(1.) THIS is an income-tax reference made by the Tribunal in FA No. 67/ind/1994 at the instance of assessee arising out of an appellate order dt. 17th March, 1994, passed in ITA 680/ind/1989 for the year 1982-83 to answer following questions of law :
1. Whether the Tribunal is correct in law to hold that the ITO was right in imposing penalty when he has not sought instructions from the CIT about the revised return filed under the scheme admitting the addition and whether in such circumstances, the order imposing penalty by the ITO is in accordance to law? 2. Whether, on the facts and circumstances of the case, the order passed by the Hon'ble Tribunal confirming the minimum penalty on addition of Rs. 74,044 even when the return was under the scheme and is protected by Circular No. 451, dt. 17th Feb. , 1986, is correct in law, when the merits of the said addition is not gone into either by CIT (A) or by the Tribunal to find out the scope of the circular ?
(2.) IN short, the question that arises for consideration in this reference is, whether AO was justified in imposing a minimum penalty of Rs. 56,000 on the assessee due to non-disclosure of their true income amounting to Rs. 76,040 under Section 271 (1) (c) of the Act. Since the addition of Rs. 10,000 was accepted by the AO to be not justified and the same having been also accepted by the Tribunal, it does not survive for examination.
(3.) IT is not in dispute that against the said addition made by AO, the assessee filed an appeal to CIT (A) and later withdrew it and filed revised return offering the addition of Rs. 74,044 to be their income from undisclosed source. It is on the basis of this, i. e. , withdrawal of appeal and filing of revised return, the assessee contended that now no penalty be levied on the assessee for the alleged non-disclosure. In other words, the contention of assessee was that since they have filed their revised return, consequent upon withdrawal of appeal and giving up the challenge to the addition made, they be extended the benefit of amnesty scheme by not imposing any penalty on them under Section 271 (1) (c) of the Act. It is this contention, which did not find favour to AO, but found acceptance to CIT (A). However, in an appeal filed by CIT, the Tribunal reversed the decision of CIT (A) and restored that of AO by imposing a minimum penalty of Rs. 56,000. It is against this decision of Tribunal, the assessee felt aggrieved prayed for reference to this Court by taking recourse to the provisions of Section 256 (1) of the Act. The Tribunal acceded to the prayer so made by the assessee and accordingly, made the reference to this Court on the questions referred supra.
(4.) HEARD Shri S. C. Goyal, learned Counsel for the applicant, and Shri R. L. Jain, learned senior counsel with Ku. V. Mandlik, learned Counsel for the non-applicant.
(5.) HAVING heard the learned Counsel for the parties and having perused the record of the case, we are inclined to answer the question against the assessee and in favour of Revenue (CIT).
(6.) IN our opinion, the question referred to has to be decided keeping in view the Circular No. 451, dt. 17th Feb. , 1986 quoted infra :
Question No. 28 : Where an addition is contested in appeal, whether an assessee could make a declaration and agree to pay tax thereon ? answer : Yes, the assessee should withdraw that appeal and make a declaration before the administrative Commr. In such a case a lenient view will be taken, though such a declaration cannot be taken as entirely voluntary.
(7.) THE answer to the question itself suggests that there will be no total immunity but while considering the case of assessee, the authorities will have to take lenient view in the case. This circular fell for interpretation before Allahabad High Court in the case of Jyoti Steel v. CIT and Anr. . , (1987)63 CTR (All)347 , [1987 ]166 ITR558 (All), [1987 ]31 TAXMAN420 (All). It is in this case their Lordships held as under : (ii) That reading the expressions 'lenient' and 'not entirely voluntary' used in the clarification to question No. 28 in Circular No. 451 together, the intention was that only a 'liberal view' in such cases should be taken, that is to say, that strict legality might be mitigated by soft approach, what should be a lenient view would vary from case to case and the CIT might have to bear in mind several factors such as the severity of the default, the loss occasioned to the Revenue and a host of other attending circumstances.
(8.) IN this case, one cannot dispute that Circular No. 451 has its application so too the case of assessee falls in question No. 28 quoted supra. In other words, it is a case where assessee first contested the addition in appeal, then withdrew the appeal and filed revised return in relation to addition which was made subject-matter of appeal, as their income. In a case of this nature, the circular says that take "lenient view" in imposing the penalty and not a harsh one. The Tribunal has rightly held that lenient view has been taken by imposing a minimum penalty on the assessee.
(9.) PLACING reliance on the amnesty scheme as also on a decision rendered by this Court in the case of Harkatwat Co. v. CIT ,, (2005)197 CTR (MP)686 , [2005 ]273 ITR84 (MP), learned Counsel contended that assessee is entitled to claim the complete immunity once the amnesty is extended to them in payment of penalty. According to learned Counsel, the assessee withdrew the appeal only to purchase peace and hence, they cannot be saddled with the penalty amount. We do not agree in view of what we have held supra. The circular in question being very clear in regard to applicabi
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lity of amnesty scheme, the authorities had the discretion to impose penalty which in the facts of the case was minimum. (10.) WE do not, however, wish to express any opinion on the application made by the assessee under Section 273a of the Act for waiver of penalty because as per observation of Tribunal, it is pending consideration. It is for the authority concerned to decide its merit and pass appropriate orders, as the case may be, keeping in view the requirement of Section 273a ibid. (11.) IN view of aforesaid discussion, we answer the questions referred to us against the assessee and in favour of CIT. No costs.