TMI Blog1993 (3) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... ised return was filed on 26-1-1986 declaring a total income of Rs.2,02,260, which was further revised as per the return filed on 31-1-1986 declaring total income at Rs.2,56,650. In reply to the show-cause notices, the assessee reiterated the facts of submitting the original return and two revised returns. It also submitted that the revised returns were filed under the Amnesty Scheme introduced by the department. The assessee further stated that it had withdrawn the appeals filed against the assessment orders passed by the ITO. The revised returns were filed to buy peace of mind and to avoid long-term litigation although the assessee had not accepted the addition, but only offered the same for taxation as per its letters dated 30-1-1986. The ITO did not accept the assessee's contention. He found that the assessment for the assessment year 1979-80 was completed on 19-2-1986 and that for the assessment year 1980-81 on 18-2-1986, on the total incomes of Rs.2,47,543 and Rs.2,68,057 respectively which included for the first year the income from undisclosed sources amounting to Rs.1,30,000 and interest of Rs.39,606 thereon and for the second year the income from undisclosed sources amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative of the assessee relied upon the following decisions, viz.: (i) Shashi Raj Kapoor v. ITO [IT Appeal Nos. 800 to 802 (Bom.) of 1987] (ii) CIT v. Gurudas Ram Papshi Bros. [1983] 15 Taxman 567 (Pat.) (iii) CIT v. Patna r Works [1977] 106 ITR 452 (Pat.) (iv) CIT v. Anwar Ali [1970] 76 ITR 696 (SC) (v) Shri Balakram Jankidas v. IAC As against the above, it was urged by the learned Departmental Representative that during the course of the assessment proceedings the assessee was requited to submit proof of the cash loans claimed to have been received during the two years. It is only when the assessee failed to produce any satisfactory evidence and felt that it could not substantiate its claim, it filed the revised returns showing higher incomes. The disclosure of the concealed income was thus neither voluntary nor was made before the detection of the concealments. Merely by giving the particulars with regard to the identity of the lenders the assessee could not be held to have discharged its burden. When the assessee failed to prove by satisfactory evidence of the fact of its having borrowed amounts from the creditors and the capacity of those creditors to finance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns. Even after the filing of the first revised returns the assessee had persisted with its claim of the remaining loan being genuine for each of the two years. It was only after it was pointed out to the assessee's partner that the remaining loan was also not genuine that he chose to file the second revised return for each of the two years. In view of these facts and circumstances, we do not fed persuaded to accept the assessee's contention that there was no concealment of income or that the disclosure was made by the assessee voluntarily. Indisputably, the disclosure was made only in compelling circumstances when the assessee, on being required to furnish proof of the genuineness of the loan, failed to furnish any satisfactory evidence. 6. As regards the second contention of the assessee, here again, we do not find any force in it. The learned representative of the assessee referred to the departmental circulars on Amnesty Scheme. Particular reference was made by him to the Question No. 19 and its answer, which are part of the Circular No. 441 (F.No. 225/86/85-I.T. (A-II) dated 15-11-1985. That part of the circular reads as under: "Question No.19: Kindly clarify the expressio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncealments by the department. The facts and circumstances clearly show that the department had found material to show that there had been concealments and it was for this reason that the assessee was repeatedly required and given opportunities to file evidence to show that the loans were genuine. The assessee filed the revised returns only in compelling circumstances and as such we do not feel inclined to accept the assessee's contention to the effect that the declaration of enhanced incomes in the revised returns was made voluntarily. As regards the Court/Tribunal decisions cited above, we find that they do not offer any material assistance to the assessee in the present case. The facts in those cases before the Court/Tribunal were clearly distinguishable and materially different from the facts of the case before us. In the present case the original returns were filed on 22-8-1979 and 27-6-1980 respectively. In the course of the assessment proceedings, the assessee kept persisting that the questioned loans were genuine ones. It is only after the failure of the assessee to produce satisfactory evidence in spite of repeated opportunities given for the purpose that the assessee found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Amnesty Scheme introduced by the Income Tax Department. While filing its second revised returns on 31-1-1986, the assessee filed its letter, which reads as under:-- "To The 1st Income-tax Officier, C-V. Ward, Bombay. Dear Sir, Re: GIRNo. CV/238-B(1) Assessment year 1979-80 Without Prejudice. We are revising the return of income by adding the unsecured loans, treating the same as income of the year covering all the additions and disallowances of the year. We are revising the return of income voluntarily to buy peace without admitting any concealment whatsoever. It is with a view to avoid long drawn litigation. We hope no adverse inference will be drawn by your honour. We have also to state that while taking loans, we have complied with all the conditions laid down under the law. From which source the loan is given by the parties cannot put the firm into problem. Since the cost of litigation will be more than tax payable and relying upon the assurance given by the Chairman, Central Board of Direct Taxes In their circular, we are revising the return of income. Thanking you, Your faithfully, for B-TEX CORPORATION. Partner." These returns were ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these submissions of the assessee, the submissions made by the departmental representative are reproduced in para 4 of the order of my learned brother. 6. Considering the facts and circumstances of the case, I am of the opinion that the returns were revised by the assessee taking benefit of the Amnesty Scheme announced by the department. In fact, the purpose of Amnesty Scheme was to exonerate the assessees from the levy of interest, penalty and prosecution and protracted litigations over the tax matters concerning the assessees. The Scheme was open to those who make such declaration before the detection by the department. In these cases, in my view, the assessee filed the returns in pursuance of the Amnesty Scheme simply to take the benefit of Amnesty circulars announced by the Government. The clarifications made on this regard amply substantiate the assessee's contentions. The department has not proved the concealment of income beyond relying upon the assessee's revised return filed in pursuance of the Amnesty Scheme. In my view, it would be incorrect to attribute any motives to the assessee declaring higher incomes on each of the occasions in pursuance of the enquiry made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e keeping up its own promise made to the assessees through the Amnesty Schemes and clarifications in the matter. 8. In the result, all the penalties are liable to be cancelled. For the reasons, I allow the appeals. ORDER UNDER SECTION 255(4) OF THE I.T. ACT, 1961 Since there is a difference of opinion between the learned Judicial Member and the learned Accountant Member on the grounds of appeal raised by the assessee in its appeals, we hereby frame the points of difference for the opinion of the President under section 255(4) of the I.T. Act, 1961 as under: "1. Whether, on the facts and in the circumstances of the case, the learned CIT (A) erred in upholding the penalty imposed under section 271(1)(c) of the I.T. Act for the assessment years 1979-80 and 1980-81? 2. Whether, on the facts and in the circumstances of the case, the learned CIT (A) erred in upholding the penalty imposed under section 273(2)(c) of the I.T. Act, 1961 for the assessment years 1979-80 and 1980-81?" THIRD MEMBER ORDER 1. These appeals have come before me for my opinion as a Third Member under section 255(4) of the Income-tax Act, as the Members who heard the appeals originally could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the latest revised returns. The Income-tax Officer simultaneously instituted penalty proceedings under section 271(1)(c) for levy of penalty for concealment of income. In response to these notices, the assessee submitted that it had filed the revised returns admitting the loans as income not because the loans constituted its concealed income but because at that distance of time it was not possible for it to prove the loans to the hilt and the admission, was therefore more by way of purchasing peace with the department to avoid protracted litigation and also taking advantage of the Amnesty Scheme. It was also brought to the notice of the ITO that while filing the revised return on 31-1-1986 the assessee made its intention very clear in a letter dated of that date as to why it was offering the loans as income and how it requested the department that no adverse inference should be drawn from the surrender of the loans and that the assessee was able to prove the genuineness of the loans and actually complied with all the conditions laid down under the law in the direction of proving the genuineness of the loans. Ultimately it was mentioned in that letter that since the cost of lit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r held agreeing with the view expressed by the department that the filing of the revised returns was not voluntary and it was only after the department had detected the concealment of income that penalties were rightly imposed. To support his view, the learned Judicial Member referred to three aspects: one, the ITO found that in the earlier years also claims of bogus loans were made by the assessee and some of the loans alleged to have been borrowed this year were from the same parties from whom the loans were claimed to have been received in the earlier years. Secondly, the ITO long before filing of the revised returns had been insisting on the assessee to produce evidence to prove the genuineness of these loans. The assessee was given repeated opportunities but it failed to avail. It was finally on 13-1-1986 that the ITO gave a last opportunity to the assessee to produce evidence. As the assessee had no evidence, it filed the revised returns surrendering these loans and by way of cloak set up a smoke-screen of voluntary surrender under the Amnesty Scheme. Thirdly, even in the first return filed on 26-1-1986, all the loans were not surrendered. A hearing took place on 27-1-1986 be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee had been persistently, claiming that all its credits were genuine. He justified the claim of the assessee that it was not liable for the levy of penalties. According to him, the conduct of the assessee should not be viewed with reference to its conduct in the earlier years. Ultimately, he held that the finding that the department had found some material to show that there was concealment of income was not correct and he would accept the assessee's contention and would cancel the penalties. 5. Thus, the above points of difference of opinion arose and were referred to me. I have carefully heard the learned counsel for the assessee Shri I.C. Jain and the learned Departmental Representative Shri Keshav Prasad. Though this is not a very easy case to decide, nevertheless, on the facts found by the learned Judicial Member, I find it difficult to agree with the assessee's contention that the filing of the returns was purely or fairly or wholly voluntary. If one traces the history of the assessee, there were as many as four revised returns. As rightly pointed out by the learned Judicial Member, the last and final revised return was filed, not on the assessee's own volition, bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the creditors and to produce further proof to establish the genuineness of the loans for both these assessment years as under: "4. It is seen that the assessee-firm is paying substantial interest on its borrowings. The assessee-firm has filed some confirmation letters with regard to loans raised during the year. However, the identity of the parties advancing loans, their capacity to advance the amounts is to be clarified/verified. I would therefore request you to produce the following parties with their books of accounts (their loans accounts appears in your books for the assessment years 1979-80 and 1980-81) so as to enable me to verify the genuineness of these loans: -------------------------------------------------------------------------- 1979-80 1980-81 ----------------- ----------------- S.No. Name of the party Loan during Int. Loan during Int. the year the year Rs. Rs. Rs. Rs. -------------------------------------------------------------------------- 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e served, the parties have not attended. I give you a final chance to produce the parties so that the loan accounts can be verified. Further the information called for at Sl. Nos. 1, 2 and 3 in my letter 16-12-1985 may also be furnished. The requisite information should reach the undersigned within a week of receipt of this letter. In case you fail to comply with the requirements, the assessments shall be completed on the basis of data available on records. Since time-barring assessments are involved, no further time can be given which please note. Thanking you." It is only thereafter that the assessee came forward with the filing of the revised returns admitting the income in two instalments. Can it be said that the department has no material before it to conclude that the loans were not genuine? Can it be said in this background that the department has only a prima facie feeling of concealment of income. In my opinion, the department had material before it to conclude that the loans were not genuine and it was only when the assessee was forced with this unanswerable situation that it came forward with the filing of the revised returns taking advantage of the Amnesty Scheme a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to prove concealment of income. It is no doubt true that the assessee might be able to show that the admission by it was incorrect or illegally made. That was not the case here. No doubt, the assessee stated in the covering letter filed along with the revised returns that the amount surrendered was not its concealed income, but this averment in the circumstances of the case is only an escape route thought of by the assessee to avoid penal consequences. When the return was filed by the assessee in 1979, I see no reason why the assessee had filed the revised return surrendering the loans in 1986, about six years thereafter. It is not as if in these six years' period the department was keeping quiet. The department was making enquiries after enquiries. But the assessee somehow or the other allowed the proceedings to lie over and when suddenly the Amnesty Scheme was announced, thought of taking advantage and surrender the sum by making a plea of exoneration from the levy of penalty. 7. The learned counsel for the assessee placed reliance upon a judgment of the Supreme Court in the case of CIT v. Orissa Corpn. (P.) Ltd. [1986] 159 ITR 78 for the proposition that if confirmation let ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy. There was no effort made to pursue the so--called alleged creditors. In those circumstances, the respondent could not do anything further. In the premises, if the Tribunal came to the conclusion that the respondent had discharged the burden that lay on it, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such arose. The High Court was right in refusing to state a case." Thus, the Supreme Court affirmed the judgment of the Orissa High Court. It will be seen from the above that this was a case where the ITO treated the sum in question as unexplained income of the assessee and added it to the income and the IAC even levied a penalty for concealment of income. The Supreme Court there laid down, and rightly too, that when the names and addresses of the alleged creditors were furnished along with their GIR numbers, the revenue should have pursued the matter to find out whether the alleged creditors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontention between the two Members was, whether the Amnesty Scheme applied or not. The Judicial Member said that the Amnesty Scheme did not apply because there was material before the department that led to the conclusion of concealment of income, while the learned Accountant Member held that that material was not sufficient to come to that conclusion. This being the real difference of opinion, he submitted that I should address myself to this question and express my opinion thereon. 9. As I have pointed out earlier, to my mind, it appeared that the filing of the revised returns was not voluntary and there was material on record to show that the department was pursuing the genuineness as well as creditworthiness of the loans to be able to arrive at a conclusion adverse to the assessee at which point of time the assessee came forward with the filing of the voluntary returns preventing thereby the department from pursuing the matter further. Having prevented the department from pursuing the matter further, I don't think it is open to the assessee to say, leaving aside the legal authorities, that the department is still to establish that the loans surrendered represented the conceal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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