BORMAH JAN TEA CO. (1936) LTD. VS COMMISSIONER OF INCOME-TAX
2001 P T D 3317
[240 I T R 477]
[Calcutta High Court (India)]
Before Y.R. Meena and Ranjan Kumar Mazumdar, JJ
BORMAH JAN TEA CO. (1936) LTD.
Versus
COMMISSIONER OF INCOME‑TAX
Income‑tax Reference No. 107 of 1994, decided on 18/08/1999.
Income‑tax‑‑‑
‑‑‑‑Amnesty scheme‑‑‑Benefits under scheme available only in respect of income not offered for taxation‑‑‑Excessive deduction claimed in original return‑‑‑Deduction as per provisions of Act claimed in revised return‑‑ Consequent additional income was entitled to benefits of Amnesty Scheme‑‑ Entire income shown in revised return was not entitled to benefit of Amnesty Scheme.
The assessee filed a return for the assessment year 1985‑86 in November, 1985, declaring a total income of Rs.11,69,100. Thereafter, the assessee filed a revised return on September 12, 1986, declaring a total income of Rs.11,77,590. The difference represented an increase of the income by Rs. 8,488. The assessee claimed that the revised return filed voluntarily disclosing higher income came within the Amnesty Scheme. The Assessing Officer completed the assessment and also initiated penalty proceeding under section 271(1)(a) and section 273(2)(a) of the Income Tax Act, 1961. According to the Income‑tax Officer, the increase in the income in the revised return was a result of statutory disallowance and re‑calculation of depreciation under the Income‑tax Rules and hence, no higher income had been shown by the assessee in the revised return and that, therefore, it could not get the benefit of Amnesty Scheme. The Tribunal confirmed the order of the Assessing Officer. On reference:
Held, (i) that the benefit of the Amnesty Scheme can be extended only to the escaped income. "Income escaped" means the income which has not been offered to tax. In the instant case in the original return the assessee had claimed excessive deductions which were not permissible under the Act. But, in the revised return, it had claimed the deductions as per the provisions of the Act. Therefore, to the extent, the income of the assessee could be treated as income escaped, but the benefit of the Amnesty Scheme could not be extended to the entire income disclosed in the revised return as it was neither concealed income‑ nor undisclosed income. Accordingly only the additional income of Rs.8,488 was covered by the Amnesty, Scheme.
(ii) that the assessee was entitled for the benefit of the Amnesty Scheme, that is, immunity from the levy of interest under sections 139(8) and 215 and from the levy of penalty under section 273(l)(a) only on the additional income, i.e., Rs.8,488 shown in the revised return.
N.K. Poddar, Senior Advocate, P. Ganguly and M.K. Mukherjee for the Assessee.
P.K. Bhowmick and B.D. Halder for the Commissioner.
JUDGMENT
Y. R. MEENA, J.‑‑‑By this reference application under section 256(1) of the Income Tax Act, 1961, the Tribunal has referred the following questions for the opinion of this Court:
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the revised return filed by the assessee‑company for the assessment year 1'984‑85 on September 12, 1986, could not be treated as disclosure of concealed or additional income and was not covered by the Amnesty Scheme?
(2)Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the assessee‑company was not entitled to immunity from the levy of interest under sections 139(8) and 215 and from the levy of penalty, under section 273(1)(a) and the Income Tax Act, .1961, as envisaged under the Amnesty Scheme?"
The assessee is a limited company. It filed its return on November 29, 1985, declaring a total income of Rs.11,69,100. Thereafter, the assessee filed a revised return on September 12, 1986, declaring a total income of Rs.11,77,590. The difference represented is an increase of the income by Rs.8,488.
The assessee claimed that the revised return filed voluntarily disclosing higher income comes within the Amnesty Scheme formulated by the Central Board of Direct Taxes through various circulars. The Assessing Officer has completed the assessment order and also initiated the penalty proceedings under section 271(1)(a) and section 273(2)(a) of the Act. According to the Income‑tax Officer the increase in the income in a revised return was a result of statutory disallowance and recalculation of depreciation under the Income‑tax Rules. Hence, no higher income has been shown by the assessee in the revised return. Therefore, he cannot get the benefit of the Amnesty Scheme. His claim for the benefit of the Amnesty Scheme was rejected.
In appeal before the Commissioner of Income‑tax (Appeals), the Commissioner of Income‑tax (Appeals) has also confirmed the view taken by the Income‑tax Officer that the assessee is not entitled for benefit under the Amnesty Scheme of the Central Board of Direct Taxes as no higher income has been shown in the revised return. Mere recomputation and disallowance of a statutory deduction does not mean that the assessee has disclosed the higher income than the income‑shown in the original return. In appeal before the Tribunal, the Tribunal also had the view that in the revised return the assessee has just recomputed the income, by rectifying the mistake omitted to deduct the statutory disallowance, under the original return. Therefore, that increase cannot be equated with the disclosure of concealed income by the assessee.
The assessee has not furnished the inaccurate particulars of income in the original returns. Therefore, it cannot be said that the assessee has disclosed some income which has not been disclosed in the original returns.
The Tribunal also has agreed with the view taken by the Income‑tax Officer and the Commissioner of Income‑tax (Appeals) that the assessee is not entitled to the benefit of the Amnesty Scheme as no higher income has been disclosed by the assessee in the revised returns.
Learned counsel, Mr. Poddar, submits and drew our attention to various circulars which were issued in 1985 and 1986. The date of benefit of the Scheme has also been extended uptil 31st March, 1987.
The original returns were filed on November 29, 1985. Revised returns were filed on September 12; 1986. The details of the statutory deduction which are revised in the revised return reads as under:
(1)Dividend income of Rs.200 was taken out from the head business and included under the head other sources.
(2)Disallowance under section 37(3) for hotel expenses was calculated at Rs.1,147 and added back.
(3)Disallowance under section 37(3A) was calculated at Rs.5,731 and under section 40A(5) was computed at Rs.14,370 and added back.
(5)Disallowance under section 43B of Rs.60,010 was added back.
(6)Depreciation was re‑calculated at Rs.4,27,206 and claimed as against Rs.4,52,918 claimed in the original return.
(7)Development allowance of Rs.85,750 was calculated and claimed.
In the revised return though the assessee has added back some amounts of expenditure as per the provisions of this Act such as section 37(3), section 37(3A), section 40A(5) and disallowance under section 43B, but at the same time, he has claimed depreciation to the tune of Rs.85,750 which the assessee has not‑claimed in the original returns.
Thus, it appears that it is a re‑calculation or computation of the income of the assessee as disclosed in the original returns and that in the revised return. The net difference comes to Rs.8,488.
Learned counsel for the Revenue submits that as per the provisions in case the assessee has disclosed fully and truly the income which he has not disclosed, within the period permissible under the Circular of the Board, then the assessee will have immunities from the penalty in under section 271(1)(a) or 123 (see (1985) 155 ITR (St.) 45), dated 26th June, 1985, provides that if the assessee has declared the income escaped and paid tax even if that income is concealed income of an earlier year, he can give an application to the Commissioner for the reduction or waiver of penalty and interest under section 273A of the Income‑tax Act.
The doubts arising out of those circulars are clarified by issue of further circulars in the form of questions and answers. One of the numbers is Circular No.451 (see (1986) 158 ITR (St.) 135), dated February 17, 1986. A doubt was raised where thd assessments in some years are completed and in some cases the assessment proceedings are pending whether the assessee can have the benefit of the Amnesty Scheme, the Board has answered if the assessee approaches the concerned Commissioner with the full disclosure of the amount of income and/or wealth "concealed in various years" and also files returns for the relevant years and produces the evidence of payment of tax before March 31, 1986, then he can have the benefit of the Amnesty Scheme. In Question No. 3 a doubt was raised whether old assessees who are regularly filing their returns of income would be eligible for the benefit of the circulars in respect of their income, which has escaped assessment for an earlier assessment year and whether the assessment is completed or pending, the answer was that circulars apply to old assessees also. A doubt was also raised that whether the immunity from penalty and prosecution is guaranteed to the assessee unlike the circular in respect of wealth tax, the answer was immunity from penalty and prosecution applies in all cases whether of income‑tax or wealth tax where the assessee admits the true facts properly.
The benefit of these circulars was extended uptil March 31, 1987, by Circular No.472 (see (1986) 162 ITR (St.) 17), dated October 15, 1986. The perusal of the circulars shows that all these circulars are in respect of the higher estimate of the income, that means, if some income has been declared and disclosed and thereafter if for the purpose of the benefit of the scheme the assessee comes forward and discloses its true, full and enhanced income then in that case the assessee will be entitled for the benefit of the Scheme, for the enhanced part of income.
In the case in hand, the assessee before revising the return in the original return, has disclosed the income to tune of Rs.11,69,100. Can that be said that the income disclosed in the original return has escaped or that is the enhanced or higher income for the purpose of the Amnesty Scheme, our answer will be in the negative, i.e., the income which is disclosed in the regular return neither that can be said as concealed income nor undisclosed income nor a higher income‑‑‑that is an income which the Department expects the assessee to disclose in a routine under the provisions of the Act.
The assessee filed the original return on November 29, 1985. Thereafter, the assessee has filed a revised return on September 12, 1986, and in that revised return, the assessee has corrected some figures of statutory allowances and thereby the reduced part of the income declared in the original return. But a fresh claim has also been made in the revised return on account of development allowance. The net difference of income disc by the assessee in the revised return comes to Rs.8,488.
Now the limited question for our consideration is whether the entire income disclosed in the revised return is entitled for the benefit of the Amnesty Scheme. As we have answered earlier that as the income to the extent of Rs.11,69,100 disclosed in the original return cannot be said as escaped income or concealed income, disclosed in pursuance of the circulars or the Amnesty Scheme. There is no question of extending the benefit to the entire income disclosed under the Amnesty Scheme in the revised return. The benefit of the Amnesty Scheme can be extended only to the escaped income. "Income escaped" means the income that has not been offered to tax.
Learned counsel for the assessee has brought to our notice Circular No. 451 (see (1986) 158 ITR (St.) 135), dated February 17, 1986, where in answer to question No. 1, the Board itself has clarified that the filing of the returns will be regularised by issue of formal notice under section 148 of the Income‑tax Act. That means the provisions of section 147 are attracted for revised return and the definition of "escaped income" should be considered for the purpose of assessing income of the assessee under the Amnesty
Learned counsel for the assessee drew our attention to the definition of "income escaped" given under the provisions of section 147 of the Act. Specially, he drew our attention to clause (b) of Explanation 2 to section 147 which provides that where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return.
This Explanation 2 starts with the wording "for the purpose of this section". Further, the definition under the Explanation is deemed escaped income, not the escaped income which is commonly understood.
Considering that definition and from a perusal of the revised return and the income recomputed for the purpose of disallowing the deduction under different provisions of the Act, it shows that in the original return the assessee has claimed excessive deductions which are not permissible under the Act. But in the revised return, he has claimed the deductions as per the provisions of the Act, if we accept the submission of learned counsel for the assessee, that as per the provision of the Explanation, defined deemed escaped income, on account of more deduction claimed by the assessee iii the return than the deduction allowable under the provisions of the Act that is also deemed escaped income. Therefore; to that extent, the income of the assessee can be treated as income escaped; but the benefit of the Amnesty Scheme cannot be extended to the entire; income disclosed in the revised return as neither that is the concealed income nor escaped income nor undisclosed income.
In the circulars at various places the Board has referred to the expression "concealed income", or "higher income" for the assessment year 1986‑87 or earlier years. But higher income or concealed income or escaped income can be only which has not been disclosed by the assessee in the return of that particular year.
Therefore, in our view, the assessee is not entitled for the benefit of the Scheme for the income which is disclosed by the assessee in the original return. Therefore,‑ whatever benefits are extended to the Amnesty Scheme that can at best, be extended only to the income which has not been disclosed by the assessee.
Iii this case even if we accept that definition of "escaped income" in the Explanation can be applied for the purpose of the Amnesty Scheme, the tax effect is negligible as escaped income is R&.8,488: We will consider this issue in an appropriate case.
Learned counsel for the assessee further submits that any return, even the regular return filed after the Amnesty Scheme, that is, with effect from November 15, 1985, and the income shown thereunder is entitled for the benefit of the Amnesty Scheme.
We are not inclined to accept this submission of learned counsel for the assessee that any return, even the regular return filed after November 15, 1985, and the income shown thereunder, is entitled for the benefit of the Amnesty Scheme.
In fact, the Amnesty Scheme is to encourage the assessee to disclose the concealed income, not the regular income which is accounted for in the books of the assessee. If any concealed income which has not been disclosed and which he could not show under the routine return of income and it is not easy to discover and tax that income only that type of income he can disclose and get the benefit of the Amnesty Scheme.
The questions are not properly framed in fact in the revised return there are two types of income, one part pertains to the income which has already been disclosed in the original return and the other part pertains to which the assessee has accepted first time in the revised return.
In the result, we answer Question No. l that the assessee's additional income i.e., Rs.8,488 is covered by the Amnesty Scheme.
Question No. 2 is consequential and we answer that the assessee is entitled for the benefit of the Amnesty Scheme, that is, immunity from the levy of interest under sections 139($) and 215 and from the levy of penalty under section 273(1)(a) only on the additional income, i.e., Rs.8,488 that shown in the revised return.
The reference application is., accordingly disposed of.
M.B.A./338/FC Order accordingly.