ORDER
B. L. Chhibber, A. M.
1. These cross appeals arise out of the order of the CIT(A) – IV, Ahmedabad.
2. The assessee is an individual who is otherwise assessed to tax. Towards the end of September, 1986 persuaded by the assurances given in the CBDT Circular relating to Amnesty Scheme the assessee decided to avail of the said scheme and filed returns of income for the asst. yrs. 1979-80 to 1982-83 as also filed revised returns of income for the asst. yrs. 1983-84 to 1985-86 and filed return of income for the asst. yr. 1986-87 as also estimate for advance tax for asst. yr. 1987-88 i.e. the year under appeal. The assessee had paid full taxes payable in respect of these returns. The returns for the asst. yrs. 1979-80 to 1986-87 were filed on 30th Sept., 1986. However, as the return for the asst. yr. 1987-88 was not due the assessee made declaration of additional income by filling estimate of advance tax in Form No. 29 on 29th Sept., 1986.
2.1 Correspondingly, the assessee also filed his WT returns for the asst. yrs. 1982-83 to 1986-87 on 30th Sept., 1986 whereby the effect was given in respect of income disclosed in each year under the returns filed under Amnesty Scheme. For the asst. yrs. 1979-80 to 1986-87 these returns were filed on 30th Sept., 1986. The WT return for the asst. yr. 1987-88 was filed on 6th July, 1987.
2.2 The Assessing Officer (AO) completed income-tax assessments as also wealth-tax assessments right upto asst. yr. 1986-87 under the Amnesty Scheme accepting that the assessee had earned income as disclosed under the income tax returns and he had also wealth as disclosed by him on the respective valuation dates.
2.3 The wife of the assessee Smt. Nayna Rohit Shah who was income-tax assessee in her own right had filed returns of income for the asst. yrs. 1983-84, 1984-85 and 1985-86 in normal course. The wife Smt. Nayna R. Shah, like the assessee, filed return of income from asst. yrs. 1979-80 to 1982-83 and revised returns of income for asst. yrs. 1983-84 to 1986-87 under the Amnesty Scheme. She also filed WT returns showing the incremental wealth generated on account of earning of income in each year. The assessments of the said income as also said wealth were completed in her case also. Department, therefore, accepted the fact that the wife had earned income in each of these years and was owner of wealth as disclosed on the valuation date in each of the assessment years.
2.4 The return of income for asst. yr. 1987-88 was filed. According to the assessee, he believed that even for this year the benefit of Amnesty Scheme would be available. Therefore, even in this year like earlier years the assessee made disclosure of income under the head “Income from other sources”.
2.5 The case of the assessee for asst. yr. 1987-88 was taken up for scrutiny assessment. The followings three issues were raised by the AO as follows :
(1) Whether income earned by the assessee in the earlier years right from asst. yr. 1979-80 to asst. yr. 1986-87 which was assessed to income tax as also wealth tax can be once again taxed during the asst. yr. 1987-88.
(2) Whether the income earned by the assessee’s wife in the earlier years right from the asst. yr. 1979-80 to asst. yr. 1986-87 which was assessed to income tax as well as wealth tax in her own hands can be once again taxed during the asst. yr. 1987-88 in the hands of the assessee.
(3) Whether the income earned by the assessee’s wife for the asst. yr. 1987-88 would be assessed to tax in the hands of the assessee.”
3. The AO decided all the above three issues against the assessee.
4. The assessee carried the matter in appeal to the First Appellate Authority, who decided the first two issues in favour of the assessee and deleted the additions.
5. The Department is in appeal against the said deletions. So far as the third issue viz. addition of income of the assessee’s wife viz. Smt. Nayna R. Shah in the hands of the assessee is concerned, the learned CIT(A) restored the matter back to the file of the AO observing as follows :
“However, as regards the income of Rs. 2,45,862 belonging to appellant’s wife Smt. Nayna R. Shah, declared in the return for the asst. yr. 1987-88 and included in the aforesaid addition in the hands of the appellant, this amount stands in a different footing inasmuch as the AO was empowered to make necessary enquiries this year to find out whether the income was really earned by Smt. Nayna R. Shah or it was actually earned by the appellant but declared in the name of his wife in the estimate filed for the purpose of advance-tax and then in the return of income. Obviously the immunities provided under the Amnesty Scheme were not available in respect of the return filed for the asst. yr. 1987-88 or in respect of advance tax paid for this year. However, I find that the appellant was under a bona fide belief that since advance tax has been paid for the asst. yr. 1987-88 before 31st March, 1987 upto which the Amnesty Scheme was applicable, he was not required to furnish the details of the receipts and the information as to the correct source of income in view of the clarification issued by the CBDT. The notice under s. 143(2) was issued for the first time on 13th March, 1990 and naturally the appellant had just two weeks of time to furnish such details to convince the AO that the income could have been earned by his wife in her own right. The time obviously was not sufficient inasmuch as the details were required to be collected from different concerns who might have paid the commission and brokerage and since the alleged parties were in Bombay, more time would have been required for furnishing some sort of satisfactory reply to the query of the AO. Therefore, in view of this incomplete nature of enquiries and lack of adequate time available to the appellant before completion of the assessment, I would set aside this aspect of the matter relating to only clubbing of the income of appellant’s wife as declared in the return for the asst. yr. 1987-88 in the assessment of the appellant. The appellant shall cause to be produced such necessary evidence as required for the purpose of establishing that his wife might have earned income from commission and brokerage from various parties in her own right. Needless to say that the appellant should be given proper opportunity of being heard in the matter for establishing his case in the light of the submission as has been made before me.”
6. The Revenue has challenged the above restoration order whereas the assessee has preferred cross appeal contending that the said addition ought to have been deleted by the CIT(A) himself and restoration to the file of the AO was not justified.
6.1 First we take up the Revenue’s appeal. The following grounds have been raise :
(1) The learned CIT(A) has erred in law and on facts in deleting the addition of Rs. 5,33,500 made in respect of income declared by the assessee from asst. yr. 1979-80 to asst. yr. 1986-87.
(2) The learned CIT(A) has erred in directing to delete the clubbing of income of assessee’s wife amounting to Rs. 5,30,500 declared by her for asst. yr. 1979-80 to 1986-87.
(3) The learned CIT(A) has erred in setting aside the clubbing of income of assessee’s wife declared by her for asst. yr. 1987-88 amounting to Rs. 2,45,862.
(4) On the facts and in the circumstances of the case the learned CIT(A) ought to have upheld the order of the AO.
(5) It is, therefore, prayed that the order of the learned CIT(A) may be set aside and that of the AO may be restored to the above extent.
7. Shri K. V. Trivedi, the learned Departmental Representative strongly supported the order of the AO. He submitted that the Amnesty Scheme was not applicable to the asst. yr. 1987-88 and accordingly the AO rightly selected the case for scrutiny. During the course of assessment proceedings the AO was empowered to go into the source of income of the assessee and his wife and could make detailed enquiries in this connection. The learned Departmental Representative submitted that since the assessee could not explain the source of income declared by the assessee from asst. yrs. 1979-80 to 1986-87 the AO was justified in making the addition of Rs. 5,33,500.
7.1 On the second ground raised by the Revenue, the learned Departmental Representative submitted that the assessee’s wife had no independent source of income and she was not competent to declare the sums under the Amnesty Scheme for the asst. yrs. 1979-80 to 1986-87 and as such the AO was justified in making the addition of Rs. 5,30,500 in the hands of the assessee.
7.2 On the third ground the learned Departmental Representative submitted that during scrutiny of the case the assessee could not prove any independent source of assessee’s wife and as such the AO was justified in making the addition of Rs. 2,45,862 on account of alleged income of the wife in the hands of the assessee. According to the learned Departmental Representative the CIT(A) ought to have upheld the addition instead of setting aside the issue and restoring it back to the file of the AO.
8. Shri S. N. Soparkar, the learned counsel for the assessee, strongly supported the order of the CIT(A) so far as it relates to the first ground raised by the Revenue. He submitted that it is not even the case of the Department that the assessee is not entitled to the benefit of Amnesty Scheme. Benefit of Amnesty Scheme has been granted and the assessments for asst. yrs. 1979-80 to 1986-87 had been framed in the respective assessment years. The same have become final. The same are not sought to be disturbed either by rectification or revision or reopening of assessment. Under the circumstances the benefit of Amnesty Scheme which had been available to the assessee for earlier years could never have been the subject matter of inquiry for asst. yr. 1987-88. According to the learned counsel the Department had accepted that the assessee had earned income and was entitled to consequential wealth on account of such income in the respective year by passing such assessment orders which have not been altered. The learned counsel submitted that it is well settled that once income is earned the same is available to the assessee. Assessment of income presupposes existence of income, in fact, the Courts have held that even addition to income presupposes availability of income and addition made in earlier year would be available to the assessee to explain investment made in the later year. In this connection, the learned counsel relied upon the following decisions which have taken a view that once assessment of income has taken place the same cannot be ignored and must be recognised for all purposes :
(1) Anantharam Veerasinghaiah & Co. vs. CIT (1980) 123 ITR 457 (SC)
(2) Addl. CIT vs. Dharamdas Agarwal (1983) 144 ITR 143 (MP)
(3) CIT vs. Premchand Jain (1991) 189 ITR 320 (P&H)
(4) CIT vs. Nabadwip Chandra Dey (1991) 190 ITR 133 (Gau)
(5) CWT vs. K. C. Xaveir (1991) 191 ITR 169 (Ker)
(6) CIT vs. K. Sreedharan (1994) 210 ITR 1010 (Ker)
The learned counsel submitted that the AO has not accepted the above argument of the assessee on the ground that the assessee had not disclosed source of income and that during the respective assessment year income was disclosed under the head “income from other sources”, but even this ground is totally without any basis. In this connection, the learned counsel for the assessee relied upon the Circular issued by CBDT being Circular No. 451 dt. 17th Feb., 1986 reported at (1986) 158 ITR (St) 135.
8.1 On the second ground raised by the Revenue i.e. clubbing of income of assessee’s wife, the learned counsel for the assessee submitted that the income cannot be added in the hands of the assessee for the simple reason that no finding has been given that the said lady became a benamidar of the assessee. The wife of the assessee was separately assessed to tax and was filing regular returns of income and she, taking advantage of the Amnesty Scheme, made disclosure of additional income in her independent capacity and the income so declared for the asst. yrs. 1979-80 to 1986-87 was accepted by the Department under the Amnesty Scheme. The assessments in the hands of the wife have become final and she being not benamidar of her husband there was no justification in adding sums aggregating to Rs. 5,30,500 declared by her under the Amnesty Scheme and accepted by the Department under the Amnesty Scheme for asst. yrs. 1979-80 to 1986-87 in the hands of the assessee.
8.2 The third ground raised by the Revenue has also been raised by the assessee in his appeal. The Revenue has challenged the said restoration order on the ground that instead of setting aside, the CIT(A) ought to have confirmed the addition whereas the assessee has preferred cross appeal contending that the said addition ought to have been deleted by the CIT(A) himself and restoration to the file of the AO was not justified. On this ground, submissions of the learned counsel for the assessee are that the assessee, his parents, wife and other members of their family had made their respective independent declarations of additional income under the Amnesty Scheme and for that purpose, they had all filed their respective returns for the asst. yrs. 1979-80 to 1986-87 on 30th Sept., 1986 and estimates of advance tax for asst. yr. 1987-88 on 29th Sept., 1986 declaring therein the additional income for the respective assessment years after paying the tax thereon. The assessee, therefore, bonafidely believed that the amnesty scheme was still applicable in respect of income estimated on which advance tax was paid not only by him but also by his wife and, therefore, all along he was under the impression that no further information as to the true nature of the income as declared by him and his wife and other details would be required to be furnished in the course of the assessment proceedings. According to the learned counsel for the assessee, therefore, even if the Revenue were to take a too narrow and technical view that the Amnesty Scheme could not be applied to asst. yr. 1987-88, that by itself would not somehow enable the assessee and/or his wife to produce evidence showing that the income declared by the assessee’s wife in her case belonged to her and not to the assessee; that therefore no useful purpose could possibly be served by setting aside the assessment even for the limited purpose of determining whether the income declared by the assessee’s wife in her return for the asst. yr. 1987-88 could be included in the hands of the assessee. The learned counsel for the assessee submitted that except for a suspicion that the income declared by the assessee’s wife in asst. yr. 1987-88, firstly by filing the advance tax estimate simultaneously with filing the returns for asst. yr. 1979-80 to 1986-87 under the Amnesty Scheme, and thereafter, by duly filing the IT returns for asst. yr. 1987-88, could not have been earned by the assessee’s wife and must, therefore, be assumed to have been earned by the assessee, there was nothing whatsoever with the AO to show that the income declared by the assessee’s wife was not hers but instead, was assessable in the hands of the assessee; that just because the declarant happens to be wife of the assessee, it cannot be concluded, without anything more than the act of her filing the advance tax estimate and her return of income, firstly that the income declared by her did not belong to her and secondly, that it belonged to her husband, i.e. present assessee; that whilst it could very well be that if the Department had any evidence showing that the income declared by the assessee’s wife did not belong to her but did indeed belong to her husband, i.e. the present assessee, it would just not be possible for the assessee to resist inclusion of that income in his hands and at the same time, it would also not lie in the mouth of the assessee’s wife to say that the income returned by her was not hers and must, therefore, be excluded from her hands and further, that in that event, it may not be possible for her even to plead the principles of double taxation of the same income as long as the Department did not have any evidence whatsoever showing that the income returned by the assessee’s wife was not hers but had been earned by the assessee and was, therefore, taxable in his hands, it cannot be open to the Department to assess that income in the hands of the assessee. The learned counsel has therefore prayed that setting aside of the assessment order for the limited purpose of determining whether or not the income as declared by the assessee’s wife in her return for asst. yr. 1987-88 was includible in the hands of the assessee may be ordered to be cancelled.
9. We have considered the rival submissions and perused the facts on record. We are of the view that incomes already declared and assessed in the hands of the assessee under the Amnesty Scheme from asst. yrs. 1979-80 to 1986-87 cannot again be assessed in the asst. yr. 1987-88 in view of the Circular of the CBDT and the clarifications issued from time to time under the Amnesty Scheme. Needless to say that these circulars are binding on the AOs as has been held by the Hon’ble MP High Court in the case of Jai Kishan Gopikishan & Ors. vs. CIT (1989) 178 ITR 481 (MP). The clarification issued by the CBDT in the Circular No. 451 on question No. 24 clearly stated that any amount could be declared under the head “other sources”. Again in clarification to question No. 5, Shri M. C. Joshi, the Chief CIT, New Delhi has categorically stated that no enquiry would be made into the lumpsum declaration by an assessee. The clarification is extracted below :
“Q. No. 5 : Whether an assessee shows income from other sources in lumpsum, can the ITO ask the assessee the sources and the basis of the computation of such income ?
Ans. : The AO will not ask any question and will accept the income declared, provided the conditions laid down in circular has been complied within regard to payment of taxes and filing of the estimate before 31st March, 1986.”
The above clarification given by Shri M. C. Joshi, Chief CIT, New Delhi, has been confirmed by Shri M. S. Narayanan, Chairman, CBDT. Therefore, lumpsum amounts declared by the assessee and his wife in different years upto the asst. yrs. 1986-87 stood assessed under the Amnesty Scheme as per the assessment orders already passed. Under the circumstances the AO could not have, for this reason, added back the amount of Rs. 5,33,500 in this year. In any case, this issue became insignificant in view of the fact that the assessments for earlier years have not been disturbed and have been taken as final. In fact, any attempt at this stage to permit the Department to assess the income earned in the earlier years again in this year would go against the very spirit of the Circular and an executive officer like the AO cannot be permitted to act contrary to the promise held out by the Hon’ble Finance Minister on the floor of the Parliament or by the CBDT in its various circulars. The AO has nullified the Amnesty Scheme inasmuch as what was declared by the assessee as income of earlier years under the Amnesty Scheme is again brought to tax in this year. In other words, the AO has held that this income is income for the current year ignoring the fact that this was taxed under the Amnesty Scheme. One income cannot be taxed twice over. Therefore, attempt of the AO is to nullify the Scheme and tax income ignoring the provisions of Amnesty Scheme. The said act on the part of the AO is really unfortunate and cannot be permitted. In view of this, it is obvious that the first ground raised by the Revenue fails and is dismissed.
10. Coming to the second ground raised by the Revenue, we find that Smt. Nayna R. Shah, like her husband (the present assessee) filed the returns of income from asst. yrs. 1979-80 to 1982-83 in her own right; later on revised the returns of income for the years 1983-84, to 1986-87 under the Amnesty Scheme. She also filed the wealth-tax returns showing the incremental wealth generated on account of earning of income in each year. The assessments of the said income as also wealth were completed in her hands under the Amnesty Scheme. As per CBDT Circular No. 451 referred to supra, there was nothing which debars ladies from availing benefits of Amnesty Scheme. Question No. (11) in this connection is reproduced below :
Q. No. (11) : Whether the ladies and minors can avail of the immunity given by the Circulars ?
Answer : Yes. In respect of their own income or wealth certainly. But the tax payers who try to introduce black money and benami investment in the name of ladies or minors will be doing so at their own risk.
It is well settled that before an income can be added in the hands of another person other than its ostensible owner a finding must be reached that the person claiming to be the owner is not the real owner, but some one else, by virtue of certain specific reasons, as its real owner. No such finding has been given by the AO in this case. In fact, the Hon’ble Supreme Court has held that heavy burden lies on the Department that the person is not the real owner, but benami for another. In such situation no addition can be made as held in the following decisions :
(1) Kalwa Devadattam & Ors. vs. Union of India & Ors. (1963) 49 ITR 165 (SC)
(2) CIT vs. Daulat Ram Rawatmall (1973) 87 ITR 349 (SC)
(3) Sukhdayal Rambilas vs. CIT (1982) 136 ITR 414 (Bom)
In fact, in the following cases when the house property was standing in the name of the wife, the Hon’ble Court has taken the view that the income cannot be added in the hands of the husband unless there is a positive finding that the funds have flown to the wife from the husband :
(1) CIT vs. Daya Chand Jain Vaidya (1975) 98 ITR 280 (All)
(2) V. Ramaswami Naidu vs. CIT (1974) 93 ITR 341 (Mad)
(3) L. Sheo Narain Lal, In re (1954) 26 ITR 249 (All)
(4) Kurella Pullayya vs. CIT (1962) 45 ITR 364 (AP)
In view of the above position the second ground raised by the Revenue, viz. addition of Rs. 5,30,500 of wife of the assessee in the hands of the assessee is without any substance and accordingly fails. The same is accordingly dismissed.
11. Coming to the third ground which has been raised both by the Revenue and the assessee for different reasons, we find that there was no Amnesty Scheme in operation for asst. yr. 1987-88 and the Amnesty Scheme was applicable only upto asst. yr. 1986-87. We accordingly do not find any merit in the contention of the learned counsel for the assessee that the assessee bonafidely believed that the Amnesty Scheme was still applicable in respect of income estimated on which advance tax was paid not only by him but by his wife, and, therefore, all along he was under the impression that no further information as to the true nature of the income as declared by him and his wife would be required to be furnished in the course of assessment proceedings. The provisions in this regard being very clear, the belief harboured by the assessee is misconceived and misplaced. Under the circumstances the AO was empowered to take up the assessment for asst. yr. 1987-88 for scrutiny and call for details and sources of income of the assessee and his wife. He accordingly issued notice under s. 143(2) for the first time on 13th March, 1990 and the assessment was completed on 30th March, 1990 i.e. the assessee had just two weeks time to furnish the details to convince the AO that the income could have been earned by his wife in her own right. As rightly pointed out by the CIT(A) the time obviously was not sufficient inasmuch as the details were required to be collected from different concerns who might have paid the commission and brokerage and since the alleged parties were in Bombay, more time would have been required for furnishing some sort of satisfactory reply to the query of the AO. Therefore, in view of this incomplete nature of enquiries and lack of adequate time available to the assessee before completion of the assessment, the CIT(A) had no option but to set aside this issue and restore the same to the file of the AO for fresh adjudication. Under the circumstances, we do not find any merit in the contention of the learned Departmental Representative that instead of setting aside, the learned CIT(A) ought to have upheld the addition or for that matter the contention of the learned counsel for the assessee that the CIT(A) ought to have deleted the addition. The ground raised by both the parties is dismissed.
12. Now, we take up other grounds raised in the cross appeal filed by the assessee. Ground No. 1 reads as under :
“The impugned assessment is bad in law and on the facts and circumstances of the case, liable to be annulled.”
At the time of hearing, this ground was not pressed and the same is accordingly dismissed.
13. Ground No. 2 reads as under :
“The learned CIT(A) has erred in setting aside the order of the AO and restoring the same to his file for deciding afresh as regards addition of income of the assessee’s wife Smt. Nayna R. Shah in the sum of Rs. 2,45,862 being her income for asst. yr. 1987-88. In the facts and circumstances he ought to have deleted the said addition.”
This ground has already been dealt with in the Revenue’s appeal and for the reasons discussed therein, we dismiss this ground.
14. Ground No. 3 reads as under :
“The learned CIT(A) has erred in holding that levy of interest under s. 215 of the Act was consequential in nature.”
The assessee challenged the levy of interest under s. 215. The learned CIT(A) treated this ground as consequential and held that “interest would be automatically reduced while giving effect to the appeal order in view of the relief allowed.”
14.1. The learned counsel for the assessee submitted that the CIT(A) has erred in holding that the interest under s. 215 of the Act was consequential in nature. If the Department’s appeal is dismissed and the assessee’s appeal on ground No. 2 is allowed, it may become consequential, otherwise it will not become consequential. The learned counsel further submitted that the additions as made hereinabove could never have been envisaged by the assessee and it would be impossible to assume that income earned by the assessee in the earlier years and assessed to income-tax and wealth-tax under the Amnesty Scheme would be taxed again in the later years; so also the income earned by the assessee’s wife duly taxed for income-tax and wealth-tax could not have been expected to be taxed again in the later year. Similarly, for the reasons stated above it could never have been envisaged that income of the assessee’s wife would be assessed in the hands of the assessee. Relying upon the judgment of the Gujarat High Court in the case of CIT vs. Bharat Machinery & Hardware Mart (1982) 136 ITR 875 (Guj), the learned counsel for the assessee submitted that no interest under s. 215 was leviable in this case. The learned Departmental Representative supported the order of the CIT(A).
14.2 After hearing both the sides we hold that the case of the assessee stands squarely covered by the judgment of the Gujarat High Court in the case of Bharat Machinery & Hardware Mart (supra) wherein it has been held that the assessee cannot be expected to assume that such addition would be made to the assessee’s income and, therefore, we hold that no interest under s. 215 is leviable in this case. This ground accordingly succeeds.
15. Ground No. 4 reads as under :
“The learned CIT(A) has erred in not dealing with the contentions of the appellant that the AO ought not to have initiated penalty proceedings under ss. 273(2)(a) and 271(1)(c) of the IT Act.”
In our view, such a ground is not maintainable because a separate appeal lies against an order of penalty under s. 273(2)(a) and 271(1)(c) of the Act. This ground accordingly fails and is dismissed.
16. In the result, the Revenue’s appeal is dismissed and the assessee’s appeal is allowed in part.