AI Structured Summary
Not yet generated for this judgment
Judgment
N.K Sud, J.
This appeal u/s 260A of the Income Tax Act, 1961 (hereinafter referred to as "the Act") is directed against the order of the Tribunal, Chandigarh Bench, dated 7-10-1998. The following question of law had been formulated for consideration vide order dated 4-3-1999 :
"1. Whether in the facts and circumstances of the case, the Tribunal was justified in sustaining the addition of Rs. 64,000 in view of the provisions of section 40A(3) of the Income Tax Act, 1961, and rule 6DD of the IT Rules, 1962 ?
Whether, in the facts and circumstances of the case the Tribunal was right in sustaining the addition of Rs. 3,00,000 ?"
For resolving the controversy it is necessary to advert to the relevant facts. The assessee filed its return of income for assessment year 1981-82 on 8-5-1981, declaring an income of Rs. 41,380. The assessment u/s 143(3) was framed by the assessing officer on 27-3-1986, and an addition of Rs. 6,06,578 was made on account of alleged bogus purchases. The assessing officer had also raised another dispute about four payments totalling Rs. 1,42,749 having been made in contravention of section 40A(3) of the Act. However, no separate addition on this score was made on the ground that the same stood covered in the addition of Rs. 6,08,578 on account of bogus purchases.
The assessee filed an appeal before the Commissioner (Appeals) on 21-4-1986, in which both the issues about the bogus purchases as well as payments in contravention of section 40A(3) of the Act were agitated.
During the pendency of the aforesaid appeal the assessee filed a revised return on 31-3-1987, to take the benefit of the Amnesty Scheme, then in vogue, and offered an additional amount of Rs. 3 lacs for taxation, The assessee also submitted that the tax of Rs. 74,700 due on the additional income may be adjusted out of the excess amount already paid by it.
The Commissioner (Appeals) disposed of the appeal of the assessee vide his order dated 7-3-1989. The addition of Rs. 6,08,578 on account of alleged bogus purchases was deleted. The other dispute about the four payments totalling Rs. 1,42,749 made in contravention of section 40A(3) of the Act, was restored to the file of the assessing officer for readjudication.
Meanwhile to regularise the revised return filed by the assessee on 31-3-1987, offering an additional income of Rs. 3 lacs for taxation under the Amnesty cheme, the assessing officer issued a notice u/s 148 on 16-2-1990. In response to this notice the assessee furnished a letter on 9-7-1990, in which the validity of the notice was questioned. However, it was also stated that the original return filed may be treated as having been filed in compliance to the said notice.
The assessing officer thereafter proceeded to complete the reassessment initiated vide notice u/s 148 dated 16-2-1990, and also to give effect to the order of the Commissioner (Appeals), dated 7-3-1989, for readjudicating the issue about payment made in contravention of section 40A(3). He passed an order u/s 143(3) of the Act on 13-7-1990, wherein he once again held that the four payments to the tune of Rs. 1,42,749 had been made in contravention of the provisions of section 40A(3) of the Act and added the amount to the total income. He also made an addition of Rs. 3 lacs on the basis of the additional income offered in the return filed under the Amnesty Scheme.
Aggrieved by the said order the assessee filed an appeal before the Commissioner (Appeals) on 27-5-1991. The said appeal was disposed of vide order dated 8-7-1991. The addition of Rs. 1,42,749 consisted of the following four payments :
Date
Amount Rs.
Name of the party
10th Feb., 1981
24,000
M/s Rajnish Trading Company.
28th March, 1981
61,795
M/s S&A Steel Industries, Mandi Gobindgarh.
26th June, 1980
17,000
-Do-
13th Nov., 1980
40,000
M/s Khurmi Steel Corporation, Mandi Gobindgarh
The case put up by the assessee was that since the four parties were genuine and the payments had been made to them in cash on their insistence, the same fell within the exceptions provided in the Circular No. 220 (F. No. 206/17/176ITA.U, dated 31-5-1977) issued by the CBDT and as such no disallowance u/s 40A(3) could be made. The Commissioner (Appeals) accepted this explanation in respect of the first three payments of Rs. 24,000, Rs. 61,795 and Rs. 17,000. However, he upheld the disallowance of the 4th payment of Rs. 40,000 on the ground that the genuineness of the same had not been proved. Thus, out of the addition of Rs. 1,42,749 only an addition of Rs. 40,000 was sustained. The Commissioner (Appeals) also deleted the addition of Rs. 3 lacs on the ground that the assessing officer had exceeded his jurisdiction in making the said addition. According to him when the revised return was filed on 31-3-1987, the appellate proceedings were pending before the Commissioner (Appeals) and as the appellate proceedings were merely a continuation of the assessment proceedings, the Commissioner (Appeals) while deciding the appeal on 7-3-1989, could have himself taken note of the revised return and made the addition on its basis. Thus, according to the Commissioner (Appeals), the assessing officer could not reopen the assessment u/s 147 to rope in the amount of Rs. 3 lacs declared in the revised return and the only issue for consideration by the assessing officer in the remand proceedings was in respect of addition of Rs. 1,42,749.
Against the order of the Commissioner (Appeals), the Revenue filed an appeal before the Tribunal challenging the relief of Rs. 1,02,749 and Rs. 3 lacs granted by the Commissioner (Appeals). The assessee filed cross- objections in which the addition of Rs. 40,000 sustained u/s 40A(3) of the Act was challenged. The Tribunal vide order dated 7-10-1998, not only confirmed the Commissioner (Appeals)''s order in upholding the disallowance of Rs. 40,000 made u/s 40A(3) but also accepted the departmental appeal in respect of the payment of Rs. 24,000 which was also held to have been made in contravention of the said provision. The Tribunal found that the assessee had not fulfilled the requirements provided in the Board''s Circular itself and as such exceptions provided therein. The Tribunal also restored the addition of Rs. 3 lacs which had been deleted by the Commissioner (Appeals) on the ground that the assessee had itself declared it in the return filed under the Amnesty Scheme.
It is in this background that the questions formulated by this Court have to be answered. Regarding the question No. 1, the counsel for the appellant has reiterated his stand as taken before the authorities below and relies on the Board''s Circular, dated 31-5-1977. Shri R.P. Sawhney, standing counsel for the department, relies upon the order of the Tribunal is support of the disallowance.
We have heard the counsel for the parties and perused the records. The only defence of the assessee before the authorities below has been that the transactions fell within the exceptions provided in the Board''s Circular, dated 31-5-1977. No doubt the explanation rendered by the assessee in respect of the payments of Rs. 24,000 and Rs. 40,000 would be covered by the exceptional circumstances as provided in Board''s circular, yet that by itself win not entitle the assessee to claim the relief. There is a further requirement provided in the Board''s Circular itself for furnishing of a confirmatory letter from the concerned parties. The relevant extract from the said circular is being reproduced., below FEE for the sake of convenience it can be said that it would generally satisfy the requirements of rule 6DD(j), if a tter to the above effect is produced in respect of each transaction falling within the categories listed above from the seller giving full particulars of his address, sales-tax number/permanent account number, if any, for the purposes if proper identification to enable the Income Tax Officer to satisfy himself about the genuineness of the transactions. The Income Tax Officer will, however, record his satisfaction before allowing the benefit of rule 6DD(j)."
Admittedly no such letter in the above terms had been furnished by the assessee. In this view of the matter, this question has to be decided against the assessee and in favour of the Revenue. We, therefore, hold that the Tribunal was justified in sustaining the addition of Rs. 64,000 in view of the provisions of section 40A(3) of the Act read with rule 6DD of the IT Rules.
Coming to question No. 2, the learned counsel for the assessee has submitted that the Tribunal has wrongly upheld the addition on the ground that the assessee itself had shown the income of Rs. 3 lacs in the revised return. It has been contended that the Tribunal seems to have referred to the return filed on 31-3-1987 which was an invalid return and as such was non est in the eyes of law. In response to the notice u/s 148 of the Act, the assessee had requested that the original return filed by it be treated as return filed in compliance of the said notice. Thus, it was argued that there was no return before the assessing officer during the reassessment proceedings in which a sum of Rs. 3 lacs had been offered for assessment. Shri R.P. Sawhney, Senior Advocate, on the other hand, supported the order of the Tribunal. It was contended by him that once the assessee had filed the return under the Amnesty Scheme offering an additional income of Rs. 3 lacs for taxation, ''the assessing officer had to accept the same and bring the additional income to tax. No further onus lay on the assessing officer to prove the existence of such an income.
We have heard the counsel for the parties and perused the records. It is an undisputed fact that the assessee had filed its return on 31-3-1987, offering an additional income of Rs. 3 lacs to take the benefit of the Amnesty Scheme which was then in vogue. This scheme had been introduced in June, 1985 and was valid upto 31-3-1987. It offered amnesty from penal consequences to all those persons who came forward to declare their undisclosed income voluntarily. Various circulars had been issued by the CBDT in this behalf explaining the scheme and also clarifying the doubts of the assessees. Vide Circular No. 451, dated 17-2-1986, the CBDT had answered various questions about the scheme. It would be relevant here to reproduce the question Nos. I and 2 and the answers thereto which would resolve the issue in hand.
"Question No. 1.-What will be the procedure required to be followed by the assessee who wants to declare income or wealth in respect of the past years?
(a) in case where the assessments pertaining to those years are already completed:
(b) in case where the assessments in respect of those years are pending.
Answer : In cases were the asessments are already completed, the taxpayer should approach the concerned CIT with the full disclosure of the amounts 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 31-3-1986. The filing of the returns will be regularised by issue of formal notices u/s 148 of the Income Tax Act/s. 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. 2 : In respect of completed assessments, the question will arise whether the assessee should merely declare the income relevant to those years and pay the tax according to the rates prevalent in those years in such declared income or whether he is required to file the return of income showing the additional income ?
Answer : As mentioned above, he must file a fresh return of income including the additional income."
Here it needs to be clarified that initially the Amnesty Scheme was valid upto 31-3-1986, but later it was extended upto 31-3-1987. Thus, the year in answer to question No. 1 has to be read as 1987 in place of 1986. The above clarifications clearly show that the scheme itself provided for a procedure to reulrise the returns filed under the Amensty Scheme in cases where the assessment for the relevant assessment year stood already completed. The assessees were required to file the return of income including the additional income and the said returns were to be regularised by issue of a case. The assessee had filed the return offering the additional income of Rs 13 lacs under the Amensty Scheme after the assessment for the for the assessment year 1981-82 had already been completed. The assessing officer, therefore, had rightly issued the notice u/s 148 to regularise the said return and bring the amount of Rs. 3 lacs to tax. This action is clearly in accordance with the terms of the Amnesty Scheme and the assessee cannot possibly object to the additional income under the Amnesty Scheme being added to its total taxable income. In this view of the matter, we are satisfied that the Tribunal has correctly restored the addition of Rs. 3 lacs. Thus, this question is also to be answered against the assessee.
In this result, the appeal is dismissed.