1993 (7) TMI 8 - HC - Income Tax

Amnesty Scheme, Income Tax Act, Mistake Apparent From Record, Rectification Proceedings, Revised Return, Search And Seizure, Wealth Tax Act

Issues Involved:
1. Whether the appellant-writ petitioner is entitled to the benefits of the amnesty scheme despite the search and seizure conducted by the income-tax authorities.
2. The legality and validity of the notice dated February 23, 1989, issued under section 154 of the Income-tax Act, 1961, and the subsequent order dated January 1, 1990.

Issue-Wise Detailed Analysis:

1. Entitlement to Amnesty Scheme Benefits:

The appellant-writ petitioner, who was assessed for income-tax and wealth-tax, did not include income from three proprietary concerns in his returns for the assessment years 1981-82 to 1985-86. Following a search on March 7, 1986, certain documents were seized, but no items were taken from the appellant's possession. The appellant filed revised returns under the amnesty scheme on March 31, 1986, disclosing previously undisclosed income and wealth.

The Central Board of Direct Taxes (CBDT) issued Circular No. 451, clarifying that immunity under the amnesty scheme would not be available to assessees whose premises had been searched (Question No. 12). However, the same circular allowed disclosures for assets or income not found during the search (Question No. 30). The CBDT also clarified that "before detection by the Department" meant that if the Income-tax Officer only had prima facie belief, it would not constitute detection (Question No. 19).

In this case, the court found that although documents were seized, they were not scrutinized by the tax authorities before the revised returns were filed. The appellant disclosed his income and wealth fully and paid taxes as per the amnesty scheme. The court concluded that mere seizure did not equate to detection of concealment. Thus, the appellant was entitled to the benefits of the amnesty scheme as the tax authorities had not investigated or detected the concealed income before the revised returns were filed.

2. Legality and Validity of Notice and Subsequent Order:

The Commissioner of Income-tax issued a notice on February 23, 1989, under section 154 of the Income-tax Act, proposing to rectify errors in the previous order dated November 11, 1988, which granted the appellant benefits under the amnesty scheme. The appellant challenged this notice, arguing that the conditions for rectification were not met.

The court observed that the scope of section 154 is limited to correcting glaring and obvious mistakes of fact or law. Debatable issues or those with two conceivable opinions cannot be rectified under this section. The court found that the Commissioner's notice and subsequent order were based on an erroneous interpretation of the amnesty scheme's applicability. Since the tax authorities had not detected the concealment before the revised returns were filed, the appellant was entitled to the scheme's benefits.

The court held that the notice issued on February 23, 1989, and the order dated January 1, 1990, were without jurisdiction, illegal, invalid, and void ab initio. Consequently, the appeal was allowed, and both the impugned notice and order were quashed.

Conclusion:

The court concluded that the appellant-writ petitioner was entitled to the benefits of the amnesty scheme as the tax authorities had not detected the concealed income before the revised returns were filed. The notice and order under section 154 were deemed without jurisdiction and quashed.

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