2007 (7) TMI 255 - HC - Income Tax

In pursuance of Amnesty scheme assessee revised his return AO made additions on account of unexplained expenditure in marriage and charged interest department was not justified in charging interest u/s 139(8) and 215 in relation to the unexplained expenditure incurred on the marriage - Tribunal was right in law in holding that case of the assessee was covered under the Amnesty Scheme in view of circular no. 451 taking liberal view interest charged under section 139(8)/215 are deleted

Summary

Issues:
Interpretation of the Amnesty Scheme under the Income-tax Act, 1961 regarding detection of concealment by the department and its application to the case. Assessment of unexplained expenditure incurred on the marriage of the assessee's daughter at Taj Hotel, Delhi. Charging of interest under Section 139(8) and 215 of the Act. Compliance with Circular No. 451, dated 17.2.1986 issued by the Central Board of Direct Taxes (CBDT) regarding waiver of interest in cases involving the Amnesty Scheme.

Interpretation of the Amnesty Scheme:
The case involved an individual assessee with income from various sources who had filed a return for the assessment year 1984-85. Following a survey at Taj Hotel, Delhi, certain documents regarding marriage expenses were discovered, leading to an investigation. The assessee revised his return multiple times, eventually surrendering an amount under the Amnesty Scheme to avoid prosecution. The Tribunal held that the case fell under the Amnesty Scheme, and interest charged by the Assessing Officer was unjustified. The Tribunal emphasized the need for proper detection of concealment, stating that the word 'detection' involves a step-by-step process of inquiry. The Tribunal referred to a previous case to support the liberal interpretation of the Amnesty Scheme, highlighting the Scheme's purpose to encourage disclosure without penalties for defaults.

Assessment of Unexplained Expenditure:
The Assessing Officer had made an addition to the assessee's income from undisclosed sources due to unexplained expenditure on the marriage at Taj Hotel, Delhi. The CIT (A) upheld this decision, but the Tribunal disagreed, ruling in favor of the assessee under the Amnesty Scheme. The Tribunal noted discrepancies in the evidence presented by the department and highlighted the importance of allowing the assessee to rebut the evidence collected. The Tribunal concluded that the department's decision to charge interest was unwarranted given the circumstances of the case and the assessee's compliance with the Amnesty Scheme.

Charging of Interest under Section 139(8) and 215:
The Assessing Officer had charged interest under Section 139(8) and 215 of the Act, which was upheld by the CIT (A) but overturned by the Tribunal. The Tribunal reasoned that since the case fell under the Amnesty Scheme, charging interest was not justified. The Tribunal cited Circular No. 451 issued by the CBDT, which instructed Income Tax Officers to be liberal in waiving interest in cases involving the Amnesty Scheme. The Tribunal upheld its discretion in favor of the assessee, emphasizing the CBDT's directive to adopt a lenient approach towards interest waivers.

Compliance with Circular No. 451, CBDT:
The Tribunal referenced Circular No. 451, which directed Income Tax Officers to be liberal in waiving interest in cases related to the Amnesty Scheme. The Tribunal noted that the CBDT's instruction supported a lenient approach towards interest waivers, and since the Tribunal had exercised its discretion accordingly, it found no legal basis to interfere with the decision. The Tribunal emphasized the minimal tax incidence in the case as a factor favoring the assessee.

In conclusion, the High Court upheld the Tribunal's decision, ruling in favor of the assessee regarding the interpretation of the Amnesty Scheme, assessment of unexplained expenditure, charging of interest, and compliance with the CBDT circular. The judgment emphasized the importance of proper detection of concealment, adherence to the principles of the Amnesty Scheme, and the need for a liberal approach towards interest waivers in cases involving voluntary disclosures.