Kishorilal F. Jhunjhunwala, Nirmal P. Jhunjhunwala and Niranjan P. Jhunjhunwala for asst. yr. 1987-88.

(4) Rs. 1.18 lakhs in the name of minors to be assessed in Jhunjhunwala & Co. and Purshottamdas F. Jhunjhunwala & Sons as per Annexure I of Asstt. CIT's report.

The assessments thereafter were completed in almost identical language on the basis of this final discussion and issue of notice under s. 143 and upon hearing the assessees. One of such an order of assessment as a specimen reads as under : "Return was filed on 3rd March, 1987, disclosing additional income of Rs. 51,000 after the original assessment was completed and action under s. 132 was taken on 22nd August, 1986 in this group of assessees. Return being filed after the original assessment was regularised under s. 148. In response to notice under s. 143(2) N. P. Jhunjhunwala personally attended on 23rd March, 1989 and details discussed with him.

Assessment is completed under s. 143(3), 147(b) and total income is computed as under :as per revised return 22,124Income from other sources :(A) Interest, Dividends, as per return 6,059(B) Income disclosed after action unders. 132 in this group on 22nd August, 1986 51,000Add : Additional income on account ofof their petition under s. 273A 5,206 -----------meaning of s. 271(1)(c) 56,206 -----------Gross total income 84,389Less : Deductions/Under s. 80L 2,805 ----------- Assessed as above. Allow credit for taxes paid and TDS, if any, as per record. Charge interest under s. 217, 138(9). Proceedings under s. 271(1)(a), 271(1)(c) & 273 are initiated separately. Issue DN/C." 6. Consequent upon assessment, wherein the proceedings under s.

271(1)(c) are initiated, the penalties were levied on 23rd March, 1990, on each of the assessees with reference to the income assessed and undisclosed in the petition and the additional income thereafter, as per the discussion pursuant to petition under s. 273A. The AO rejected the assessee's contention that the disclosure under s. 132(4) and/or 273A was voluntary, as according to him, the disclosure of higher amount of income was based on the income available from the books seized based on unexplained assets and investments detected by the Department. He also held that the contention of the assessee to the effect that all the taxes and additional income were paid and that the assessee co-operated with the Department diligently. The AO's order on which lot of emphasis is placed by the assessee, as well as the Department, reads as under : "While granting spread over the CIT has directed that penalty proceedings should be initiated against the assessee. This is a case where the assessee has deliberately concealed the particulars of his income. There was conscious attempt on his part to conceal his income and the same could be detected only when search action was taken by the Department. The very fact that this income was thereafter offered by the assessee for taxation shows that the income not disclosed originally was the "income" of the assessee.

The fact that this was the third search in the case of the assessee shows that he is a habitual defaulter and as such, the case clearly attracts the provisions of s. 271(1)(c). I am, therefore, satisfied that the assessee has concealed the particulars of his income and has furnished inaccurate particulars thereof. Looking to the recalcitrant and unrepenting attitude of the assessee, it is a fit case for levying penalty under s. 271(1)(c). I, therefore, levy minimum penalty under s. 271(1)(c) at 100 per cent of the tax/income sought to be evaded." 7. Challenging the order of the AO, the assessee submitted before the CIT(A) that following the search action on 22nd August, 1986, on the group to which the assessee belongs, suo motu offer was made on the initial period while the raid was in operation and while no incriminating papers or assets were found; due to the massive raid the quantification of offer and the units under which to be taxed could not be decided; it was urged to the Intelligence Wing either to allow to have xerox copies of inspection of the papers which were seized indiscriminately to come to the correct amount to be offered; the group was allowed the xerox copies of the relevant papers in the third week of November, 1986. It was also submitted that the details were worked out and the petition was made to the CIT, disclosing the income of Rs. 2.29 crores for taxation. It was further submitted that it was a matter of record that between the date of raid and the date of suo motu settlement petition dt. 27th January, 1987, neither any enquiries were made by the Revenue nor any findings were reached. Thus the group had suo motu without prior detection by the Revenue made the offer, the offer of the group for settlement of income was, therefore, voluntary prior to detection and can be inferred to have been made to avoid prolonged litigation with the Revenue and to buy peace. The income assessed in all the units of the group spread over years have been based on such suo motu offer and declaration and thus the petition of settlement giving complete details have been the basis of addition and it was submitted that there was no case for any detection or concealment of income so as to warrant any levy of penalty. Certain case law have been relied on in support of the contention that under more or less similar circumstances penalty for concealment of income was not exigible. It was further argued that the Asstt. CIT had not sought to tax any amount in excess of what has been disclosed by the assessee and thus relied on the decisions of the Calcutta High Court in the case of Nurruddin & Bros. (1990) Taxtion 96 (3)-59 that penalty should not be imposed merely because it is lawful to do so. It was also submitted that the additional income of Rs. 20,00,000 was agreed to at the suggestion of the CIT for the amicable conclusion of the assessment. Merely because this small difference in the initial offer made in 1987 and further offer of Rs. 20 lakhs in the group was agreed to for the smooth and final conclusion of settlement petition, it was urged that, it cannot be the ground to hold that the Revenue had detected the concealment of income. The assessee has also claimed that where an assessee had agreed to the addition of the cash credits as its income without mentioning anything else, still under such circumstances the penalty was deleted by the Calcutta High Court in the case of Girdharilal Soni (supra), as the same could not be levied merely because of assessment of undisclosed income. It was urged by the assessee that the assessment and penalty proceedings are different in nature and the Revenue has to establish the concealment of income by independently leading evidence and to cancel the penalties levied in view of the various decisions relied upon by the assessee.

8. The CIT(A) upheld the penalties vide para 5 of her order, wherein it was held that in the returned income of the assessee as per the original return and the income at which the assessee had been assessed finally for different assessment years, after considering the assessee's petition before the CIT for spread over there was wide disproportion in the figures. In the petition under s. 273A of the IT Act, 1961 (and 18B of the WT Act, 1957), dt. 27th January, 1987, relating to asst. yrs. 1970-71 to 1987-88, vide para No. 13, additional income of Rs. 2,29,90,529 was offered in respect of the Jhunjhunwala group of cases pertaining to different assessment years as per details enclosed therewith. As per para 14E, each firm and member of Jhunjhunwala group agreed to submit individual petition along with the returns of income and wealth (on or before 15th February, 1987). In Para 17, it was admitted that the individual petitions were commensurate with the investments made by the group and the expenses incurred on household expenses, marriage expenses, purchase of jewelleries, charity and donations. In the annexure to the petition being the details of disclosure, the amount offered, however, was Rs. 2,29,92,254. The above petition was followed by another letter, dt. 3rd March, 1987, addressed to the CIT-VIII, Mumbai, with respect to payment of taxes. It was observed by the CIT(A) from the said petition that vide para 2 thereof it was categorically admitted that the offer made in the petition, dt. 27th January, 1987, commensurate with the papers found at the time of action under s. 132 of the IT Act; therefore the plea taken at this stage that the group made suo motu offer while no incriminating papers or things were found during the initial period of raid appeared to be prima facie not borne out from the records, and in fact perusal of the appraisal report and other records lead to the conclusion that when confronted with a number of incriminating papers found during the search, viz., paper Nos. 5, 21 to 26, 27, Boston diary, etc. the representatives of the group had little option left out but to confess wide scale concealment and come forward with disclosure in the hands of the assessee and various members of the group as per details on record. The CIT(A) found it difficult to accept that the assessee would have suo motu come forward with the disclosure if the search operations had not taken place resulting in detection of concealed income, which was also evidenced from the fact that in the original returns in this case and other cases of the group, assessments have been framed at meagre income and without declaring income shown as per the assessment framed afresh following search and seizure action in the group. It was also observed that the benefit extended under s.

132(4) for the purpose of levy of penalties, if any, was not available to the assessee as search took place on 22nd August, 1986, and the said provisions were operative from 10th September, 1986, by Taxation Laws (Amendment miscellaneous Provisions) Act, 1986. Thereafter she held that the assessee's case is covered against them by the decision of the Nagpur Bench of the Tribunal in the case of ITO vs. Dhanpatrai Badridas Malhotra (1990) 35 ITD 247 (Nag).

9. The assessee came in second appeal and the Tribunal also upheld the penalties vide its order, dt. 26th November, 1991 in ITA Nos. 3226 to 3240/Mum/1991. The summary of the contentions of the assessee before the Tribunal are set out in para 12 of its order as under : "(i) The onus is on the ITO to establish that the assessee had concealed income quantum-wise, year-wise, source-wise and assessee-wise. Since in the instant case, the AO has failed to establish the same, no penalty could be imposed under s. 271(1)(c) of the Act.

(ii) The offer for taxation of the additional income cannot be considered to be the concealment of income in the contest of the facts and circumstances obtaining in the case.

(iii) The provisions of Expln. 5 to s. 271(1)(c) of the Act do not help the Revenue. On the contrary they help the assessee, in view of the transactions noted in Boston diary, which should be considered as "the books of accounts" maintained by the assessee.

(iv) In any event, for the asst. yrs. 1986-87 and 1987-88, the provisions of s. 271(1)(c) of the Act cannot be attracted as the assessee had shown the correct income in the returns originally filed." 10. The Tribunal upheld the penalties vide para 18 of its order by observing as under : "18. We have carefully considered the rival submissions of the parties, the material to which our attention was drawn and the reported decisions cited at the Bar, in order to support the respective stand taken by the parties and we are of the view that there is no escape for the assessee to salvage his case from the clutches of the provisions of s. 271(1)(c) of the Act. The material available on record clearly show that the assessee was systematically earning huge income since last several years, which was not disclosed in the return filed originally, nor was it offered for taxation on his own volition in the present proceedings. It was only when the search operations under s. 132 of the Act were launched in August, 1986 that the assessee and the other members of the Jhunjhunwala Group actively started to forestall further proceedings including the penalty proceedings, which would start by the Revenue in respect of various activities carried on by them in clandestine manner. We make this observation, as the transactions noted in Boston diary speak volumes. It is pertinent to mention that the notings in the said diary were in code and it took great time, patience and persuasion to decipher the same. As noted above, the transactions noted in the said diary were running into lakhs and lakhs of rupees. It is under this situation that the assessee and the other members of Jhunjhunwala Group came forward with disclosure under the guise of "buying peace with the Revenue" and thus trying to prevent any further investigation. Surely, under such circumstances, it does not lie in the mouth of the assessee to say that no penalty could be imposed under s. 271(1)(c) of the Act, as it was for the AO to establish which income, its extent, its source, the year to which it pertains and the individual to which it belongs, that was concealed from the Revenue. If one were to consider the entire sequence of events right from August, 1986, when the search operations were carried out in proper perspective, one gets a clear impression as to how the Jhunjhunwala group, as a whole, which included the assessee had successfully concealed large chunk of income/wealth from the Revenue over the year till the bubble was burst which was to burst one day. Therefore, without going into the issue, as to whether by making application under s.

273A of the Act, the assessee is said to have conceded the fact of concealment of income/wealth, we have no hesitation in holding that on the proper appreciation of the facts and circumstances obtaining in the instant case, the assessee had, in fact concealed income/wealth for the years under consideration. According to us, there is no substance in the stand taken on behalf of the assessee and the other members of the Jhunjhunwala group that while making disclosure of income they had not taken into account liabilities.

This may be due to various reasons best known to the members of the Jhunjhunwala group. However, one thing is clear that by making disclosure of income and requesting its spread over the years and in different hands, the members of the Jhunjhunwala Group have stopped further probing/investigation by the Revenue in the matter. At the same time, it appears that the Revenue too, was not interested in investigating further when the Jhunjhunwala group has disclosed substantial income/wealth, as a result of successful search carried out under s. 132 of the Act. Such investigation would not only have entailed time-consuming proceedings but also would not have resulted in unearthing further income/wealth than that already disclosed by the members of the Jhunjhunwala group. It is in this background that one has to decide whether there was anything left for the AO to establish the concealment of income, its extent, its source, the year to which it pertained and the individual to which it belonged, before imposing penalty under s. 271(1)(c) of the Act." 11. A miscellaneous application to rectify/recall the order was made and this order of the Tribunal was recalled vide Misc. Appln. Nos. 413 to 430/Mum/ 1994, dt. 20th April, 1995, primarily on the issue that the Tribunal had not dealt with the issue of the validity of the initiation of the proceedings which appear to have been issued at the directions of the CIT and, therefore, the order deserves to be rectified; and the second reason given for recalling was that their contention that the offer for additional income was conditional and, therefore, could not be relied upon for levying the penalty, was not considered.

12. Be that as it may, this order of the Tribunal in miscellaneous application has not been disputed by the Revenue either at the time of the hearing of the miscellaneous application or thereafter when the appeal was reheard by the Tribunal and it ended with a difference on the aspects stated above, and as a Third Member, I have to confine myself as aforesaid, on the points of difference.

13. The first point of difference is whether the initiation of penalty proceedings is invalid. The assessees' contention is that initiation of proceedings is on the direction of the CIT and not on the own satisfaction of the AO and, therefore, in view of the Supreme Court decision reported in the case of D. M. Manasvi (supra) and the decision of the Tribunal reported in the case of Ram Commercial Enterprises Ltd. vs. Asstt. CIT (1995) 52 ITD 147 (Del), they were invalid. The assessee's support in this connection is on the discussion note, dt.

20th March, 1989, and the penalty order stating "while granting spread over the CIT has directed that penalty proceedings should be initiated against the assessee". According to the learned counsel of the assessee, C. V. Kothari, it is a clear case where the notice for penalties were initiated at the direction of the CIT and not on the own satisfaction of the AO. It is also submitted that the AO has not applied his mind at all, as is evident by the fact that he initiated the proceedings under s. 271(1)(a)/273 as well for all the years and under s. 271(1)(a) for asst. yr. 1987-88, even though there was no default. The learned Departmental Representative, S.U. Pathak, on the other hand supported the order of the Departmental authorities and contended that the initiation was on his own satisfaction of the AO.According to him, in the order itself, the AO records his satisfaction to the following effect : "Total addl. income particulars of which were concealed within the meaning of s. 271(1)(c) Rs. ....." There is no mention either in the assessment order or in the notices issued by the AO that the initiations were not at his own satisfaction of the AO, but were on the direction of the CIT. It was an independent action of the AO to initiate the proceedings. Relying upon the decision of the Supreme Court in the case of Sirpur Paper Mills Ltd. vs. CWT (1970) 77 ITR 6 (SC), the learned Departmental Representative submitted that if the directions issued without jurisdiction, they would be invalid and are to be ignored. On the contrary, in the penalty order he submitted that the AO prior to mentioning of the venerable lines "while granting spread over the CIT has directed that penalty proceedings should be initiated against the assessee" recorded a finding that the assessee had concealed the particulars of income and that the declaration of higher income was based on the details available from the books seized and the unexplained income detected by the Department.

The venerable lines only indicate the notings of the discussion note and not that the satisfaction of the AO was on that basis.

14. On a careful consideration of either contentions, I am of the opinion that the satisfaction of the AO was his own satisfaction and the initiation of proceedings was not at the direction of the CIT. Such satisfaction, as held by the Supreme Court in the case of D. M. Manasvi vs. CIT (1972) 86 ITR 557 (SC) and is also evident from the provisions of s. 271(1), is to be formed in the course of assessment proceedings.

If something is said by anybody, or the CIT, as is alleged in this case, somewhere other than in the course of assessment proceedings, it is to be ignored. Even otherwise, from the language used in the discussion note, denotes the approval of some report submitted by the AO. It gives an impression that it was not the direction by the CIT, but an approval of some action proposed to be taken by some appropriate authority and that can be none else than of the AO himself. The discussion note is on the petition made by the assessee to the CIT under s. 273A and cannot in any case be treated as a direction by the CIT.15. Furthermore, neither in the assessment order nor in the show-cause notices did the AO mention or state or give impression that any of the notices were issued at the direction of the CIT or under his influence.

On the contrary, the noting in the assessment order does indicate that it was AO who initiated the proceedings on his own satisfaction. The mention of initiation of other proceedings under s. 271(1)(a) or 273 in the concluding paragraph of the assessment order does not in anyway indicate that the AO did not apply his mind, if the notings just below the assessment of the addition is kept in mind, i.e., "total additional income particulars of which were concealed within the meaning of s.

271(1)(c)". This noting is prior to the concluding paragraph of the AO, wherein he mentioned about initiation of proceedings under s.

271(1)(a)/271(1)(c)/273A separately. Furthermore, the observation of the AO to the effect "while granting spread over the CIT has directed that penalty proceedings should be initiated against the assessee" cannot be taken as directions for initiation of the proceedings. It is a mere mention of the discussion that has taken place. In any case these notings are of the successor AO and, therefore, cannot be taken to be the true imprint of the mind of the AO initiating the proceedings. The satisfaction of the AO who initiated the proceedings does not indicate any influence or impact of the alleged directions, if any, in the discussion note. In fact, as aforesaid, no such directions are there is the discussion note, if they are read in the right perspective. The observations of the Tribunal in the order in miscellaneous application aforesaid, to the effect that these notings are directions of the CIT, is not a finding, but as per this very order itself a suggestion to consider after a proper opportunity of being heard given to the parties and, therefore, that should not, in my opinion, act as a bar for consideration of the issue afresh. I, therefore, hold that the initiation of the proceedings was valid and were based on the satisfaction of the AO and not on the direction of the CIT. The contention of the assessee, therefore, is to be rejected.

16. The second reason for recalling the earlier order also gives rise to difference of opinion between the two Members in the fresh proceedings. In fact, this reason for recalling was whether offer was voluntary under s. 273A, but it took a shape in the fresh proceedings to the effect "whether the assessee was entitled to Amnesty Scheme" whereunder also for its applicability one of the requirement is that the disclosure should be before detection of concealment, by the Revenue. Both the Judicial Member and the Accountant Member held that it can be raised even if it is new and the Judicial Member has even concluded that it was not a new contention but raised earlier before the AO at p. 3, and before the CIT(A) at p. 5. The original submission was concerning s. 273A and the assessee was seeking relief from the CIT (Administration) whereas the newly raised submission is emanating from various Board Circulars called Amnesty Scheme applicable upto 31st March, 1987. Both these aspects seem to be administrative relief and probably cannot be sought for in any appellate proceedings. Be that as it may, since there is no difference on these aspects, I proceed on the assumption that they can be invoked in the appellate proceedings as well.

17. The learned Judicial Member held that the cases upto 1986-87 were covered by Amnesty Scheme. Returns were filed on 3rd March, 1987 (though not specifically marked as under Amnesty Scheme) and the reasons prevailing are as under : (1) Search warrants were issued only in four names and, therefore, other sixteen assessees were not search cases. The four persons are - Purshottam F. Jhunjhunwala, Kishorilal F. Jhunjhunwala, Shri Niranjan P. Jhunjhunwala and Nirmal P. Jhunjhunwala.

(ii) There was no disclosure of assets seized. It was because of certain expenditure and investments recorded in the Boston diary decoded by the assessees only and, therefore, disclosure was voluntary, full and true.

18. The learned Accountant Member, on the other hand, held that Jhunjhunwala group as a whole was systematically earning huge income since last several years, which was not shown in the originally filed returns and they came forward only after search and seizure under s.

132 was carried and the material seized indicated concealed income. The income was not recorded in the regularly maintained books of account, but was found recorded in the Boston's diary; but for which the assessees would not have come forward for disclosure, as they refrained in 1976, when even after a search the assessees did not come forward.

Circular of CBDT, according to him, do not apply to any assessee whose premises is searched. He further opined that it was not a full and true disclosure, as the income above Rs. 20 lakhs and odd was assessed and offered by the assessee over and above disclosed in the disclosure petition.

19. The chronology of events show that the disclosure of higher income of all the assessees was on search and seizure action that had taken place. The disclosure is not of the year in which the search has taken place, but of the earlier years as well, right from asst. yr. 1970-71.

Inspite of an action in 1976, the assessee had been successful in keeping the income undisclosed until some incriminating material was found and seized in the search conducted in 1986, i.e., in the form of seized papers marked Nos. 5, 21 to 26, 27, Boston diary, etc. referred to in assessee's letter, dt. 27th January, 1987, to the CIT, penalty orders under s. 271(1)(c) and the order of the CIT(A). The assessee's contention that nothing was found in the earlier raid and, therefore, there was no question of offering any additional income shows the conduct of the assessee. It means that offer would have been made if some incriminating material was there. This seems to be precise reason that this time because of the incriminating documents did catch the Department's attention which were seized, the assessee came forward and offered the undisclosed income. This is, in my opinion, cannot be said to be voluntary, if seen in the light of the decision of the Supreme Court in the case of Tribhovandas Bhimji Zaveri vs. Union of India (1993) 204 ITR 368 (SC). The assessee came in the grip of the Department with sufficient evidence in its hands indicating the non-disclosure of the income of a substantial amount. The assessee had no option but to surrender. Otherwise, as apprehended by the Accountant Member, a larger amount could have come to the notice of the Department and the assessee would have been in quandary (in a mis).

20. The contention of the learned counsel of the assessee that the Supreme Court's decision in the case of Tribhovandas Bhimji Zaveri (supra) was under Voluntary Disclosure Scheme Act, 1965, which implies a different language for granting "immunity" is of not much relevance.

The question is what does the word "voluntary" appearing in s. 273A or used in the Amnesty circulars issued by the CBDT mean generally, as a word of English language and as a word of art or technique When there is no option but the result is to flow because of certain events preceding the action, it cannot be said to be a voluntary action of the doer as, if he had not disclosed it, the events would have given the result. Lot of emphasis have been placed by the learned counsel of the assessee to the question and answer 19 of the Circular No. 451, dt.

17th February, 1986, enabling an assessee to seek amnesty prior to detection of concealment and the Board stating "prima facie belief of the AO does not mean detection". Firstly, the Circular is not the letter of law or clause in a statute book and, therefore, should not receive a technical interpretation and secondly, it does not, in absolute term, say that in all situations, prima facie belief view is not detection of concealment. The question and answer are reproduced here below : "Q. 19 : Kindly clarify the expression "before detection by the Department ?" Ans : If the ITO has already found material to show that there has been concealment, that would mean the Department has detected the concealment. If the ITO only had prima facie belief, that would not mean concealment has been detected." 21. The latter part of the circular has to be read with the first part, which says "if the ITO has already found material to show that there has been concealment, that would mean the Department has detected concealment". Paper Nos. 5, 21 to 26, 27, including the Boston diary is sufficient to conclude that the Department has detected concealment, and had the assessee not owned up the situation, the Department would have held so. That material had already come to the possession of the Department and the concealment detected is the result thereof. Again, the assessee's efforts were to suggest that it was assessee's co-operation in deciphering the coded language used in the 'Boston Diary' that brought the undisclosed income home and not because of the detection by the Department, I do not find myself in agreement with this contention of the assessee. The primary evidence has come to the hands of the Department and that contained the record of concealed income of the assessees. The material is there with the Department for the income concealed. As to who read and deciphered the coded language, does not make much of difference. When asked, the assessee could not have kept his mouth shut but to explain except on his own peril, as otherwise he would have committed another offence of withholding information knowingly and wilfully. In any case, as stated by the assessee himself, the Boston diary contained information of concealed income of around Rs. 65 lakhs; and the balance from the other seized paper Nos. 5, 21 to 26, 27, etc. as per the letter of the assessee. In my opinion, therefore, there was material with the Department to the effect that the income was concealed and that it was not a mere prima facie view of the situation shorn of supporting evidence. The assessees, therefore, are not entitled to amnesty benefit. It may be stated here that from both the sides certain decisions have been referred to to advance their respective claims. They are not being discussed specifically as they have no direct bearing on the issue under consideration and are also distinguishable on facts.

22. The assessee came out with a legal plea that except in four cases, search warrants were not issued in other names and, therefore, those cases were not search cases, disentitling them to amnesty benefit. A reference to the decision of the Bombay High Court in the case of Bombay Cloth Syndicate vs. CIT (1995) 214 ITR 210 (Bom) was invited. At the first instance, once the case of the assessee is out by Question and Ans. No. 19 from the purview of the Amnesty Circular, one need not go to see whether the other clauses apply. Be that as it may, the Jhunjhunwala's as a Group, owned up the transaction which was found in the search action, which was in the names of four persons and other concerns at Mittal Court, wherein all the members have interest direct or indirect and by all of whom the income is owned up as belonging to them. The petition to the CIT was made as such on the premises that Jhunjhunwalas as a group was a search case and, therefore, it does not lie in the mouth of the assessee now to say that this was not a search case. May be that search warrants were there only in four names, but the premises where the search was carried was common, seized documents and other material was owned up as belonging to all, they cannot be said to be non-search cases. Reliance on the decision of the Bombay High Court in the case of Bombay Cloth Syndicate (supra), is not of much help to the assessee, as it was with reference to the provisions of s. 139(5), where the Court held that the second return filed by the assessee was a revised return as contemplated under s. 139(5); that the incorrectness in the original return had not been discovered by the ITO; that the account books were impounded by him merely to remove the suspicion which arose in his mind due to some discrepancies and to find out the truth; that much before the enquiry was completed and any discoveries of evasion were made, the revised return was filed; and that apart the Department having assessed the income of the assessee on the basis of the second return and taken advantage of the extended period of one year for completion of assessments under s. 153(1)(c) from the date of its filing, could not be allowed to take the stand that it was not a revised return. The four persons were in possession of documents and that when are found and owned up by others, all would be search and seizure cases. The assessee would, therefore, be not entitled to any immunity. See answer to Q. No. 12 of the Circular No.451, wherein the Board answered in negative the question "Can immunity given by the circulars be availed of by assessee whose premises have been searched by the tax authorities"? 23. The learned counsel of the assessee then contended that circulars dissentitled amnesty only in those cases where disclosure is based on seized assets and since the search and seizure being only in the case of Shri Kishorilal F. Jhunjhunwala, the others cannot be denied the amnesty benefit. This contention, in my opinion, has no force. First of all, it is not correct to say that only in the case of Kishorilal F.Jhunjhunwala the search was there. Read Para 5 of the Judicial Member's order, stating that in three out of the four cases, the seizure of cash/jewellery was there. In any case, the disclosure is based on the seized material and stated to be in commensurate with the investment made by the group and the expenditure on household, marriages, jewellery purchases and charity and donations made. It is not necessary that, if the disclosure is not based on the assets found, only then the case is out of amnesty benefit. Question No. 30 in this connection can be stated, which reads as under : "Q. 30 : Whether an assessee could make a declaration in respect of assets or income which is not the subject-matter of seizure Ans : Yes, if it has not been already found out in the course of the search." 24. The aforesaid question and answer clearly shows that the disclosure can be made of assets not seized, but this is subject to a condition that "if it has not been already found out in the search". The documents, seized, as aforesaid, are the evidence that the assessee's income was lying undisclosed therein and the disclosure was based on that and commensurate with the investment and expenditure etc. I, therefore, do not find any force in the contention of the assessee that any benefit can be granted to the extent of income which is not based on the assets seized. Sec. 132(7) authorises the AO to proceed against other persons from whom the seized assets or any part thereof were found to be held by such person for or on behalf of any other person, in that case the AO can proceed under sub-s. (5) against such other person and all the provisions of this section apply accordingly. In these circumstances, in my opinion, the mere fact that warrants were issued only in the names of four persons does not take out other cases out of search for claiming the amnesty benefit.

25. The learned counsel of the assessee also attempted to make out a case that it was a conditional offer-a sort of package deal and, therefore, in view of the decision of the Bombay High Court in the case of CIT vs. Kiran & Co. (1996) 217 ITR 326 (Bom), no penalty be levied.

Here also, I do not find any merit in the contention of the assessee.

There does not seem to be any conditional offer. Under petition 273A, the assessees only requested not to initiate the penalty proceedings and there is no acceptance of any such condition, nor can there arise any such question in the light of the material found in the shape of paper Nos. 5, 21 to 26, 27, etc. and the Boston diary, and the examination of the case leading to assessment of income more than the income admitted by the assessee. Income assessment is not only because of the offer by the assessee, but was based on the material on record.

In, therefore, reject this contention of the assessee as well.

26. For asst. yr. 1986-87, the assessee submitted that the revised returns were filed before the issue of notice under s. 143(2) and, therefore, the disclosure was voluntary and penalty should not be levied. Reference to Q. Nos. 1 & 7 of the Circular No. 451 to public address reported in (1995) 214 ITR 210 (Bom); Kanga & Palkhivala - discussion at p. 1634; decision of the Madras High Court in the case of CIT vs. Sri Rajaram Cloth Stores (1995) 214 ITR 262 (Mad), was invited to. The question is not whether the income was disclosed before or after the issue of notice under s. 143(2), but whether it was voluntary and before the detection by the Department. As aforesaid, neither it was voluntary nor it was before the detection by the Department. In my opinion, this year also cannot be put in a separate category and the assessee has to suffer the penalty.

27. For asst. yr. 1987-88, the returns were filed on 10th September, 1986, i.e., after the disclosure and, therefore, there was no concealment. On going through the records, I find that penalty is levied not on the disclosed income, but on the income assessed over and above the amount shown in the returns. Explanation 5 also came up for discussion, but in view of the fact that the penalty is not levied for the income disclosed, but in respect of income assessed over and above that amount, it has no application. It was also not invoked by any authority. The question, whether the penalty for the additional income is to be levied, however, requires consideration. The details of the additional income, as given aforesaid of Rs. 20.02 lakhs on account of jewellery declaration are : (1) Rs. 10.53 lakhs represent the difference of expenses incurred out of unaccounted income; and (2) Rs. 9.49 lakhs is spread over between Kishorilal F. Jhunjhunwala, Nirmal P.Jhunjhunwala, Niranjan P. Jhunjhunwala and Purshottamdas F.Jhunjhunwala for asst. yr. 1987-88. These differences are basically for difference in valuation of the jewellery, therefore, in my opinion, cannot be termed as concealment and penalty cannot be levied for this amount.

28. Apart from asst. yr. 1987-88, in some of the cases it is claimed that the additional income was offered in the returns filed for the first time and there were no assessments made earlier prior to the disclosure. In such cases, I find myself in agreement with the assessee's contention that when the income is disclosed in the first return itself, no penalty can be levied for concealment. This is because the concealment has to be in the return of income. Assessees to furnish the particulars before passing of the final order under s.

255(4) of the Act.