Declaration of higher income before 31-3-1986 for earlier assessment years-Liability of penalty under section 10 of Compulsory Deposit Scheme (Income-tax Payers) Act, 1974-Clarification regarding - Income Tax - 450/1986

Declaration of higher income before 31-3-1986 for earlier assessment years-Liability of penalty under section 10 of Compulsory Deposit Scheme (Income-tax Payers) Act, 1974-Clarification regarding Circular No.450 Dated 13/2/1986 The Finance Act, 1985, has with the objective of securing better tax compliance, rationalised the rates of personal income-tax. In certain earlier circulars issued by the Government, it has been made clear that those who declare higher incomes or wealth for assessment year 1986-87 will be assessed at normal rates applicable to this assessment year and will not be subjected to any prosecution or penalty and that their earlier assessment also will not be reopened on this ground alone. It has also been clarified that even for earlier assessment years, if higher incomes and wealth are declared suo motu before March 31, 1986, the assessees will not be liable to penalty or prosecution. 2. There is an apprehension that if higher income is declared in respect of assessment year 1985-86, or earlier assessment years when Compulsory Deposit Scheme (Income-tax Payers) Act, 1974, was in force, the assessees may be liable to penalty under section 10 of this Act, apart from their liability to make Compulsory Deposit under section 4 of the said Act. 3. The matter has been examined by the Board. Whereas the liability to make the deposit under the Compulsory Deposit Scheme (Income-tax Payers) Act in respect of assessment year 1985-86 or earlier assessment years remains, the position in respect of liability to penalty under section 10 of this Act is somewhat different. By virtue of the amendment brought about in this section by the Finance (No. 2) Act, 1980, with retrospective effect from April 1, 1975, no penalty is leviable in cases where there had been a reasonable cause for the default. Keeping in view the special circumstances obtaining in this type of cases where higher income is declared suo motu before March 31, 1986, pertaining to the assessment year 1985-86 or earlier assessment years, the Department will be considering the applicability of the provisions of section 10 of the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974, to these cases in a liberal and sympathetic manner. Instructions to this effect are being issued to all officers of the Department swo as to ensure that the assessees old as well as new are able to avail themselves of this opportunity to come forward and make full and true disclosures of income without fear of penal consequences under the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974. (Sd.) Girish Dave Under Secretary to the Government of India.