Lmp Precision Engg. Co. Ltd. Vs. Deputy Commissioner of Income - Court Judgment

Excerpt:
1. the common ground raised by the assessee in these three appeals is against the confirmation of penalties by the learned cit(a) levied by the ao under s. 271(1) (c) of the it act, 1961.2. the assessee-company is engaged in the business of manufacturing engineering equipments viz. drilling rigs for water wells and mining, mineral oil and earth works.3. the assessments for all the three assessment years under appeal were completed under s. 143(3). later on, the dy. director (investigation), bombay undertook survey action in the month of september, 1988 and certain purchases of the assessee were verified and the statement of chairman and managing director was recorded on 21st september, 1988. in the course of enquiries made during the survey, it was found that certain purchases of the assessee-company were not verifiable. in view of the above the assessee-company declared total income of rs. 108 lakhs under s. 273a. out of this, a sum of rs. 54 lacs pertains to asst. yr. 1985-86 and the other rs. 54 lacs were offered for assessment in three assessment years viz. asst. yrs. 1986-87, 1987-88 and 1988-89 at the rate of rs. 18 lacs in each year. thereupon on 14th february, 1989 the assessee filed revised returns for all the three years viz.asst. yrs. 1985-86, 1986-87 and 1987-88. as the assessments for the above three years were already concluded, obviously the said returns could not be processed. under the circumstances the ao issued notices, dt. 11th august, 1989 under s. 148 of the act for each of the three assessment years and in reply thereto the assessee addressed a letter dt. 28th august, 1989, placed on record that the returns filed by it in february, 1989 be treated as having been filed in compliance with the notices for reopening of assessments under s. 148. in the meantime, the dy. director of it (investigation) surat also conducted certain inquiries regarding the purchases of the assessee-company on the basis of specific information. again the assessee-company could not produce certain suppliers for verification and the assessee-company again disclosed a sum of rs. 78 lacs in the asst. yrs. 1985-86. the assessments for the asst. yrs. 1986-87 and 1987-88 were also completed after incorporating disclosures made by the assessee. the assessee accepted the assessments and no appeals were filed against the quantum 4. the ao initiated penalty proceedings under s. 271(1) (c). in response to the show-cause notices the assessee filed explanations. it will be worthwhile to reproduce the explanation filed by the assessee for the asst. yr. 1985-86 : "the original assessment which was completed on 28th may, 1986 and subsequently we came forward for voluntary disclosure on 20th october, 1988 and accordingly we disclosed our income and filed the revised return of income on 14th february, 1989. as the disclosure was voluntarily made by us on account of non-cooperation of the suppliers even though our purchases were genuine. during the course of assessment, there was no other addition or concealment detected except only the disclosure made by the company. there was no mala fide intention. during the time of reassessment, certain suppliers were asked to remain present who attended your good office and confirmed their transactions with the company and cooperated. no inaccurate particulars or details were submitted during the course of the assessment and, therefore, there was no concealment on our part under s. 271(1) (c). even at the time of disclosure, we were orally assured by the person concerned of the department that there will not be any levy of penalty or prosecution under this act. as there is no concealment, we request you to please drop the penalty proceedings which are to be initiated against the company under this section." the crux of the explanation filed by the assessee was that it filed voluntary returns disclosing therein additional income to purchase peace with the department and no concealment was involved on the part of the assessee. the ao held that the disclosure was not voluntary but because the assessee was caught by the department not once but twice as a result of the inquiries made by the dy. director (investigation), bombay and dy. director (investigation), surat. the assessee could not explain the purchases which were made from certain concerns and hence the assessee did conceal the particulars of income. he accordingly levied penalties at the maximum rate i.e. rs. 1,69,43,380 for asst. yr.1985-86; rs. 10,39,500 for asst. yr. 1986-87 and rs. 22,57,872 for asst. yr. 1987-88.5. on appeal, the learned cit(a) confirmed the penalties. like the ao, the cit(a) held that the disclosures made by the assessee were not voluntary but were made as a result of detection by the department on the basis of surveys/inquiries made by the dy. directors (investigation) bombay and surat. he held that the assessee did conceal the particulars of income and hence levy of penalty at the maximum rate was justified.6. shri s. n. soparkar, the learned counsel for the assessee submitted that there is no justification for the impugned penalties. he submitted that pursuant to the revised/voluntary returns the ao started assessment proceedings and during the course of assessments for the asst. yr. 1985-86, the ao decided to look into the genuineness of the supplies made by various parties to the assessee. the ao examined a large number of parties. except for one viz. shreeji corporation each and every party confirmed before the ao the transactions entered into by them with the assessee. so far as shreeji corporation is concerned, its main partner was absconding and the assessee found that for various reasons the said party was not cooperating in the inquiries against the assessee. that apart, two other suppliers, viz. narendra brothers and navnit pipe and steel traders, though had confirmed the sales made by them to the assessee, it was felt that the issue as to the genuineness of the purchases made from them would be subject-matter of protracted and time-consuming litigations to establish the genuineness beyond doubt. under the circumstances the assessee was advised that it can revise its earlier declaration made under s. 273a of the act.therefore, on 30th march, 1990 the assessee revised its earlier declaration for offering for tax additional sum of rs. 78,56,613 for the asst. yr. 1985-86, being the purchases made from the above referred three parties. the learned counsel for the assessee submitted that it was specifically clarified that on account of this disclosure the ad hoc disclosure made of rs. 18 lacs in each of the subsequent years is required to be deleted. according to the learned counsel ultimately after examining the records in depth the ao has framed assessments and in fact, the said assessments are by and large in conformity with the returned income and except for a small addition made in the asst. yr.1986-87 in other years the returned income tallies with the assessed income as shown below :asstt. yr. income as per revised return assessed income rs. rs.1985-86 82,15,400 1,62,88,038 78,56,613 (second disclosure)1986-87 38,48,810 38,96,2801987-88 44,63,800 47,68,100 the variation in the third year is on account of disallowance of rs. 2,98,217 for which the assessee is in appeal in ita no. 4988/ahd/1991.the learned counsel submitted that no penalty should be imposed under s. 271(1) (c) in the facts and circumstances of the case inasmuch as the disclosure were made by the assessee considering the fact that at the relevant time there was a specific condition that there will be no penalty and that interest would be waived by the department. having accepted the revised returns filed by the assessee on that basis, it is not open to the department to go back upon the same. in support of this contention, he relied upon the decision reported as taiyabji lukmanji vs. cit (1981) 131 itr 643 (guj). without prejudice to the above, the learned counsel submitted that the penalty notices are vague and devoid of any particulars. again without prejudice to what is stated hereinabove, the assessee submitted that the ao came to the conclusion that the assessee had not correctly disclosed the income on the ground that its purchases had been inflated. this inference was made because of higher consumption ratio i.e. lower g.p. rate for this year.according to the learned counsel the inference drawn by the ao is patently bad and incorrect.6.1 for the asst. yr. 1986-87, the learned counsel submitted that no defects were found by the ao and in this regard he drew our attention to para 4 of the assessment order relating to asst. yr. 1986-87 of the ao which reads as under : "4. the results of the enquiry undertaken are all incorporated in the order of this assessee for the asst. yr. 1985-86. nothing specific was found against the assessee for asst. yr. 1986-87." 6.2 the learned counsel for the assessee alternatively argued that the penalties levied at the maximum rate i.e. 200 per cent were highly excessive and arbitrary. in support of his contention, he placed reliance on the decisions in sir shadi lal sugar & gen. mills ltd. vs.cit (1987) 168 itr 705 (sc), 103 itr 453 (sc) (sic), cit vs. ram chandra singh (1976) 104 itr 77 (pat), viraj technocom ltd. vs. ito (1992) 40 itd 365 (cal); bhagwanji bhagwan bhai & co. vs. cit (1983) 141 itr 640 (cal), cit vs. haji gaffar haji dada chini (1988) 169 itr 33 (bom), asstt. cit vs. advance film club (1993) 45 ttj (ahd) 259 : (1992) 43 itd 509 (ahd), ito vs. jalan timbers (1993) 47 ttj (gau) 49, ito vs. b. d. yadav & m. r. meshram (1994) 48 itr 54 (nag) and cit vs.jagjit kaur (1986) 162 itr 844 (pat).7. shri p. n. dixit, the learned departmental representative filed detailed written submissions which have been placed on record. after stating the factual position, the learned departmental representative drew our attention to the two surveys made by dy. director (investigation), bombay and dy. director (investigation), surat and submitted that it was a result of these two surveys that the assessee came forward with the disclosures and hence the disclosures cannot be said to be voluntary. he also explained modus-operandi adopted by the assessee i.e. the assessee was making bogus purchases of raw materials from different firms. he cited the case of supplier international steels. the said international steels was having its bank account only with jankalyan sahakari bank ltd. juhu (west) branch, bombay and with no other bank. a perusal of the statement of partner shri babulal d.doshi, recorded on 21st september, 1988 showed that he had denied having received or got discounted any cheques for payment of over rs. 31 lacs from january to march, 1986 drawn by the assessee-company through an account opened with the syndicate bank, nana chowk branch, bombay. according to the learned departmental representative, shri jayantilal l. mistry, chairman and managing director of the assessee-company in complicity with shri babulal d. doshi, partner of international steels, bombay and shri shantilal b. shah, a friend of mr. babulal d. doshi got an account opened with the syndicate bank, nana chowk, bombay in the name of international steels and for this purpose the said shri shantilal b. shah introduced one ramanna bhandari shetty, another known person of shri shantilal b. shah to the said bank as babulal doshi of international steels. when only rs. 31 lacs worth of cheques issued by the assessee company were found to have been encashed by the assessee's own employees, one najmu lukmanji vora through shantilal b. shah & ramanna bhandari shetty during a very small period of time i.e. within a very few days of the depositing of the cheques, the investigations and survey operations were taken up. shri shantilal b. shah admitted that the amount of cheques encashed through the syndicate bank, nana chowk, bombay was being refunded back to the assessee-company through its employee, najmu vora after deducting 10 per cent of the value of cheques. according to the learned departmental representative, this 10 per cent cut from the value of the cheques so encashed was only 'hawala charges' in which no goods were being purchased by assessee-company, but bogus purchases were being debited to the accounts. this is evident from shri shantilal b. shah's statement to which he drew our attention. the learned departmental representative concluded that the one and the only one finding arrived at after the two surveys were carried out by the investigation wing of the it department is that the assessee-company debited the value of purchase of raw materials at figures which were inordinately higher than the actual purchases made by the assessee-company and this was done by resorting to fictitious purchases.he therefore, submitted that the assessee did conceal the particulars of income and when it was cornered, that it came forward with the disclosures which fact could not absolve the assessee-company of the charge of concealment. the learned departmental representative also made an attempt to distinguish the cases relied upon by the learned counsel for the assessee and submitted that the assessee was liable to penalties under s. 271(1) (c). he also submitted that the levy of maximum penalty was justified in the facts and circumstances of the case.8. we have considered the rival submissions and perused the facts on record. the term "voluntary" in s. 273a of the it act, 1961 has been used to indicate the action free of any constraint. a return filed under the constraint of exposure to adverse action by the it department will not be voluntary within the meaning of s. 273a. the action of an assessee in filing a return after a search/survey would be impelled by the compelling circumstances that the assessee was likely to be dealt with under the penal provisions of the it act. the action of the assessee in filing under such a constraint cannot be said to be voluntary. the word "voluntary" has been defined in shorter oxford dictionary, vol. 2, page 237 as performed or done of one's own will, impulse or choice not constrained, prompted or suggested by another, proceeding from the free, unprompted or unconstrained will of a person.accordingly a return filed under constraint of exposure or adverse action of the it department will not be voluntary. in the instant case two surveys were conducted, one by the dy. director (investigation) bombay and the other by dy. director (investigation) surat, and during the course of surveys it was found that the assessee was making certain bogus purchases; the modus operandi in this regard adopted by the assessee has been explained in the submissions of the learned departmental representative and accordingly it was after such detection by the department that the assessee came forward with the two disclosures in the asst. yr. 1985-86 amounting to rs. 54 lacs and rs. 78 lacs and the disclosure of rs. 18 lacs each for the three subsequent years. as such it can be said that the disclosures were made by the assessee after detection of concealment of income by the department as a result of extensive inquiries conducted by the revenue during the course of two surveys during the course of which the statement of the managing director and the statement of the partners of the firms from whom the assessee had allegedly made bogus purchases were recorded. the word "detection" has not been defined in the act. in black's dictionary, the word "detection" has several meanings. one of them is investigation while the other is to follow up a step by step by patient inquiry or observation. it would therefore mean that even a case where the ao starts investigation by laying open what was concealed or hidden or what continued to elude observation, would also be covered in a case of detection within the meaning of that word. in the instant case it is only when the revenue detected the concealed income that the assessee came forward with the disclosures. hence we reject the contention of the learned counsel for the assessee that the disclosures made by the assessee were voluntary. we also do not find any evidence on record or with the assessee that the revenue compelled the assessee to make disclosures with an assurance that no penal action would be taken against the assessee. in fact, the petition filed by the assessee under s. 273a has been rejected by the cit. under the circumstances we hold that the levy of penalty under s. 271(1) (c) is justified in principle.as regards the contention of the learned counsel for the assessee that for asst. yrs. 1986-87 and 1987-88 nothing specific was found by the ao, we find that the learned counsel can not take advantage of the casual remarks made by the ao referred to and reproduced in para 6.1 because the disclosure of rs. 54 lacs spreading over three subsequent years i.e. rs. 18 lacs each was part of the overall concealment detected by the department during the course of two surveys. the cases relied upon by the learned counsel are not applicable to the facts of the present case before us because here is a case where detection of a concealed income was duly established during the course of two surveys and hence levy of penalty under s. 271(1) (c) is justified in principle. but we find some merit in the contention of the learned counsel for the assessee that the levy of penalty at the maximum rate is arbitrary and excessive. we find that as soon as the two surveys were conducted and inquiries were made in respect of purchase made by the assessee from the different firms, the assessee came forward with the disclosure petition, filed the revised returns; notices were issued under s. 148 by the ito to regularise assessments, and the assessee fully co-operated with the revenue in the matter of finalisation of assessments. under the circumstances we hold that the assessee deserves concession in respect of the quantum of penalty in view of the above co-operative attitude. in our view the minimum penalty i.e. at the rate of 100 per cent will meet the ends of justice. to sum up the ao will levy minimum penalty for concealment of rs. 54 lacs and rs. 78 lacs in the asst. yr. 1985-86 and for concealment of rs. 54 lacs each in the asst. yrs. 1986-87 and 1987-88.8.1 so far as the penalty in respect of addition of rs. 2,98,217 for the asst. yr. 1987-88 is concerned, this addition has been deleted by us in ita no. 4988/ahd/91. so no penalty is leviable in respect of this amount.

Judgment:
1. The common ground raised by the assessee in these three appeals is against the confirmation of penalties by the learned CIT(A) levied by the AO under s. 271(1) (c) of the IT Act, 1961.

2. The assessee-company is engaged in the business of manufacturing engineering equipments viz. drilling rigs for water wells and mining, mineral oil and earth works.

3. The assessments for all the three assessment years under appeal were completed under s. 143(3). Later on, the Dy. Director (Investigation), Bombay undertook survey action in the month of September, 1988 and certain purchases of the assessee were verified and the statement of chairman and managing director was recorded on 21st September, 1988. In the course of enquiries made during the survey, it was found that certain purchases of the assessee-company were not verifiable. In view of the above the assessee-company declared total income of Rs. 108 lakhs under s. 273A. Out of this, a sum of Rs. 54 lacs pertains to asst. yr. 1985-86 and the other Rs. 54 lacs were offered for assessment in three assessment years viz. asst. yrs. 1986-87, 1987-88 and 1988-89 at the rate of Rs. 18 lacs in each year. Thereupon on 14th February, 1989 the assessee filed revised returns for all the three years viz.

asst. yrs. 1985-86, 1986-87 and 1987-88. As the assessments for the above three years were already concluded, obviously the said returns could not be processed. Under the circumstances the AO issued notices, dt. 11th August, 1989 under s. 148 of the Act for each of the three assessment years and in reply thereto the assessee addressed a letter dt. 28th August, 1989, placed on record that the returns filed by it in February, 1989 be treated as having been filed in compliance with the notices for reopening of assessments under s. 148. In the meantime, the Dy. Director of IT (Investigation) Surat also conducted certain inquiries regarding the purchases of the assessee-company on the basis of specific information. Again the assessee-company could not produce certain suppliers for verification and the assessee-company again disclosed a sum of Rs. 78 lacs in the asst. yrs. 1985-86. The assessments for the asst. yrs. 1986-87 and 1987-88 were also completed after incorporating disclosures made by the assessee. The assessee accepted the assessments and no appeals were filed against the quantum 4. The AO initiated penalty proceedings under s. 271(1) (c). In response to the show-cause notices the assessee filed explanations. It will be worthwhile to reproduce the explanation filed by the assessee for the asst. yr. 1985-86 : "The original assessment which was completed on 28th May, 1986 and subsequently we came forward for voluntary disclosure on 20th October, 1988 and accordingly we disclosed our income and filed the revised return of income on 14th February, 1989. As the disclosure was voluntarily made by us on account of non-cooperation of the suppliers even though our purchases were genuine. During the course of assessment, there was no other addition or concealment detected except only the disclosure made by the company. There was no mala fide intention. During the time of reassessment, certain suppliers were asked to remain present who attended your good office and confirmed their transactions with the company and cooperated. No inaccurate particulars or details were submitted during the course of the assessment and, therefore, there was no concealment on our part under s. 271(1) (c). Even at the time of disclosure, we were orally assured by the person concerned of the Department that there will not be any levy of penalty or prosecution under this Act. As there is no concealment, we request you to please drop the penalty proceedings which are to be initiated against the company under this section." The crux of the explanation filed by the assessee was that it filed voluntary returns disclosing therein additional income to purchase peace with the Department and no concealment was involved on the part of the assessee. The AO held that the disclosure was not voluntary but because the assessee was caught by the Department not once but twice as a result of the inquiries made by the Dy. Director (Investigation), Bombay and Dy. Director (Investigation), Surat. The assessee could not explain the purchases which were made from certain concerns and hence the assessee did conceal the particulars of income. He accordingly levied penalties at the maximum rate i.e. Rs. 1,69,43,380 for asst. yr.

1985-86; Rs. 10,39,500 for asst. yr. 1986-87 and Rs. 22,57,872 for asst. yr. 1987-88.

5. On appeal, the learned CIT(A) confirmed the penalties. Like the AO, the CIT(A) held that the disclosures made by the assessee were not voluntary but were made as a result of detection by the Department on the basis of surveys/inquiries made by the Dy. Directors (Investigation) Bombay and Surat. He held that the assessee did conceal the particulars of income and hence levy of penalty at the maximum rate was justified.

6. Shri S. N. Soparkar, the learned counsel for the assessee submitted that there is no justification for the impugned penalties. He submitted that pursuant to the revised/voluntary returns the AO started assessment proceedings and during the course of assessments for the asst. yr. 1985-86, the AO decided to look into the genuineness of the supplies made by various parties to the assessee. The AO examined a large number of parties. Except for one viz. Shreeji Corporation each and every party confirmed before the AO the transactions entered into by them with the assessee. So far as Shreeji Corporation is concerned, its main partner was absconding and the assessee found that for various reasons the said party was not cooperating in the inquiries against the assessee. That apart, two other suppliers, viz. Narendra Brothers and Navnit Pipe and Steel Traders, though had confirmed the sales made by them to the assessee, it was felt that the issue as to the genuineness of the purchases made from them would be subject-matter of protracted and time-consuming litigations to establish the genuineness beyond doubt. Under the circumstances the assessee was advised that it can revise its earlier declaration made under s. 273A of the Act.

Therefore, on 30th March, 1990 the assessee revised its earlier declaration for offering for tax additional sum of Rs. 78,56,613 for the asst. yr. 1985-86, being the purchases made from the above referred three parties. The learned counsel for the assessee submitted that it was specifically clarified that on account of this disclosure the ad hoc disclosure made of Rs. 18 lacs in each of the subsequent years is required to be deleted. According to the learned counsel ultimately after examining the records in depth the AO has framed assessments and in fact, the said assessments are by and large in conformity with the returned income and except for a small addition made in the asst. yr.

1986-87 in other years the returned income tallies with the assessed income as shown below :Asstt. yr.

Income as per revised return Assessed income Rs. Rs.1985-86 82,15,400 1,62,88,038 78,56,613 (second disclosure)1986-87 38,48,810 38,96,2801987-88 44,63,800 47,68,100 The variation in the third year is on account of disallowance of Rs. 2,98,217 for which the assessee is in appeal in ITA No. 4988/Ahd/1991.

The learned counsel submitted that no penalty should be imposed under s. 271(1) (c) in the facts and circumstances of the case inasmuch as the disclosure were made by the assessee considering the fact that at the relevant time there was a specific condition that there will be no penalty and that interest would be waived by the Department. Having accepted the revised returns filed by the assessee on that basis, it is not open to the Department to go back upon the same. In support of this contention, he relied upon the decision reported as Taiyabji Lukmanji vs. CIT (1981) 131 ITR 643 (Guj). Without prejudice to the above, the learned counsel submitted that the penalty notices are vague and devoid of any particulars. Again without prejudice to what is stated hereinabove, the assessee submitted that the AO came to the conclusion that the assessee had not correctly disclosed the income on the ground that its purchases had been inflated. This inference was made because of higher consumption ratio i.e. lower G.P. rate for this year.

According to the learned counsel the inference drawn by the AO is patently bad and incorrect.

6.1 For the asst. yr. 1986-87, the learned counsel submitted that no defects were found by the AO and in this regard he drew our attention to para 4 of the assessment order relating to asst. yr. 1986-87 of the AO which reads as under : "4. The results of the enquiry undertaken are all incorporated in the order of this assessee for the asst. yr. 1985-86. Nothing specific was found against the assessee for asst. yr. 1986-87." 6.2 The learned counsel for the assessee alternatively argued that the penalties levied at the maximum rate i.e. 200 per cent were highly excessive and arbitrary. In support of his contention, he placed reliance on the decisions in Sir Shadi Lal Sugar & Gen. Mills Ltd. vs.

CIT (1987) 168 ITR 705 (SC), 103 ITR 453 (SC) (sic), CIT vs. Ram Chandra Singh (1976) 104 ITR 77 (Pat), Viraj Technocom Ltd. vs. ITO (1992) 40 ITD 365 (Cal); Bhagwanji Bhagwan Bhai & Co. vs. CIT (1983) 141 ITR 640 (Cal), CIT vs. Haji Gaffar Haji Dada Chini (1988) 169 ITR 33 (Bom), Asstt. CIT vs. Advance Film Club (1993) 45 TTJ (Ahd) 259 : (1992) 43 ITD 509 (Ahd), ITO vs. Jalan Timbers (1993) 47 TTJ (Gau) 49, ITO vs. B. D. Yadav & M. R. Meshram (1994) 48 ITR 54 (Nag) and CIT vs.

Jagjit Kaur (1986) 162 ITR 844 (Pat).

7. Shri P. N. Dixit, the learned Departmental Representative filed detailed written submissions which have been placed on record. After stating the factual position, the learned Departmental Representative drew our attention to the two surveys made by Dy. Director (Investigation), Bombay and Dy. Director (Investigation), Surat and submitted that it was a result of these two surveys that the assessee came forward with the disclosures and hence the disclosures cannot be said to be voluntary. He also explained modus-operandi adopted by the assessee i.e. the assessee was making bogus purchases of raw materials from different firms. He cited the case of supplier International Steels. The said International Steels was having its bank account only with Jankalyan Sahakari Bank Ltd. Juhu (West) Branch, Bombay and with no other bank. A perusal of the statement of partner Shri Babulal D.Doshi, recorded on 21st September, 1988 showed that he had denied having received or got discounted any cheques for payment of over Rs. 31 lacs from January to March, 1986 drawn by the assessee-company through an account opened with the Syndicate Bank, Nana Chowk Branch, Bombay. According to the learned Departmental Representative, Shri Jayantilal L. Mistry, Chairman and Managing Director of the assessee-company in complicity with Shri Babulal D. Doshi, partner of International Steels, Bombay and Shri Shantilal B. Shah, a friend of Mr. Babulal D. Doshi got an account opened with the Syndicate Bank, Nana Chowk, Bombay in the name of International Steels and for this purpose the said Shri Shantilal B. Shah introduced one Ramanna Bhandari Shetty, another known person of Shri Shantilal B. shah to the said Bank as Babulal Doshi of International Steels. When only Rs. 31 lacs worth of cheques issued by the assessee company were found to have been encashed by the assessee's own employees, one Najmu Lukmanji Vora through Shantilal B. Shah & Ramanna Bhandari Shetty during a very small period of time i.e. within a very few days of the depositing of the cheques, the investigations and survey operations were taken up. Shri Shantilal B. Shah admitted that the amount of cheques encashed through the Syndicate Bank, Nana Chowk, Bombay was being refunded back to the assessee-company through its employee, Najmu Vora after deducting 10 per cent of the value of cheques. According to the learned Departmental Representative, this 10 per cent cut from the value of the cheques so encashed was only 'Hawala charges' in which no goods were being purchased by assessee-company, but bogus purchases were being debited to the accounts. This is evident from Shri Shantilal B. Shah's statement to which he drew our attention. The learned Departmental Representative concluded that the one and the only one finding arrived at after the two surveys were carried out by the investigation wing of the IT Department is that the assessee-company debited the value of purchase of raw materials at figures which were inordinately higher than the actual purchases made by the assessee-company and this was done by resorting to fictitious purchases.

He therefore, submitted that the assessee did conceal the particulars of income and when it was cornered, that it came forward with the disclosures which fact could not absolve the assessee-company of the charge of concealment. The learned Departmental Representative also made an attempt to distinguish the cases relied upon by the learned counsel for the assessee and submitted that the assessee was liable to penalties under s. 271(1) (c). He also submitted that the levy of maximum penalty was justified in the facts and circumstances of the case.

8. We have considered the rival submissions and perused the facts on record. The term "voluntary" in s. 273A of the IT Act, 1961 has been used to indicate the action free of any constraint. A return filed under the constraint of exposure to adverse action by the IT Department will not be voluntary within the meaning of s. 273A. The action of an assessee in filing a return after a search/survey would be impelled by the compelling circumstances that the assessee was likely to be dealt with under the penal provisions of the IT Act. The action of the assessee in filing under such a constraint cannot be said to be voluntary. The word "voluntary" has been defined in Shorter Oxford Dictionary, Vol. 2, page 237 as performed or done of one's own will, impulse or choice not constrained, prompted or suggested by another, proceeding from the free, unprompted or unconstrained will of a person.

Accordingly a return filed under constraint of exposure or adverse action of the IT Department will not be voluntary. In the instant case two surveys were conducted, one by the Dy. Director (Investigation) Bombay and the other by Dy. Director (Investigation) Surat, and during the course of surveys it was found that the assessee was making certain bogus purchases; the modus operandi in this regard adopted by the assessee has been explained in the submissions of the learned Departmental Representative and accordingly it was after such detection by the Department that the assessee came forward with the two disclosures in the asst. yr. 1985-86 amounting to Rs. 54 lacs and Rs. 78 lacs and the disclosure of Rs. 18 lacs each for the three subsequent years. As such it can be said that the disclosures were made by the assessee after detection of concealment of income by the Department as a result of extensive inquiries conducted by the Revenue during the course of two surveys during the course of which the statement of the managing director and the statement of the partners of the firms from whom the assessee had allegedly made bogus purchases were recorded. The word "detection" has not been defined in the Act. In Black's Dictionary, the word "detection" has several meanings. One of them is investigation while the other is to follow up a step by step by patient inquiry or observation. It would therefore mean that even a case where the AO starts investigation by laying open what was concealed or hidden or what continued to elude observation, would also be covered in a case of detection within the meaning of that word. In the instant case it is only when the Revenue detected the concealed income that the assessee came forward with the disclosures. Hence we reject the contention of the learned counsel for the assessee that the disclosures made by the assessee were voluntary. We also do not find any evidence on record or with the assessee that the Revenue compelled the assessee to make disclosures with an assurance that no penal action would be taken against the assessee. In fact, the petition filed by the assessee under s. 273A has been rejected by the CIT. Under the circumstances we hold that the levy of penalty under s. 271(1) (c) is justified in principle.

As regards the contention of the learned counsel for the assessee that for asst. yrs. 1986-87 and 1987-88 nothing specific was found by the AO, we find that the learned counsel can not take advantage of the casual remarks made by the AO referred to and reproduced in para 6.1 because the disclosure of Rs. 54 lacs spreading over three subsequent years i.e. Rs. 18 lacs each was part of the overall concealment detected by the Department during the course of two surveys. The cases relied upon by the learned counsel are not applicable to the facts of the present case before us because here is a case where detection of a concealed income was duly established during the course of two surveys and hence levy of penalty under s. 271(1) (c) is justified in principle. But we find some merit in the contention of the learned counsel for the assessee that the levy of penalty at the maximum rate is arbitrary and excessive. We find that as soon as the two surveys were conducted and inquiries were made in respect of purchase made by the assessee from the different firms, the assessee came forward with the disclosure petition, filed the revised returns; notices were issued under s. 148 by the ITO to regularise assessments, and the assessee fully co-operated with the Revenue in the matter of finalisation of assessments. Under the circumstances we hold that the assessee deserves concession in respect of the quantum of penalty in view of the above co-operative attitude. In our view the minimum penalty i.e. at the rate of 100 per cent will meet the ends of justice. To sum up the AO will levy minimum penalty for concealment of Rs. 54 lacs and Rs. 78 lacs in the asst. yr. 1985-86 and for concealment of Rs. 54 lacs each in the asst. yrs. 1986-87 and 1987-88.

8.1 So far as the penalty in respect of addition of Rs. 2,98,217 for the asst. yr. 1987-88 is concerned, this addition has been deleted by us in ITA No. 4988/Ahd/91. So no penalty is leviable in respect of this amount.