1995 (5) TMI 62 - AT - Income Tax

Amnesty Scheme, Assessing Officer, Assessment Proceedings, Reassessment Proceedings, Revised Return, S. 10

Issues Involved:
1. Validity of the addition of Rs. 10,00,000 to the assessee's income.
2. Applicability of the Amnesty Scheme.
3. Validity of proceedings under section 147 and notice under section 148.
4. Withdrawal of deduction under section 35CCA.
5. Alleged breach of agreement by the department.

Issue-wise Detailed Analysis:

1. Validity of the Addition of Rs. 10,00,000
The primary issue was whether the addition of Rs. 10,00,000 to the assessee's income was justified. The assessee had initially claimed a deduction under section 35CCA for donations made to Seva Charitable Trust. However, subsequent investigations revealed that the trust did not carry out activities as per the terms of approval. The assessee voluntarily withdrew the deduction in a revised return. The Tribunal upheld the addition, noting that the surrender was made in view of facts disclosed during the investigation, and there was no evidence of coercion.

2. Applicability of the Amnesty Scheme
The assessee argued that the additional income of Rs. 1,20,000 declared in the revised return was under the Amnesty Scheme. However, the Assessing Officer determined that the return was filed due to investigations into bogus purchases and not under the Amnesty Scheme. The Tribunal found no support for the claim that the surrender was under the Amnesty Scheme and upheld the proceedings initiated under section 147 to regularize the revised return.

3. Validity of Proceedings under Section 147 and Notice under Section 148
The Tribunal examined whether the proceedings under section 147 were validly initiated. It was established that the proceedings were initiated to bring the additional income of Rs. 1,20,000 to tax. The Tribunal held that once notice under section 148 is issued, the entire assessment is open for reassessment, allowing the Assessing Officer to include other items of income that escaped assessment. This was supported by the Supreme Court's decision in CIT v. Sun Engg. Works P. Ltd.

4. Withdrawal of Deduction under Section 35CCA
The Tribunal analyzed the provisions of section 35CCA, which require that the institution or association must implement approved rural development programs. The Seva Charitable Trust failed to do so, rendering the initial approval conditional and subject to reassessment. The Tribunal referenced the Gujarat High Court's decision in Kaka Ba and Kala Budh Public Charitable Trust v. CIT, which emphasized the necessity of actual implementation of rural development programs for eligibility under section 35CCA. The Tribunal concluded that the withdrawal of the deduction was justified based on the material evidence from the investigation.

5. Alleged Breach of Agreement by the Department
The assessee contended that the department breached an agreement by imposing penalties and filing an appeal against relief allowed by the CIT(A). The Tribunal found no material evidence to support the existence of such an agreement. The conditions mentioned in the letter dated 7th March 1988 were deemed unilateral and not binding on the department. Consequently, the Tribunal upheld the actions of the Assessing Officer and dismissed the appeal.

Conclusion
The Tribunal dismissed the assessee's appeal, upholding the addition of Rs. 10,00,000 to the income and validating the proceedings under sections 147 and 148. The withdrawal of the deduction under section 35CCA was justified due to the failure of the Seva Charitable Trust to implement the approved rural development programs. The Tribunal found no evidence of coercion or breach of agreement by the department.

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