TaxTMI 
TaxTMI 
1997 (7) TMI 675
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....e parties, through, are mentioned at the relevant place, yet, we would like to extract a brief before we proceed to discuss and decide various solutions. The facts of the case are that as a result of search warrants and subsequent authorisations dt. 19th Aug., 1986 in the name of 4 individuals'(1) Purshottamdas F. Jhunjhunwala, (2) Kishorilal F. Jhunjhunwala, (3) Niranjan P. Jhunjhunwala, and (4) Nirmal P. Jhunjhunwala. Search was conducted at the premises called Giri Kunj Paliram Road, Bombay'78, on 22nd Aug., 1986. During the course of search, Kishorilal F. Jhunjhunwala disclosed income to the tune of Rs. 1,76,29,155 details of which have been extracted at p..... of this order, as is covered from his statements recorded under s. 132(4). As a result of the search, certain documents and one diary called 'Boston Diary' and following assets/things/valuables were seized : (1) Shares/units/debentures valued at Rs. 82,00,000 (2) Cash of Rs. 7,25,000 (3) Ornaments and jewelleries valued at Rs. 11,34,280 (4) Silver utensils valued at Rs. 2,70,000 As per 4 Panchnamas in the case of persons in whose names search warrants were issued (co....
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....., 1986, is a sum of Rs. 1,44,57,923. There were huge liabilities incurred by our clients for the investment referred to above. 6. Since our clients had submitted in a statement under section .... of the Act, that they shall not claim the liabilities against the investments, that they shall offer for taxation a sum of Rs. 1,44,57,923. 7. From xerox copy of p. 5 of seized papers, it will appear that a sum of Rs. 67,27,966 is shown to have been received under the head "K.F." during the previous years to asst. yrs. 1970-71 to 1987-88 (family members of Jhunjhunwala). 8. A sum of Rs. 13,71,933 is shown to have been received under the head "P.F." during the previous years to asst. yrs. 1970-71 to 1987-88. 9. Similarly, a sum of Rs. 6,66,889 is shown to have been received under the head 'Miscellaneous' during the previous years to asst. yrs. 1970-71 to 1987-88. (This sum of Rs. 6,66,889 includes a sum of Rs. 78,182 being the amounts received by P.F. Jhunjhunwala as perquisites either tax-free or taxed in the case of P.F. Jhunjhunwala in his hands. 10. Our clients shall offer for taxation this sum of Rs. 86,88,606 (Rs. 67,27,966 + Rs. 1....
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....e : (1) commensurate with the investments made by the Group, (2) commensurate with the expenses incurred on household expenses, marriages, or purchase of jewelleries, charity and donations. 18. We submit to your honour on behalf of our clients that at the time of an action under s. 132 of the Act, our client had submitted in the statements recorded under s. 132(A) of the Act, that they shall submit full and true disclosures and shall pay the taxes. 19. Under the circumstances of the case, we request your honour to be kind enough not to initiate any proceedings for levy of penalty or institute any prosecution. Thanking you, Yours faithfully, Sd/ M.C. Mehta, I.T.P." As the assessments upto asst. yr. 1985-86 in the cases of appellants who were already assessee assessments had been completed by the time disclosure was made, so the revised returns in those cases and fresh returns in other cases and revised returns for asst. yr. 1986-87, based on disclosure petitions were furnished in the case of the persons of the Group on 3rd March, 1987, under the Amnesty Scheme. The disclosure was discussed by the CIT with ....
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....view of the reliance by the assessee's counsel on the decisions reported in Jaikishan Gopikishan & Sons vs. CIT (1989) 76 CTR (MP) 103: (1989) 178 ITR 481(MP), CIT vs. Cellulose Products of India Ltd. (1985) 44 CTR (Guj) 278: (1985) 151 ITR 499(Guj) and CIT vs. Scindia Steam Navigation Co. Ltd. (1961) 42 ITR 589(SC) and the submissions that this ground was not a fresh ground as the same was raised before the Asstt. CIT even before filing of the revised returns and it has been duly acknowledged by the Addl. Director of Income-tax as well as the CIT(A). In support of this submission, the assessee's counsel referred to various letters written by the appellant to the Addl. Director of Income-tax and CIT, copies of which have been filed before us, last but one para at page No. 3 of the penalty order, and top sentence at page No. 5 of the order of the CIT(A). From these documents, he submitted that it is very much clear that the revised returns were furnished as a result of disclosure under the Amnesty Scheme, consequently, the learned Departmental Representative withdrew his objections. After considering the submissions and the fact that it was an admitted fact that the issue....
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....o 31st March, 1987, and the revised return making the disclosure of amounts representing expenses and investments were filed on 3rd March, 1987, so, the benefits of Amnesty Scheme were very much available to the appellants. He further submitted that as far as cases of 16 (sixteen) appellants other than Purshottam F. Jhunjhunwala, Kishorilal R. Jhunjhunwala, Niranjan P. Jhunjhunwala and Nirmal P. Jhunjhunwala were concerned, there was neither any search in any of these 16 (sixteen) appellants nor was any seizure in their hands. To clarify this aspect a little further, he submitted that search warrants were only in case of the abovementioned 4 individuals, namely; (1) Purshottam F. Jhunjhunwala, (2) Kishorilal R. Jhunjhunwala, (3) Niranjan P. Jhunjhunwala and (4) Nirmal P. Jhunjhunwala. From the copies of Panchnamas filed before us, he further submitted that out of these 4 appellants no valuables such as cash, jewellery, ornaments or any other asset were found in the case of Nirmal P. Jhunjhunwala and there was no seizure in his case. As regards to other three, he submitted that : (i) in case of Purshottam F. Jhunjhunwala, most of the jewellery found was not seized. A part o....
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....he Amnesty Scheme was available. The counsel for the assessee further went on to interpret the effect of answer to question Nos. 1, 7, 19, 12 and 30 of the Circular Nos. 451 which are reproduced as under : Q.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 ? Ans. : In case where the assessments 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 31st March, 1986. The filing of the returns will be regularised by issue of formal notices under s. 148 of the IT Act/s. 17 of the WT Act. In cases where the assessments are pending, the taxpayer should file revised return before the ITO along with evidence of payment of taxes. Q.7 : Where the investigations in the case of persons other t....
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....ad the Department detected any concealment then there was no reason for either not taking any action under s. 147 or accepting the disclosure in the hands of 21 assessees and in assessment years ranging from asst. yrs. 1970-71 to 1986-87. 6. From answer to question No. 7, he submitted that without prejudice to his aforesaid submissions, even if at all, it is assumed that there was some investigation, then also these could be said to be only in case of 4 persons in whose cases action under s. 132 was taken and, therefore, the cases of other 16 (sixteen) appellants were definitely entitled to immunity. 7. From answers to question Nos. 12, 19 and 30, he submitted that the disclosed amount in the hands of all the appellants except the four in whose cases action under s. 132 was taken, was not at all the subject-matter of seizure. As regards to the other 4, he submitted that there was no seizure at all in the cases of Nirmal P. Jhunjhunwala and in the case of the other three, namely, Purshottam Jhunjhunwala, Kishorilal Jhunjhunwala, and Niranjan Jhunjhunwala, though there was some seizure of some cash and jewellery, but these assets, i.e., cash and jewellery which were the subject....
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....ppellants were entitled to immunity under the Amnesty Scheme. In support of his submissions, he relied in the following cases : Scindia Steam Navigation Co. Ltd.'s case (supra), Jaikishan Gopikishan & Sons' case (supra), Shama Raising Chandel vs. ITO (1992) 43 TTJ (Ahd) 268: (1992) 41 ITD 212(Ahd), Uttamchand Bhutani & Co. vs. ITO (1992) 42 ITD 404(Del), ITO vs. Ram Nihara Thakur (1993) 46 ITD 90(Pat), Smt. P.M. Celine vs. Asstt. CIT (1991) 39 ITD 454(Coch), Asstt. CIT vs. Manorajyam (1996) 54 TTJ (Coch) 397: (1995) 54 ITD 116(Coch), Asstt. CIT vs. Prakash Oil Industries & Ginning Factory (1995) 52 TTJ (Ahd) 514, Anand Kumar Saraf vs. CIT (1995) 211 ITR 562(Cal) and Ambassador Dry Cleaners vs. Union of India (1994) 210 ITR 292(Raj). The learned Departmental Representative has, on the other hand, submitted that though the search warrants were in the name of 4 persons only, but the search being of a particular premises, so it will amount to search in case of all persons residing at those premises and, therefore, according to him, action under s. 132 was deemed to have been taken in cases of all the 20 appellants. Referring to answers to Q. No. 12 and No. 30 of Circular ....
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.... the Indian IT Act, 1922 (11 of 1922) or under this Act, or (c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been or would not be disclosed for the purposes of Indian IT Act, 1922 (11 of 1922), or this Act, (hereinafter in this section referred to as the undisclosed income of property), then : (A) the Director General or Director or the Chief CIT or CIT as the case may be, may authorise any Dy. Director, Dy. CIT, Asstt. Director, Asstt. CIT or ITO, or (B) such Dy. Director or Dy. CIT as the case may be, may authorise any Asstt. Director or Asstt. CIT or ITO (the officer so authorised in all cases being hereinafter referred to as the authorised officer) to (i) enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or things are kept; (ii) break open the lock of any door, box, locker, safe, almirah or other r....
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....longs to such person; (ii) that the contents of such books of account and other documents are true; and (iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested. (5) Where any money, bullion, jewellery or other valuable article or thing (hereafter in this section and in ss. 132A and 132B referred to as the assets) is seized under sub-s. (1) or sub-s. (1A), the AO after affording a reasonable opportunity to the person concerned of being heard and making such enquiry as may be prescribed, shall, within one hundred and twenty days of the seizure, make an order, with the previous approval of the Dy. CIT: (i) estimating the undisclosed income (including the income from the undisclosed property) in a summary manner to the best o....
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....t though the authorised officer can search any person who has got out of, or is about to get into or is in, the building, etc., but this power can be exercised only if the authorised officer has reason to suspect that such person has secreted about his person any books of account, other documents, money, bullion, jewellery or other valuable articles or things. These provisions, which state in clear terms, confirms that a person other than a person in whose name search warrants have been issued can be searched only if the mandatory requirement of sub-cl. (iia) of sub-s. (1) of s. 131 is satisfied and unless and until a person is searched in accordance with these sub-clauses, it cannot be assumed that action under s. 132 has been taken in case of every person staying at the relevant premises' may be a living person or otherwise, such as HUF, companies and firms; and therefore, the arguments of the learned Departmental Representative that in spite of search warrants being in the name of 4 individuals only (supra), action under s. 132 will be deemed to have been taken in all the 18 cases, cannot be accepted. Neither there is anything about such presumption in the provisions of s. 1....
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..... But taxpayers who try to introduce black money and benami investments in the name of ladies or minors will be doing so at their own risk. Q. 12 : Ans. : (please refer to p. 12 above). Q. 13 : Whether in disclosing assets which have been suppressed earlier or undervalued for the purpose of wealth-tax under this circular the Board has devised any proforma for making such an application or whether the assessee is required to file a return before the WTO ? Ans. : If the assessment for the relevant year is pending, the assessee should disclose the information before the WTO. If the assessment or the year is already completed, the assessee should disclose the particulars before the concerned CIT. Where the assessee files a return also to the CIT along with the showing of particulars and pays the tax due thereon, he would have satisfied the conditions prescribed by s. 18B. Q. 19 : Ans. : (Please refer to p. 11 above). Ans. : (Please refer to p. 12 above). From the aforesaid relevant portion of the circular which are in the form of specific answers to specific questions, relating to the scope of the Amnesty Scheme, i....
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....d cumulative effect of all the circulars issued under the Amnesty Scheme, we are of the opinion that the immunity under the Amnesty Scheme was available to these 4 appellants also. As regards to the Departmental Representative's submission that the disclosure was not made under the Amnesty Scheme, we are of the opinion that this argument also does not hold good because the 4 appellants, during search and all the 20 appellants in their various letters addressed to the Addl. Director of Income-tax (Inv.) and CIT had duly stated that they were making disclosure was made under the Amnesty Scheme. In view of our aforesaid discussion, we are of the opinion that the immunity/benefits of Amnesty Scheme were available to all the 20 appellants upto the asst. yrs. 1986-87 and therefore, the penalty orders in all these 20 cases for all the asst. yr. 1986-87 are cancelled. 15. Before parting with this aspect of the case, we would like to make a brief mention of the various decisions relied upon by the parties, as under : Cases relied by the assessee : (i) Jaikishan Gopikishan & Son's case (supra). After having gone through the decision and especially the conclusion of the Hon&#....
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....are issued from time to time to deal with the cases of such assessees, who claim immunity and consideration of their cases leniently and sympathetically, and the authorities are bound to deal with the cases, according to the instructions issued from time to time." (ii) Shama Raising Chandel vs. ITO (supra) : The facts in this case were that a search was conducted at the premises of one VC and AL on 23rd Sept., 1986, and 24th Sept., 1986; and it was revealed that there was a racket which involved conversion of substantial amount of black money into white money by issuing bogus bank drafts shown as having been issued from NRE account. Assessee-appellants had received bogus bank drafts, who after one week from the date of search of the premises of VC and AL submitted returns for asst. yr. 1985-86 under Amnesty Scheme in which the amount received by such bogus drafts was surrendered as income liable to tax. As the Amnesty Scheme was extended upto 31st March, 1987, so G&C furnished returns of income for asst. yrs. 1985-86 and 1987-88 on 31st March, 1987 and 23rd Feb., 1988, respectively. The ITO held that the appellants did not disclose voluntarily but disclosure was made after searc....
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....nt, notice under s. 148 was issued in response to which the assessee filed return showing assessed income. In reassessment, additions that were made to the returned income were profits at 10 per cent on suppressed sales and unexplained cash credit. On appeal, the CIT(A) allowed relief on trading additions only. And when the assessee's appeal against addition of cash credit was pending before the Tribunal, the Amnesty Scheme, 1986, was announced. The assessee, availing benefits of Amnesty Scheme paid taxes on reassessment figures including relief allowed by the CIT(A) and based on these filed revised return under the Amnesty Scheme; and consequently the appeal before the Tribunal was withdrawn. During the course of penalty proceedings under s. 271(1)(c), the AO was apprised of the revised return but he rejected the assessee's claim under the Amnesty Scheme and levied penalty. On appeal, the CIT(A) also upheld the order of the AO. On appeal before the Tribunal by the assessee, it was held that the assessee was entitled to the benefit under the Amnesty Scheme as per Circular No. 451, dt. 17th Feb., 1986, and consequently the penalty was concealed. The decision in this case als....
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....ent account with the Oriental Bank of Commerce in the name of AKT, which were the proprietary concerns of the assessee. It was an admitted fact that the income of these two proprietary business had not been disclosed by the assessee in the IT return filed earlier. These cheque books and pay-in-slips were seized. On 31st March, 1986, the assessee filed revised returns of income and wealth under the Amnesty Scheme administered by the Board through its various circulars' the scheme which is under consideration in appeal before us. In the revised returns for asst. yrs. 1981-82 to 1985-86, the assessee included the income derived from the proprietary business done by him in the names of AKSC, AKT and RT. It was also stated that the declaration made through these returns included/covered all the transactions which were incorporated in the books and documents seized by the Department in course of search carried out in the office and residential premises on 7th March, 1986. The assessee requested that no penalty should be imposed and all interests should be waived. Similarly, WT returns for asst. yrs. 1982-83 to 1985-86 including therein the assets represented by the income so disclose....
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....bsence of jurisdiction is apparent, the Court should interfere in a writ proceeding. A combined reading of Circular No. 451 as a whole leads one to believe that an assessee whose premises had been searched could not claim immunity and other benefits given in the Amnesty Scheme only in respect of assets or income which had been found and/or seized by the tax authorities before the filing of revised returns by the assessee concerned and also in those cases where the tax authorities had looked into the seized papers and had carried out some investigations (before the furnishing of revised returns by the assessee) to show that the income now declared in the revised return had already been detected by the Department from the papers and documents found and seized in the course of the search. In the instant case, it was found that search was carried out at the residential premises of the petitioner on 7th March, 1986, at Calcutta and on 27th March, 1986, at Surat. It was true that certain documents had been found and seized in the course of the said search, but none of these documents had been scrutinised by the tax authorities prior to 31st March, 1986, when the assesse....
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.... certain documents and papers were seized. They might or might not have revealed concealment. Even the seizure could not have led to a prima facie belief as to concealment as the contents purported 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 appellant's 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. Furthermore, the scope of proceedings under s. 154, is very limited. It is well settled that an issue which is debatable or on which there could conceivably be two opinions cannot be the subject-matter of rectification. A glaring and obvious mistake either of fact or law can alone be corrected under s. 154. On the facts and circumstances of the instant case, it was to be held that the impugned notice issued by the CIT on 23rd March, 1989, was clearly without jurisdiction, and therefore, all proceedings taken in pursuance thereto including the im....
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....or asst yrs. 1975-76 to 1979-80 were reopened under s. 148. While making reassessments, a net profit rate of 25 per cent was applied on receipts disclosed by the assessee. These assessments were set aside by the Tribunal by its order, dt. 30th March, 1986, upto the stage of filing of the revised returns. Before the petitioner filed the revised returns, the Amnesty Scheme was introduced by the Revenue. In the revised return, the petitioners disclosed its income by applying the net rate of 25 per cent which the ITO had adopted. These returns were filed under Amnesty Scheme and were accepted. The assessee moved an application under s. 273A before the Chief CIT, praying for waiver of penalties and claiming other benefits of Amnesty Scheme. The ITO initiated penalty proceedings. The Chief CIT accepted the assessee's request for withdrawal of the prosecution, but when he approached the ITO for dropping the penalty proceedings, the ITO did not accept his request and consequently penalty was imposed. The CIT(A) confirmed the penalty. On a writ petition filed by the assessee, the Hon'ble Rajasthan High Court held that the revised returns filed by the petitioner would be treated to h....
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....een denied/rejected by the partner, it could in noway be said that the offer made by the firm under the Amnesty Scheme for a sum of Rs. 2,25,000 was after the detection. The suo motu offer by the assessee-firm was for a sum of Rs. 2,50,000 whereas Rs. 2,50,000 is presumed to be concealed income of the firm by the Department, could in noway abstain the firm from the benefits as envisaged under the Amnesty Scheme. Moreover, the reasoning of the CIT(A) that 1/6th of Rs. 2,25,000 could be the concealed income of the firm, referable to the assessment year cannot also hold the ground for the fact that the Department has failed to detect any concealed income, and merely a seizure of a paper and a statement of an employee which had been rebutted immediately by the partner of the firm cannot be treated as detection, the offer of the sum of Rs. 2,50,000 was made suo motu by the firm only to avail the benefits of the Amnesty Scheme and to avoid further litigation, cannot be taken as a ground that the offer was after detection and estop the firm from the benefits under the Amnesty Scheme. The Revenue had almost two years and after the search was conducted and the statement of the employee and ....
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....nce that the assessee-firm made sales to G. It is an admitted fact that the diary was seized from the residence of G who has got interest in 12 different firms in his individual sub-group and if he has admitted about his financial transactions as recorded in the diary such admission binds him alone and not the assessee-firm merely because he happens to be one of the partners of the assessee-firm. It is further noted that five different families are interested in the assessee-firm and therefore, it is difficult to believe that G would have been allowed to divert any profit to the extent of 50 per cent in respect of any transaction. Further, the ITO has talked of 50 per cent share in the accounted profit whereas G individually holds only 25 per cent share and even with his daughter and brother he has only 32 per cent share in the firm, and, therefore, the distribution could not have been 50 per cent. Further, it is noted that G has owned up the entries in the diary and has surrendered peak of credits in the asst. yrs. 1982-83, 1983-84 and 1984-85. He has paid substantial tax thereon. Mere entries in the accounts of third party was not sufficient to prove that the assessee had indulge....
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.... yr. 1982-83 held that the revised return filed by the assessee was voluntary and consequently penalty under s. 271(1)(c) was not leviable. The relevant findings are found in para 10 of the order which is reproduced below : "10. We have examined the facts as brought on record. We have gone through the assessment order, penalty order and the order of the CIT(A) sustaining the said penalty order. There is no difference between the facts for the asst. yrs. 1982-83 and 1983-84. The penalty levied for the alleged concealment of income under s. 271(1)(c) for asst. yr. 1982-83 has been cancelled by the Tribunal. It is a fact that the appellant filed the revised return of income voluntarily before making the assessment with a view to buying peace. The assessment was made exactly on the basis of the income disclosed by the appellant in his revised return of income. A search was conducted and several discrepancies were found. On the basis of the finding of such discrepancies, the appellant came forward and filed the revised return of income voluntarily. All these actions of the appellant would establish that the assessee promptly and immediately volunteered to come forward by showin....
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....and investigations and to buy peace. This petition related to asst. yrs. 1979-80 to 1982-83. This offer was increased gradually to Rs. 30 lakhs and later on further increased to Rs. 52 lakhs plus vide letter, dt. 22nd Sept., 1984. This offer was not accepted by the Department. In the meanwhile assessee filed a settlement petition before the Settlement Commission on 31st Oct., 1983, pertaining to asst. yrs. 1979-80 to 1983-84. The said petition was accepted for all the years except for asst. yr. 1982-83. The petition for 1982-83 was rejected on the ground that concealment was likely to be established by the Department. 3. In the course of assessment proceedings, the AO asked assessee to file the details of cash creditors. Summons under s. 131 were issued by him to twenty two parties at the addresses furnished by the assessee but the same remained unserved with the remarks that such parties were not available at such addresses. The AO vide his letter, dt. 17th Dec., 1985 informed the assessee about this fact and further asked the assessee to produce the parties along with the books of account and pass-books. Since the assessee was not able to produce these cash creditors exc....
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.... of the assessee-firm Vajubhai. It appears that the assessee was not asked to cross-examine her in spite of the fact that assessee's CA along with DMH Advocate remained present till 9 p.m. This is seen from the letter filed by the assessee..... office of the AO on the next day, i.e., 26th March, 1987 which is placed at p. 60 of the compilation. 6. Faced with this situation, assessee again filed a revised return on 30th March, 1987, under the Amnesty Scheme offering an additional income of Rs. 11.5 lakhs comprising of the following : Rs. (i) 2,85,000 In respect of loans from six cash creditors. (ii) 38,047 Interest on above loans. (iii) 5,50,000 Re. Jewellery purchased by Miss Rekha Ganeshan. (iv) 2,78,788 Interest on loans taken in earlier years. 11,51,835 rounded of Rs. 1,150,000 Finally the assessment was finalised on the total income of Rs. 26,10,123 after further disallowing interest of Rs. 1,77,212 regarding bogus loans of earlier years and Rs. 25,000 out of the expenses. Penalty proceedings under s. 271(1)(c) and under s. 273 were initiated by the AO in respect of the above add....
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.... Amnesty Scheme (supra) and therefore, we hold that penalty under s. 271(1)(c) in all these cases have been imposed in complete disregard to the Amnesty Scheme which was binding on the lower authorities. Consequently, the orders of the CIT(A) as well as the penalty orders of the Asstt. CIT are quashed. 17. The next ground of attack by the counsel for the assessee is that penalty proceedings in all these cases have been initiated on the basis of directions of the CIT and, therefore, the initiation of penalty proceedings itself is bad in law. He further submitted that the penalty orders passed as a result of initiation which itself is bad in law, are also bad in law and void ab initio. He further submitted that as per the provisions of s. 271(1)(c) as they stood at that time, it was the ITO or the AAC or the CIT(A) who could initiate the penalty proceedings and, therefore, he proceeded to argue that penalty proceedings being penal and quasi judicial, no other authority other than the authorities mentioned in the section itself, had jurisdiction either to initiate the proceedings or to direct any of these authorities to initiate the proceedings. Referring to the last para of the di....
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....rued that the CIT had observed that penalty proceedings will be initiated then also it cannot be said that the CIT had issued any directions because order under s. 273A is a judicial order and not an administrative order. 18. We have considered the submissions made by both the sides and have carefully gone through the penalty orders, order of the CIT(A), the Tribunal's order (since recalled), order in miscellaneous application, CIT's letter dt. 21st March, 1988, Dy. CIT's letter dt. 20th March, 1989, and various case law relied upon by the assessee's counsel. Before expressing our opinion, we would like first of all, to reproduce the relevant portions of various documents referred to by the parties as under : "Extract on discussion note in Jhunjhunwala group of cases' Petition under s. 273A. Present before the CIT City, VIII, Bombay (1) Nirmal Kumar P. Jhunjhunwala, the assessee, (2) P.S. Hajela, D.C. Range 26, Bombay, (3) S. Halder, A.C. Cir. 26(1), Bombay, and (4) M. Madhavan, A.C. H.Q. Trs. City VIII, Bombay. The report, dt. 6th March, 1989, was received from A.C. Cir. 26(1). Thereafter he was ....
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...., viz., Kishorilal F. Jhunjhunwala, Niranjan P. Jhunjhunwala and Nirmal Kumar P. Jhunjhunwala. As regards Purshottamdas Jhunjhunwala, the Asstt. CIT has submitted a report, dt. 16th March, 1989 showing jewellery at Rs. 1,99 lakhs not disclosed and jewellery with vide variations at Rs. 1.90 lakhs. Thus, the total unexplained jewellery comes to Rs. 17.28 lakhs. Regarding jewellery of Rs. 4.77 lakhs in the hands of Purshottamdas since they are pertaining to other parties and they have been shown in their respective hands, they are to be ignored for the purpose of this disclosure. Thus, unexplained jewellery of Rs. 17.28 lakhs will be added along with silver utensils not disclosed by the assessee at Rs. 2.74 lakhs making the total at Rs. 20.02 lakhs. It is explained by the assessee that all these items have naturally been purchased out of the expenditure for which the amount of Rs. 10.53 lakhs has already been added and, therefore, the reduction of the aforesaid amount should be given. Accordingly, out of Rs. 20.02 lakhs, the deduction of Rs. 10.53 lakhs being expenditure already taxed above is allowed and thereby an addition of Rs. 9.49 lakhs is made on account of unexplained jeweller....
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..... 23rd March, 1989, forwarding the discussion note, dt. 20th March, 1989. CIT's remarks are as under : "Approved, assessments in the respective cases to be made as per the note and as discussed." M. Madhavan For CIT B.C. VIII, Bombay." Extract from CIT(A)'s order dt. 7th Feb., 1991 in the case of Nirmal P. Jhunjhunwala : Page 5, para 3 "... Lastly the Asstt. CIT pointed out that while granting spread over, the CIT had directed that the penalty proceedings should be initiated against the assessee. Extract from Asstt. CIT's penalty order : P. 4, 2nd para : "While granting spread over the CIT has directed that penalty proceedings should be initiated against the assessee..." Extract from Tribunal's order, dt. 26th Nov., 1991 in the case of Nirmal P. Jhunjhunwala: Page 4, para 7 : "The penultimate para of the order of the AO for the asst. yr. 1972-73 reads as under : "While granting spread over the CIT has directed that penalty proceedings should be initiated against the assessee..." Extract from Tribunal's order on M.A. Page 7, para ....
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....reference to p. 11 of the Asstt. CIT's report. However, the tax paid by the assessee in respect of those years in which the disclosure is not accepted should be given credit in the remaining years. Fifthly, the last para of the note which goes as : "... The penal interest should be charged and penalty proceedings should also be initiated. The question of waiver would be considered subsequently, with the prior approval of the Board" confirms beyond any doubt that this para was nothing but the directions of the CIT because of the following two reasons : (i) Had it been from the Asstt. CIT, then there was no question of using the word "should" rather the words would have been as "if approved" and then the words "should" or "would" or "may" because when some one seeks instructions or approval from a higher authority, then such lower authorities can never use the directive language; rather will mention just his proposal which in this case was as to what action the AO was likely to take and for that purpose, and, therefore, he should have used the words "If approved" and then "should" or "would" or "may". It is, therefore, clear that the word "shou....
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.... confirms beyond doubt that the Revenue had all along been accepting that the penalty proceedings were initiated by the CIT and, therefore, we are of the opinion, that the CIT had given such directions. 22. Having found from the facts on record and admission by various Revenue authorities that the penalty proceedings under appeal were initiated on the basis of directions issued by the CIT, the next question for our consideration is as to whether the penalty proceedings initiated as per the terms of the CIT were bad in law or not. To decide this issue, we would like to reproduce s. 271(1)(c) : "Sec. 271(1) : If the ITO or the AAC or the CIT(A) in the course of any proceedings under this Act, is satisfied that any person: (a) xxxxx xxxxx xxxxx (b) xxxxx xxxxx xxxxx (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such persons all pay by way of penalty." From the above provisions of s.....
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....are concerned, we have already found from facts that penalty proceedings were initiated on the direction of the higher authority, that is, CIT and, therefore, in view of that finding coupled with aforesaid conclusion, we are of the opinion that penalty proceedings in case of all these appellants were bad in law, and consequently, the penalty orders passed by the Asstt. CIT on the basis of such initiation are automatically bad in law and void ab initio. The same are held to be null and void. 25. Though, after having reached the aforesaid conclusion it is not necessary to make any further comments, but we would like to mention that in the order passed in assessee's miscellaneous application, it has been clearly held in para 20 of its order that if the penalty proceedings are initiated as per the direction of the superior authority, the entire penalty proceedings would get vitiated and the penalty orders would have to be struck down. The Tribunal has further held in para 20 itself at p. 21, that: (i) only because a show-cause notice had been issued by the AO, it cannot be concluded that he was satisfied in the course of proceedings under the Act before him that the ass....
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.... of proceedings under the Act before him that the assessee had committed one of the specified defaults. If the initiation of penalty proceedings is not because of such satisfaction on the part of the ITO but is because of the directions of the superior authority, the entire penalty proceedings would get vitiated and the penalty orders would have to be struck down. The question, therefore, for our consideration, is whether the AO had initiated penalty proceedings because he was satisfied that the defaults mentioned in s. 271(1)(c) had been committed by the assessee or he had initiated the penalty proceedings because of the directions of the CIT. Only because a show-cause notice had been issued by the AO it cannot be concluded that he was satisfied in the course of proceedings under the Act before him that the assessee had committed the default mentioned in s. 271(1)(c) and this is more so in the present case in view of the admission on the part of the AO that the CIT had directed him to initiate penalty proceedings. The fact that the AO has initiated penalty action even in respect of asst. yr. 1987-88, the return for which year had been filed after the group submitted a petition und....
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....6, he submitted that a disclosure to the tune of Rs. 1,76,29,155 as detailed below was made during the search itself : S. No. Amount disclosed Nature of amount In whose hand disclosure was made (1) (2) (3) (4) (Rs.) . 1. 4,00,000 Cash Jhunjhunwala Co. 2. 2,00,000 Cash Shakti Housing Development (P) Ltd. 3. 1,00,000 Difference in valuation of jewellery Whole of Jhunjhunwala Group. 4. 3,25,000 Payment in cash for flat Niranjan P. Jhunjhunwala 5. 2,00,000 Income from bldg. construction work Niranjan P. Jhunjhunwala 6. 90,126 Creditors Kishorilal Jhunjhunwala 7. 93,67,129 Expenses and investments, last 20 years Whole of Jhunjhunwala Group 8. 69,46,900 Advances given Kishorilal Jhunjhunwala After referring to the letters, dt. 28th Aug., 1986, and 7th Nov., 1986, addressed to the Additional Director of Income-tax (Inv.) and CIT respectively, he submitted that in para 2A of these letters, the other members of the group had submitted a proposal for making disclosure under the Disclosure Scheme, 1986, so-called Amnesty Scheme. He further submit....
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....f objection that either the Department should have accepted the disclosure in toto or should have rejected. In support of the aforesaid submissions, the counsel for the assessee relied on the following decisions : (i) CIT vs. Anwar Ali (1970) 76 ITR 696(SC); (ii) Smt. Ram Rakhi vs. ITO (1989) 30 ITD 221(Chd); (iii) ITO vs. Moti Ram Subash Chand Jain (1989) 27 ITD 44(Del); (iv) Shri Balkram Jankidas Agarwal vs. Asstt. CIT (1983) (v) Shashi Raj Kapoor vs. ITO (1991) 40 TTJ (Bom) 600; (vi) Kunal Agency vs. Asstt. CIT (ITA Nos. 6905 to 6908 (Bom) of 1989); (vii) Mahabir Prasad Agarwala vs. ITO (1990) 36 TTJ (Ctk) 181 (SMC Bench); (viii) Sir Shadilal Sugar & General Mills Ltd. vs. CIT (1987) 64 CTR (SC) 199: (1987) 168 ITR 705(SC); (ix) Anantharam Veerasinghaiah & Co. vs. CIT (1980) 16 CTR (SC) 189: (1980) 123 ITR 457(SC); (x) CIT vs. Haji Gaffar Haji Dada Chini (1987) 63 CTR (Bom) 130: (1988) 169 ITR 33(Bom); (xi) CIT vs. Kurruddin & Bros. (1990) Taxation 96(3)-59; (xii) A.N. Sarvaria vs. CWT (1985) 49 CTR (Del) 264: (1986) 158 ITR 803(Del); (xiii) CIT vs. Amalendu Paul ....
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....as not applicable to the appellant's case. He further submitted that the furnishing of revised returns do not absolve the appellants of its default of concealment. As regards to acceptance of disclosure he submitted that the Department had nowhere accepted the condition that no penalty will be imposed and to support his submission, the Departmental Representative relied on the following decisions : Tube Fabrico (I) Ltd. vs. CIT (1994) 210 ITR 1035(Del), Krishna Kumari Chamanlal vs. CIT (1996) 127 CTR (Bom) 458: (1996) 217 ITR 645(Bom), CIT vs. K. Govindarajulu Naidu (1991) 190 ITR 318(Mad), S. Vasudeva Rao vs. P.S.J. Sigamang (1995) 125 CTR (Mad) 93: (1995) 211 ITR 284(Mad), F.C. Agarwal vs. CIT 1976 CTR (Gau) 82: (1976) 102 ITR 408(Gau), CIT vs. Industrial Finance Corpn. of India Ltd. ((1990) 85 CTR (Del) 72: 1989) 180 ITR 440(Del), Dayabhai Girdharbhai vs. CIT (1957) 32 ITR 677(Bom), Vadilal Ichhachand vs. CIT (1957) 32 ITR 569(Bom), Tribhovandas Bhimji Zhaveri's case (supra) and CIT vs. Express Newspapers Ltd. (1994) 115 CTR (SC) 496: (1994) 206 ITR 443(SC). Tribunal's decision in Tribhovandas Bhimji Zaveri & Sons case (supra). 27. After considering the subm....
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....ount of Rs. 20 lakhs for taxation which were gracefully accepted even though not fully convinced. In the said meeting, the Hon'ble CIT decided the years and the persons in whose hands the said amount of Rs. 20 lakhs were to be taxed. On the basis of said directions, various assessments were completed between May to July, 1989. (x) As per the discussion note, disclosure with respect to the some assessment years had been accepted as is clear from the last sentence at p. 2 of the note which goes as "... However, the tax paid by the assessee in respect of those years in which the disclosure is not accepted should be given credit in the remaining years." (xi) When the settlement was arrived at and spread over was accepted, the appellants were certainly given assurance for not initiating the penalty proceedings and the reasons for this conclusion in the sentence in the said discussion note to the effect that "penal interest should be charged and penalty proceedings should be initiated. The question of waiver would be considered subsequently, with the prior approval of the Board". Had there been no intention to waive the penalty, this sentence should not have been st....
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....s upon the Revenue to establish the mens rea on the part of the assessee as the penalty proceedings were quasi-criminal in nature and the CIT(A) was not justified in holding that mens rea was not required in view of Supreme Court's judgments. (ii) That the ratio laid down by the Hon'ble Supreme Court in the case of CIT vs. Anwar Ali (1970) 76 ITR 696(SC) would apply to the facts of the present case. Therefore, the penalty cannot be imposed on the mere findings arrived at in the course of assessment proceedings as these findings, though relevant, are not conclusive. (iii) That all the facts on the record should be taken into consideration in deciding the justification of penalty imposed by the AO. 11. Both the parties have been heard at length and the material placed before us had been perused. There cannot be any dispute about the legal position taken by the assessee that in the absence of application of Explanation the law declared by the Supreme Court in Anwar Ali's case (supra) would apply. Penalty proceedings being quasi-criminal in nature the onus lies on the Revenue to prove that there is concealment of the particulars of the income by t....
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.... notwithstanding anything contained in the Indian IT Act, 1922 (11 of 1922), or the IT Act or in any Finance Act, income-tax shall be charged in respect of the income so declared such income being hereinafter referred to as the voluntary disclosed income (Emphasis in italisized in print, supplied) at the rate or rates specified in the Schedule. (2). Nothing contained in sub-s. (1) shall apply in relation to: (i) the income assessable for any assessment year for which a notice under s. 139 or s. 148 of the Act has been served upon such person and the return has not been furnished before the commencement of this Act; (ii) where any books of account, other documents, money, bullion, jewellery, or other valuable articles or things belonging to the person making the declaration under sub-s. (1) (hereinafter in this section, in ss. 4 to 13 and in the Schedule referred to as the declarant) have been seized as a result of any search under s. 132 of the IT Act or under s. 37A of the WT Act, income in respect of the previous year in which such search was made on any earlier previous year. (3) In addition to the amount of income-tax to be paid under sub-s. (1), the dec....
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....the declaration had been made under that section. (4) A copy of the declaration made by the declarant under sub-s. (1) shall be forwarded by the CIT to the ITO and the information contained therein may be taken into account for the purposes of the proceedings relating to assessment or reassessment of the income of the declarant under the provisions of any of the Acts mentioned in sub-s. (1) of s. 8 or the WT Act. (5) The immunity provided under sub-s. (1) shall not be available to the declarant unless the tax chargeable in respect of the income of the previous year or years for which the declaration has been made is paid by the declarant in accordance with the provisions of s. 5." Under s. 3(2)(ii) of this Act, it was specifically provided that provisions of sub-s. (1) were not applicable to a case where books of account, etc., had been seized as a result of action under s. 132. It was, therefore, in this context and the fact that as per s. 3(1), the income so disclosed (in cases where there was no search) was considered to be "voluntarily disclosed income"; meaning thereby, that in these provisions, the specific limitation was placed on the meaning of "voluntarily disclos....
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....ended Explanation but in view of the legislature's intention behind the amendment and the disclosure being voluntary, we are of the opinion that no penalty was leviable in this case. As regards to the Departmental Representative's reference to the statement of Kishorilal Jhunjhunwala recorded during the search and reference to the order under s. 132(5), we are of the opinion that these also do not help the Department because the admission in the statements recorded during the search was a disclosure and the amounts which were considered as income in the orders under s. 132(5) were nothing but the amount disclosed by the assessee during the search and that too have not been assessed anywhere in the final assessment orders because the assessment orders have been completed on the basis of appellants' disclosure. The assessee's counsel had further submitted that even if it is taken that the amended Expln. 5 was not applicable, then also, the appellants were entitled to immunity under the old Explanation because of the disclosed amounts were recorded in the 'Boston diary' which was a part of the books of account as contemplated in Expln. 5(1). Elaborating h....
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....es or material available with it. From the assessment orders and the discussion note, it is, however, evident beyond doubt that the assessments have been completed solely on the basis of disclosure made by the assessee after having accepted the spread over of the income in the hands of the various persons and in various years. So, having done so, now, it does not lie in the mouth of the Department to claim that the disclosure was unconditional or that the condition would not be accepted as the disclosure was made after the search. Our opinion is fortified by the decisions in the following two cases : I. Ramnath Jagannath vs. State of Maharashtra (1984) 57 STC 46(Bom). To justify our view, we would like to reproduce the relevant portion of this decision as under : "Held, that on a plain reading of the letter of the assessee's counsel to the Dy. CIT and in the light of the facts, it was clear that the offer made in the letter to give up the claim of deduction under first proviso to s. 9 of the Act was clearly a conditional offer on the post-assessment penalty levied and leviable being given up. If it was not possible to accept that condition the only result would b....
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.... In the case at No. I above, the appellants' condition was not accepted because according to the authorities, it was not possible to accept the same. The Hon'ble High Court held that an offer is coupled with conditions which are not reasonable or one which cannot be accepted in law completely would not render it unconditional offer, which is in terms, made on a condition. The High Court further held that if it is not possible to accept that condition, the only result would be that offer must be rejected, but when an offer is coupled with conditions, then whether those conditions can be accepted or not, the offer cannot be treated as unconditional. In the case at No. II above, the Hon'ble High Court while dealing with the levy of penalty under s. 271(1)(c) by the Department in spite of the fact that surrender of cash credits by the assessee was subject to the conditions of no penalty would hold affirming the Tribunal's order cancelling the penalty, that conditional admission made by the assessee cannot be relied upon for imposing the penalty under s. 271(1)(c) as an unconditional admission. Respectfully following the law laid down in the aforesaid decisions and t....
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....ntative, on the other hand, submitted that the unamended Explanation was applicable and the penalty was justified. After considering the submissions we are of the opinion that when search was conducted, returns for asst. yr. 1987-88 were not due and as we have already held that the amendment in the Explanation was nothing but a recognition to the prevailing concept of law, so the assessee was entitled to benefit of the amended Explanation. Consequently, the asst. yr. 1987-88 is covered by the amended Explanation and as the income declared in the return has been accepted as it is, so the appellants are entitled to the amendment to Expln. 5. Consequently, the penalties for asst. yr. 1987-88 also are held to be unjustified which are cancelled. Before departing, we woud, like to record that the cases relied upon by the assessee's counsel supports the relevant submissions 'in some cases directly and in some cases indirectly, whereas the decisions in the cases relied upon by the learned Departmental Representative are completely distinguishable on facts. In the result, the appeals of all the 20 appellants in all the assessment years are allowed. G.E. VEERABHADRAPPA, A.M.....
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....ssessments upto the asst. yr. 1985-86 were already completed. The returns for the asst. yr. 1987-88 were filed for the first time by the members of the group on the said date. In respect of completed assessments for all the years, the AO issued notice under s. 148 of the Act. Thereafter, the AO passed orders under s. 143(3)/147(b) of the Act including therein the additional income disclosed in each of the years under consideration in terms of disclosure petition. 4. With the framing of assessments under s. 143(3)/148 of the Act, the AO initiated proceedings under s. 271(1)(c) of the Act in respect of the concealed income brought to tax in the reassessments. The assessees, by the letter of their representatives, dt. 19th Feb., 1990, stated as under : "(i) During the actions under s. 132, the assessee voluntarily made the declaration under s. 132(4) by offering the additional income for taxation. (ii) As a corollary and in furtherance to the said statement the assessee filed the petition under s. 273A to the Hon'ble CIT and offered the additional income for taxation. Just to make the declaration full and complete as per the spirit of the provision of the said....
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.... income. There was conscious attempt on his part to conceal his income and the same could be detected only when search action was taken by the Department. The very fact that this income was thereafter offered by the assessee for taxation shows that the income not disclosed originally was the 'income' of the assessee. The fact that this was the third search in the case of the assessee shows that he is a habitual defaulter and as such, the case clearly attract the provisioins of s. 271(1)(c). I am, therefore, satisfied that the assessee has concealed the particulars of his income and has furnished inaccurate particulars thereof. Looking to the recalcitrant and unrepenting attitude of the assessee, it is a fit case for levying penalty under s. 271(1)(c). I, therefore, levy minimum penalty under s. 271(1)(c) at 100 per cent of the tax/income sought to be evaded amounting to Rs. 56,206, as per working given below : Rs. Income as finally assessed 81,580 Income as per original return 24,444 Tax on assessed income as per order of final assessment ' Income-tax sought to be evaded, minimum penalty @ 100 per cent of Income-tax sought to be evaded ....
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....ncriminating papers found during the search for instance papers No. 5, 21 to 26, 27, diary (Boston note), etc., the representatives of the group had little option left but to confess wide scale concealment and come forward with disclosure in the hands of the assessee and various members of the group as per details on record. Thus, it is difficult to accept that the appellant would have suo motu come forward with disclosure if the search operations had not taken place resulting in detection of concealed income. This is also evidenced from the fact that in the original returns in this case and other cases of this group, assessments have been framed at meagre income(s) an without declaring income(s) shown as per the assessment framed afresh following search and seizure action in this group. It may also be added here that the benefit extended under s. 132(4) for the purpose of levy of penalties, if any, was not available to the assessee as search took place on 22nd Aug., 1986, and the said provisions were operative from 10th Sept., 1986, by Taxation Laws (Amendment miscellaneous Provisions) Act, 1986. Regarding the citations relied upon by the appellant at the time of hearing before me....
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.... revised returns and such disproportion is occurred on account of material detected at the time of search operations on 22nd Aug., 1986. Further, in asst. yr. 1987-88, the return was filed after the search operations had taken place and accordingly on the basis of material detected in search operations. Thus, keeping in mind the ratio of citation (supra), the facts of the case on record and reasons detailed at paras 3 and 5 of the order, I hold that the appellant has concealed particulars of his income and levy of penalties under s. 271(1)(c) was justified. The Asstt. CIT's orders are accordingly confirmed and the appeals dismissed." 6. Aggrieved by the order of the CIT(A), the assessees came up in appeal before the Tribunal and strongly argued against the imposition of penalty on the basis of income that was stated to be voluntarily declared by the group of assessees. The Tribunal, by a Bench consisting of U.T. Shah, Vice-President and H.C. Srivastava, A.M. vide their order, dt. 26th Nov., 1991, dismissed all the appeals of the assessees resulting in confirmation of the penalties. Thereafter, the assessees filed reference applications under s. 256(1) against the aforesaid o....
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....ear to which it pertained. The AO has not given any finding on these material issues and the entire assessments are based on the disclosures made as to the extent and to the year. The amounts, according to the learned counsel for the assessee, were based on a disclosure that were made voluntarily before any sort of detection by the AO. It was highlighted that the additional income was offered for taxation on the basis of investments made on certain assets and the expenditure incurred on various occasions like marriages in the family and other auspicious occasions. The income so declared was not the actual income earned from a particular source. It was argued that the assessment proceedings and the penalty proceedings are two separate and distinct proceedings and, therefore, in deciding the issue relating to the penalty, one should not be influenced by the fact that certain additions were made in the assessment. It was vehemently argued that by making applciation under s. 273A of the Act, there can be no presumption that the assessees had tacitly or otherwise conceded the fact of concealment on their part. Reliance was placed on to: (1) Sir Shadilal Sugar & General Mills Lt....
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....persons involved in different years. But, for the help rendered by the assessees, the Department would not have ever been able to identify the fact of additional income, the particular person in whose hands the additional income is liable to be taxed and the previous year for which such income has to be added. It was submitted that the assessees, in order to buy peace, agreed to be assessed to additional income in different hands and for different years and there is no evidence on record to prove that the income assessed was actually concealed by the assessees in the previous accounting period and as such the principle of mens rea has not been satisfied. It was submitted that the assessment of a person for an amount of income which has not been proved to be belonging to him cannot be based on the ground that he himself wanted to be assessed on it. It was, therefore, submitted that the Department has, prima facie, failed to make out a case of concealment of income or furnishing of inaccurate particulars and as such the penalty imposed should be cancelled. The learned counsel further continued that the disclosure is voluntary and, therefore, the penalty is not leviable. According to ....
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....learned counsel for the assessee summarised his contentions as under : (1) That the initiation of the penalty is on the basis of the direction of the CIT as contained in the discussion note. (2) The onus is on the AO to establish that the assessees had concealed income' quantum-wise, year-wise, source-wise and assessee-wise. Since, in the instant case, the AO has failed to establish the same, no penalty could be imposed under s. 271(1)(c) of the Act. (3) The offer for taxation of the additional income cannot be considered to be concealment of income in the context of the facts and circumstances obtaining in the case. (4) The provisions of Expln. 5 to s. 271(1)(c) of the Act do not help the Revenue. On the contrary, they help the assessee in view of the transactions noted in Boston diary, which should be considered as "the books of account" maintained by the assessees. (5) In any event, the assessment is based on the disclosure, which was voluntary and an additional offer and the Department should not impose any penalty as a condition for accepting the addition. (6) In any event, for the asst. yrs. 1986-87 and 1987-8....
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....ton diary did record the unaccounted transactions of the group. The existence of Boston diary is only to record the concealed income earned by the assessees in multifarious transactions. The learned Departmental Representative wondered how within the provisions of s. 271(1)(c) and its Explanation such Boston diary could be considered as part of regular books of account. The learned Departmental Representative disputed the fact that there was any conditional offer. According to him, when there is an admission of concealment, nothing is left for the Department to do to establish the concealment assessee-wise, year-wise, quantum-wise and source-wise. According to the learned Departmental Representative neither agreed assessments nor filing of revised returns would absolve the assessees from the penal provisions of s. 271(1)(c) of the Act. In this connection, he relied upon the decisions in the cases of Durga Timber Works vs. CIT (1971) 79 ITR 63(Del), Mahavir Metal Works vs. CIT (1973) 92 ITR 513(P&H), Western Automobiles (India) vs. CIT 1977 CTR (Bom) 303: (1978) 112 ITR 1048(Bom), Calicut Trading Co. vs. CIT (1989) 178 ITR 430(Ker), Madras Bangalore Transport Co. vs. CIT (1990) 90 C....
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....d Departmental Representative pointed out that the Department has collected substantial material before the assessees made any disclosure and, therefore, the assessees' disclosure cannot be taken to be voluntary or prior to the detection by the Department. Our attention was invited to the decision of the Delhi High Court in Tube Fabrico (I) Ltd.'s case (supra). When there is a clear admission on the part of the assessee, the Department need not venture into the task of establishing further concealment with reference to the years or the assessees in relation to which such disclosure is made by the assessees. In other words, such exercise is only factual and sheer waste of time. The learned Departmental Representative further pointed out the authorities relied upon by the assessees are in relation to cash credits, which were offered on voluntary basis, and has no relation to the type of the case which is before us. Our attention was invited to the following authorities: (1) Sir Shadilal Sugar & General Mills Ltd.'s case (supra) (2) A.N. Sarvaria vs. CWT (1985) 49 CTR (Del) 264: (1986) 158 ITR 803(Del); (3) Krishna Kumari Chamanlal vs. CIT 1972 C....
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....or was made under the Amnesty Scheme. The Amnesty Scheme does not apply in the cases in which there was search or there was a detection of concealed income by the Revenue. The Department has collected material sufficient to prove that there was a large concealed income before the assessees made any sort of disclosure. In the light of this it was strongly argued that we should uphold the penalty imposed under s. 271(1)(c) of the Act. 12.1. I have carefully considered the rival submissions of the parties, the material to which our attention was drawn and the reported decisions cited at the Bar in order to support the respective stand taken by the parties and I am of the opinion that there is no escape for the assessees to salvage their case from the clutches of the provisions of s. 271(1)(c) of the Act. The material available on the record clearly show that the assessees were systematically earning huge income since last several years which was not disclosed in the returns filed originally. It was only when the search operations under s. 132 of the Act were taken and the material which indicated concealed income, the group actively offered the concealed income spread over diffe....
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....he modus operandi employed by the assessees over the years in not disclosing the proper income to the Department, I am of the opinion that the assessee deserves to be penalised in accordance with the law. According to me, there is no substance in the stand taken on behalf of the assessees that in making the disclosure of income, they have not taken into account the liabilities, which were also recorded in the said Boston diary. This may be due to various reasons best known to the members of the Jhunjhunwala group. One thing is clear that by making disclosure of income and requesting its spread over a number of years and in different hands, the members of the Jhunjhunwala group have forestalled further investigations/ probing by the Revenue, which, perhaps, would have disclosed larger concealed income. At the same time, it appears that the Revenue too was not interested in investigating further when the Jhunjhunwala group had disclosed substantial income/wealth as a result of successful search carried out under s. 132 of the Act. Such investigation would not only have entailed time consuming proceedings but also would have resulted in hardship to the assessees. It is in this backgro....
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.... about the discussion note, which they contend to be in the nature of direction, I am afraid such a stand cannot be accepted. After all, the discussion note, as it reads, is the recording of the minutes of the discussion that took place in pursuance of the petition filed by the assessees before the CIT under s. 273 of the Act. Whenever such petition comes before the Revenue, it is posted for such discussion and such discussion is normally reduced into writing. What has been discussed is contained therein. It is not in the nature of a direction nor is it meant to be used as direction when it comes to the imposition of penalty. The AO has independently initiated the proceedings and was satisfied with the facts and circumstances of the case requiring the imposition of penalty and is certainly not guided by the so-called directions of the CIT. In fact, there is no such direction by the CIT. The contention of the assessees is out of context. The discussion note does not decide the fate of the assessees in the penalty proceedings. The AO has issued the notice, called for the explanations from the assessees and gave them opportunities to file explanations. In my opinion, the penalties are....
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....there were material gathered in the course of search, which show that the group had possessed undisclosed income or assets. I am, therefore, of the opinion that the aforesaid decision also would not be of any help to the assessee. In the case of Punjab Tyres (supra), no evidence was adduced by the Revenue to show that the assessee had consciously concealed particulars of its income. However, in the present case, on proper appreciation of facts and circumstances obtaining, it would be difficult to hold that the assessees have not consciously concealed particulars of their income/assets. 12.3. As regards the assessees' contention about the applicability of the Amnesty Scheme to the cases of the group, I may observe that all the members of the group reside in the premises known as Giri Kunj, Paliram Road, Bombay-78. All the search warrants are on that premises. To a question that whether an immunity given by the amnesty circular be availed of by the assessees whose premises have been searched by the tax authorities, the answer given by the CBDT is an emphatic No. The above answer is available in question No. 2 in the CBDT Circular No. 451, dt. 17th Feb., 1986. Question No. 30 a....
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....embers constituting the Bench in ITA Nos. 1528 to 1534/Bom/1991 and others in the case of Nirmal Udyog Co. & Ors., involving asst. yrs. 1970-71 to 1987-88, is being referred to the Hon'ble President of the Tribunal for making reference to Third Member as provided for in s. 255(4) of the IT Act, 1961: "Whether, on the facts and in the circumstances of the case, levy of penalty under s. 271(1)(c) on these assessees is justified?" R.P. GARG A.M. (AS A THIRD MEMBER) : On a difference of opinion between the two Members of the Tribunal constituting 'E' Bench, on the point of levy of penalty under s. 271(1)(c), the following point of difference was referred for my opinion under s. 255(4) of the Act : "Whether, on the facts and in the circumstances of the case, levy of penalty under s. 271(1)(c) on these assessees is justified?" Though the question is of wide amplitude, the opinion expressed by the two Members differ on the following main aspects: (1) Whether the notices for initiating the penalty proceedings were invalid and consequently no penalty can be levied? the Judicial Member opined that the notices were issued on the directions of th....
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....rporation. 4. As the assessments for and upto asst. yr. 1985-86 were completed on the basis of the returns filed in regular course, fresh returns were filed for asst. yrs. 1970-71 to 1985-86 as per the disclosure petition and for asst. yr. 1986-87, a revised return was filed before issue of any notice under s. 143(2) by the AO. These returns are stated to have been filed on 3rd March, 1987. The return for asst. yr. 1987-88 was the first return and filed on 10th Sept., 1987. 5. A letter to the CIT-VIII was also written on 3rd March, 1987, requesting inter alia for the payment of tax modalities. In paras 2 to 6 of this letter, it is stated as under: "2. Vide the said petition, we had offered a sum of Rs. 2,29,99,254 to be added to our income over a period of years. The offer made in the said petition is commensurate with the papers found at the time of an action under s. 132 of the Act not only that the offer made by us is commensurate with the papers found, but we have not taken into consideration the liabilities which are ascertainable from the papers seized. 3. Based upon the said petition under s. 273A of the IT Act and 18-B of the WT Act, we have got comp....
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....986 51,000 Add 5,206 Total addl. income particulars of which were concealed within the meaning of s. 271(1)(c) 56,206 Gross total income 84,389 Less: Deductions/Under s. 80L 2,805 Assessed income 81,584 or 81,580 Assessed as above. Allow credit for taxes paid and TDS, if any, as per record. Charge interest under s. 217, 138(9). Proceedings under s. 271(1)(a), 271(1)(c) & 273 are initiated separately. Issue DN/C." 6. Consequent upon assessment, wherein the proceedings under s. 271(1)(c) are initiated, the penalties were levied on 23rd March, 1990, on each of the assessees with reference to the income assessed and undisclosed in the petition and the additional income thereafter, as per the discussion pursuant to petition under s. 273A. The AO rejected the assessee's contention that the disclosure under s. 132(4) and/or 273A was voluntary, as according to him, the disclosure of higher amount of income was based on the income available from the books seized based on unexplained assets and investments detected by the Department. He also held that the contention of the assessee to the effect that all the taxes and additional income w....
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....ion by the Revenue made the offer, the offer of the group for settlement of income was, therefore, voluntary prior to detection and can be inferred to have been made to avoid prolonged litigation with the Revenue and to buy peace. The income assessed in all the units of the group spread over years have been based on such suo motu offer and declaration and thus the petition of settlement giving complete details have been the basis of addition and it was submitted that there was no case for any detection or concealment of income so as to warrant any levy of penalty. Certain case law have been relied on in support of the contention that under more or less similar circumstances penalty for concealment of income was not exigible. It was further argued that the Asstt. CIT had not sought to tax any amount in excess of what has been disclosed by the assessee and thus relied on the decisions of the Calcutta High Court in the case of Nurruddin & Bros. (1990) Taxtion 96 (3)-59 that penalty should not be imposed merely because it is lawful to do so. It was also submitted that the additional income of Rs. 20,00,000 was agreed to at the suggestion of the CIT for the amicable conclusion of the as....
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....as categorically admitted that the offer made in the petition, dt. 27th Jan., 1987, commensurate with the papers found at the time of action under s. 132 of the IT Act; therefore the plea taken at this stage that the group made suo motu offer while no incriminating papers or things were found during the initial period of raid appeared to be prima facie not borne out from the records, and in fact perusal of the appraisal report and other records lead to the conclusion that when confronted with a number of incriminating papers found during the search, viz., paper Nos. 5, 21 to 26, 27, Boston diary, etc. the representatives of the group had little option left out but to confess wide scale concealment and come forward with disclosure in the hands of the assessee and various members of the group as per details on record. The CIT(A) found it difficult to accept that the assessee would have suo motu come forward with the disclosure if the search operations had not taken place resulting in detection of concealed income, which was also evidenced from the fact that in the original returns in this case and other cases of the group, assessments have been framed at meagre income and without dec....
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....ast several years, which was not disclosed in the return filed originally, nor was it offered for taxation on his own volition in the present proceedings. It was only when the search operations under s. 132 of the Act were launched in August, 1986 that the assessee and the other members of the Jhunjhunwala Group actively started to forestall further proceedings including the penalty proceedings, which would start by the Revenue in respect of various activities carried on by them in clandestine manner. We make this observation, as the transactions noted in Boston diary speak volumes. It is pertinent to mention that the notings in the said diary were in code and it took great time, patience and persuasion to decipher the same. As noted above, the transactions noted in the said diary were running into lakhs and lakhs of rupees. It is under this situation that the assessee and the other members of Jhunjhunwala Group came forward with disclosure under the guise of "buying peace with the Revenue" and thus trying to prevent any further investigation. Surely, under such circumstances, it does not lie in the mouth of the assessee to say that no penalty could be imposed under s. 271(1)(c) of....
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....m/ 1994, dt. 20th April, 1995, primarily on the issue that the Tribunal had not dealt with the issue of the validity of the initiation of the proceedings which appear to have been issued at the directions of the CIT and, therefore, the order deserves to be rectified; and the second reason given for recalling was that their contention that the offer for additional income was conditional and, therefore, could not be relied upon for levying the penalty, was not considered. 12. Be that as it may, this order of the Tribunal in miscellaneous application has not been disputed by the Revenue either at the time of the hearing of the miscellaneous application or thereafter when the appeal was reheard by the Tribunal and it ended with a difference on the aspects stated above, and as a Third Member, I have to confine myself as aforesaid, on the points of difference. 13. The first point of difference is whether the initiation of penalty proceedings is invalid. The assessees' contention is that initiation of proceedings is on the direction of the CIT and not on the own satisfaction of the AO and, therefore, in view of the Supreme Court decision reported in the case of D.M. Manasvi (sup....
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....entions, I am of the opinion that the satisfaction of the AO was his own satisfaction and the initiation of proceedings was not at the direction of the CIT. Such satisfaction, as held by the Supreme Court in the case of D.M. Manasvi vs. CIT 1972 CTR (SC) 437: (1972) 86 ITR 557(SC) and is also evident from the provisions of s. 271(1), is to be formed in the course of assessment proceedings. If something is said by anybody, or the CIT, as is alleged in this case, somewhere other than in the course of assessment proceedings, it is to be ignored. Even otherwise, from the language used in the discussion note, denotes the approval of some report submitted by the AO. It gives an impression that it was not the direction by the CIT, but an approval of some action proposed to be taken by some appropriate authority and that can be none else than of the AO himself. The discussion note is on the petition made by the assessee to the CIT under s. 273A and cannot in any case be treated as a direction by the CIT. 15. Furthermore, neither in the assessment order nor in the show-cause notices did the AO mention or state or give impression that any of the notices were issued at the direction of the....
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.... of the requirement is that the disclosure should be before detection of concealment, by the Revenue. Both the Judicial Member and the Accountant Member held that it can be raised even if it is new and the Judicial Member has even concluded that it was not a new contention but raised earlier before the AO at p. 3, and before the CIT(A) at p. 5. The original submission was concerning s. 273A and the assessee was seeking relief from the CIT (Administration) whereas the newly raised submission is emanating from various Board Circulars called Amnesty Scheme applicable upto 31st March, 1987. Both these aspects seem to be administrative relief and probably cannot be sought for in any appellate proceedings. Be that as it may, since there is no difference on these aspects, I proceed on the assumption that they can be invoked in the appellate proceedings as well. 17. The learned Judicial Member held that the cases upto 1986-87 were covered by Amnesty Scheme. Returns were filed on 3rd March, 1987 (though not specifically marked as under Amnesty Scheme) and the reasons prevailing are as under: (1) Search warrants were issued only in four names and, therefore, other sixteen assesse....
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....on that this time because of the incriminating documents did catch the Department's attention which were seized, the assessee came forward and offered the undisclosed income. This is, in my opinion, cannot be said to be voluntary, if seen in the light of the decision of the Supreme Court in the case of Tribhovandas Bhimji Zaveri vs. Union of India (1993) 115 CTR (SC) 411: (1993) 204 ITR 368(SC). The assessee came in the grip of the Department with sufficient evidence in its hands indicating the non-disclosure of the income of a substantial amount. The assessee had no option but to surrender. Otherwise, as apprehended by the Accountant Member, a larger amount could have come to the notice of the Department and the assessee would have been in quandary (in a mis). 20. The contention of the learned counsel of the assessee that the Supreme Court's decision in the case of Tribhovandas Bhimji Zaveri (supra) was under Voluntary Disclosure Scheme Act, 1965, which implies a different language for granting "immunity" is of not much relevance. The question is what does the word "voluntary" appearing in s. 273A or used in the Amnesty circulars issued by the CBDT mean generally, as a ....
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...., the assessee could not have kept his mouth shut but to explain except on his own peril, as otherwise he would have committed another offence of withholding information knowingly and wilfully. In any case, as stated by the assessee himself, the Boston diary contained information of concealed income of around Rs. 65 lakhs; and the balance from the other seized paper Nos. 5, 21 to 26, 27, etc. as per the letter of the assessee. In my opinion, therefore, there was material with the Department to the effect that the income was concealed and that it was not a mere prima facie view of the situation shorn of supporting evidence. The assessees, therefore, are not entitled to amnesty benefit. It may be stated here that from both the sides certain decisions have been referred to to advance their respective claims. They are not being discussed specifically as they have no direct bearing on the issue under consideration and are also distinguishable on facts. 22. The assessee came out with a legal plea that except in four cases, search warrants were not issued in other names and, therefore, those cases were not search cases, disentitling them to amnesty benefit. A reference to the decision ....
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.... have been searched by the tax authorities"? 23. The learned counsel of the assessee then contended that circulars dissentitled amnesty only in those cases where disclosure is based on seized assets and since the search and seizure being only in the case of Shri Kishorilal F. Jhunjhunwala, the others cannot be denied the amnesty benefit. This contention, in my opinion, has no force. First of all, it is not correct to say that only in the case of Kishorilal F. Jhunjhunwala the search was there. Read Para 5 of the Judicial Member's order, stating that in three out of the four cases, the seizure of cash/jewellery was there. In any case, the disclosure is based on the seized material and stated to be in commensurate with the investment made by the group and the expenditure on household, marriages, jewellery purchases and charity and donations made. It is not necessary that, if the disclosure is not based on the assets found, only then the case is out of amnesty benefit. Question No. 30 in this connection can be stated, which reads as under: "Q. 30: Whether an assessee could make a declaration in respect of assets or income which is not the subject-matter of seizure? ....
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....to public address reported in (1995 ) 214 ITR 210(Bom); Kanga & Palkhivala 'discussion at p. 1634; decision of the Madras High Court in the case of CIT vs. Sri Rajaram Cloth Stores (1995) 214 ITR 262 (Mad), was invited to. The question is not whether the income was disclosed before or after the issue of notice under s. 143(2), but whether it was voluntary and before the detection by the Department. As aforesaid, neither it was voluntary nor it was before the detection by the Department. In my opinion, this year also cannot be put in a separate category and the assessee has to suffer the penalty. 27. For asst. yr. 1987-88, the returns were filed on 10th Sept., 1986, i.e., after the disclosure and, therefore, there was no concealment. On going through the records, I find that penalty is levied not on the disclosed income, but on the income assessed over and above the amount shown in the returns. Explanation 5 also came up for discussion, but in view of the fact that the penalty is not levied for the income disclosed, but in respect of income assessed over and above that amount, it has no application. It was also not invoked by any authority. The question, whether the penalty f....