Income Tax Appellate Tribunal - Cochin
Smt. P.M. Celine vs Assistant Commissioner Of Income-Tax on 31 July, 1991
Equivalent citations: [1991]39ITD454(COCH)
ORDER
A. Satyanarayana, Accountant Member
1. These appeals filed by the assessee are against two separate orders dated 28-6-1990 for the assessment years 1983-84 to 1986-87 for which the previous years ended on 31-3-1983,31-3-1984,31-3-1985 and 31-3-1986 respectively. Since common points are involved in these appeals, they are being disposed of by a consolidated order for the sake of convenience.
2. Returns of income for the assessment years 1983-84 to 1985-86 were filed on 25-2-1987 and the return of income for the assessment year 1986-87 was filed on 6-3-1987 whereas the returns were due on 31st July of each assessment year. The Assessing Officer completed the assessments for all these four assessment years on 30-10-1987. Penalty proceedings under Section 271(1)(a) and 273(1)(b) were initiated. The assessee has filed a written reply on 23-3-1989. According to the Assessing Officer, the main claim of the assessee was that the returns were filed under the Amnesty Scheme and so the penalty proceedings should be dropped. The Assessing Officer observed that the Amnesty Scheme envisaged that the returns filed should be full and true and the said conditions were not satisfied in the assessee's case as the returned incomes had not been accepted as such. He also observed that the returns filed could not be termed as voluntary in nature as they were filed after a search in the case of the assessee's husband Shri T.V. Augustine. Hence he held that the penalty proceedings could not be dropped. In that view, he levied the penalties as under:-
Assessment Penalty levied Penalty levied year Under Section 271(1)(a) Under Section 273(1)(b) 1983-84 Rs. 49,720 Rs. 4,446 1984-85 Rs. 41,327 Rs. 5,166 1985-86 Rs. 28,218 Rs. 5,879 1986-87 Rs. 20,985 Rs. 11,242
Aggrieved with the said penalties the assessee carried the matters in appeal before the Commissioner of Income-lax (Appeals).
3. Before the CIT (Appeals) the assessee's counsel urged that the returns were filed under the Amnesty Scheme and that the assessee co-operated with the department and paid the taxes and so the Assessing Officer should not have levied the penalties. The CIT (Appeals) observed that the returns were filed by the assessee on account of a search conducted by the department in the case of the assessee's husband Shri T.V. Augustine, that it was obvious that the returns were filed in order to explain the investments of the assessee, that the Assessing Officer had not accepted the returns under Amnesty Scheme, that since the assessments were not completed under the Amnesty Scheme, penalty proceedings under Section 271(1)(a) and 273(1)(b) were attracted and so the Assessing Officer was justified in levying the impugned penalties. In that view, he confirmed the penalties levied. Aggrieved by the action of the CIT (Appeals), the assessee filed the present appeals before the Tribunal.
4. At the time of hearing, the assessee's counsel filed a statement showing the dates of filing the returns, incomes returned and incomes assessed by the Assessing Officer. The arguments of the assessee's counsel were to the following effect : For the assessment years 1984-85 and 1985-86 the incomes returned and assessed were Rs. 1,25,500 and Rs. 1,50,500 respectively. So the Assessing Officer and the CIT (Appeals) were not correct in stating that the returned incomes were not accepted as such. Only in the assessment years 1983-84 and 1986-87 the incomes returned and the incomes assessed were different. Even then, no proceedings under Section 271(1)(c) were initiated. The returns of income were filed on 25-2-1987 for the assessment years 1983-84, 1984-85 and 1985-86 voluntarily. To regularise the returns filed on that day the ITO has issued the notice under Section 148 and took the signatures of the assessee's representative. The returns were filed only under the Amnesty Scheme. The Central Board of Direct Taxes has issued Circular Nos. 423, 432, 439, 440, 441, 450, 451, 453 and 472 in the matter of Amnesty Scheme. The effect of all these circulars is an open invitation to all persons to file their returns of income and pay the taxes. In Circular no. 432 dated 20th September, 1985/November 15,1985 [156ITR 162 (Statutes)] it was emphasized that the department's approach will be very liberal and sympathetic in the case 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. It was also stated therein that 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 were 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. In Circular No. 441 dated November 15,1985 [156ITR 165 (Statutes)] it was again stated that old as well as new assessees should avail themselves of the Amnesty Scheme by voluntarily filing returns of income and wealth without fear of any penal consequences such as penalty or prosecution. In para 3 of the said circular it was clearly mentioned that the Amnesty Scheme applies to filing of returns after being caught also. In Circular No. 451 dated 17-2-1986 [158 ITR 135 (Statutes)] in answer to Question No. 4 it was clarified that the immunity from penalty and prosecution applied in all cases whether of income-tax or wealth-tax where the assessee admitted the truth and paid taxes properly. In answer to question No. 7 it was clarified that the assessee would be entitled to immunity where the investigations in the cases of persons other than the assessee indicated concealment of income by the assessee and the assessee made a true and full disclosure of his income. In this case, the enquiries were in the assessee's husband's case only. In the answer to Question No. 11 it was indicated that ladies also can avail of the immunity given by the circulars under the Amnesty Scheme. In the answer to Question No. 19 the expression "before detection by the department" was explained. It was explained as "If the Income-tax Officer has already found material to show that there has been concealment, that would mean the Department has detected the concealment. If the Income-tax Officer only had prima facie belief, that would not mean concealment has been detected". In the present assessee's case no concealment had been detected. As already stated above, proceedings under Section 271(1)(c) were not initiated. As per Circular No. 472,dated 15-10-1986 [162 ITR 17 (Statutes)] the benefit of the Amnesty Scheme was extended till 31-3-1987. Since the assessee had filed the returns before this date, Amnesty Scheme applies to the. assessee. The Kerala High Court in the case of A.V, Joy, Alukkas Jewellery v. CIT [1990] 185 ITR 638 held that merely because the returns are filed after the search, they will not cease to be a voluntary or a bona fide disclosure. The expressions "good faith" and "full and true disclosure of the income" mean that the assessee in the circumstances must have felt that he has filed the return voluntarily and in good faith and according to him has made a full and true disclosure of his income. The mere fact that what has been disclosed in the return has not been accepted by the ITO in the order of assessment would not in any way disentitle the assessee from the relief of waiver or reduction under Section 273A (See Seetha Mahalakshmi Rice & Groundnut Oil Mill Contractors Co. v. CIT [1981] 127 ITR 579 (AP). According to this decision, the immunity under the Amnesty Scheme is available to the assessee even in the assessment years 1983-84 and 1986-87 where the incomes assessed were different from the incomes returned. The assessee is deemed to have made a full disclosure of her incomes. Further in the assessment orders or in the order sheets in the files of the ITO there was no recording of the satisfaction of the ITO about the offences under Section 271 (1)(a) and 273(1)(b). Even on facts also the assessee succeeds. Even in the assessments additions have been made on the basis of the wealth statements filed by the assessee only. Thus, there was full and true disclosure from the assessee. Hence all penalties are liable to be quashed.
5. The Departmental Representative filed photostat copy of letter dated 8-1-1987 from the Assistant Director of Inspection (Inv.) addressed to the ITO, B-Ward, Alwaye, wherein the information about the possession of certain assets by the assessee was given to the ITO. The arguments of the Departmental Representative were to the following effect: The three essential conditions under the Amnesty Scheme are (i) the return should be voluntary, (it) the return should be filed in good faith, and (iii) the income declared should be true and full. In the present case whether the returns were filed voluntarily or not should be tested against the mental state of the assessee. Merely because they were filed before the issue of notices under Section 139(2) or under Section 148 will not be enough. The Tribunal should look to the circumstances that prompted the assessee to file the returns. The investments made by the assessee came to the notice of the Income-tax Department as can be seen from the letter dated 8-1-1987 filed before the Tribunal. The element of voluntariness is absent. The non-initiation of proceedings under Section 271(1)(c) appears to be a genuine mistake on the part of the ITO and hence the assessee cannot capitalize on the said mistake of the ITO. Non-recording of the satisfaction in the assessment order or in the order-sheets is not material. Notices under Section 271(1)(a) and 273(1)(b) were simultaneously issued along with the assessment orders on 31 -10-1987. This is clear from the notings made in the order-sheets, copies of which have been filed before the Tribunal. Hence it has to be taken that the ITO's satisfaction was very much there about the initiation of penalty proceedings. Even if the full disclosure was accepted for arguments sake, voluntariness was not there. On this ground alone the penalties levied should be confirmed. The returns were filed only after detection by the department (see the letter dated 8-1-1987 filed).
6. In reply, the assessee's counsel pointed out that the Departmental Representative fairly admitted that notices under Section 148 were issued to regularise the filing of the returns by the assessee.
7. We have considered the rival submissions, case law cited and the papers filed before us. The expressions "good faith" and "full and true disclosure of the income" have been explained by the Andhra Pradesh High Court in the case of Seetha Mahalakshmi Rice & Groundnut Oil Mill Contractors C (supra). According to the High Court, the said expressions mean that the assessee must have felt that he has filed the return voluntarily and in good faith and according to him has made a full and true disclosure of his income. The mere fact that what has been disclosed in the return has not been accepted by the ITO in the order of assessment would not in any way disentitle the assessee from the relief of waiver or reduction. The said judgment was delivered in the matter of interpretation of Section 273A. In the said section the expressions 'voluntarily' and "in good faith made full and true disclosure of his income" appear. In Circular No. 441 dated 15-11-1985 the Central Board of Direct Taxes has assured that the department's approach will be liberal and sympathetic in the case of assessees who come forward voluntarily to make a full and true disclosure of their incomes and wealth. In this case, the assessee had filed the returns and felt that she had filed the returns voluntarily and in good faith and had made a full and true disclosure of her income. In fact, the incomes returned were accepted as such in the assessment years 1984-85 and 1985-86. Only in the assessment years 1983-84 and 1986-87 the incomes assessed were higher than the income returned. But, as held by the Hon'ble Andhra Pradesh High Court in. the decision in Seetha Mahalakshmi Rice & Groundnut Oil Mill Contractors Co. s case (supra) the mere fact that the incomes disclosed have not been accepted by the ITO would not disentitle the assessee from the immunity under the Amnesty Scheme. Further, enquiries and search were conducted in the case of the assessee's husband and the Departmental Representative's contention was that voluntariness was absent in the filing of the returns by the assessee. But the Kerala High Court in the case of A .V. Joy, Alukkas Jewellery (supra) held that merely because returns were filed after the search they will not be ceased to be voluntary or a bona fide disclosure. In these circumstances, we hold that the immunity under the Amnesty Scheme is clearly available to the assessee and the penalties are not at all leviable.
8. Further, Section 271(1)(a) envisages the satisfaction of the Assessing Officer that the assessee has without reasonable cause failed to furnish the returns which he was required to furnish under Section 139(1) or Section 139(2). Similarly Section 273(1)(b) envisages the satisfaction of the ITO that the assessee has without any reasonable cause failed to furnish a statement of advance-tax/estimate of advance-tax. In this case, the Assessing Officer has not recorded his satisfaction in the assessment orders about the initiation of proceedings under Section 271(1)(a) and 273(1)(b). This is an admitted position. Even in the order-sheets also there is no recording of the said satisfaction by the ITO in respect of the said offences committed by the assessee in the matter of failure to file the return and failure to file advance-tax statement estimate. In the order-sheets the UDC simply stated the total income and computed the tax and the interest payable under Sections 139(8) and 217. Under the said computations it was written as under:
Asst. order, D.N, Chalan, 271(1)(a) and 273(b) penalty notices put up At the bottom of the said noting by the UDC, the UDC signed and put the date 30-10-1987. The ITO had not even signed or initiated therein. This clearly shows that the satisfaction was recorded by the UDC only and the satisfaction of the ITO was not at all there. In fact, the issuance of the said penalty notices was not even under the directions of the Income-tax Officer in the assessment orders. No such direction also can be seen in the order-sheets, photostat copies of which are filed before us. The Departmental Representative contended that the satisfaction of the ITO has to be inferred with the simultaneous issue of the penalty notices. But the Patna High Court in the case of CIT v. Dewan Kunj Lal Kanhaiya Lal [1987] 164ITR 284 held that the satisfaction of the ITO cannot be equated with the actual issue of notice and that the satisfaction precedes the issue of notice. Satisfaction is essentially a condition of the mind. The phrase "is satisfied" means "make up its mind" (Blyth v. Blyth 1 All. 524). Thus the ITO in the course of proceedings for the assessments has to form a prima facie view that it is a case where, subject to what the assessee may have to say, he should initiate proceedings so that the majesty of the law is upheld. He must reach a clear conclusion that a good ground exists for launching penalty proceedings. It is this satisfaction which is the foundation of action for imposition of penalty [Jiten & Co. v. STO [1977] 39 STC 308 (Delhi)]. The Supreme Court had held in CIT v. S.V. Angidi Chettiar [ 1962] 44 ITR 739 at page 745 that satisfaction before conclusion of the proceeding under the Act, and not the issue of a notice of initiation of any step for imposing penalty is a condition for the exercise of the jurisdiction. In this case we are satisfied that the satisfaction of the ITO was not there for launching of the penalty proceedings. Hence the penalties levied are liable to be quashed. Accordingly, we quash them.
9. In the result, all the appeals are allowed.