TMI Blog1996 (1) TMI 149X X X X Extracts X X X X X X X X Extracts X X X X ..... ased to Rs. 52 lakhs plus vide letter dated 22-9-1984. This offer was not accepted by the department. In the meanwhile assessee filed a settlement petition before the Settlement Commission on 31-10-1983 pertaining to assessment years 1979-80 to 1983-84. The said petition was accepted for all the years except for assessment year 1982-83. The petition for 1982-83 was rejected on the ground that concealment was likely to be established by the department. 3. In the course of assessment proceedings the Assessing Officer asked assessee to file the details of cash creditors. Summons under section 131 were issued by him to twenty-two parties at the addresses furnished by the assessee but the same remained unserved with the remarks that such parties were not available at such addresses. The Assessing Officer vide his letter dated 17-12-1985 informed the assessee about this fact and further asked the assessee to produce the parties along with the books of account and pass books. Since the assessee was not able to produce these cash creditors except in the case of K.B. Shah HUF, it filed a revised return on 31-3-1986 under the amnesty scheme offering an additional income of Rs. 7 lakhs whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain jewellery from the assessee firm on 15-5-1981 against the cash payment. The statement of Miss Rekha Ganeshan was, however, recorded by the Assessing Officer on 25-3-1987 wherein it was stated that she had visited the shop of the assessee but the jewellery was purchased through some other person who was introduced to her by the partner of the assessee firm Shri Vajubhai. It appears that the assessee was not asked to cross-examine her in spite of the fact that assessee's Chartered Accountant along with Shri D.M. Harish Advocate remained present till 9.00 p.m. This is seen from the letter filed by the assessee in the office of the Assessing Officer on the next day, ie., 26-3-1987 which is placed at page 60 of the compilation. 6. Faced with this situation, assessee again filed a revised return on 30-3-1987 under the amnesty scheme offering an additional income of Rs. 11.5 lakhs comprising the following : Rs. (i) 2,85,000 In respect of loans from six cash creditors. (ii) 38,047 Interest on above loans (iii) 5,50,000 Regarding Jewellery purchased by Miss Rekha Ganeshan. (iv) 2,78,788 Interest on loans taken in earlier years. --------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd under section 273. These penalties have been deleted by the CIT(A) by holding that amnesty scheme applies in the present case. Besides this, it was also held by him that penalty was not leviable on merits. 8. The learned Sr. Departmental Representative Mr. Tilakchand has assailed the order of the CIT(A) on various grounds. His first contention is that the benefits of amnesty scheme could not be provided to the assessee in as much as, there was no full and true disclosure of the income. He drew our attention to the order under section 119(2) dated 14-2-1986 passed by the CBDT which specifies the conditions for availing the immunity from levy of the penalty under section 271(1)(c) and under section 273. The said order is published in 158 ITR 162 Statute. He also drew our attention to question No. 1 provided in circular No. 451 dated 17-2-1986. According to him until and unless assessee comes forward with the clean hands and makes a true and full disclosure of its income the immunity from the levy of penalty cannot be granted. In this regard he submitted that the assessee filed its original return declaring its income at Rs. 5,63,910 on 21-9-1982 but when inquiries were started b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Orissa Corpn. (P.) Ltd. [1986] 159 ITR 78. He also drew our attention to the fact that the Assessing Officer had made an inquiry in respect to the cash credits introduced in the year under appeal and found that the GIR numbers given by the assessee were wrong and the parties were not available at their addresses. This information was confronted with the assessee. Since the assessee was unable to explain the genuineness of the cash credits it offered the same under the amnesty scheme. According to him the particulars supplied by the assessee in respect to such cash credits were false and, therefore, the Assessing Officer had found the cash credits as non-genuine and in order to save the penal consequences the assessee had filed the revised return. Regarding the addition made on account of sale of jewellery worth Rs. 5.5 lakhs to Miss Rekha Ganeshan, he relied upon the statement given by her in the course of search conducted at her residence wherein she had admitted that the said jewellery was purchased from the assessee. 8.2. Regarding penalty under section 273, he submitted that the CIT(A) has not decided the issue on merits and has merely deleted the penalty on the basis of fili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 ITD 212 (Ahd.) (xv) Uttamchand Bhutani Co v. ITO [1992] 42 ITD 404 (Delhi). 10. The rival contentions of the parties as well as the case laws and the material to which our attention was drawn have been considered by us carefully. In our opinion, the first contention of the revenue regarding non-applicability of the amnesty scheme to the present case is not without force. We have gone through the circular No. 451 dated 17-2-1986 on which heavy reliance has been placed by the assessee. We have also gone through the order of the CBDT dated 14-2-1986 passed under section 119(2)(a) which provides immunity from the levy of penalty under section 271(1)(c) and under section 273 to those assessees who had made full and true disclosure of the income between the period commencing from 15th day of February, 1985 to 31st day of March, 1986. This period was later extended upto 31st March, 1987. For the benefit of our order, we are reproducing the order of CBDT under section 119(2) which is as under : " Order dated February 14, 1986 (F. No. 281/8/86 - I.T. INV. III) Income-tax Act, 1961 : Order under section 119(2)(a) ; Direction to ITO and IAC not to initiate penalty proceedings unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ady completed, the taxpayer should approach the concerned Commissioner of Income-tax with the full disclosure of the amount 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 March 31, 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. 21 --- Whether such a declaration by the partners could be taken as information by the Income-tax Officer for initiating proceedings under section 147A/(b) against the firm ? Answer --- Yes, unless they also choose to disclose the income of the firm. As pointed out earlier, their desire to turn honest must be full and not partial " From the combined reading of the said circular and the order under section 119, it is clear that the most important requirement is that assessee must come forward with clean hands by making a full and true disclosure of its income honestly. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the CBDT under section 119(2). In the Madhya Pradesh High Court decision in 76 ITR 103 (sic). Their lordships had held that the circulars issued by the CBDT under section 119 are binding on all subordinate authorities. It further held that the Commissioner is bound to offer an oppurtunity of hearing and pass a reasoned order. There cannot be any dispute with such proposition. It was a case where a full disclosure was made. The Hon'ble Bombay High Court in the case of Laxman was concerned with the request whether the return was voluntarily or not. On the contrary, this judgment goes against the assessee as it has been held in that case that one of the conditions for exercising the discretion under section 273A was making of full and true disclosure of income in good faith. We have already held that assessee had not disclosed the income truly and fully. The Hon'ble Calcutta High Court in the case of Anand Kumar Saraf was concerned with a case where the revised return was filed under the amnesty scheme after the search. At page 323 it has been mentioned that it was an admitted fact that assessee had disclosed fully and truly his income which is not the case before us. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght or prevent discovery of." The above definitions clearly show that the question of concealment arises only when the person knowingly hides the information. Therefore, in our opinion, the question of concealment arises only where the assessee is shown to have the knowledge of the income in respect of which the particulars are to be furnished. But where the assessee denies totally in regard to a transaction outside its books, it cannot be charged for concealment of the particulars unless it is established on materials or evidence that income belongs to the assessee in respect of which it has to disclose the particulars. A distinction has to be drawn where the addition is made by the Assessing Officer on the basis of the material found in possession of the assessee and the addition made on the basis of material found by the revenue from extraneous sources. In the former case the assessee can be charged for concealment of particulars of income or furnishing of inaccurate particulars if it withholds the information or provides inaccurate particulars or fails to offer any explanation or if it is found that assessee is not able to substantiate the explanation in respect of the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndered by the assessee in order to buy peace with the department, the assessee cannot be penalised. It is, therefore, held that the CIT(A) was justified in deleting the penalty in respect of such addition. 15. The next category of addition of Rs. 4.5 lakhs is on account of disallowance of interest in respect of loans pertaining to earlier years. We find that the settlement petition of the assessee for earlier years has been admitted by the Settlement Commission and it has been directed by the Settlement Commission to waive the penalty leviable under section 271(1)(c) and under section 273. The relevant portion of the order of Settlement Commission is being reproduced as under : " No interest is chargeable under section 139(8) for any of these four years. Interest under section 215/217/217(1A) is also not chargeable for the assessment year 1979-80. As for the other three assessment years, interest under section 215/217/217(1A) will be charged from the first April of the relevant assessment year upto a date which falls one year from the date of filing of the return. No penalty is leviable under section 271(1)(a) for any of the years. Penalties leviable under sections 271(1)(c) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er dated 17-12-1985 to the assessee confronting with this fact and requested the assessee to produce the cash creditors. The list of the parties not found in the income tax records was given in that letter. Again in the penalty proceedings this fact was also confronted by the Assessing Officer to the assessee vide his letter dated 18-1-1989. Thereafter another opportunity which was finally given to the assessee to produce them by his letter dated 25-1-1989 as the assessee recently had been able to obtain their affidavits. In spite of all these opportunities, assessee was not able to rebut the stand of the revenue, regarding identity and genuineness of the cash creditors. 17. After perusing the above facts, we have to categorise the cash credits into two parts. First-those cash credits in respect of which the Assessing Officer has found that the particulars given by the assessee were inaccurate ; and second - those cash credits where particulars given by the assessee remained uncontroverted. The former category includes the cash credits appearing at serial Nos. 1 to 15 mentioned in para 16 amounting to Rs. 7.45 lakhs. This has been found by us from the perusal of the list of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereon is, therefore, sustained. 18. As far as cash credits falling in the second category amounting to Rs. 3.75 lakhs and interest thereon are concerned, we are of the opinion that no penalty can be levied inasmuch as the revenue had not been able to establish that the particulars filed by the assessee were inaccurate. The assessee had given all the particulars including the GIR numbers. The Assessing Officer has made his own inquiries and nothing against them has been found by him. Merely because, summons were not served on them, assessee cannot be penalised. The ratio of judgment of Apex Court in the case of Orissa Corpn. (P.) Ltd. squarely applies in respect of such cash credits. Hence, we uphold the order of the CIT(A) in respect of such cash credits. 19. Lastly before parting with our judgment, we would like to mention the judgment of the Supreme Court in the case of Varkey Chacko on which reliance has been placed by the assessee. In that case the Supreme Court was concerned with the issue regarding the jurisdiction of the authority who could impose the penalty. The learned counsel for the assessee relied upon certain observations to the effect that penalty could be imp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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