1996 (1) TMI 149 - AT - Income Tax

Advance Tax, Amnesty Scheme, Assessing Officer, Assessment Year, Business Premises, Cash Credits, False Estimate, Penalty For Concealment, Revised Returns

Summary

Issues Involved:

1. Applicability of the amnesty scheme.
2. Merits of the penalty under section 271(1)(c).
3. Merits of the penalty under section 273.

Issue-wise Detailed Analysis:

1. Applicability of the Amnesty Scheme:

The primary contention was whether the benefits of the amnesty scheme could be extended to the assessee. The revenue argued that the assessee did not make a full and true disclosure of income voluntarily and in good faith before detection by the department. The assessee filed multiple revised returns under the amnesty scheme, which the revenue contended were not bona fide and were made only after further investigations by the Assessing Officer. The Tribunal held that the assessee did not fulfill the conditions of making a full and true disclosure as specified in the CBDT order under section 119(2). The Tribunal emphasized that the disclosure must be honest and complete, and partial disclosures are not covered by the scheme. Therefore, the CIT(A) was not justified in applying the benefits of the amnesty scheme to the assessee.

2. Merits of the Penalty under Section 271(1)(c):

The Tribunal analyzed the penalties on the merits and categorized the surrendered income into three parts:

(a) Sale of Jewellery to Miss Rekha Ganeshan (Rs. 5.5 lakhs): The revenue relied on the statement of Miss Rekha Ganeshan recorded under section 132(4) during a search at her residence. However, the Tribunal noted that the statement did not conclusively establish that the jewellery was purchased from the assessee. The assessee was not given an opportunity to cross-examine Miss Rekha Ganeshan, which violated the principles of natural justice. Consequently, the Tribunal upheld the CIT(A)'s decision to delete the penalty for this addition, as the revenue failed to prove that it represented the income of the assessee.

(b) Disallowance of Interest on Loans from Earlier Years (Rs. 4.5 lakhs): The Settlement Commission had admitted the settlement petition for earlier years and directed the waiver of penalties under section 271(1)(c) and section 273. In the interest of justice, the Tribunal upheld the CIT(A)'s decision to delete the penalty for this amount.

(c) Cash Credits and Interest (Rs. 10,07,985): The Tribunal divided the cash credits into two categories:
- First Category (Rs. 7.45 lakhs): The Assessing Officer found that the particulars given by the assessee were inaccurate, as the cash creditors did not exist at the provided addresses and were not found on the income tax records. The Tribunal held that the assessee furnished inaccurate particulars, thereby concealing income to that extent. The penalty for this amount and interest thereon was sustained.
- Second Category (Rs. 3.75 lakhs): The revenue did not establish that the particulars filed by the assessee were inaccurate. The Tribunal upheld the CIT(A)'s decision to delete the penalty for this amount, as the assessee had provided all necessary particulars, and the non-service of summons alone did not justify a penalty.

3. Merits of the Penalty under Section 273:

The CIT(A) had canceled the penalty under section 273 solely on the grounds of the amnesty scheme's applicability. As the Tribunal had already held that the amnesty scheme benefits could not be extended to the assessee, the impugned penalty order could not be sustained. The Tribunal set aside the CIT(A)'s order and restored the matter for adjudication on merits.

Conclusion:

The Tribunal modified the CIT(A)'s order and directed the Assessing Officer to recompute the penalty under section 271(1)(c) in light of the observations made. The appeal relating to the penalty under section 271(1)(c) was partly allowed, while the appeal relating to the penalty under section 273 was allowed for statistical purposes.