Satish Chandra, C.J. - (1.) THERE are five petitioners in this writ petition. They have been assessed to income-tax as an association of persons. They are aggrieved by the dismissal of their application under Section 273A of the I.T. Act by the CIT. The petitioners had applied for waiver or reduction of penalty. The Commissioner dismissed the application on the ground that the returns filed by the petitioners were not voluntary.
(2.) IT appears that on 22nd November, 1973, the business premises of Messrs. Popular Transport Agency and Messrs. Gupta Service Station were searched by the I.T. department, and certain books were seized. Kartar Singh was a partner in those firms. Kartar Singh is one of the members of the petitioner-association of persons. The petitioner-association on 7th October, 1974, filed returns of income for the assessment years 1966-67, 1967-68, 1968-69, 1969-70, 1972-73 and 1973-74. Subsequently, on 25th March, 1975, a notice under Section 148 of the I.T. Act was served on the petitioners. In due course, the ITO initiated penalty proceedings for delay in filing the return and for not filing the estimate of advance tax under Sections 271(1)(a) and 273(b). Thereupon the petitioners applied to the Commissioner under Section 273A for waiver or reduction of the imposable penalty. The Commissioner, by the impugned order, dismissed the application on the finding that the filing of the returns was not voluntary. He held that it is admitted that "a search operation was carried out and the books of account of the A.O.P. were seized. In other words, the premises where the books of account of the A.O.P. were kept were searched. IT is further admitted that the returns were filed after the search. IT, therefore, follows that the returns were not filed voluntarily". Section 273A provides : "(1) Notwithstanding anything contained in this Act, the Commissioner may, in his discretion, whether on his own motion or otherwise,--(i) reduce or waive the amount of penalty imposed or imposable on a person under Clause (i) of Sub-section (1) of Section 271 for failure, without reasonable cause, to furnish the return of total income which he was required to furnish under Sub-section (1) of Section 139 ; or..... if he is satisfied that such person-- (a) in the case referred to in Clause (i) has, prior to the issue of a notice to him under Sub-section (2) of Section 139, voluntarily and in good faith made full and true disclosure of his income;....." According to the notification issued by the Central Board of Direct Taxes, dated September 30, 1969, the word "voluntary" has been explained in paragraph 7 as follows : "The word 'voluntary' in its primary sense means 'proceeding from one's own free will' or 'without compulsion'. In its secondary sense it implies 'without any legal obligation' or 'not prompted by fear or inducement' depending upon the context in which it is used. In the context in which the word 'voluntary' has been used it is not possible to take the view that it means 'without any legal obligation'. Section 139 places a legal obligation on all persons having taxable income to disclose their income in the prescribed form. If the word 'voluntary' is interpreted to mean 'without legal obligation' no disclosure under Section 271(4A) would be voluntary. This interpretation has, therefore, to be rejected. Therefore, in the context in which the word 'voluntary' has been used in Section 271(4A) it is only reasonable to infer that the disclosure should be one which is not prompted by fear or inducement of any kind. If there is seizure of incriminating material in the course of a search and penalties and prosecutions are imminent and the disclosure is a sequel to such a search, it would not be possible to treat the disclosure as a voluntary one. The compulsion of such a situation is even more real than any legal compulsion. Similarly, if a disclosure is made by an assessee after obtaining an assurance that the penalty would be waived, the disclosure would be clearly prompted by inducement....."
(3.) THE Commissioner appears to have accepted and followed the interpretation put by the Board on the word "voluntary", He has held that, since on a search, books of account of the association of persons were seized and the returns were filed long after the search, they were prompted by a sense of fear and so they were not voluntary. Learned counsel for the petitioners has seriously contested this view of the Commissioner. He has invited our attention to a decision of the Gujarat High Court in Madhukar Manilal Modi v. CWT [1978] 113 ITR 318. In that case, the ITO, while conducting assessment proceedings for the assessment year 1971-72, asked the assessee to file his return for the year.s 1969-70 and 1970-71. For these years the returns were filed by the assessee. Since the returns were not filed within time, proceedings for imposing penalty for late filing of the returns were initiated. The Commissioner refused to waive or reduce the penalty on the view that the returns were not. filed voluntarily. The Gujarat High Court held that the word "voluntary" has to be read with the expression "made full disclosure of his net wealth". The word "voluntary" has not to be read in the context of filing a return. This concept has been taken care of by providing that the assessee should have filed the return prior to the issue of notice. They then held that merely because the return has been filed under the advice, suggestion or even at the behest, otherwise than by a notice, it dbes not cease to be a voluntary return.;