TMI Blog1996 (9) TMI 160X X X X Extracts X X X X X X X X Extracts X X X X ..... l to supply pipes to the Irrigation Department of the State Government. The understanding was that Shri A.A. Pathan would get everything done, like filing the tenders, getting them accepted, arranging for purchase of the pipes, supplying them, etc. Shri Pravinbhai had to provide for finance only and for this purpose, he opened a bank account at Baroda, which, it was stated, was introduced by Shri A.A. Pathan himself. The affairs were so arranged in collusion with the engineering staff of the Department that the quotations and tenders furnished by Shri Khatiwala and his allied concerns were accepted at the rates more than even double of the market price. The pipes were supplied at the rate of Rs. 448 per metre as against the market price of Rs. 195.50 per metre. The excessive payment received in this transaction amounted to Rs. 48,17,917. In another transaction the pipes valued at Rs. 359.30 per metre were supplied but the payment was made at the rate of Rs. 575 per metre. The two concerns namely M/s. Seema Enterprises and M/s. Associated Engineering Corporation had received Rs. 1.20 crores approximately as extra payment. It was published in the news item in 'Gujarat Samachar' dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Department of the State Government. The learned counsel for the assessee submitted that when the returns of income were filed for all the three years, only primary inquiries had been conducted by the Revenue and that too on the basis of the news items appearing in "Gujarat Samachar". No specific concealment of income was detected by the Income-tax Department. He prayed that when only primary inquiries were going on and no concealment had been detected prior to filing of returns filed under the Amnesty Scheme, the same cannot be rejected with reference to various Circulars issued by the CBDT and on the basis of the following two decisions : (1) Asstt. CIT v. Prakash Oil Industries ginning Factory [1995] 52 TTJ (Ahd.) 514. (2) Anand Kumar Saraf v. CIT [1995] 211 ITR 562 (Cal.). 7. Shri V.K. Mathur the learned DR drew our attention to CBDT Circular Nos. 423, dated 26-6-1985 and 432 dated 15-11-1985 and submitted that the Amnesty Scheme was a package scheme under which the assessee was required to disclose income voluntarily prior to detection by the department. In the instant case, according to the learned DR on the basis of the news items which appeared in "Gujarat Samachar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amachar" on 8-5-1986. As a result of this, 24 officers of the Irrigation Department were suspended for these irregularities in the purchase of E.R.W. pipes. On the basis of the above news items the Investigation Wing of the Income-tax Department started extensive inquiries against the assessee-firm and Shri A.A. Pathan. When the inquiries were at a fairly advanced stage the assessee-firm came forward with the three returns of income filed on 30-9-1986 under the Amnesty Scheme. The fact that the inquiries were carried out at an extensive magnitude is evident from the letter dated 17-9-1986 addressed by the Assistant Director of Income-tax (Inspection), Surat to Shri P.C. Khatiwala and Smt. Nirmala P. Khatiwala placed at page 44 of the paper book. It will be relevant to quote the following paragraph from the said letter :-- "As you know, inquiries were going on the basis of some newspapers reports about the non disclosure of income earned by the two contractor concerns mentioned above and they were at fairly advanced stage when indication from you about the option of disclosure at your end. Letters have been sent to various authorities of Gujarat State Government to supply the deta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion No. 19 : Kindly clarify the expression "before detection by the Department ? Answer : If the Income-tax Officer has already found material to show that there has been concealment, that would mean the Department has detected the concealment. If the Income-tax Officer only had prima facie belief, that would not mean concealment has been detected." Since extensive inquiries had been conducted on the basis of the news item which appeared in the paper 'Gujarat Samachar', as a result of which the Revenue had already found material to show that there had been concealment by the assessee-firm, the case of the assessee will not be covered by the Amnesty Scheme. We do not find any merit in the contention of the learned counsel for the assessee that only prima facie inquiries were conducted on the basis of news item in the Gujarati paper 'Gujarat Samachar' because as is evident from our observations above, thorough inquiries were conducted as a result of which the Revenue had material to show that there had been concealment. 9. Coming to the cases relied upon by the learned counsel for the assessee in support of the assessee's claim that it was entitled to the benefits of Amnesty S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ird/New International Dictionary, 1976 edition). In the instant case, certain documents and papers were seized. They might or might not reveal concealment. Even the seizure could not lead to a prima facie belief as to concealment as the contents, purport and the implications of the documents were yet to be gone into. Therefore, at the point of time the return under the Amnesty Scheme was filed, the Assessing Officer admittedly had no idea as to whether the seized papers would reveal any concealment. The mere fact that the petitioner-appellant's case was awaiting a probe with reference to his past records as well as extrinsic sources could not lead to his ouster from the scope of the scheme." From the above paragraph, it is evident that in the case of Anand Kumar Saraf, the petitioner-appellant's case was awaiting a probe with reference to his past records as well as extrinsic sources whereas in the case before us a thorough inquiries had been carried out as a result of which the factum of concealment had been established. 9.1 The Amnesty Scheme, 1985 was a package scheme offered by the Government to the taxpayers to come forward with full and true disclosures of their hitherto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... :-- "From the formula that has been applied by the Assessing Officer net profits comes to as much as 51.36% of sales which is certainly high. In my opinion, keeping in view the extent and volume of the business carried out by the appellant in all the three years, it would be fair to estimate the net profits at the rate of 30% of the sales. The Assessing Officer is accordingly, directed to work out the net profit in all the three years at the rate of 30% of the sales. The appellant's request for giving specific direction to Assessing Officer to allow its claim for overhead expenses or secret commission or payment made to Mr. A.A. Pathan are accordingly rejected." 13. Shri R.M. Shah, the learned counsel for the assessee submitted that the assessee is a contractor and generally in the case of a contract or profit is worked out by applying the net profit rate of 12.5% on the sales. He submitted that the CIT(A) erred in estimating the net profit of the assessee's business at the high rate of 30% when in the line of business carried on, it is not possible to earn such huge profit. He further, submitted that the assessee had to pay 30% secret commission and had also to pay brokerage t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received in this transaction amounted to Rs. 48,71,917. In another transaction the pipes valued at Rs. 359.30 per mtr. were supplied but the payment was made at the rate of Rs. 575 per mtr. The two concerns namely, M/s. Seema Enterprises and M/s. Associated Engineering Corporation (the present assessee) had received Rs. 1.20 crores approximately as extra payment. As a result of these collusive transactions, as many as 24 officers of the Irrigation Department were suspended for these irregularities in the purchase of E.R.W. pipes. In view of these special features ; in the absence of regular books of account and in the absence of any evidence that secret commission was paid and brokerage was also paid to Shri Pathan, the rate of 30% upheld by the CIT(A) is fair and reasonable and no interference is called for. This ground accordingly fails and is dismissed. 16. The last grievance of the assessee relates to charge of interest under section 139(8)/217. It has been submitted that the assessments have been framed by the Assessing Officer under section 148 and as such these assessments were not regular assessments and hence there was no justification for charging interest under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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