1. By this writ petition, under arts. 226 and 227 of the Constitution, the petitioners seek a declaration that various penalty proceedings initiated and completed by respondent No. 3 (IAC of Income-tax, Delhi Range IV, New Delhi) and confirmed in appeal by respondent No. 5 (Income-tax Appellate Tribunal, Delhi Bench 'C') were illegal, void and/or ultra virus the Constitution ; writ of certiorari or any other appropriate writ, order or direction calling for the records of the said respondents Nos. 3 and 5 and quashing the various orders of penalties and various notices of demand issued by respondent No. 4 (ITO, Companies Circle, New Delhi) and the order of the Income-tax Appellate Tribunal ; writ of mandamus or any other appropriate writ restraining the respondents from imposing any penalties under the provisions of s. 271 or any other provisions of the I. T. Act in respect of the income voluntarily disclosed by the petitioners and a writ of mandamus or any other appropriate writ directing respondent No. 1 (Central Board of Direct Taxes and Revenue) and/or respondent No. 2 (Commissioner of Income-tax, Delhi), waiving and/or reducing the minimum amount of penalty by way of an appropriate order in respect of the petitioner's application dated February 12, 1965.
2. Petitioner No. 2 is a partnership firm known as M/s. Ram Krishan Kulwant Rai (hereinafter referred to as 'the Firm'). Petitioner No. 1, Shri Jaswant Rai, is one of its partners. The firm has been carrying on business in steel and other allied material, including imported material. Its accounting year is from 1st April to 31st March. It is assessed to income-tax.
3. In or about January, 1965, an Ordinance was promulgated to incorporate the scheme of voluntary disclosure. The said Ordinance was subsequently replaced by I.T. (Amend.) Act, 1965, and, inter alia, a new section, s. 271(4A), was added to the I.T. Act. In pursuance of this scheme of voluntary disclosure, the firm made an application dated February 12, 1965 (annex.'A'), intimating that they would place before the ITO a true statement of their financial affairs and transactions and that they were preparing the statement of affairs of the firm as on March 31, 1965, which they would file later on. The firm filed the said statement of affairs on May 20, 1965, voluntarily disclosing an income of about Rs. 28,00,000 as the total accretion to its wealth over the eight years up to March 31, 1965. Thereafter, some negotiations took place between the firm and the Commissioner and ultimately the petitioners agreed to be assessed at Rs. 66,56,000 subject to usual allowances for depreciation, etc. This amount was to be spread over eight assessment years, i.e., from 1958-59 to 1965-66. At that time assessments up to 1959-60 were complete. Thus, assessments for two years, 1958-59 and 1959-60, were reopened for the purposes of spreading over of the income disclosed. Admittedly, the disclosed income was spread over as agreed.
4. The IAC (respondent No. 3) issued various notices to the firm, dated March 22, 1968, calling upon it to show cause why penalty should not be imposed under s. 271(1)(c) of the I.T. Act for the non-disclosure of the income relating to the aforesaid period. Ultimately, a penalty of Rs. 4,90,365 was imposed on the petitioners for the years 1958-59 to 1964-65. The firm preferred appeals before the Income-tax Appellate Tribunal. The said appeals were dismissed by the Tribunal, vide its order dated February 21, 1970. Hence this petition.
5. The petitioners challenge the penalty proceedings on various grounds, namely, (i) initiation of penalty proceedings by the ITO under s. 271(1)(c) was illegal, without authority of law and/or premature inasmuch as the petitioner's application under s. 271(4A) was pending before the CBDT and/or the Commissioner ; (ii) that the said CBDT and the Commissioner were bound to pass orders on the petitioner's application under s. 271(4A); (iii) the petitioners made a voluntary disclosure relying on the promises and/or representations made by the respondents through the provisions of s. 271(4A) and/or at the time of discussion with the Commissioner to the effect that the petitioners would not be subjected to any penalty and in view of these promises and representations no penalty could be levied and the respondents could not go back on their assurances ; (iv) the penalty notices were issued after the completion of the assessment proceedings and were, thereforee, without jurisdiction; (v) there was no concealment and, thereforee, no penalty could be levied; and (vi) the penalty proceedings were arbitrary, illegal and invalid.
6. On behalf of the CBDT and the Revenue, its Under-Secretary, Shri V. P. Mittal, has filed an affidavit-in-reply. It is averred that the CBDT and the Revenue never received any petition under s. 271(4A) of the I.T. Act, 1961. The Board did not approve the proposals of the Commissioner to reduce or waive the penalty under s. 271(4A) of the I.T. Act, 1961, after giving a hearing to the petitioners on March 25, 1968.
7. Shri M.G.C. Goyal, ITO, has filed an affidavit on behalf for the Commissioner. He raises two preliminary objections. First, that this court should not exercise its extraordinary jurisdiction inasmuch as the petitioners had not exhausted the alternative remedy by way of reference under s. 256 of the Act, and, secondly, because disputed questions of facts are involved. On merits it is contended that the ITO was fully competent to initiate penalty proceedings. For invoking the provisions of s. 271(4A), the statute had prescribed certain guidelines, namely, (i) the disclosure should be voluntary and made in good faith; (ii) it should be made prior to the detection by the ITO of the concealment of the particulars of income in respect of which the penalty was imposable; (ii) it should be full and true; (iv) the assessed should have co-operated in an inquiry relating to the assessment of disclosed income; and (v) the assessed should have paid and made satisfactory arrangements for the payment of taxes in consequence of an order passed in respect of the relevant assessment year, i.e., the year in which the penalty is imposable. There was another condition, namely, that if in any case the minimum penalty imposable in respect of all the years involved exceeded a sum of Rs. 50,000, no order reducing or waiving the penalty shall be made by the Commissioner unless the previous approval of the Board had been obtained. In this case, all the conditions had not been satisfied and, thereforee, the Board had declined to interfere under s. 271(4A). It was not necessary to inform the petitioners about the decision. Neither the Board nor the Commissioner ever gave any assurance or made any promise as alleged nor any such promise or assurance could be given. The penalty proceedings were initiated by the ITO during the course of the assessment proceedings. The show-cause notice, dated March 22, 1968, issued by the IAC was not a fresh notice; it was in continuation of the earlier notice issued by the ITO. The orders were issued in accordance with law.
8. Shri V.S. Desai, learned counsel appearing on behalf of the petitioners, made only two submissions before us. These were, (i) that the imposition of penalty was premature inasmuch as the application of the petitioners under s. 271(4A) for waiver of the penalty was still pending disposal; and (ii) the condition precedent, namely, the satisfaction of the ITO that the assessed had concealed his income had not been satisfied in this case in view of the petitioners having come forward and voluntarily disclosed their total income.
9. Neither of these submissions, in our view, has any substance. Section 271(1)(c) for the I.T. Act reads as under :
'271. (1) If the Income-tax Officer or the Appellate Assistant Commissioner, in the course of any proceedings under this Act, is satisfied that any person ---...
(c) has concealed the particulars of his income or furnished inaccurate particulars of such income,
he may direct that such person shall pay by way of penalty,...'
10. There is nothing in these provisions to show or suggest that these provisions were dependent on the provisions contained in s. 271(4A). As a matter of fact, s. 271(4A) provides for a reduction or waiver of the amount of minimum penalty imposable on a person under clause (i) of sub-s. (1) of s. 271. The question of reduction would arise only when the penalty has been imposed. In such a situation, the pendency of the application under s. 271(4A), even if this fact is assumed as correct, would not make any difference so far as the penalty proceedings under s. 271(1)(c) were concerned. It may also be mentioned that according to the affidavit filed by Shri V.P. Mittal, the CBDT and the Revenue did not approve the proposal of the Commissioner to reduce or waive the penalty and had communicated this decision to the Commissioner on March 28, 1968. The penalties were imposed by the IAC on March 29, 1968. In all the circumstances, it cannot be said that the imposition of penalty was premature.
11. An examination of s. 271(1)(c), reproduced above, shows that the penalty can be imposed when the assessed has concealed the particulars of income or furnished inaccurate particulars of such income. In the present case, the assessed, i.e., the petitioners, voluntarily disclosed their income and for that reason it was argued that there was no concealment. In our view, the assessed had concealed the income, later on disclosed by it, in the returns which had been filed prior to the disclosure scheme. The subsequent act of disclosure of an income of Rs. 28,00,000 and then agreeing that the figure may be raised to Rs. 66,56,000, we feel, would not make any difference and it cannot be said that the petitioners had not concealed particulars of their income or had not furnished inaccurate particulars of such income.
12. Accordingly, we discharge the rule and dismiss the petition. The parties are, however, left to bear their own costs.