ORDER
H.L. KARWA, JM:
This appeal by the assessee is directed against the order of CIT(A), Surat, dt. 19th June, 1992, relating to asst. yr. 1985-86.
2. The first effective ground raised in this appeal by the assessee reads as under:
The leamed-,-CIT(A), Surat, has grievously erred in confirming the addition of Rs. 1 lakh made, by the ITO, Surat, to the taxable income of the appellant as alleged 1 concealed income’.
3. Briefly stated the facts of the case are that the IT authorities conducted search at the premises of Shri V.C. Shroff on 23rd Sept., 1986 and 24th Sept., 1986. As a result of said action, the Department came to know about certain transactions regarding bogus gift. According to the AO the Department conducted the enquiries in assessee’s case and as a result of which the assessee made disclosure and filed the returns of income under the Amnesty Scheme on 23rd Feb., 1987. The AO, did not accept the returns of the assessee under the Amnesty Scheme and the assessee was accordingly informed. The assessee claimed that he had earned a taxable income from asst. yrs. 1981-82 to 1985-86, which according to him was disclosed in good faith under the Amnesty Scheme and paid the tax thereon. Further the case of the assessee was that out of undisclosed income of earlier years, Rs. 1 lakh was introduced in bank account under the name of taking gift from non-resident external account of Shri RamnikIal Narandas Patel of USA. For arranging the same the assessee paid Rs. 11,800 as commission to Shri V.C. Shroff. Therefore, the assessee claimed the benefits of the Amnesty Scheme and requested that his returns should be accepted under the said scheme. The AO held that the assessee was involved in bogus havala entries racket unearthed in September, 1986. According to the AO the assessee had handed over. Rs. 1 lakh to Shri V.C. Shroff for purchasing demand draft from Bank of Baroda, Navasari Branch. The said draft was enclosed with a letter from one Shri RaninikIal N. Patel of USA stating that he had given gift of Rs. 1 lakh. The AO was of the view that the said draft was obtained out of his non-resident external account which was supported by bogus bank certificate. The draft amount of Rs. 1 lakh was deposited in bank. According to the AO the assessee had made willful attempt to evade the payment of tax in collusion with Shri V.C. Shroff and Shri A.L. Ghael who were engaged by the assessee in helping them fabricating havala transaction. The AO further opined that both Shri V.C. Shroff and A.L. Ghael were issuing bogus bank draft shown as having issued from non-resident external accounts. The AO, therefore, took the view that the search conducted in the cases of A.K. Ghael and V.C. Shroff and the survey conducted in the cases of concerned parties, cannot be considered as third party enquiries. He, therefore was of the view that the enquiries were directly made in the case of assessee and the concealment was detected, by Department and before the filing of returns in question. Consequently, the AO added Ps. 1 lakh to the total income of the assessee treating the same as concealed income of the assessee and also charged interest under s. 139(8) and under s. 217 of the Act. He also initiated penalty proceedings under ss. 271(1)(a), 271(1)(c) and 273(1)(b) of the IT Act, 1961.
4. In further appeal, the CIT(A) confirmed the addition of Rs. 1 lakh made by the AO. He further held that the return of income submitted by the assessee was not covered by the Amnesty Scheme and, therefore, the assessee was not held entitled to the immunities declared under the Amnesty Scheme. He also confirmed the action of the AO in charging the interests under ss. 139(8) and 217 of the Act. He further held that no appeal against the initiation of penalty proceedings can be filed before the CIT(A) and he, therefore, dismissed the ground of appeal regarding AO’s action in issuing penalty notices for defaults under ss. 271(1)(a), 273(1)(b) and 271(1)(c).
5. Before us, Shri M.K. Patel, the learned counsel for the assessee submitted that the assessee filed the returns of income ‘from asst. yr. 1981-82 to 1986-87 voluntarily and in good faith declaring his undisclosed income. According to him these returns were filed under the Amnesty Scheme: but the AO refused to accept the returns under the said scheme and consequently benefits available to the assessee under the Amnesty Scheme were also not allowed.
6. The learned counsel further submitted that the AO was wrong in holding that the returns were filed after the enquiries were conducted in assessee’s case and hence benefits of Amnesty Scheme were not available to the assessee. According to the learned counsel in assessee’s case, no survey or search operation was conducted by the Revenue authorities. Even no notice or letter under the provisions of IT Act was issued to the assessee. No concealment of income was detected by the Department before filing the return of income. According to him the assessee had made full and true disclosure of his income in the returns submitted by him. The return was filed voluntarily. The learned counsel for the assessee specifically pointed out that the AO was not correct while observing that enquiries were conducted by the DDI against the assessee. According to the learned counsel this observation of the AO is factually incorrect and there is no material on record to substantiate the said contention of the AO.
7. The learned counsel for the assessee also submitted that the assessee had filed his return of income, during the period when Amnesty Scheme of 1985 was in force and in view of various circulars issued by the CBDT under the said Scheme, the AO was not justified in initiating penalty proceedings under ss. 271(1)(a), 271(1)(c) and 273(1)(b) of the Act. According to the learned counsel for the assessee, even the interest under ss. 139(8) and 217 of the Act were wrongly charged by the AO and further the CIT(A) has wrongly confirmed the action of the AO.
8. It was also contended by the learned counsel for the assessee that for asst. yrs. 1981-82 to 1984-85 the AO made the assessments under s. 143(3) of the Act after verifying the relevant material supplied by the assessee. According to the learned counsel for the assessee, as per capital account enclosed for asst. yr. 1984-85, the assessee’s balance at the end of the year was at Rs. 1,07,819 which was accepted by the AO. According to the learned counsel for the assessee in 1985-86, it was stated in the note attached with the return that out of capital and which was taxed from asst. yrs. 1981-82 to 1984-85 the assessee had arranged for gift of Rs. 1 lakh. The amount was deposited in Bank account and out of that amount investment was made. He, therefore, submitted that the Department having been already taxed the income declared from unexplained sources including from other sources for asst. yr. 1984-85, the very same amount of Rs. 1 lakh deposited in the bank out of the previous closing capital balance duly accepted by the Department should not have been taxed once again as concealed income of the assessee for the year under appeal.
9. The next contention of the learned counsel for the assessee was that the Department had not detected any concealed income of the assessee before voluntarily filing of the returns and, therefore, the Revenue authorities were not justified in denying the benefits of the Amnesty Scheme to the assessee on the ground of proceedings against Shri V.C. Shroff and A.L. Ghael and no addition should have been made especially in view of the voluntary disclosure made by the assessee for asst. yrs. 1981-82 to 1986-87 of total amount of Rs. 1,54,150. The assessee has paid Rs. 19,232 as tax on the disclosed amount. According to the learned counsel for the assessee there was no reason for denying the benefits available to the assessee under the Amnesty Scheme. In support of the above contention, the learned counsel for the assessee also relied on the decision of the Tribunal, Ahmedabad Bench in the case of Sharma Raising Chandel vs. ITO (1992) 4 3 M (Ah d) 268 : (1992) 41 ITD 212 (Ahd).
10. On the other hand, the learned Departmental Representative relied on the orders of the authorities below. While supporting the reasons for making the addition it was submitted by the learned Departmental Representative that in the facts and circumstances of the present case, the returns filed by the assessee for asst. yrs. 1981-82 to 1986-87 could not be treated as furnished before detection by the Department.
According to him in the instant case, the contention of the assessee cannot be accepted, particularly when the disclosure made by the assessee was neither suo motu nor prior to the detection by the Revenue. Therefore, the assessee is also not entitled to the immunities declared through various circulars issued by the CBDT under the Amnesty Scheme of 1985. In fact, when the Department conducted the search at the premises of Shri V.C. Shroff and A.L. Ghael it came to the knowledge of the Revenue that there was a racket which was involved in conversion of substantial amount of black money to white money by issuing bogus bank drafts, etc. Both Shri V.C. Shroff and A.L. Ghael were collusively acting on behalf of the assessee to abate the offences of concealment of income and, therefore, the search conducted by the Department in the cases of concerned parties cannot be considered as 3rd party enquiries. According to the learned Departmental Representative in these circumstances, it cannot be said that no concealment of income was detected by the Department before filing of returns in question. He, therefore, urged that the appeal may be dismissed.
11. After hearing the parties at length, we find that the assessee had earned taxable income from asst. yr. 1981-82 to 1986-87 but he was not assessed to income-tax. The assessee vide his letter dt. 21st Feb., 1987, addressed to the CIT, Surat, disclosed its true and full income concealed from asst. yr. 1981-82 to 1986-87 under the Amnesty Scheme. The details of income disclosed and the tax paid are as follows :
Asst. yr.
Income disclosed
Taxpaid
1981-82
22,130
2,731
1982-83
26,210
3,752
1983-84
27,680
4,302
1984-85
26,230
3,578
1985-86
25,440
2,680
1986-87
26,460
2,188
1,54,150
19,232
From the above narrated facts as well as submissions made by both the parties it is clear that there is no material on record to show that till the time the assessee furnished his returns under the Amnesty Scheme, no query in relation to disputed gift was raised in the case of present assessee. There is also no material on record to show that the Revenue had conducted any enquiry in relation to the disputed gift received by the assessee. Admittedly the return in question was filed on 23rd Feb., 1987 when the Amnesty Scheme was in force. The income has been assessed under s. 143(3) of the Act by accepting the declared income as true and correct. Therefore, it cannot be denied that the assessee had not made true and full disclosure of his income in the return furnished under the Amnesty Scheme. We do not find any force in the submissions of the learned Departmental Representative that the return in question submitted by the assessee after search in the cases of V.C. Shroff and A.L. Ghael, cannot be treated as valid return under the Amnesty Scheme. It is relevant to note that CBDT in Circular No. 451, dt. 17th Feb., 1986, has clarified that Where the investigations in the case of persons other than the assessee, indicate concealment of income by the assessee and the assessee makes a true and full disclosure of his income, would be entitled to immunity under those circulars (see question No. 7 and answer thereto).
12. It is pertinent to state that various circulars issued by the CBDT under the Amnesty Scheme require that such returns should be furnished voluntarily and in good faith and the disclosure of income should be full and true. In the instant case, the assessee filed returns of income from asst. yrs. 1981-82 to 1986-87 on 23rd Feb., 1987, voluntarily under the Amnesty Scheme and paid the tax on his concealed income. It is also evident from the petition filed before the CIT, Surat, wherein the assessee admitted that he had taken bogus gift of Rs. 1 lakh out of concealed income from asst. yrs. 1981-82 to 1984-85. There is substance in the contention of the learned counsel for the assessee that though the assessee wanted to evade tax and so he had arranged for bogus gift but because of introduction of Amnesty Scheme he voluntarily furnished his returns covering his concealed income for all the above assessment years from which gift draft of Rs. 1 lakh was taken. There is no denying the fact that the assessee had paid tax payable as per his returns filed under the Amnesty Scheme. Furthermore the AO while making assessment for asst. yr. 1984-85 has accepted the income declared by the assessee. Computation for asst. yr. 198485 was accompanied by balance sheet and capital account in which it was clearly mentioned closing balance of capital account of assessee at Rs. 1,07,819. The details of the same are reproduced herein below :
COMPUTATION OF INCOME
Rs.
Rs.
“Salary: Received from Ajay J. Mehta
10,800
Less : Standard `deduction
2,700
8,100
Dividend : As per grossing (tax Rs. 12)
53
Interest : Deb. Int. as per grossing (tax Rs. 109)
1,256
Other sources :
Income disclosed under Amnesty Scheme
18,000
27,409
Less : LIP
1,129
under s. 80L Dividend
52
1,182
Net total income
26,227
26,230
Tax liability
3,578
Less : TDS (109 + 12)
121
Self asst. tax paid
3,457
CAPITAL ACCOUNT
Op. Capital
80,760
LIP
1,129
Salary
10,800
Tax
121
Dividend
53
Withdrawals
1,800
Deb. Interest
1,256
Closing capital
1,07,819
Other sources
18,000
1,10,869
1,10,869
BALANCE SHEET
Capital a/c
Share & Debenture
16,775
Shri Minesh J. Mehta
1,07,819
Bank Bal.
3,538
Cash on hand
87,506
1,07,819
1,07,819
Note : Return of Income is filed under Amnesty Scheme so please waive the penalty and interest chargeable if any.”
From the above details it cannot be denied that out of Rs. 1,07,819 the assessee arranged for a gift draft of Rs. 1 lakh and, therefore, the AO was totally wrong in making the addition of Rs. 1 lakh in disclosed income for asst. yr. 1985-86. The AO has not brought any material on record to show that further Rs. 1 lakh was earned by the assessee in assessment year under appeal. In our view the Department having already taxed the income declared from unexplained sources including from other sources for asst. yr. 1984-85 the very same amount of Rs. 1 lakh deposited in the bank out of the previous closing capital balance which has been accepted by the Department, should not have been taxed once again as concealed income of the assessee for the year under consideration.
13. For the reasons mentioned above, the return in question should have been accepted as valid return furnished under the Amnesty Scheme and, therefore, the authorities below were not justified in rejecting the claim of the assessee. Similarly, the assessee has convincingly explained the investment of Rs. 1 lakh. In this view of the matter, we delete the addition made by the AO and confirmed by the CIT(A).
14. The next ground relates to charging of interest under s. 139(8) and under s. 217 of the IT Act.
15. We have already held that the return in question filed by the assessee should have been treated as valid return furnished under the Amnesty Scheme and accordingly the assessee was also entitled to the immunities declared under the said scheme. Charging of interest under ss. 139(8) and 217 was also not proper and justified and accordingly we allow this ground.
16. No other ground was pressed before us.
17. In the result, the appeal is allowed.