Applicability of Sec 10 of CDS(ITP) Act, 1974. - Income Tax - 1694/CBDT

INSTRUCTION NO. 1694/CBDT Dated: February 13, 1986 Section(s) Referred: 10 of CDS Act The Finance Act, 1985, has, with the objective of securing better tax compliance, rationalised the rates of personal income-tax. In the circular No. 423 dated 26.6.1985 and subsequent circular Nos. 432, 439, 440 and 441 dated 15.11.1985, issued by the Government, it has been made clear that those who declare higher income 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 penalty or prosecution or that their earlier assessments 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-moto before 31-3-1986, 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 CDS(ITP) 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 considered by the Board. By virtue of the amendment brought about in Section 10 of the CDS (ITP) Act, 1974 by the Finance (No.2) Act, 1980 with retrospective effect from 1-4-1975 no penalty is leviable in cases where there had been a reasonable cause for default in making compulsory deposit. Keeping in view the special circumstances obtaining in the type of cases where income is declared suo-motu before 31-3-1986 pertaining to assessment year 1985-86 or earlier years in pursuance to the circulars referred to above, it could be held that the default was due to a reasonable cause. In such cases, therefore, penalty proceedings under section 10 of CDS (ITP) Act, 1974, need not be initiated. 4. The above instructions may please be brought to the notice of all the officers working in your charge.