K L SWAMY Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN this petition for a writ of certiorari the petitioners call in question the validity of an order passed by the respondent-Commissioner of INcome-tax under Section 273A of the INcome-tax Act, 1961, refusing to reduce or waive interest and penalty levied under Sections 139(8), 217, 271(l)(a), 273(2)(b) and 271(l)(c) of the INcome-tax Act, for the assessment years 1980-81 and 1985-86.

(2.) THE petitioners are real brothers and have been referred to as the Kho-days in the course of the proceedings before the authorities below. THEy appear to have evinced interest in the purchase of two estates situate in the Chickmagalur District of the State of Karnataka. THEse estates were then owned by a partnership comprising one Sri Thyagarajan and a few others. Instead of an outright transfer under an instrument, the parties appear to have adopted a circuitous route apparently to avoid payment of the stamp duty payable on any such transfer. This included the dissolution of the original partnership and constitution of two new partnership firms one in the name of Laxmi Estates and the other in the name of Saraswati Estate. While the petitioners K. L. A. Padmanabha and K. S. Swamy, were inducted as partners in Saraswati Estate, Sri K. L. Srihari and K. L. Swamy, were taken as partners in the other partnership, namely, Laxmi Estate, in terms of two partnership deeds both executed on November 17, 1984. THEse partnerships were within a period of three months dissolved by two different deeds dated March 6, 1985, under which all other partners except the petitioners retired on being paid their share in cash. THE net effect was that the estates stood transferred to the petitioners in lieu of the capital brought in by them. THE payments made to the out going partners in each one of the partnerships, was shown to be Rs. 45 lakhs so that a total sum of Rs. 90 lakhs was paid as consideration for the transfers in question.

(3.) THE crucial question that falls for consideration is : Whether the disclosures made by the petitioners in the returns filed by them were voluntary and in good faith. THE question it is obvious is a mixed question of law and fact with two distinct facets one relating to the true meaning of the expressions "voluntary" and "good faith" appearing in Section 273A of the Act and the other relating to the factual matrix to which the said expressions shall have to be applied. Judicial pronouncements on analogous questions would therefore be relevant only to the extent the same interpret the two expressions. THE decisions relied upon by Mr. Sarangan, and those that were referred to by Mr. Sheshachala, do not however show any cleavage in judicial opinion. In the absence of any definition for the expressions there is no option but to depend upon the literal and the dictionary meaning thereof. So viewed the term "voluntary" has to be understood as anything done intentionally and without coercion, compulsion or constraint. Coercion may in turn be direct or positive as in cases where physical force is used to compel an act against one's will or it may be implied legal or constructive as is the position where one party is constrained by subjugation to another to do what his free will would refuse. Coercion that vitiates confession can in terms of Black's Law Dictionary be mental as well as physical. In other words, an action can be "involuntary" not merely because it has been taken by the use of actual direct or positive physical force but also where such action is taken on account of mental and other constraints. That would not however mean that a mere legal obligation to do something should constitute a constraint of the kind which would render any such action involuntary. For if that be so, there would hardly be any disclosure made under the Income-tax Act which can be treated as "voluntary", in the light of Section 139 which creates a legal obligation for all those having a taxable income, to disclose the same in the prescribed form. It follows that the circumstances, conditions or constraints that make a disclosure under the Act "involuntary" must be constraints other than obligations that arise under the Act, requiring the assessee to take a particular action.