1990 (4) TMI 94 - AT - Income Tax

Summary

Issues Involved:
1. Legitimacy of Income from Private Tuitions and Coaching
2. Validity of Assessments under Section 143(1)
3. Applicability of Section 263 to Amnesty Scheme
4. Binding Nature of Benevolent Circulars

Detailed Analysis:

1. Legitimacy of Income from Private Tuitions and Coaching:
The Commissioner of Income-tax questioned the legitimacy of the income declared by the assessee from private tuitions and coaching, asserting that a minor could not earn such income while preparing for competitive exams. The Commissioner argued that the assessee's financial position did not necessitate earning from tuitions and that there was no evidence supporting the income from tuitions. He concluded that the income shown was a case of capital building and not genuine earnings.

2. Validity of Assessments under Section 143(1):
The assessments for the years 1983-84 to 1986-87 were completed under Section 143(1) based on returns filed under the Amnesty Scheme. The Commissioner held that the Income-tax Officer did not conduct proper inquiries regarding the tuition income and accepted the initial capital without evidence. The assessee argued that assessments completed under Section 143(1) could not be the subject of Section 263 proceedings, citing various CBDT circulars.

3. Applicability of Section 263 to Amnesty Scheme:
The Commissioner relied on Board's Circular No. 451, asserting that the Amnesty Scheme required disclosure of actual income, not 'benami' income, and did not preclude inquiries into the genuineness of cash credits. The assessee contended that the Amnesty Scheme, supported by multiple CBDT circulars, assured taxpayers that no roving inquiries would be made if they filed returns of income without fear. The Tribunal noted that the Amnesty Scheme allowed for some percentage of cases to be scrutinized but emphasized the benevolent approach encouraged by the circulars.

4. Binding Nature of Benevolent Circulars:
The Tribunal considered several CBDT circulars, including Circular No. 432, which assured taxpayers of a liberal approach and no reopening of earlier assessments if higher returns were filed. Circular No. 47 stated that assessments completed under the summary assessment scheme should not be disturbed under Section 143(2)(b) or 154. Circular No. 176 indicated that no remedial action under Section 263 was necessary for summary assessment cases, as the revenue loss was consciously accepted by the government. The Tribunal held that these benevolent circulars, being binding on the income-tax authorities, precluded the Commissioner from taking action under Section 263 for assessments completed under Section 143(1) based on returns filed under the Amnesty Scheme.

Conclusion:
The Tribunal quashed the order of the Commissioner, emphasizing that the assessments completed under the Amnesty Scheme and summary assessment scheme should not be disturbed under Section 263. The Tribunal highlighted that the Commissioner's order was based on surmises and not justified by actual errors of fact or law. The appeals were allowed, and the assessments were upheld as valid.