1991 (7) TMI 134 - AT - Income Tax

Issues Involved:
1. Delay in filing returns and applicability of penalties under sections 271(1)(a) and 273(1)(b).
2. Applicability of the Amnesty Scheme to the assessee's case.
3. Satisfaction of the Assessing Officer for initiating penalty proceedings.

Issue-wise Detailed Analysis:

1. Delay in Filing Returns and Applicability of Penalties under Sections 271(1)(a) and 273(1)(b):

The returns of income for the assessment years 1983-84 to 1985-86 were filed on 25th Feb., 1987, and for the assessment year 1986-87 on 6th March, 1987, whereas the returns were due on 31st July of each assessment year. The Assessing Officer completed the assessments on 30th Oct., 1987, and initiated penalty proceedings under sections 271(1)(a) and 273(1)(b). The penalties levied were as follows:

| Assessment Year | Penalty under s. 271(1)(a) | Penalty under s. 273(1)(b) |
|-----------------|----------------------------|----------------------------|
| 1983-84 | Rs. 49,720 | Rs. 4,446 |
| 1984-85 | Rs. 41,327 | Rs. 5,166 |
| 1985-86 | Rs. 28,218 | Rs. 5,879 |
| 1986-87 | Rs. 20,985 | Rs. 11,242 |

The Assessing Officer observed that the returns were not voluntary as they were filed after a search in the case of the assessee's husband, hence penalties were justified. The CIT(A) confirmed the penalties, stating that the returns were filed due to the search conducted and were not accepted under the Amnesty Scheme.

2. Applicability of the Amnesty Scheme to the Assessee's Case:

The assessee contended that the returns were filed under the Amnesty Scheme, which should exempt them from penalties. The CBDT issued several circulars (Nos. 423, 432, 439, 440, 441, 450, 451, 453, and 472) emphasizing a liberal and sympathetic approach towards assessees who voluntarily disclosed their incomes. Circular No. 432 stated that the Department would adopt a sympathetic approach even if the returns were filed after being caught, provided the disclosure was full and true. Circular No. 451 clarified that immunity from penalties and prosecution applied if the assessee admitted the truth and paid taxes properly.

The Kerala High Court in A.V. Joy, Alukkas Jewellery vs. CIT held that returns filed after a search could still be considered voluntary and bona fide. The Andhra Pradesh High Court in Seetha Mahalakshmi Rice and Groundnut Oil Mill Contractors Co vs. CIT stated that the mere fact that the disclosed income was not accepted by the ITO does not disentitle the assessee from immunity under the Amnesty Scheme. The Tribunal concluded that the assessee was entitled to immunity under the Amnesty Scheme, and penalties were not leviable.

3. Satisfaction of the Assessing Officer for Initiating Penalty Proceedings:

Section 271(1)(a) requires the satisfaction of the Assessing Officer that the assessee failed to furnish returns without reasonable cause. Similarly, section 273(1)(b) requires satisfaction that the assessee failed to furnish a statement of advance tax without reasonable cause. In this case, the Assessing Officer did not record his satisfaction in the assessment orders or order sheets about initiating penalty proceedings. The Tribunal noted that the satisfaction was recorded by a U.D.C. and not the ITO. The Patna High Court in CIT vs. Dewan Kunj Lal Kanhaiya Lal held that satisfaction must precede the issue of notice and cannot be equated with the actual issuance of a notice.

The Supreme Court in CWT vs. Angidi Chettiar held that satisfaction before the conclusion of proceedings is a condition for exercising jurisdiction for imposing penalties. The Tribunal found that the ITO's satisfaction was not recorded, and thus, the penalties levied were quashed.

Conclusion:

The Tribunal allowed all the appeals, quashing the penalties levied under sections 271(1)(a) and 273(1)(b), concluding that the assessee was entitled to immunity under the Amnesty Scheme and that the Assessing Officer's satisfaction for initiating penalty proceedings was not properly recorded.

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