1996 (9) TMI 160 - AT - Income Tax

Additions To Income Amnesty Scheme Assessing Officer Assessment Year Full And True Disclosure Higher Rate Income Tax Secret Commission

Summary

Issues Involved:
1. Treatment of returns filed under the Amnesty Scheme, 1985.
2. Estimation of net profit rate.
3. Charge of interest under section 139(8)/217.

Issue-wise Detailed Analysis:

1. Treatment of Returns Filed Under the Amnesty Scheme, 1985:
The primary issue in these appeals was whether the returns filed by the assessee for the assessment years 1982-83, 1983-84, and 1984-85 should be treated as returns filed under the Amnesty Scheme, 1985. The assessee, a partnership firm engaged in supplying E.R.W. pipes to the Irrigation Department of the Gujarat State Government, filed returns under the Amnesty Scheme on 30-9-1986. The Income-tax Department had initiated inquiries based on a news item in 'Gujarat Samachar' dated 8-5-1986, which reported irregularities in the purchase of E.R.W. pipes, leading to the suspension of 24 officers of the Irrigation Department. The Department's inquiries revealed that the assessee had received excessive payments for the pipes supplied. The Assessing Officer and the CIT(A) rejected the assessee's claim for benefits under the Amnesty Scheme, citing that the returns were not filed voluntarily before detection by the Department. The Tribunal upheld this decision, noting that extensive inquiries had already been conducted, and material indicating concealment was found before the returns were filed. The Tribunal referenced CBDT Circular Nos. 423 and 432 and concluded that the returns were not voluntary and were filed after detection by the Department.

2. Estimation of Net Profit Rate:
The second issue concerned the estimation of the net profit rate. The Assessing Officer noted that the assessee did not maintain regular books of account and had claimed secret commission and brokerage expenses without substantiating evidence. The Assessing Officer estimated the net profit at 51.36% of sales. On appeal, the CIT(A) reduced the net profit rate to 30%, considering the extent and volume of the business. The assessee argued that a net profit rate of 12.5% was more appropriate for a contractor. However, the Tribunal upheld the CIT(A)'s decision, noting the collusive nature of the transactions and the absence of evidence for the claimed expenses. The Tribunal found the 30% net profit rate to be fair and reasonable given the special features of the case.

3. Charge of Interest Under Section 139(8)/217:
The final issue was the charge of interest under section 139(8)/217. The assessee contended that since the assessments were framed under section 148, they were not regular assessments, and interest should not be charged. The Tribunal found merit in this contention, referencing the Supreme Court judgment in Modi Industries Ltd. v. CIT [1995] 216 ITR 759/82 Taxman 377, which affirmed the view taken by the Bombay High Court in 146 ITR 452. Consequently, the Tribunal directed the Assessing Officer to remit the interest charged under section 139(8)/217.

Conclusion:
The Tribunal confirmed the authorities' decision to deny the benefits of the Amnesty Scheme to the assessee, upheld the CIT(A)'s estimation of the net profit rate at 30%, and directed the remission of interest charged under section 139(8)/217. The appeals were allowed in part.