1990 (2) TMI 113 - AT - Income Tax

Amnesty Scheme, Disclosure Petition, Income From Other Sources, Orders Prejudicial To Interests

Issues Involved:
1. Validity of the Commissioner's jurisdiction under Section 263.
2. Existence of any agreement, settlement, or understanding between the assessee and the Income-tax authorities.
3. Interpretation and application of the Amnesty Scheme and related Circulars.
4. Examination of the assessment order under Section 143(3) and directions under Section 144A.
5. Relevance of the doctrine of promissory estoppel.
6. Assessment of the Income-tax Officer's actions and directions from superior authorities.

Detailed Analysis:

1. Validity of the Commissioner's Jurisdiction under Section 263:
The Commissioner issued a notice under Section 263, asserting that the Income-tax Officer (ITO) had accepted the assessee's explanation on a "complete misconception of law" and misunderstanding of the Board's Instruction No. 1691 dated 12-2-1986. The Commissioner argued that the ITO failed to recognize that unaccounted cash introduced by the assessee in the financial year 1984-85 was utilized in the business, thus constituting tangible assets. The Tribunal held that the Commissioner had jurisdiction under Section 263 to examine the assessment order, even if it was based on directions under Section 144A. The Tribunal emphasized that the Commissioner's power under Section 263 is quasi-judicial and not administrative, and thus, the Board's instructions cannot influence it.

2. Existence of Any Agreement, Settlement, or Understanding:
The assessee argued that a settlement was reached with the earlier Commissioner, whereby the cash credits for the assessment year 1985-86 would be covered by the additional income disclosed in the assessment year 1986-87. The Tribunal found no evidence of any such agreement or settlement. The Tribunal concluded that neither the petition dated 5-3-1986 nor the actions or directions of the IAC, the Commissioner, or the Board indicated any binding agreement on the department.

3. Interpretation and Application of the Amnesty Scheme and Related Circulars:
The Tribunal examined the Amnesty Scheme and related Circulars, including Circular No. 423 dated 26-6-1985, Circular No. 432 dated 20-9-1985, and Instruction No. 1691 dated 12-2-1986. The Tribunal noted that these Circulars aimed to secure voluntary tax compliance and treat repentant taxpayers on par with honest ones. The Tribunal found that the assessee's disclosure petition dated 5-3-1986, which offered Rs. 1,15,08,000 as current year's income, was in line with the Amnesty Scheme. The Tribunal held that the ITO's assessment, which treated the disclosed income as covering past untaxed income, was justified under the broad and liberal approach advocated by the Circulars.

4. Examination of the Assessment Order under Section 143(3) and Directions under Section 144A:
The ITO, guided by the IAC's directions under Section 144A, completed the assessment by treating the disclosed income as covering the unexplained cash credits. The Tribunal held that the ITO's actions were consistent with the directions and the Amnesty Scheme. The Tribunal also noted that the ITO sought and followed the IAC's directions, which were binding under Section 144A. The Tribunal concluded that the assessment order was not erroneous or prejudicial to the interests of the revenue.

5. Relevance of the Doctrine of Promissory Estoppel:
The assessee invoked the doctrine of promissory estoppel, arguing that the department should be bound by the earlier Commissioner's assurance. The Tribunal rejected this argument, stating that there was no evidence of any express or implied understanding that could give rise to promissory estoppel. The Tribunal emphasized that the conduct of the department's officers did not create any binding promise or assurance.

6. Assessment of the Income-tax Officer's Actions and Directions from Superior Authorities:
The Tribunal examined whether the ITO acted independently or merely followed superior officers' directions. The Tribunal noted that while the ITO followed the IAC's directions under Section 144A, these directions were within the framework of the law and the Amnesty Scheme. The Tribunal held that the ITO's assessment was based on a proper understanding of the facts and the applicable Circulars, and thus, it could not be considered erroneous.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, holding that the assessment order was neither erroneous nor prejudicial to the interests of the revenue. The Tribunal emphasized the importance of the Amnesty Scheme and related Circulars, which encouraged voluntary disclosure and a liberal approach towards repentant taxpayers. The Tribunal also clarified the scope of the Commissioner's jurisdiction under Section 263, reaffirming that the Commissioner's quasi-judicial power is not influenced by administrative instructions from the Board.

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