1993 (10) TMI 108 - AT - Income Tax

Summary

Issues Involved:
1. Legitimacy of the penalty under section 271(1)(c) of the Income-tax Act.
2. Applicability of the Amnesty Scheme to the revised return filed by the assessee.
3. Whether the revised return was filed suo motu and voluntarily or after detection by the Assessing Officer.
4. Interpretation of instructions under section 119 of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Legitimacy of the penalty under section 271(1)(c) of the Income-tax Act:
The Revenue challenged the Appellate Commissioner's decision to cancel the penalty of Rs. 6,97,270 levied by the Assessing Officer (AO) under section 271(1)(c) of the Income-tax Act. The AO scrutinized the cloth manufacturing account of the assessee, a partnership firm engaged in crimping yarn and manufacturing and selling cloth, and found discrepancies in the consumption of yarn. The AO discovered that the consumption of yarn was more than double the normal rate, which led to the suspicion of inflated consumption resulting in suppressed income. The AO initiated proceedings under section 271(1)(c) for concealment of income after the assessee filed a revised return disclosing higher income and paying the due tax. The AO was not satisfied with the assessee's explanation that the revised return was filed under the Amnesty Scheme and imposed the maximum penalty. The Tribunal upheld the AO's decision to impose the penalty but reduced the amount to Rs. 3,48,635, concluding that the revised return was not filed suo motu but after detection by the AO.

2. Applicability of the Amnesty Scheme to the revised return filed by the assessee:
The assessee argued that the revised return was filed under the Amnesty Scheme, which provides immunity from penalties and prosecution if the disclosure is truthful and taxes are paid. The Appellate Commissioner accepted this argument and canceled the penalty, stating that the assessee's conduct was bona fide and honest. However, the Revenue contended that the revised return was filed after the AO had already detected the concealment through a detailed inquiry, thus disqualifying the assessee from the benefits of the Amnesty Scheme. The Tribunal agreed with the Revenue, stating that the revised return was a result of the AO's detection and not a voluntary action by the assessee.

3. Whether the revised return was filed suo motu and voluntarily or after detection by the Assessing Officer:
The Tribunal examined whether the revised return was filed voluntarily or after detection by the AO. The AO had conducted a thorough inquiry, including examining several persons on oath and issuing summons under section 131. The Tribunal found that the assessee filed the revised return after realizing that the AO would uncover the inflated consumption of yarn. The Tribunal concluded that the revised return was not filed suo motu but due to the AO's diligent efforts and detection of concealed income.

4. Interpretation of instructions under section 119 of the Income-tax Act:
The assessee relied on answers given by the Chief Commissioner of Income-tax (Administration), New Delhi, and the Board's Chairman in various circulars, claiming that these answers constituted instructions under section 119 of the Act and were binding on the AO. The Tribunal disagreed, stating that the Chief Commissioner's answers could not be construed as instructions under section 119, as he is lower in rank to the Board. However, the Tribunal acknowledged that the Board's Chairman's answers should be given effect, though not as instructions under section 119 but based on the credibility of the income-tax department. The Tribunal emphasized that the revised return was filed after detection by the AO, and thus, the assessee could not claim immunity from penalty under the Amnesty Scheme.

Conclusion:
The Tribunal upheld the imposition of penalty under section 271(1)(c) by the AO, concluding that the revised return was filed after detection of concealed income. However, it reduced the penalty amount from Rs. 6,97,270 to Rs. 3,48,635, considering the peculiar facts and circumstances of the case. The appeal was allowed in part.