Commissioner of Income Tax vs Maulana Tea Co.

Arijit Pasayat, C.J.—Accepting the Revenue''s prayer i''or a reference in terms of Section 256(1) of the Income Tax Act, 1961 (in short, the Act), the Income Tax Appellate Tribunal, Cochin Bench (in short, "the Tribunal"), has referred the following questions for the opinion of this court :

"1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in cancelling the penalty levied u/s 271B of the Income Tax Act ?

Whether, interpretation of the amnesty scheme/circulars by the Tribunal is correct ?

Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in holding that even on merit the penalty is not leviable ?"

The factual background, as set out in the statement of case, is almost undisputed and is as follows : For the assessment year 1985-86, the asses-see filed a return of income on March 31, 1987, declaring total income of Rs. 2,25,000. The return was filed under the "amnesty scheme". The income declared was on an estimated basis on a turnover of Rs. 2,69,32,671. The assessment was completed on a total income of Rs. 2,50,000. As the turnover had exceeded Rs. 40,00,000 the assessee was required to get its accounts audited in terms of Section 44AC of the Act. As it had not been done, penalty was levied u/s 271B of the Act. The matter was carried in appeal before the Commissioner of Income Tax (Appeals), Calicut (in short, CIT(A)), who cancelled the levy on the ground that the return having been filed under the amnesty scheme, there was no scope for levy of penalty. The conclusions were challenged by the Revenue before the Tribunal, which concurred with the views of the Commissioner of Income Tax (Appeals). Thereafter, an application u/s 256(1) of the Act was filed to make a reference and as stated above, the questions as set out have been referred.

The only question that falls for determination is whether in respect of a return filed under the "amnesty scheme" and on assessment on the basis of the same, there is scope for initiation of penalty proceeding''s and/or levy of penalty. The Tribunal found that the Assessing Officer himself had observed that proceedings under Sections 271(1)(a) and 273(2)(c) were not initiable. But the Revenue''s stand is that none of the circulars issued in relation to the scheme specifically dealt with a case of penalty u/s 271B. Therefore, the Tribunal was not justified in cancelling the penalty.

So far as Section 271B is concerned, that deals with failure to comply with the requirement of Section 44AB.

In the normal course, penalty could have been levied in case of non-compliance with the provisions of Section 44AB. But the situation is somewhat different under the amnesty scheme. It would be necessary to make reference to some of the circulars issued on the point. The relevant portions of the circulars, which have bearing on the point, read as follows :

Circular No. 423 (F. No. 225/86/85-ITA.II), dated 26th June, 1985 (see [1985] 155 ITR 45).

"3. In such cases, the advisable course for the taxpayer will be to, voluntarily and in good faith, make a full and true disclosure of his concealed income, prior to its detection by the Income Tax Officer, and then make an application to the Commissioner of Income Tax for the reduction or waiver of penalty and interest u/s 273A of the Income Tax Act."

Circular No, 432 (F. No. 225/86/85-ITA-II), dated September 20, 1985/ November 15, 1985 (see Commissioner of Income Tax Vs. Mc. Dowell and Company Ltd., ).

"While it is true that the penal provisions of the law will be applied more strictly in the cases where a person having" taxable income does not come forward and file a return showing that income and pay tax thereon and is brought into the tax net only as a result of the efforts of the Department, the Department''s approach will be very liberal and sympathetic in the cases of new assessees who come forward themselves to show their true incomes in good faith and co-operate in any enquiry relating to the assessment of their incomes.

Though the penal provisions of the law do apply in such cases, such as failure to comply with statutory obligations relating to filing of estimates and payment of advance tax, filing of returns in time, etc., instructions are being issued to all officers of the Department that they should adopt a liberal and sympathetic approach where the assessee has come forward suo motu and co-operates with the Department . . ."

Circular No. 439 (F. No. 225/86/85-ITA-II), dated November 15, 1985 (see [1985] 156 ITR 163) :

"Taxpayers liable to wealth-tax should avail of this opportunity to come forward and file returns of wealth showing their true net wealth irrespective of what they might have done earlier. They need not have any apprehension that they will be subject to penalty or prosecution so long as they come forward suo motu before detection by the Department. Similarly, where for earlier years there has been any suppression of assets or undervaluation of assets for the purposes of wealth-tax, the taxpayers would be well advised to come forward and disclose such undervaluation or suppression now to the Commissioner of Wealth-tax, whether the wealth-tax assessments for those years are pending or completed. They will, of course, have to pay wealth-tax on those assets at the rates applicable to those years, but will not be subject to any penalty or prosecution."

Circular No. 441 (F. No, 225/86/85-ITA-II), dated November 15, 1985 (see [1985] 156 ITR 165) :

"3. While it is true that the penal provisions of law will hereafter be applied strictly in cases where a person having taxable income or wealth does not voluntarily come forward to declare the same and pay tax thereon and has, therefore, to be brought into the tax net only through efforts of the Department, the Department''s approach will be wholly different and necessarily liberal and sympathetic in the cases of those assessees who come forward voluntarily to make a full and true disclosure of their incomes and wealth. Instructions to this effect are being issued to all officers of the Department so as to ensure that the level of voluntary compliance increases substantially and the assessees, old as well as new, are enabled to avail themselves of this opportunity by voluntarily filing returns of income and wealth without fear of any penal consequences such as penalty or prosecution . . ."

Circular No. 451 (F. No. 225/86/85-ITA.II), dated February 17, 1986 (see [1986] 158 ITR 135).

"Question No. 4.--The Income Tax circulars are not very clear as to whether the immunity from penalty and prosecution is guaranteed to the assessee unlike the circular in respect of wealth-tax which appears to be clear on this point ?

Answer.--The immunity from penalty and prosecution applies in all cases whether of Income Tax or of wealth-tax where the assessee admits the truth and pays taxes properly . . .

Question No. 35--Whether any amount or penalty will be payable or leviable under the Compulsory Deposit Scheme (income tax Payers) Act, 1974, where applicable ?

Answer.--Where the compulsory deposit is payable under the law, it will have to be paid. Instructions are issued to the Income Tax Officer not to levy penalty under the Compulsory Deposit Scheme (income tax Payers) Act."

On a bare reading of the relevant portions of the circulars referred to above, it is clear that there was total immunity from penal proceedings. Learned counsel for the Revenue, with reference to Circular No. 432, dated September 20, 1985 (see Commissioner of Income Tax Vs. Mc. Dowell and Company Ltd., ), submitted that restriction on levy of penalty was relatable to filing of estimates, payment of advance tax, filing of returns in time and not to a case covered u/s 271B of the Act. This submission overlooks the use of expression "etc." after mentioning some of the specified categories of default. "Etc." is an abbreviation of "etcetera", and may mean and others ; and so forth ; and the rest ; other things ; other things of the same character, or only those things ejusdem generis ; intention of the parties, the context and the manner and place in which the abbreviation is used may govern its meaning. The word "etc.", does not share the character of an inclusive definition. Usually, after reciting the initiatory words of a set formula, or a clause given in full, "etc." is added as an abbreviation for the sake of convenience. Circular No. 432, dated September 20, 1985 (see Commissioner of Income Tax Vs. Mc. Dowell and Company Ltd., ), did not refer to any particular type or category of failure to carry out statutory obligation and the use of the word "etc.". cannot be given any restrictive meaning. In any event, subsequent circulars made it clear that the intention was to give immunity from penal proceedings of all nature. The Tribunal was, therefore, justified in directing deletion of the penalty u/s 271B. The questions referred are, therefore, answered in the affirmative, in favour of the assessee and against the Revenue.