Punjab-Haryana High Court
Aggarwal Steel Traders vs Cit & Anr. on 16 November, 1999
Equivalent citations: [2001]250ITR738(P&H)
Author: N.K. Sud
Bench: N.K. Sud
JUDGMENT
N.K. Sud J.
This appeal under section 260A of the Income Tax Act. 1961 (hereinafter referred to as "the Act"), is directed against the order of the Income Tax Appellate Tribunal, Chandigarh Bench (hereinafter referred to as "the Tribunal"), dated 7-10-1998. The followinguestions of law had been formulated for consideration vide order dated 4-3-1999 :
"1. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate 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 Income Tax Rules, 1962 ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in sustaining the addition of Rs. 3,00,000 ?"
2. For resolving the controversy it is necessary to advert to the relevant facts. The assessee filed its return of income for the assessment year 1981-82 on 8-5-1981, declaring an income of Rs. 41,380. The assessment under section 143(3) was framed by the assessing officer on 27-3-1986, and an addition of Rs. 6,08,578 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) (hereinafter referred to as "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 lakhs 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 lakhs for taxation under the amnesty scheme, the assessing officer issued a notice under section 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 wasuestioned. However, it was also stated that the original return filed may be treated as having been filed in compliance with the said notice.
The assessing officer thereafter proceeded to complete the reassessment initiated vide notice under section 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 the payments made in contravention of section 40A(3). He passed an order under section 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 said amount to the total income. He also made an addition of Rs. 3 lakhs 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 Name of the party 10-2-1981 Rs. 24,000 Rajnish Trading Company 28-3-1981 Rs. 61,795 S and A Steel Industries, Mandi, Gobindgarh.
26-6-1980 Rs. 17,000
-do-
13-11-1980 Rs. 40,000 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. 206/17/76-ITA-II, dated 31-5-1977) (see (1977) 108 ITR (St.) 8), issued by the Central Board of Direct Taxes and as such no disallowance under section 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 fourth 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 lakhs 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 under section 147 to rope in the amount of Rs. 3 lakhs 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 lakhs granted by the Commissioner (Appeals). The assessee filed cross-objections in which the addition of Rs. 40,000 sustained under section 40A(3) of the Act was challenged. The Tribunal vide order dated 7-10-1998, not only confirmed the Commissioner (Appeals) order in upholding the disallowance of Rs. 40,000 made under section 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 re uirements provided in the Boards circular itself and as such could not be said to be covered by the exceptions provided therein. The Tribunal also restored the addition of Rs. 3 lakhs 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.
3. It is in this background that theuestions formulated by this court have to be answered. Regardinguestion No. 1, counsel for the appellant has reiterated his stand as taken before the authorities below and relied on the Boards circular dated 31-5-1977. Shri R.P. Sawhney, standing counsel for the department, relies upon the order of the Tribunal in support of the disallowance.
We have heard 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 Boards 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 the Boards circular, yet that by itself will not entitle the assessee to claim the relief. There is a further re uirement provided in the Boards circular itself for furnishing of a confirmatory letter from the concerned parties. The relevant extract from the said circular is being reproduced below for the sake of convenience (see (1977) 108 ITR (St.) 8, 9) :
"It can be said that it would generally satisfy the re uirements of rule 6DD(J), if a letter 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 of proper identification to enable the Income Tax Officer to satisfy himself about the genuineness of the transaction. 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, thisuestion 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 Income Tax Rules.
4. Coming touestion No. 2, 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 lakhs 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 under section 148 of the Act, the assessee had re uested that the original return filed by it be treated as a return filed in compliance with 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 lakhs 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 lakhs 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 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 lakhs to take the benefit of the amnesty scheme which was then in vogue. This scheme had been introduced in June, 1985, and was valid up to 31-3-1987. It offered amnesty from penal conse uences to all those persons who came forward to declare their undisclosed income voluntarily. Various circulars had been issued by the Central Board of Direct Taxes in this behalf explaining the scheme and also clarifying the doubts of the assessees. Vide Circular No. 451, dated 17-2-1986 (see (1986) 158 ITR (St.) 135), the Central Board of Direct Taxes had answered variousuestions about the scheme. It would be relevant here to reproduceuestions Nos. 1 and 2 and the answers thereto which would resolve the issue in hand.
"question No. 1.What will be the procedure re uired to be followed by the assessee who wants to declare income or wealth in respect of the past years ?
(a) in cases where the assessments pertaining to those years are already completed;
(b) in cases where the assessments in respect of those years are pending.
Answer.In cases where the. assessments are already completed, the taxpayer should approach the concerned Commissioner of Income Tax 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 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.
uestion No. 2.In respect of completed assessments, theuestion 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 on such declared income or whether he is re uired 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."
5. Here it needs to be clarified that initially the amnesty scheme was valid up to 31-3-1986, but later it was extended up to 31-3-1987. Thus, the year in answer touestion 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 regularise the returns filed under the amnesty scheme in cases where the assessment for the relevant assessment year stood already completed. The assessees were re uired to file the return of income including the additional income and the said returns were to be regularised by issue of a notice under section 148 of the Act. This is precisely what has been done in this case. The assessee had filed the return offering the additional income of Rs. 3 lakhs under the amnesty scheme after the assessment for the assessment year 1981-82 had already been completed. The assessing officer, therefore, had rightly issued the notice under section 148 to regularise the said return and bring the amount of Rs. 3 lakhs 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 lakhs. Thus, thisuestion is also to be answered against the assessee.
In this result, the appeal is dismissed.