Income Tax Appellate Tribunal - Ahmedabad
Assistant Commissioner Of Income Tax vs Jayantilal Tribhovandas. on 31 August, 1995
Equivalent citations: (1996)54TTJ(AHD)484
ORDER
B. L. CHHIBBER, A. M. :
The main grievance projected in these two appeals by the Revenue is that the learned CIT(A) is not justified in directing the Assessing Officer (AO) to allow the benefit of Amnesty Scheme in respect of amounts of Rs. 42,639 and Rs. 91,480 for asst. yrs. 1983-84 and 1984-85 respectively declared as income by the assessee.
2. The assessee is a partnership concern. A search was conducted at the residential premises of one of the partners, viz., Shri Tribhovandas Madhavdas on 9th May, 1984, during the course of which some loose papers were found which contained certain notings. During the course of search statement of Shri Jayantilal Tribhovandas, son of the partner Shri Tribhovandas Madhavdas, was recorded on 9th May, 1984. It is pertinent to note that no search was conducted at the premises of the assessee. The firm is constituted of four partners out of which only two were raided. The assessee-firm declared the amounts of Rs. 42,639 and Rs. 91,480 for asst. yrs. 1983-84 and 1984-85 respectively on the basis of notings on the loose papers found at the residential premises of Shri Tribhovandas Madhavdas, a partner, in the revised returns and claimed the benefits under the Amnesty Scheme, 1985. The AO assessed the aforesaid two amounts but refused the benefits of Amnesty Scheme to the assessee-firm stating that "This is a search and seizure case and there was prior detection of concealment. Immunity under the Amnesty Scheme is, therefore, not available in respect of addition of Rs. 42,639 and Rs. 91,480". No further clarification has been given by the AO.
3. On appeal, the CIT(A) held that the assessee was entitled to the benefits of the Amnesty Scheme because there was no prior detection of concealment in the case of the assessee-firm. He further held that the assessees case is covered under the answer to question No. 7 of the CBDT Circular No. 451, dt. 17th Feb., 1986 [(1986) 51 CTR (St) 82] which reads as under :
"Question No. 7 :
Where the investigations in the case of persons other than the assessee indicate concealment of income by the assessee and the assessee makes a true and full disclosure of his income, would he be entitled to immunity under these circulars ?
Answer : Yes."
The CIT(A) held that the Circular of the Board was binding on the Departmental authorities as held by the Honble Madhya Pradesh High Court in the case of Jaikishan Gopikishan & Sons vs. CIT (1989) 178 ITR 481 (MP).
4. The learned Departmental Representative submitted that no doubt the search was on the two partners of the firm, yet, since the loose papers pertained to the firm, it was a search and seizure case and as such the benefits of Amnesty Scheme cannot be made available to the assessee-firm. In support of his contention, he relied upon the judgment of the Honble Calcutta High Court in the case of Anand Kumar Saraf & Ors. vs. CIT (1995) 211 ITR 562 (Cal), the judgment of the Honble Kerala High Court in the case of Ramchandran & Co. vs. ITO (1994) 209 ITR 982 (Ker) and the order of the Tribunal in the case of Asstt. CIT vs. Ilaxi Textiles Industries (1994) 49 TTJ (Ahd) 491 : (1994) 49 ITD 330 (Ahd).
5. Shri K. C. Patel, the learned counsel for the assessee, strongly supported the order of the CIT(A). He submitted that there was no search and seizure operation at the premises of the assessee. The assessee-firm is constituted of four partners but only two of the partners were raided and at the premises of one of the partners Shri Tribhovandas Madhavdas some loose papers in the handwriting of his son Shri Jayantilal were found. So far as the assessee is concerned, there was no inquiry, no incriminating document was seized from the premises of the assessee-firm and as such the AO was not justified in holding that there was prior detection of concealed income as a result of search and seizure. He also relied upon the judgment of the Calcutta High Court in the case of Anand Kumar Saraf & Ors. (supra), the order of the Tribunal in the case of WTO vs. Nand Kumar Pd. Shah (1992) 41 ITD 406 (Pat) and the order of the Tribunal in the case of Asstt. CIT vs. Prakash Oil Industries & Ginning Factory (1995) 52 TTJ 514 (Ahd) to which one of us (Accountant Member) was a party.
6. We have considered the rival submissions and perused the facts on record. By any standard, it cannot be said that the search and seizure operation was carried out at the business premises of the assessee-firm. It is an admitted fact that there was no search warrant against the assessee-firm and out of four partners who constituted the firm, only two were raided. From the residence of one of the partners, viz., Shri Tribhovandas Madhavdas some loose papers were found which had some vague notings in the handwriting of the son Shri Jayantilal of the said partner (not the partner of the said firm) whose (sons) statement was recorded and in his statement his son admitted that the loose papers were written by him. Thereafter, no investigation/inquiry was conducted till 31st March, 1987, when the assessee-firm filed the revised returns under the Amnesty Scheme, 1985, which was in operation. It is significant to note that no investigation/inquiry was conducted in the intervening period of about three years either in the case of the partner at whose residence search was conducted nor in the case of the firm and accordingly it is held that the revised returns were not prompted by the investigation that was going on. As will be apparent from the decision of the Calcutta High Court in the case of Anand Kumar Saraf (supra) relied upon by both the parties before us, the Honble High Court has clearly held that merely seizure of papers cannot mean detection and that when detection has not taken place, if the assessee were to come forward with a disclosure under the Amnesty Scheme, he is very well eligible for all the benefits as envisaged under the Amnesty Scheme. The Honble High Court further observed at page 574 as under :
"The mere stigma of search and seizure cannot shut out the assessee from the amnesty. The scheme is an inducement to evaders to make a clean breast of past evasions and square up accounts with the Revenue. The persons who are left out from this opportunity are those whose concealments have been come to light beforehand by investigations and search and seizure operations carried out by the Revenue. The clarifications of the Board in its answer to question No. 19 as to the meaning of the expression "before detection by the Department" show that if the assessing authority has a prima facie belief that would not mean detection. The dictionary meaning of the word "detect" is "to discover the true especially hidden or disguised character" or "to discover or determine the existence, presence or fact" (see Websters Third New International Dictionary, 1976 edition). In the instant case, certain documents and papers were seized. They might or might not reveal concealment. Even the seizure could not lead to a prima facie belief as to concealment as the contents, purport and the implications of the documents were yet to be gone into. Therefore, at the point of time the return under the Amnesty Scheme was filed, the AO admittedly had no idea as to whether the seized papers would reveal any concealment. The mere fact that the petitioner -appellants case was awaiting a probe with reference to his past records as well as extrinsic sources could not lead to his ouster from the scope of the scheme."
The Honble Calcutta High Court has further relied on the answer 19 of the CBDT Circular No. 451 in para 14 of the judgment, has mentioned as under :
"It is an admitted fact that the assessee disclosed fully and truly his income and wealth in such revised returns and had also paid taxes in due time as provided under the amnesty scheme. Since the Department had not looked into the seized papers and had not carried out investigation prior to 31st March, 1986, it cannot be said that by the mere fact of seizure, the tax authorities could be said to have even a prima facie belief that the concealment of income and wealth by the assessee had been detected. Even if there had been such prima facie belief, the existence of such belief could not deprive the assessee from claiming the immunity and benefits given under the amnesty scheme provided the assessee disclosed his true income and wealth in the revised returns and paid taxes based on such revised returns in due time as prescribed in the amnesty scheme. This has been clearly explained by the CBDT in reply to question No. 19 in the said Circular No. 451 [see (1986) 158 ITR (St) 135], dt. 17th Feb., 1986."
In Asstt. CIT vs. Prakash Oil Industries & Ginning (supra) relied upon by the learned counsel for the assessee, it has been held by this Tribunal that mere admission of a partner who happens to be a partner of other firms also as regards the transactions mentioned in the diary seized during the course of search of his premises, cannot bind the assessee-firm and binds the partner individually and no addition can be made in the hands of the firm on the basis of such admission. In the case before us the search was admittedly at the residence of one of the partners, viz., Shri Tribhovandas Madhavdas and during the course of search statement of the son of the partner, viz., Shri Jayantilal was recorded which cannot bind the assessee firm though it may bind the son of the partner. In view of the above, we agree with the learned CIT(A) that the assessees case is covered under the answer to question No. 7 of the CBDT Circular No. 451, dt. 17th Feb., 1986 reproduced at page 2 above.
Coming to the decision of the Kerala High Court in the case of Ramchandran & Co. (supra) relied upon by the learned Departmental Representative, we find that the facts in that case are distinguishable from the facts of the case before us. In the case before the Kerala High Court, the return of the assessee for the asst. yr. 1984-85 was due on 31st July, 1984, but the petitioner sought for extension of time till 31st March, 1985, and filed the return one year later on 31st March, 1986, disclosing a total income of Rs. 4,43,370. The ITO started investigation on receipt of the return and called for various details and particulars from the petitioner by letter dt. 1st Dec., 1986. While the proceedings were thus going on the petitioner purported to take advantage of the Amnesty Scheme of 1985, and filed a revised return on 12th March, 1987, disclosing a total income of Rs. 8,39,810 for the year. The ITO, however, was not satisfied with this return as he was of the opinion that the petitioner had disclosed a lesser value for the arrack sold by it during this year than in the previous year, and for other reasons. He made an addition to the total income returned, besides disallowing certain items of expenditure claimed. On the basis of the above facts, the Honble Kerala High Court held that the revised return was evidently prompted by the investigation that was going on and was made almost on the eve of completion of the assessment, namely, on 12th March, 1987, the date of assessment being 1st April, 1987. The Honble High Court accordingly held that the return so filed was neither true nor complete and hence the petitioner became disentitled to the benefits of the Amnesty Scheme, 1985.
In the case before us, as stated above, the revised returns were not prompted by the investigation that was going on.
Coming to the decision of the Tribunal in the case of Ilaxi Textiles Industries (supra) relied upon by the learned Departmental Representative, we find that the facts of the two cases are distinguishable. In the case of Ilaxi Textiles Industries, enquiry by the Revenue had proceeded further, and had reached to a stage where concealment by the assessee had been detected and various statements of third parties to justify the same had also been recorded. Further, one of the technical third party, who had given statement against the assessee was also cross-examined by the partner of the assessee-firm. Subsequently, after the cross-examination on the date fixed for the next hearing of the case, neither the assessee nor his authorised representative appeared before the AO. Thereafter, the assessee-firm filed a revised return disclosing additional income referable to the enquiry in question under the Amnesty Scheme. For this very reason, subsequent filing of a revised return by the assessee-firm showing therein an additional income and claiming the benefits of the Amnesty Scheme had not been granted and the matter when brought before this Tribunal was decided in favour of the Revenue.
In the case before us, as is evident from the facts discussed hereinabove, the search was conducted at the residential premises of one of the partners during the course of which a vague statement of his son was recorded; no inquiry whatsoever had been made after the search by the Revenue during the course of intervening period of about three years. As such the Revenue cannot draw support from the decision of the Tribunal in the case of Ilaxi Textiles Industries (supra). In the light of the above discussion, we hold that the assessee-firm is entitled to the benefits of Amnesty Scheme of 1985 and accordingly confirm the findings of the CIT(A).
7. The next grievance of the Revenue is that the CIT(A) has erred in law and on facts in directing the ITO to modify/waive the interest under s. 215 in the light of the Boards circular in this behalf. This ground is consequential in nature. Since the CIT(A) has held that the assessee is entitled to the benefits of the Amnesty Scheme, 1985, and we have confirmed the finding of the CIT(A) in this regard, the order of charging of interest under s. 215 is liable to be modified/waived in the light of Boards circular in this behalf. Needless to say that the Boards circulars are binding on the IT authorities in view of the judgment of the Madhya Pradesh High Court in the case of Jaikishan Gopikishan & Sons (supra).
8. In the result, the appeals are dismissed.