2008 (9) TMI 162 - HC - Income Tax

Levy of penalty under sections 271(1)(a), 271(1)(c) and 273(2)(a) tribunal deleting penalty by giving benefit under Amnesty Scheme revenue contend that assessee had revised its returns on a number of occasions subsequent to search operation so it shows that return was not voluntary contention of revenue not acceptable - mere filing of revised returns on a number of occasions cannot show that the returns were not voluntary no evidence of undisclosed income penalty not imposable

Summary

Issues Involved:
1. Levy of penalty under sections 271(1)(a), 271(1)(c), and 273(2)(a) of the Income-tax Act, 1961.
2. Applicability of the Amnesty Scheme.
3. Voluntariness of the revised returns.
4. Detection of concealment by the Income Tax Department.

Issue-wise Detailed Analysis:

1. Levy of Penalty under Sections 271(1)(a), 271(1)(c), and 273(2)(a) of the Income-tax Act, 1961:

The appeals concern penalties levied under sections 271(1)(a), 271(1)(c), and 273(2)(a) of the Income-tax Act for the Assessment Years 1982-83 to 1985-86. The penalties were initially canceled by the Tribunal on the grounds that the benefit under the Amnesty Scheme was available to the assessee. The High Court initially rejected the appeals, stating no substantial question of law arose. However, the Supreme Court remitted the matter back to the High Court, directing it to address the substantial question of law regarding the applicability of the Amnesty Scheme and the voluntariness of the revised returns.

2. Applicability of the Amnesty Scheme:

The Tribunal's decision was based on the interpretation of the Amnesty Scheme, which provides immunity from penalties if certain conditions are met. The relevant circulars and orders issued by the Central Board of Direct Taxes (CBDT) were examined, particularly the order dated 14.02.1986 under Section 119(2)(a) of the Act. The conditions for immunity include:
- Voluntary and good faith disclosure of concealed income before detection by the department.
- Payment of tax on the disclosed income by the stipulated date.
- Cooperation in any inquiry relating to the assessment of the disclosed income.

The Tribunal found that the assessee had met these conditions, as the revised returns were filed before any concrete material establishing concealment was found by the department.

3. Voluntariness of the Revised Returns:

The Tribunal noted that the revised returns were filed on multiple occasions, but this alone did not disqualify them from being considered voluntary. The Tribunal emphasized that the returns were filed in response to a show-cause notice and subsequent cross-examinations, but the department did not have sufficient material to establish concealment at the time of filing the revised returns. The Tribunal concluded that the returns were voluntary and in good faith, fulfilling the requirements of the Amnesty Scheme.

4. Detection of Concealment by the Income Tax Department:

The Tribunal examined whether the department had detected the concealment before the revised returns were filed. It was found that the department only had a prima facie belief of concealment, not concrete evidence. The Tribunal highlighted that no incriminating material was found during the search operation, and the additions made in the assessment orders were based on the declarations made by the assessee. Therefore, the Tribunal held that the department had not detected the concealment before the revised returns were filed, making the assessee eligible for the Amnesty Scheme.

Conclusion:

The High Court, after considering the Supreme Court's directions, upheld the Tribunal's decision, concluding that the penalties under sections 271(1)(a), 271(1)(c), and 273(2)(a) were rightly canceled. The Tribunal's findings were based on a thorough appreciation of the evidence and the correct interpretation of the Amnesty Scheme. The appeals were dismissed, and it was held that the revised returns were voluntary and in good faith, and the department had not detected the concealment before the filing of these returns. The High Court found no legal infirmity in the Tribunal's order, thus affirming the cancellation of the penalties.