Income Tax Appellate Tribunal - Ahmedabad
Rajnikant A. Haji (Huf) vs Income-Tax Officer on 11 November, 1991
Equivalent citations: [1992]40ITD311(AHD)
ORDER
--Amnesty Scheme Ratio:
Return submitted under amnesty scheme and duly passed under section 143(1) was erroneous and prejudicial in absence of examination of legal provisions applicable regarding carry forward of speculation losses as well as non conducting of necessary enquiries.
Held:
The acceptance of returns by the Income Tax Officer under section 143(1) without considering the allowability or otherwise of the carry forward of the speculation losses and without verifying the reality of the amount of speculation losses and profits shown in the various returns renders orders passed under section 143(1) to be erroneous and prejudicial to the interest of revenue. The Amnesty Scheme nowhere gives any guarantee that the returns of income submitted under the said scheme will not be scrutinised or investigated. The assessments were made under section 143(1) without making the necessary and relevant enquiries and without considering the relevant provisions of law relating to carry forward of speculation losses and, therefore, are clearly erroneous and prejudicial to the interest of revenue. Such orders can be subjected to revision under section 263.
Application:
Also to current assessment years.
Income Tax Act 1961 s.263 Loss--SPECULATION LOSS--Carry forward.
Ratio:
Restrictions regarding allowability of carry forward of losses including losses in speculation business not relaxed in case of return filed under amnesty scheme.
Held:
A persual of various Circulars issued under the Amnesty Scheme clearly shows that the various statutory restrictions regarding allowability of carry forward of losses including losses in speculation business such as time limit and other pre-conditions prescribed under sections 72, 80, 139(3), 147 and 148 and the necessity of passing a specific order under section 157 has not, in any manner, been relaxed either expressly or by implication. Moreover, such circulars without any specific relaxation as to these restrictions cannot be interpreted in a manner so as to override these clear provisions of law.
Application:
Also to current assessment years.
Income Tax Act 1961 s.73 Income Tax Act 1961 s.119 ORDER B.M. Kothari, Accountant Member
1. These appeals are directed against the common order passed by the Commissioner of Income-tax, Guj. II, Ahmedabad (CIT) under Section 263 of the Income-tax Act, 1961 ('the Act') for assessment years 1981-82 to 1984-85.
2. The assessee submitted returns of income for assessment years 1981-82 to 1984-85 on 31st March, 1987 which were claimed to have been filed under the Amnesty Scheme. The details of income disclosed in these returns were as under:
A.Y. Taxable Income Tax paid Speculation loss
claimed as eligible
for being carried
forward
1981-82 Rs. 16,354 Rs. 1,914 (-)Rs. 92,066
1982-83 Rs. 20,801 Rs. 3,487 (-)Rs. 2,91,099
1983-84 Rs. 20,301 Rs. 3,295
Speculation profit shown Rs. 2,34,993
Less : Set off claimed in respect of carry forward of
speculation loss of assessment years 1978-79 to 1982-
83Aggregating to Rs. 5,59,916, setoff claimed to the
extent of available profit Rs. 2,34,993 --Nil
1984-85 Rs. 15,834 Rs. 1,724 (-)Rs. 31,141
Rs. 10,420
The ITO completed assessments for all these years under Section 143(1) vide orders dated 30th November, 1987 in which the income was assessed on total income shown in column 2 of the above given Chart. No specific finding as to be computation or determination of speculation loss shown in the returns of income was given in the said orders. The CIT issued a show-cause notice dated 6th February, 1990 saying these assessments completed under Section 143(1) are erroneous insofar as these are prejudicial to the interest of revenue. The speculation loss claimed and allowed in the aforesaid years is erroneous and has prejudiced the interest of revenue. The returns were filed beyond the time allowed under Section 139(1). The loss claimed in such belated returns would not be eligible to be carried forward. The ITO completed the assessments without taking into account all material and relevant facts and also the provisions of law and circulars on Amnesty Scheme. The assessee submitted a reply dated 14-2-1990 objecting to such proceedings under Section 263. The CIT passed the order under Section 263 on 12-3-1990 in which he held that the orders passed by the ITO accepting the aforesaid returns under the Amnesty Scheme are erroneous and prejudicial to the interest of revenue. He, therefore, set aside all these assessments and directed the ITO to make the assessment orders afresh after making due enquiries into the source of income of the assessee and after examining the assessee's claim for grant of carry forward of his share of speculation loss. The present appeals are directed against that common order of the CIT under Section 263.
3. Before us, the learned counsel for the assessee vehemently contended that all these returns filed by the assessee are clearly covered by the various circulars issued in relation to Amnesty Scheme. The income disclosed in these returns are true and real income. The net income shown in all these returns contain a positive figure of income, taxes thereon were duly paid within time. As per provisions of the Act, the speculation loss can only be set off against the speculation profit. Since there was no speculation profit during assessment years 1981-82, 1982-83And 1984-85, the speculation loss had to be carried forward as per the provisions of Income-tax Act. The assessments completed by the ITO under Section 143(1) cannot, therefore, be regarded as erroneous and prejudicial to the interest of revenue but those were made strictly in consonance with the circulars issued under the Amnesty Scheme and are also in consonance with the relevant provisions of law. The assessee is engaged in the business of speculation transactions since assessment year 1975-76 which has continued in all subsequent years. A chart showing details of profit or loss shown in these speculation transactions from assessment years 1975-76 to 1989-90 was also submitted to support the contention that the figure of speculation loss or income shown in these returns submitted under the Amnesty Scheme are true and correct. The CIT has passed the order under Section 263 without properly considering the facts and submissions filed on behalf of the assessee vide reply dated 14-2-1990. It was also pointed out that the provisions of Section 139(3) apply only in cases of return of losses. In the present case the total income shown in all these returns is a positive figure of income. Hence the provisions of Section 139(3) are not at all applicable in the facts and circumstances of the present case. The learned counsel also placed heavy reliance on the judgment of Hon'ble Gujarat High Court in the case of Taiyabji Lukmanji v. CIT [1981] 131 ITR 643 to support his contention that once the assessee, on faith of assurances contained in various circulars issued under the Amnesty Scheme, submitted the returns of income and those were accepted under Section 143(1), the department cannot invoke the provisions of Section 263As it will not only amount to a breach of promissory estoppel but in the long run it would be counter productive, as in future no one will come forward to disclose their concealed income voluntarily pursuant to such voluntary disclosure scheme or Amnesty Schemes. It was also pointed out that the aforesaid judgment of the Hon'ble Gujarat High Court was delivered on 16th April, 1981 at a time when bearer bonds had been issued by the Government. The CIT has not pointed out any material to show that the figures of income or speculation loss shown by the assessee was false or incorrect. The assessee has voluntarily deposited tax aggregating to more than Rs. 10,000 for these four years, the income declared in these returns are true and complete and the assessee has cooperated in all the enquiries relating to the assessment of his income. Thus all the conditions mentioned in circular F.No. 281/ 8/86-IT(INV.III) dated 17-2-1986 have been complied with by the assessee. The ITO had, therefore, rightly completed all the assessments under Section 143(1) in accordance with the Amnesty Scheme. He, therefore, urged that the order of the CIT under Section 263 should be set aside.
4. The learned D.R. supported the order of the CIT and relied upon the detailed reasons mentioned in the said order. It was submitted that the net result of taxable income as well as speculation loss shown in the returns of income for these four years clearly reveal that the assessee by filing these returns wanted to derive the benefit of carry forward of speculation losses and these returns in substance are returns showing negative figures of speculation losses. The provisions of Section 148 are not meant for the benefit of the tax payer. The circulars issued under the Amnesty Scheme nowhere provides that the time limit prescribed under Section 139(3) for claiming carry forward of losses will also be extended in respect of returns of loss submitted under the said Amnesty Scheme. In fact this scheme was introduced with a view to enable the tax payers to voluntarily disclose their undisclosed income truly and completely and was not meant for resort to a device like this by which the assessee wants to secure the right to have carry forward in respect of the speculation losses. The acceptance of such returns by the ITO under Section 143(1) without considering the allowability or otherwise of the carry forward of the speculation losses and without verifying the reality of the amount of speculation losses and profits shown in the various returns renders all these orders passed under Section 143(1) to be erroneous and prejudicial to the interest of revenue. The Amnesty Scheme nowhere gives any guarantee that the returns of income submitted under the said scheme will not be scrutinised or investigated. In almost all the circulars it was mentioned that the assessees are advised to make a true and complete disclosure of income failing which the immunity assured in these circulars may not be granted. The assessments were made under Section 143(1) without making the necessary and relevant enquiries and without considering the relevant provisions of law relating to carry forward of speculation losses and, therefore, are clearly erroneous and prejudicial to the interest of revenue. Such orders can be subjected to revision under Section 263 of the Act. He also placed reliance on judgments in CIT v. Geeta Devi Agarwal [1988] 174 ITR 601 (Pat.), CIT v. Smt. Bibi Zaibunnisa [1990] 185 ITR 284 (Pat.), Gee Vee Enterprises v. Addl. CIT [1975] 99 ITR 375 (Delhi), Thalibai F. Jain v. ITO [1975] 101 ITR 1 (Kar.) and Addl. CIT v. Mukur Corpn. [1978] 111 ITR 312 (Guj.). He, therefore, urged that the order of the CIT should be confirmed.
5. We have carefully considered the rival submissions and have also gone through the order of the CIT as well other documents and circulars to which our attention was drawn during the course of hearing. The CBDT issued various circulars, e.g., Circular No. 423, dated 26th June, 1985 and Circular Nos. 432,439,440 and 441, dated 15th November 1985 and Circular No. 451, dated 17th February, 1986 regarding declaration of higher income or wealth which is commonly known as Amnesty Scheme announced by the CBDT. In all these circulars it was mentioned that where the tax payers voluntarily and in good faith make a true and full disclosure of his concealed income prior to its detection by the ITO, immunity will granted or a very liberal and sympathetic view will be taken in matters relating to levy of penalty, penal interest etc. In subsequent circulars issued from time to time it was assured that all assessees who come forward voluntarily to make a full and true disclosure of their income and wealth may avail this opportunity of voluntarily filing the returns of income and wealth without fear of any penal consequences such as penalty or prosecution. In all these circulars issued under the Amnesty Scheme there is no such specific guarantee or undertaking that the department will accept all these returns without any scrutiny or investigation. It has been indicated in these circulars that the disclosure should be honest, complete and true. In order to verify the correctness and completeness of such disclosure of income made in the returns of income submitted under Amnesty Scheme, the revenue could make necessary and relevant enquiries in appropriate cases.
5.1 In the present case the assessee submitted returns for all these four years on which positive income ranging between Rs. 15,000 to 21,000 has been shown. However, speculation loss of Rs. 92,066, Rs. 2,91,099 and Rs. 31,141 has been claimed in assessment years 1981-82, 1982-83And 1984-85. In assessment year 1983-84 speculation profit has been shown at Rs. 2,34,993 which has been reduced to nil by claiming set off in respect of carried forward past speculation losses for assessment years 1978-79 to 1982-83. In the peculiar facts and circumstances of the present case, we have to consider as to whether the ITO completed the assessments without making necessary and relevant enquiries and without taking into consideration the relevant provisions of law relating to carry forward and set off of the speculation losses.
5.2 The matter relating to carry forward and set off of loss in speculation business is governed by Section 73 of the Act. A loss in a speculation business cannot be set off under Section 70 against any income under the same head, namely, business or profession. It also cannot be set off under Section 71 against income under any other head but it can be set off only against profits of speculation business as prosecution 73(1) of the Act. The loss in a speculation business can be carried forward to a subsequent year and set off only against the profits of any speculation business carried on in that year. Section 80 provides, inter alia, that no loss which has not been determined in pursuance of a return filed in accordance with the provisions of Sub-section (3) of Section 139 shall be carried forward and set off under Section 73(2). Thus the conditions prescribed in Section 80 require that a return must be filed in accordance with Section 139(3) and further that the loss must be determined in pursuance of such a return. Section 139(3) provides that any assessee who intends to carry forward a business loss or a speculation loss or a loss under the head capital gains should file a return within the time allowed under Sub-section (1) of Section 139. The Supreme Court in the case of C1T v. Kulu Valley Transport Co. (P.) Lid. [1970] 77 ITR 518 has held that Sub-sections (1) & (4) are to be read together and an assessee would be entitled to carry forward of the loss if he has filed the return after the period prescribed by Sub-section (1) of Section 139 but within the time allowed under Sub-section (4) of Section 139. In the present case the returns of income submitted on 31-3-1987 are beyond the limitation of time prescribed under Section 139(4). The belated return could be furnished under Section 139(4) for assessment years 1969-70 to 1988-89 before the expiry of two years period from the end of the assessment year to which the return relates. Thus, except for the return of income for assessment year 1984-85, all the returns submitted by the assessee for assessment years 1981-82 to 1983-84 were furnished beyond the period prescribed under Section 139(4). These returns were regularised by issuance of notices under Section 148. Whether, by issuance of notice under Section 148, on the basis of such belated returns voluntarily submitted by the assessee under the Amnesty Scheme would make the assessee eligible for carry forward of his speculation loss pursuant to belated returns filed beyond the period of limitation under Section 139(4) was also a relevant and necessary question which had to be decided by the ITO before completing assessments under Section 143(1). The ITO also did not take into consideration the provisions of Section 157 of the Act which require the assessing authority to notify to the assessee by an order in writing the amount of loss as computed by him for the purpose of carry forward in accordance with Section 73(2) relating to speculation loss. The assessee had mentioned in the statement of total income enclosed with these returns only the figure of share in speculation business in various years but did not submit any further particulars relating to the speculation transactions in which such loss or profit in speculation activities was derived. No enquiry was made in relation to such loss or profit in speculation business. The aforesaid discussions lead to the conclusion that the original assessments were completed by the ITO under Section 143(1) without taking into consideration the applicability or otherwise of the provisions of Sections 73(2), 80, 139(3) and 157 of the Act. The Hon'ble Gujarat High Court in the case of Mukur Corpn. (supra) has held that if the assessment was made without making necessary enquiries the assessment would be regarded as erroneous and prejudicial to the interest of revenue. The Hon'ble Patna High Court in the case of Smt. Bibi Zaibunnisa (supra) has held that the CIT, acting under Section 263(1) was competent to interfere with an order of assessment made under Section 143(1) of the Act in pursuance of the "scheme to help new tax payers under the small income group" launched by the Government.
5.3 A perusal of various circulars issued under the Amnesty Scheme clearly shows that the various statutory restrictions regarding allowability of carry forward of losses including losses in speculation business such as time limit and other preconditions prescribed under Sections 72, 80, 139(3), 147 and 148 and the necessity of passing a specific order under Section 157 has not in any manner been relaxed either expressly or by implication. Moreover such circulars without any specific relaxation as to these restrictions cannot be interpreted in a manner so as to override these clear provisions of law. The assessments under Section 143(1) were made without examining the applicability of these relevant legal provisions in relation to the given set of facts.
5.4 In view of the aforesaid facts and discussions and in view of the reasons recorded by the learned CIT in his order under Section 263, we are of the view that the CIT has rightly set aside the assessments and was fully justified in directing the ITO to make fresh assessments after making necessary enquiries in accordance with the provisions of law.
5.5 However, we would like to observe that if after making necessary enquiries and verification the ITO find, that the figures of speculation losses shown by the assessee in the returns of income submitted for the years under consideration are correct and complete the assessee will be clearly entitled to the immunity from levy of interest and penalties etc., as announced in the various circulars issued under the Amnesty Scheme regardless of the fact that the assessee may or may not be held to be entitled to grant of carry forward of speculation losses claimed pursuant to such belated returns filed beyond the time limit prescribed under Section 139(4). This is because the assessee had acted on the faith of such circulars and had inter alia disclosed substantial income from speculation voluntarily and in good faith in assessment year 1983-84. If the facts and figures relating to speculation loss and profits shown in these returns are found to be true and complete there would be no justification in levying any penalty or interest. At this stage, it will be worthwhile to make a reference to the judgment of Hon'ble Gujarat High Court in the case of Taiyabji Lukmanji (supra). In that case the Hon'ble High Court has given reference of an advertisement issued by the CBDT, which was published in the newspapers saying that if the original return filed by the assessee is false he may file a revised return to avoid the consequences of discovery including levy of penalty under Section 271(1)(c) etc. The Hon'ble Gujarat High Court, at page 646 observed as under :
... In our opinion, the Tribunal ought to have considered the question as regards the legality and propriety of levying penalty under Section 271 (1)(c) of the Act in the light of the instructions given by the Board in the advertisement referred to above. Whether or not it amounted to promissory estoppel and created a legal right apart, the question was required to be examined from the standpoint of the credibility of the department. Would it not cause greater harm to the department itself if assessees who respond to its appeals and desire to cleanse themselves of the past sins are deterred from doing so? In a way, in the long run, it might be counter productivity to do so. All these questions cannot be elbowed aside. They have to be met squarely in the face by the revenue authorities and the Tribunal by addressing themselves to it and answering the same in the manner considered right by them on policy and principle.
Our observations that in case the basic facts and figures relating to speculation loss shown in the returns of income are found to be correct no interest or penalty should be levied as assured in the circulars issued under the Amnesty is clearly fortified by the aforesaid judgment of Hon'ble Gujarat High Court.
6. In the result, the appeals are dismissed.