2003 (5) TMI 18 - HC - Income Tax

Penalty u/s 271(1)(c) - original return disclosing a total income of Rs. 48, 650 and after search the assessee had filed a revised return showing a total income of Rs. 1, 98, 650 which would show that the assessee had offered an additional income of Rs. 1, 50, 000. The Assessing Officer has completed the assessment on a sum of Rs. 2, 00, 900 which shows that over and above the amount offered in the revised return the AO has made a further addition of Rs. 2, 250. Held that assessee is entitled to immunity under the amnesty scheme in respect of a sum of Rs. 1, 98, 650 and the amount that can be subjected to penalty is Rs. 2, 250 - if a revised return offering a higher amount is filed after the search and seizure but prior to the issuance of notice under section 147 the return must be treated as voluntary and one filed before detection in respect of the amount offered in the said revised return. Penalty rightly cancelled

Issues Involved:
1. Interpretation of Circular No. 451 dated February 17, 1986.
2. Detection of concealment prior to the filing of the revised return.
3. Validity of the revised return under the amnesty scheme.
4. Seized documents and their implications on concealment detection.
5. Tribunal's decision on penalty cancellation.

Detailed Analysis:

1. Interpretation of Circular No. 451 dated February 17, 1986:
The court examined whether the circular required categoric detection of concealment before the filing of the return. The Tribunal, relying on the circular, held that the Assessing Officer had only a prima facie belief about the concealment and not a categorical detection before the filing of the revised return by the assessee on April 23, 1986.

2. Detection of concealment prior to the filing of the revised return:
The court evaluated whether the concealment was detected before the revised return was filed. The Tribunal noted that the Assessing Officer in the penalty order mentioned that the concealment was detected during the course of the assessment proceedings, not during the search. This indicated that the revised return was filed before the detection of concealment.

3. Validity of the revised return under the amnesty scheme:
The court considered whether the revised return filed by the assessee was voluntary and entitled to the benefit of the amnesty scheme. The Tribunal observed that the revised return was filed before any categorical detection of concealment, making it eligible for the amnesty scheme. The court referenced the decision in CIT v. Hotel Ambassador [2002] 253 ITR 430, which supported the view that a revised return filed before the issuance of a notice under section 147 is considered voluntary and eligible for amnesty.

4. Seized documents and their implications on concealment detection:
The court analyzed the significance of the seized documents, particularly slip No. 11, which contained details of income adjustments. The Tribunal found that slip No. 11 did not specifically establish concealment, and the Assessing Officer had only a prima facie belief about the concealment. This supported the conclusion that there was no categorical detection of concealment before the revised return was filed.

5. Tribunal's decision on penalty cancellation:
The Tribunal's decision to cancel the penalty was based on the finding that the concealment was not categorically detected before the revised return was filed. The court agreed with the Tribunal's conclusion, referencing the decisions in N. C. J. John's case [1998] 233 ITR 475 and Hotel Ambassador's case [2002] 253 ITR 430, which emphasized that the mere fact of a search does not automatically disqualify an assessee from the amnesty scheme benefits. The court concluded that the assessee was entitled to immunity under the amnesty scheme for the amount disclosed in the revised return, and only the additional amount assessed by the Assessing Officer was subject to penalty.

Conclusion:
The court dismissed the appeal, affirming the Tribunal's decision to cancel the penalty imposed on the assessee. The revised return filed by the assessee was deemed voluntary and eligible for the amnesty scheme benefits, as the concealment was not categorically detected before the filing of the revised return. The court answered all the questions in favor of the assessee and against the Revenue.

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