Commissioner of Income Tax vs Attar Mohd. Dawood and Bros.

J.P. Devadhar, J.—Challenging the order of the Income Tax Appellate Tribunal dated 8-12-2000. Revenue has filed the present Tax Appeal u/s 260A of the I. T. Act raising the following substantial question of law :--

"Whether on the facts and in the circumstances of the case, the Tribunal was right in law in confirming the order of the CIT (Appeals) cancelling the penalty Rs. 17,22,818/- levied u/s 271(1)(c) of the Income Tax Act, 1961 by the assessing officer on account of concealment of income and furnishing of inaccurate particulars of its income by the assessee, which has come to the notice of the Revenue on account of a search u/s 132 and pursuant whereto the assessee had filed a revised return declaring total income of Rs. 15,52,660/- as against Rs. 6,17,370/- offered in the original return?"

The assessment year involved herein is A. Y. 1983-84.

The assessee is engaged in the business of manufacture and sale of perfumery compounds, attar and agarbatties. For the assessment year in question, the assessee filed its return of income on 6-1-1984 declaring the total income of Rs. 6,17,370/-.

On 16th July, 1985 search action u/s 132 of the I.T. Act was conducted on the business premises of the assessee. Before any notice could be issued, the assessee filed a revised return of income under the Amnesty Scheme on 25-3-1986 declaring the total income of Rs. 15,52,660/- which included unsubstantiated loan of Rs. 2,90,000/- unexplained case circulated through the capital accounts of the Partners amounting to Rs. 1,05,000/-, suppressed sales amounting to Rs. 4,99,128/- and the purchase of copper jars to be capitalised at Rs. 92,607/-. The assessment u/s 143(3) of the I.T. Act was completed on 27-3-1986 on a total income of Rs. 19,43,870/-.

In the penalty proceedings initiated u/s 271(1)(c) of the I. T. Act, the assessing Officer held that the revised return filed on 25-3-1986 could not be said to have been filed under the Amnesty Scheme as the said revised return was filed after the date of search on 16-7-1985 u/s 132 of the I.T. Act. The assessing officer held that the revised return of income was filed only after the detection of the concealed income by the department in the proceedings initiated u/s 132 of the I.T. Act. Accordingly, the assessing officer levied penalty of Rs. 17,22,818/- u/s 271(1)(c) of the I.T. Act.

Being aggrieved by the aforesaid order, the assessee filed appeal before C.I.T. (A) who deleted the penalty on the ground that as per the order passed u/s 132(5) of the I.T. Act, the undisclosed income detected related only to cash and jewellery found at the time of the search and there was no mention or reference to any transactions recorded or not recorded in the books of accounts which were surrendered by the assessee in the revised return. The C.I.T. (A) also held that in view of the Board circular No. 423, the assessee was entitled to the benefit of Amnesty Scheme and accordingly, deleted the penalty. On appeal filed by the revenue, the Tribunal confirmed the order of the C.I.T. (A). Challenging the said order, the present Tax Appeal is filed by the revenue.

Mr. Desai, learned Senior. Counsel appearing on behalf of the revenue contended that in view of the revised return being filed by the assessee after the search action initiated by the Income Tax authorities, the assessee is not entitled to the benefit of the Amnesty Scheme and accordingly the amount surrendered after the detection of concealment cannot be accepted and hence the penalty has been rightly imposed. From the order passed by C.I.T. (A) [see para 7], it is evident that during the course of the search, no discrepancy was noticed by the search party regarding the transaction recorded or not recorded by the assessee in its books of accounts. It is also held by the C.I.T. (A) that the income detected the course of Section 132(5) order is separately considering for the A.Y. 1986-87 onwards. Moreover, answer to question No. 20 contained in the Board circular No. 423, clearly shows that the assessee can make declaration under the Amnesty Scheme in respect of asset which is not the subject matter of the seizure. In the present case, the undisclosed income disclosed in the revised return filed by the assessee was not noticed during search operations and is not the subject matter of the seizure. Hence, as per the Board Circular the assessee is entitled to the benefit of the Amnesty Scheme. In that view of the matter, we are of the opinion that the Tribunal was justified in confirming the order of C.I.T. (A) and holding that no penalty u/s 271(1)(c) of the I.T. Act was leviable upon the assessee.

Accordingly, there is no merit in the appeal filed by the revenue and the same is dismissed with no order as to costs.