ORDER
N. Pachuau, Accountant Member
1. These five appeals filed by the department are against the orders of the DC (Appeals) cancelling the penalty orders of the Assessing Officer under Sections 271(1)(a), 273(1)(b) and 273(2)(b) of the Income-tax Act, 1961. The assessment years involved are 1978-79, 1979-80 and 1980-81. As the issue involved are identical in all the three assessment years, the appeals are disposed of by a consolidated order for the sake of convenience.
2. As regards the assessment year 1978-79, the assessee filed return of income on 19-2-1982 disclosing a total income of Rs. 10,550. The assessment was made under Section 143(3) of the Act on 25-2-1986 on a total income of Rs. 44,100 which was reduced in appeal by the AAC to Rs. 37,100. The assessee filed a fresh return of income claiming it to be under Amnesty Scheme on 2-3-1987 showing a total income of Rs. 37,100. Reassessment was made under Section 143(1) of the Act accepting the return of income shown in the second return of income. As regards the assessment year 1979-80, original return was filed on 19-2-1982 declaring loss of Rs. 4,020. Assessment was made under Section 143(3) of the Act on 30-3-1985 on a total income of Rs. 43,360 which was subsequently reduced in appeal to Rs. 38,360. The assessee filed a fresh return of income on 2-3-1987 claiming it to be under Amnesty Scheme declaring total income of Rs. 38,360. The assessee also withdrew the appeal filed by him before the ITAT. Re-assessment was made under Section 143(1) of the Act on 14-9-1987 accepting the total income shown as per the fresh return of income. As regards the assessment year 1980-81, original return was filed on 28-3-1983 showing total income at Rs. 3,490. Assessment was made under Section 143(3) of the Act on 25-2-1986 on a total income of Rs. 44,190. The total income was reduced by the DC (Appeals) to Rs. 38,190. On 2-3-1987 the assessee filed a fresh return claiming it to be under Amnesty Scheme declaring a total income at Rs. 38,190. Re-assessment was made under Section 143(1) of the Act on 14-9-1987.
3. For delayed submission of return of income in all the assessment years, the Assessing Officer initiated penalty proceedings under Section 271 (1)(a) of the Act by issuing a show-cause notice to the assessee. In reply, the assessee stated that fresh returns were filed under the Amnesty Scheme in respect of all the three assessment years. Therefore, no penalty can be levied. The Assessing Officer has stated that the argument put forward was not convincing and untenable. It is stated that return filed on 19-2-1982 cannot be said to have been filed under the Amnesty Scheme. He, therefore, imposed penalty under Section 271(1)(a) of the Act @ 2 per cent per month of the tax payable for the period of default. As regards penalty under Section 273(1)(b) of the Act, the Assessing Officer found that the assessed income (after appeal effect) was much higher than the income returned. The estimate of advance tax filed by the assessee was, therefore, found to be untrue. A show-cause notice was issued calling the assessee to show cause as to why penalty should not be imposed. The assessee submitted that returns for the three years were filed under the Amnesty Scheme and no penalty should be levied. The ITO has taken a view that return filed on 19-2-1982 cannot be said to have been filed under the Amnesty Scheme and the explanation by the assessee is, therefore, untenable. There was, therefore, a default committed by the assessee attracting the penal provisions under Section 273 of the Act. Accordingly, penalty was levied by the Assessing Officer.
4. Being aggrieved, the assessee carried the matter in appeal before the DC (Appeals). Common arguments were advanced against the penalty orders under Sections 271(1)(a) and 273(1)(b) of the Act stating that subsequent to the filing of the original returns of income for the three assessment years, the assessee filed fresh returns of income under the Amnesty Scheme on 2-3-1987 for all the three assessment years. The ITO has not properly considered the second return of income filed by the assessee. It is further stated that as per the CBDT Circulars, no penalty can be levied where return has been filed under the Amnesty Scheme. The DC (Appeals) considered the submissions. He also verified Xerox copies of the receipts issued by the Income-tax Department. He found that the Assessing Officer did not consider the second return filed by the assessee on 2-3-1987. No penalty can be levied where the assessee voluntarily comes forward with higher income in any assessment year, as per CBDT Circulars. The DC (Appeals), therefore, took a view that no penalty can be levied and the orders of the Assessing Officer was cancelled.
5. Being aggrieved, the department is in appeal before the Tribunal. Shri S. Mookherjee, learned departmental Representative, relying on the orders of the Assessing Officer has argued that the Amnesty Scheme declared by the Government as per the Finance Act, 1985 cannot be applicable to the assessment years 1978-79, 1979-80 & 1980-81. The assessee had already submitted returns of income on 19-2-1982 and 28-3-1983 in respect of three assessment years under consideration. The assessments were also duly completed by the Assessing Officer and the matter was also adjudicated upon by the first appellate authority allowing certain relief. The Assessing Officer has, therefore, rightly taken a view that the Amnesty Scheme, 1985 is not applicable for the aforesaid assessment years. The explanation furnished by the assessee was rightly rejected. The DC (Appeals) is, therefore, not correct in cancelling the penalty orders of the Assessing Officer by accepting the explanation furnished by the assessee that it had filed fresh returns of income for the three assessment years on 2-3-1987 declaring higher income and no penalty can be levied in view of the CBDT Circulars. The orders of the DC (Appeals) is, therefore, liable to be reversed. On the other hand, Shri S.N. Singh, learned Counsel of the assessee, supports the orders of the DC (Appeals). Learned Counsel also filed a paper book containing 17 pages and also extracts of the CBDT Circulars in support of his argument that the DC (Appeals) has rightly appreciated the facts of the case and arguments advanced before him. Learned Counsel also relied on the appellate orders of the Tribunal, Patna Bench in the case of WTO v. Nand Kumar Pd. Shah [WT Appeal Nos. 49 to 55 (Pat.) dated 31-1-1992] to the proposition that no penalty can be levied in a case where fresh returns of wealth were filed under the Amnesty Scheme, 1985. Learned Counsel, therefore, contended that the DC (Appeals) is perfectly justified in cancelling the orders of the Assessing Officer for all the three assessment years and the appeal by the department is without merits and liable to be dismissed.
6. We have carefully considered the facts of the case and the arguments by the rival parties. We have also perused the orders of the authorities below and the paper book filed by the assessee’s Counsel. We have also considered the extracts of the CBDT Circulars filed by the assessee’s Counsel as well as the orders of the Tribunal in the case of Nand Kumar Pd. Shah (supra). We do not find any force in the arguments advanced by the Departmental Representative. On the other hand, we find considerable force in the arguments advanced on behalf of the assessee. On careful consideration of the Amnesty Scheme and the various Circulars issued by the CBDT, the arguments canvassed on behalf of the department cannot be accepted. It may be pertinent to mention here that while giving answers the specific questions raised by be members of the Bar Association on 2-1-1986 by the Chief Commissioner, New Delhi in connection with CBDT Circular No. 423 dated 26-6-1985 and Circular Nos. 432, 439, 440 & 441 dated 15-11-1985 on Finance Minister’s assurance on the disclosure of income and wealth, immunity from roving enquiry, penalty and prosecution, it has been stated in answer to question No. 4 as below:
Question No. 4 – Whether higher income can be shown in cases where assessments have been set aside on appeal or pending re-assessment being reopened under Section 147?
Answer – Yes, the assessee could avail of the benefit under the Circulars.
Question No. 7 – Where any addition is contested in appeal, can such amount be declared ?
Answer – Yes, except in search and seizure cases.
Question No. 9 – Can search and seizure cases be covered under the Circulars ?
Answer – No. The Circulars cover only suo motu declaration of income.
7. In the Board’s Circular No. 451 dated 17-2-1986, the questions and answers relevant to the present issue are clearly pointed out which are being reproduced as below:-
Question No. 1 -What will be the procedure required to be followed by the assessee who wants to declare income or wealth in respect of the past years ?
(a) in the cases where the assessments pertaining to those years are already completed;
(b) in the cases where the assessments in respect of those years are pending.
Answer – In cases where the assessments are already completed the taxpayer should approach the concerned Commissioner of Income-tax with the full disclosure of the amounts of income and/or wealth concealed in various years and should also file returns for the relevant years. He should also produce evidence of payment of taxes before 31-3-1986. The filing of the returns will be regularised by issue of formal notices under Section 148 of the Income-tax Act/section 17 of the Wealth-tax Act. In cases where the assessments are pending, the taxpayer should file revised return before the Income-tax Officer along with evidence of payment of taxes.
Question No. 2 – In respect of completed assessments, the question will arise whether the assessee should merely declare the income relevant to those years and pay the tax according to the rates prevalent in those years on such declared income or whether he is required to file the return of income showing the additional income ?
Answer – As mentioned above, he must file a fresh return of income including the additional income.
Question No. 3 – Reading Circular No. 423 (Clarification 1) together with Circular No. 441 (Clarification 5) it is clear whether the old assessees who have been regularly filing their returns of income would be eligible for the benefit of the circulars in respect of their income which has escaped assessment for an earlier assessment year and whether the assessment is completed or pending ?
Answer – The circulars apply to old assessees also.
Question No. 4 -The income-tax circulars are not very clear as to whether the immunity from penalty and prosecution is guaranteed to the assessee unlike the circular in respect of wealth-tax which appears to be clear on this point ?
Answer -The immunity from penalty and prosecution applies in all cases whether of income-tax or of wealth-tax where the assessee admits the truth and pays taxes properly.
8. It may also be stated that the period of Amnesty Scheme under Income-tax and Wealth-tax was extended till 31-3-1987 as per Circular No. 272 as corrected by Circular No. 474, dated 11-11-1986. In the present assessee’s case it is not disputed that returns of income for the assessment years 1978-79 & 1979-80 were filed on 19-2-1982 declaring total income of Rs. 10,550 and loss of Rs. 4,020 respectively. The assessments were made under Section 143(3) of the Act on 25-2-1986 and 30-3-1985 respectively. Total income determined by the Assessing Officer was contested in appeal for both the assessment years and certain relief was allowed by the first appellate authority. The total income was reduced to Rs. 37,100 and Rs. 38,360 respectively. As regards the assessment year 1980-81 original return was filed on 28-3-1983 declaring income of Rs. 3,490 and assessment was made under Section 143(3) of the Act on 25-2-1986. The total income determined at Rs. 44,190 was reduced by the first appellate authority to Rs. 38,190. The assessee filed fresh returns of income in respect of all the three assessment years on 2-3-1987 claiming it to be under the Amnesty Scheme declaring total income at Rs. 37,100 for the assessment year 1978-79 Rs. 30,360 for the assessment year 1979-80 and Rs. 38,190 for the assessment year 1980-81. It appears from the paper book filed by the assessee’s Counsel that assessment order under Section 143(1) of the Act was passed on 14-9-1987 for the assessment years 1979-80 and 1980-81 on the basis of returns of income filed on 2-3-1987, i.e., returns stated to have been filed under the Amnesty Scheme. It also appears that the assessee had duly paid self-assessrnent tax. The assessee also addressed letters to the Assessing Officer which was submitted on 2-3-1987 stating that the assessee has accepted the appellate orders of the AAC and did not file any further appeal before the Tribunal or revision petition before the CIT by voluntarily waiving his right for further appeal and revision. The assessee, therefore, filed revised return under the Amnesty Scheme. The assessee also requested the Assessing Officer that reassessment may be made waiving penal interest and penalty keeping in view the Circulars issued by the department under the Amnesty Scheme. As the assessment year 1979-80, the assessee sought permission to withdraw the appeal filed by him before the Tribunal which was duly allowed vide ITA No. 315/Pat/1986, dated 2-4-1987. It can, therefore, be seen that the facts as argued by the assessee’s Counsel have to be accepted. From the clarifications issued by the Board as reproduced above, it is clear the filing of fresh returns of income for the three assessment years was permissible in the assessee’s case although the assessments were already completed vide answer (a) to question No. 1 reproduced above. The assessee also duly filed fresh returns for the three assessment years under consideration. It also appears from the orders under Section 143(1), of the Act dated 14-9-1987 that the assessee had duly paid self-assessment tax. The case of the assessee is, therefore, covered by questions and answers at question Nos. 1 to 3. Answer to question No. 4 also clearly states that immunity from penalty and prosecution applies in all cases whether of income-tax or of wealth-tax where the assessee admits the truth and pays taxes properly. In the present case the assessee had also filed fresh returns of income under the Amnesty Scheme and also paid the taxes. In view of above, we find that the Assessing Officer was not correct in rejecting the explanation furnished by the assessee in response to show-cause notice issued under Section 271(1)(a) and Section 273(1)(b) of the Income-tax Act, 1961. Merely, because the assessee filed original returns of income in February 1982 and March 1983, it is not correct to hold that Amnesty Scheme, 1985 cannot be applied to the appellant’s case in view of the Board’s Circulars reproduced above where an assessee could file returns for the past years in the cases where assessments were already completed and he paid the tax thereon. The fact that the Assessing Officer did not regularise filing of the fresh returns by the assessee by issuing a notice under Section 148 of the Act cannot go against the assessee. The assessee had done all that was required of him and the omission/commission on the part of the Assessing Officer cannot be held against the assessee. The income returned in the fresh returns filed on 2-3-1987 under the Amnesty Scheme was also much higher than the total income declared in the original returns, as already stated above. It may also be stated that the Amnesty Scheme was intended to encourage the defaulting assessees to come forward and declare higher income and to pay tax in order to have a clean slate without being penalised for defaults etc. There was also nothing in the Scheme to suggest that it was not applicable to all cases already assessed. On the contrary, it has clearly been pointed out in the aforesaid Circulars the extracts of which are reproduced above, that the Amnesty Scheme is applicable in the cases where assessments pertaining to earlier years were already completed. We, therefore, find that the case of the assessee is fully covered by the various Circulars issued by the Board clarifying the intents and purposes of the Scheme. The Circulars have to be considered in a liberal manner as it was meant for common taxpayers. The Scheme is not to be read as a Statute since its object was to encourage the defaulting assessees to come forward and disclose concealed income. On consideration of concessions given under the Scheme and the assurance given by the Government and when the returns were filed under the Amnesty Scheme by an assessee, we see no reason to impose penalty. In the instant case, it is clear that the Amnesty Scheme was fully applicable to the assessee in respect of the three assessment years under appeal. We, therefore, do not see any reason to interfere with the orders of the, DC (Appeals) which are hereby sustained.
9. In the result, the appeals by the department are dismissed.