1996 (5) TMI 98 - AT - Income Tax

Additions To Income, Advance Tax, Amnesty Scheme, Assessing Officer, Assessment Year, So Included, Total Income

Issues Involved:
1. Taxation of income earned by the assessee from assessment years 1979-80 to 1986-87 in the assessment year 1987-88.
2. Taxation of income earned by the assessee's wife from assessment years 1979-80 to 1986-87 in the hands of the assessee in the assessment year 1987-88.
3. Taxation of income earned by the assessee's wife for the assessment year 1987-88 in the hands of the assessee.
4. Levy of interest under section 215 of the Income Tax Act.
5. Initiation of penalty proceedings under sections 273(2)(a) and 271(1)(c) of the Income Tax Act.

Detailed Analysis:

1. Taxation of Income Earned by the Assessee from Assessment Years 1979-80 to 1986-87 in the Assessment Year 1987-88:
The Assessing Officer (AO) raised the issue of whether income earned by the assessee from assessment years 1979-80 to 1986-87, which was assessed to income-tax and wealth-tax, can be taxed again during the assessment year 1987-88. The AO decided against the assessee, but the First Appellate Authority (CIT(A)) ruled in favor of the assessee and deleted the additions. The Revenue appealed against this deletion.

The tribunal held that incomes already declared and assessed in the hands of the assessee under the Amnesty Scheme from assessment years 1979-80 to 1986-87 cannot be reassessed in the assessment year 1987-88. The tribunal referred to the CBDT Circular No. 451 and clarifications which stated that no enquiry would be made into the lump sum declaration by an assessee under the Amnesty Scheme. The tribunal emphasized that one income cannot be taxed twice and that the AO's attempt to tax the income again in the assessment year 1987-88 was against the spirit of the Amnesty Scheme. Therefore, the tribunal dismissed the Revenue's appeal on this ground.

2. Taxation of Income Earned by the Assessee's Wife from Assessment Years 1979-80 to 1986-87 in the Hands of the Assessee in the Assessment Year 1987-88:
The AO also raised the issue of whether the income earned by the assessee's wife in the earlier years, which was assessed to income-tax and wealth-tax in her own hands, can be taxed again in the hands of the assessee during the assessment year 1987-88. The AO decided against the assessee, but the CIT(A) ruled in favor of the assessee and deleted the additions. The Revenue appealed against this deletion.

The tribunal found that the assessee's wife, like the assessee, filed returns of income and wealth-tax under the Amnesty Scheme for the relevant years. The tribunal noted that the CBDT Circular No. 451 allowed ladies to avail benefits of the Amnesty Scheme. The tribunal emphasized that before an income can be added in the hands of another person, a finding must be reached that the ostensible owner is not the real owner. No such finding was given by the AO in this case. The tribunal cited several Supreme Court decisions which held that the burden lies on the department to prove that the person is not the real owner. Therefore, the tribunal dismissed the Revenue's appeal on this ground.

3. Taxation of Income Earned by the Assessee's Wife for the Assessment Year 1987-88 in the Hands of the Assessee:
The AO also raised the issue of whether the income earned by the assessee's wife for the assessment year 1987-88 would be assessed to tax in the hands of the assessee. The AO decided against the assessee, but the CIT(A) restored the matter back to the file of the AO for fresh adjudication. The Revenue challenged the restoration order, while the assessee contended that the addition should have been deleted by the CIT(A).

The tribunal found that there was no Amnesty Scheme in operation for the assessment year 1987-88. The tribunal noted that the AO was empowered to scrutinize the assessment for the assessment year 1987-88 and call for details and sources of income of the assessee and his wife. The tribunal agreed with the CIT(A) that the assessee had insufficient time to furnish details to the AO. Therefore, the tribunal upheld the CIT(A)'s decision to restore the issue to the file of the AO for fresh adjudication and dismissed both the Revenue's and the assessee's appeals on this ground.

4. Levy of Interest under Section 215 of the Income Tax Act:
The assessee challenged the levy of interest under section 215. The CIT(A) treated this ground as consequential and held that "interest would be automatically reduced while giving effect to the appeal order in view of the relief allowed."

The tribunal held that the case of the assessee was covered by the judgment of the Gujarat High Court in the case of Bharat Machinery & Hardware Mart, where it was held that the assessee cannot be expected to assume that such addition would be made to the assessee's income. Therefore, the tribunal held that no interest under section 215 was leviable in this case and allowed the assessee's appeal on this ground.

5. Initiation of Penalty Proceedings under Sections 273(2)(a) and 271(1)(c) of the Income Tax Act:
The assessee contended that the AO ought not to have initiated penalty proceedings under sections 273(2)(a) and 271(1)(c) of the Act. The tribunal held that such a ground is not maintainable because a separate appeal lies against an order of penalty under these sections. Therefore, the tribunal dismissed this ground.

Conclusion:
The tribunal dismissed the Revenue's appeal and allowed the assessee's appeal in part. The tribunal upheld the CIT(A)'s decisions on the first two issues, restored the third issue to the file of the AO for fresh adjudication, held that no interest under section 215 was leviable, and dismissed the ground regarding the initiation of penalty proceedings.

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